International giant pumping R2.8 billion into vital South African sector

African Rail Company (ARC), a closely held rail logistics company, plans to raise about R2.84 billion ($170 million) this year to buy locomotives and wagons for use in South Africa, where the state logistics company is under pressure to improve performance.

United Arab Emirates-based ARC was among 11 successful bidders for slots to operate trains on South Africa’s freight network, part of the government’s almost R2 trillion drive to bring in private companies to boost efficiency.

Bottlenecks at state-owned Transnet, which also operates the country’s main ports, have been a major constraint on economic growth over the past decade.

ARC will operate on a line that runs to South Africa’s northeastern border with Mozambique, CEO Youssef Elgonaid said in an interview this week.

It will also use tracks that connect the commercial hub of Gauteng province to the main port of Durban – a line that carries the bulk of South Africa’s container cargo.

Some of the funding will also go to regional operations that move copper from mines in the Democratic Republic of Congo to Mozambique’s Maputo port, the CEO said.

“We’re seeing massive excitement about the logistics space,” in part because of rising demand for critical minerals and the need to shift heavy cargoes away from road transport, he said.

“Rail is the only solution overland for these corridors.” The company plans to raise about 30% of the $170 million in equity and the rest in debt, he said.

Private equity firms, especially from the Middle East, have shown an interest in providing funding, as well as shipping companies, Elgonaid said, without identifying them.

ARC has also spoken to development finance institutions for debt funding.