South Africa: Transnet Secures a $2.5billion Funding Guarantee from Chinese Export Credit Agency

Image courtesy of Eugine Amer

As the Chinese Premier conducts a visit of South Africa, Transnet and China Export Credit Insurance Corporation (Sinosure) agreed a $2.5 billion funding guarantee during a ceremony attended by by South African President Jacob Zuma and his Chinese counterpart Xi Jinping.

The contract was signed by acting Transnet Group Chief Executive, Mr Siyabonga Gama, and Sinosures Mr Li Haoin, and witnessed by Public Enterprises Minister, Ms Lynne Brown. The credit shall not extend for more than 15 years, which matches Transnets long term business strategy. The repayment terms are favourable to Transnet, with longer tenor and competitive interest rates .

Bilateral Agreement

Transnet will procure mechanical and electrical products and equipment from Chinese companies with the guarantee, which should preferably be for infrastructure projects such as railways, ports and pipelines. It will also pay for services, such as operation and maintenance, carried out by Chinese companies in South Africa.

It will give Transnet the opportunity to further its infrastructure investment programme, including the procurement and maintenance of rolling stock .

Chinas Presence in the South African Rail Market

Chinese companies already do business with Transnet, supplying rolling stock and equipment following open bidding processes. In April 2014, China South Rail Zhuzhou Electric Locomotive and China North Rail Rolling Stock won contracts to manufacture 359 electric and 232 diesel locomotives respectively.

This funding guarantee follows a bilateral loan of a $2.5 billion from the China Development Bank made in June 2015. It is currently undertaking unprecedented investments in infrastructure projects in South Africa. This agreement is in line with Transnets funding strategy, intended to diversity its investor base and funding sources, meaning that two-thirds of funding must be raised from its operations.

The guarantee indicates the attractiveness of Transnet and South Africa to international investors.