Infrastructure spend

Transnet and Chinese pen rail funding deal

Transnet and Chinese pen rail funding deal
rails.jpg

Transnet has signed a 'ground-breaking' agreement with the China Development Bank that is expected to yield a loan in the region of US$5 billion (R45 billion) to help finance the country's massive rail infrastructure upgrade programme.  

The agreement, signed during a meeting between President Jacob Zuma and Chinese President Xi Jinping in Pretoria recently, would enable Transnet and the China Development Bank to "identify opportunities for future collaboration in Transnet's infrastructure upgrade programmes," Transnet said in a statement.

The co-operation agreed upon would include "the financing of the construction and upgrade of railway and port infrastructure and localisation of equipment manufacturing.

"In addition, the two agreed on future collaboration on research and development initiatives, manufacturing, marketing and the construction of cross-border infrastructure throughout the continent," Transnet said.

Transnet Group chief executive Brian Molefe said the agreement, signed as the fifth BRICS (Brazil, Russia, India, China and South Africa) summit got under way in Durban on Tuesday, was proof of the opportunities created by South Africa's membership of the grouping.

Transnet last year announced an unprecedented R300 billion capital investment programme to revamp and expand its ports, rail and pipelines infrastructure and equipment, saying it would create over half-a-million new jobs while making its freight rail division the fifth largest in the world.

The company plans to spend the lion's share of this, R205 billion, on rail projects – R151 billion on freight rail – as it pushes to increase its freight rail volumes from about 200 million to 350 million tons by 2019, while increasing its market share of South African container traffic from around 79% to 92%.

This increase would significantly reduce the cost of doing business in South Africa, Transnet said at the time, citing internal studies showing that rail in the country was on average 75% cheaper than road transport.

The company said that about two-thirds of the required funding for the programme would be raised internally and the remainder in the international debt capital market.

As part of this programme, Transnet has already awarded contracts to a number of manufacturers, including the United States' General Electric, Finnish crane maker Kalmar, and China South Railways.

In October, a consortium led by Chinese manufacturer CSR Zhuzhou Electric Locomotive (CSR) was named as the winning bidder to supply Transnet with 95 electric locomotives.

Transnet will pay R2.6 billion (about $300 million) for the 95 locomotives, the first 10 of which are being assembled in CSR's factories in China, while the remainder will be made in South Africa.

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