BRICS Bank considers loan to save Transnet

The New Development Bank (NDB), founded by the BRICS bloc of nations, is considering granting an R18 billion loan to Transnet to upgrade the utility’s locomotives and help its rail corridors run at full capacity. 

BusinessDay reported that the bank aims to complete the transaction by the end of the year to expand its $5.6 billion (R105.5 billion) portfolio in South Africa. 

The Shanghai-headquartered bank was formed to provide emerging-market economies with their own multilateral financial institution. 

It was founded in 2015 by Brazil, Russia, India, China and South Africa, each contributing $2 billion (R37.68 billion) to the bank’s equity capital and owning a 20% stake. 

In 2021, the NDB initiated membership expansion and admitted Bangladesh, Egypt, United Arab Emirates and Uruguay as its new member countries.

“The loan itself will be for R18 billion for Transnet for the modernisation of its locomotives. We are considering another big loan for water and sanitation infrastructure,” the bank’s COO, Vladimir Kazbekov, said. 

The South African government will most likely guarantee the debt in line with the NDB’s requirements. 

Last week, the NDB raised R1.5 billion ($94 million) at its first-ever South African bond auction. 

The bank received more than R2.5 billion in bids for the three- and five-year bonds, enabling it to increase the size of the deal.

In a statement, the bank said it allocated 71% to institutional investors and the rest to local banks in the sale on Tuesday, 15 August. 

“NDB is seeking to increase its presence in the local capital markets of its member countries to fund its robust portfolio of local currency loans,” said NDB CFO and vice-president Leslie Maasdorp.

“The proceeds will be used to fund infrastructure and sustainable development projects in South Africa.”

Maasdorp has previously said the bank wants to increase its lending in the local currencies of its members, and the bond sale is part of this aim. 

He reiterated the bank’s commitment to helping South Africa address its electricity shortfalls by investing in renewable generation projects.

The bank has assisted South African state-owned enterprises, such as Eskom, with financing and Independent Power Producers through the Development Bank of Southern Africa and the Industrial Development Corporation. 

“Currently, our big focus is on energy and helping the country recover from the energy crisis”, Maasdorp said. 

However, he said existing projects the bank has invested in would take some time before they contribute energy to the grid. 

This is due to the need for Eskom to upgrade its grid significantly to enable renewable projects to connect to its transmission network. 

The bank has recognised that it will have to deploy capital to fund the upgrading of the grid. 

“We need to put more resources into upgrading the grid,” Maasdorp said. “It is an area we hope to play a bigger role in.”