Transnet SOC Limited – Transnet and France, via the Agence française de développement – AFD, have agreed on a EUR 300M – approximately ZAR5,8bn loan agreement in order to support contribution by Transnet to a stronger and productive South African economy in the midst of climate change.
The strategic position of Transnet in freight and energy related logistics and its stated objective to lower the carbon intensity of its operations happens to qualify it as an enabler in South Africa’s Just Energy Transition Investment Plan – JET IP.
The loan will support the Transnet Freight Decarbonisation and Corporate Sustainability Programme so as to enhance the operational sustainability of Transnet and to decarbonize freight sector in South Africa. The Company is focused to enhance its operational efficiency in order to facilitate a shift to a low-carbon operating model in line with JET-IP of South Africa and enhance the long-term financial sustainability of the organization.
According to Michelle Phillips, Group Chief Executive of Transnet, “Transnet remains committed to modernising its rail and port infrastructure and operations to improve service quality, reliability and competitiveness, while advancing sustainable growth as part of its Reinvent for Growth strategy. This funding will assist in achieving these objectives by enhancing energy efficiency and accelerate reforms.”
This loan follows a long-standing relationship that started in 2009 when AFD funded the extension of Cape Town Container Terminal from Transnet.
Says AFD’s Regional Director for Southern Africa, Marie-hélène Loison, “We are particularly pleased with this operation, as it reflects the shared priorities of both institutions. Transnet is a strategic actor in South Africa’s low-carbon transition, and it is a key enabler to the competitiveness of the economy. The investments in freight rail recovery, port modernisation and transition minerals export corridors are a demonstration that South Africa’s economic competitiveness and decarbonisation goals are inseparable.”
This partnership is also notable for its innovative structure. In contrast to conventional project finance in which loan proceeds are dedicated to specific investments, Transnet happens to have the flexibility to apply funds to a broader programme, enabling it to respond to the evolving requirements of its business.
This loan will only be released after Transnet reaches certain agreed milestones, which includes –
- Upgrading of basic transport operations in order to enhance the quality and reliability of service. This will include the rehabilitation of around 550 km of rail on the Cape and container corridors, boosting reliability and facilitating a transfer of freight from road to lower-carbon rail transport.
- Enhancement of the strategic business diversification by Transnet to explore green hydrogen as well as transition mineral logistics so as to replace the expected decline in coal volumes.
- Readiness for purchasing a total of 30 MW of renewable energy, so as to support the pathway to net-zero emissions and
- Strengthening of Transnet’s ESG
These achievements are designed to decarbonize freight sector in South Africa and minimise emissions intensity across Transnet’s operations, improve the environmental resilience of priority corridors, and provide governance improvements that improve long-term climate change resilience of Transnet.
This loan happens to be a part of a contribution by France to South Africa’s Just Energy Transition Partnership – JETP established by AFD since 2021 and meets the €1 billion commitment by France to the JETP which was announced at COP26.
