Transnet and AFD sign major agreement to decarbonise South Africa’s freight sector
Transnet SOC Limited (“Transnet”) and France, through the Agence française de développement (AFD), have signed a EUR 300M (approximately ZAR5,8bn) loan agreement to enhance Transnet’s contribution to a more resilient and efficient South African economy in the face of climate change.
Transnet plays an enabling role in South Africa’s Just Energy Transition Investment Plan (JET‑IP) due to its strategic position in freight and energy‑related logistics, and its stated objective to reduce the carbon intensity of its operations.
The loan supports the “Transnet Freight Decarbonisation and Corporate Sustainability Program,” which aims to strengthen Transnet’s operational sustainability and advance the decarbonisation of South Africa’s freight sector. It focuses on improving its operational efficiency, enabling a transition to a low-carbon operating model aligned with the South Africa’s JET-IP, and enhancing the company’s long-term financial sustainability.
“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,” said Transnet Group Chief Executive, Michelle Phillips.
This loan deepens a long-standing partnership that traces its roots back to 2009, when AFD financed the expansion of Transnet’s Cape Town Container Terminal.
“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,” said Marie-hélène Loison, AFD’s Regional Director for Southern Africa.
This partnership is also remarkable for its innovative structure. Unlike traditional project finance, where loan proceeds are allocated to specific investments, Transnet retains the flexibility to deploy funds across a widely defined programme, allowing it to respond dynamically to its evolving business needs.
Disbursements of this loan are conditional on Transnet achieving certain mutually-agreed milestones, including:
– Modernisation of core transport operations to improve service quality and reliability. This will be achieved through the rehabilitation of 550 km of rail along the Cape and Container corridors, improving reliability and enabling a shift of freight from road to lower‑carbon rail transport;
– Enhancement of Transnet’s strategic business diversification (explore green hydrogen and transition minerals logistics to replace anticipated decline in coal volumes); – Preparation for procurement of 30 MW of renewable energy, to support the pathway to net-zero emissions; and
– Strengthening of Transnet’s ESG capacities.
These milestones are intended to reduce emissions intensity across Transnet’s operations, strengthen the climate resilience of priority corridors, and deliver governance improvements that reinforce Transnet’s long‑term climate change resilience.
This loan forms part of France’s contribution to South Africa’s Just Energy Transition Partnership (JETP), implemented by AFD since 2021, and fulfils France’s €1 billion commitment (to the JETP) announced at COP26.
