[miningmx.com] – IN a response to recent credit downgrades, and slower-than-premised economic growth, Transnet has enlisted the funding support of China Development Bank which will help fund the South African firm’s ambitious R300bn Market Demand Strategy (MDS).
An agreement, the details of which were sketchy, has been signed between the two government-owned entities that will also see the Chinese bank assist with Transnet’s localisation strategy as well as cross-border infrastructure build programmes throughout Africa.
“This historic agreement between two state-owned entities within BRICS illustrate the opportunities inherent is such diplomatic ties,” said Brian Molefe, CEO of Transnet. He added that “innovative funding options” would be explored.
Ratings agencies Standard and Poor’s and Moody’s last year downgraded Transnet and Eskom to a level just above sub-investment grade and were followed in their assessment in January this year by Fitch Ratings. The downgrades were based on an earlier adjustment to the credit standing of South Africa.
In terms of MDS, Transnet said it would fund two-thirds from internal cash-flow and the balance from the international credit markets. However, Transnet’s plans are under pressure as South Africa’s economic growth will only be 2.7% this year, less than the 3% on which the MDS was premised. This means Transnet’s revenues may not generate the kind of cash it needs to meet its funding requirements.
Molefe told Miningmx in October that were the transport utility able, it could spend as much as R480bn as expansion of this ilk had been identified.
Said Transnet in an announcement today: “The cooperation includes, but is not limited to, the financing of the construction and upgrade of railway, and port infrastructure, localisation of equipment manufacturing – especially rail and port.
“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,” it added.
The MDS will expand the capacity of the Richards Bay coal line to at least 91 million tonnes a year, construct a manganese carrying rail route from the Northern Cape to Coega in the Eastern Cape, and expand the Sishen iron ore line. Various port and general freight expansions are also envisaged.
The Transnet-China Development Bank announcement is the first real meat on the bones of the BRICS summit meeting which kicked off in Durban today.
Earlier, China’s newly elected president, Xi Jinping, signed bilateral agreements with President Jacob Zuma covering international relations, environmental affairs, education and economic development.
Said Xi: “We have brought a large trade delegation with us and while we are here business contracts worth billions of dollars will be signed”. He added that the deals would be instrumental in development South African and the continent.
Xi and his premier, Li Keqiang, who were voted in to head the Communist Party last month as part of a once-in-a-decade election, had earlier visited Tanzania and will wrap up his African visit with a trip to Congo-Brazzaville. Trade between China and Africa topped $200bn last year, mostly on mineral products including oil.
