Finance Minister Enoch Godongwana welcomed world leaders and delegates to the 9th Annual Meeting of the New Development Bank. Picture: Vernon Pillay/Independent Newspapers
Transnet on Friday signed a R5 billion loan from the New Development Bank (NDB) at the opening of the bank’s 9th annual meeting, which started in Cape Town on Friday.
The loan agreement, which is guaranteed by the South African government, aims to lift the efficiency of South Africa’s freight rail systems, including improving its rail network, financing the overhaul of its locomotives, and helping fund new wagons.
South Africa’s buckling freight rail systems have in recent years become an impediment to the economy, with industry and mining groups having lost billions of rands of potential exports each year due to problems with the rail network. In July, the African Development Bank Group approved a $1bn (R18.85bn at the time) loan for its recovery and growth plan.
Since the NDB was established in 2015, it has become a formidable agent for infrastructure development finance among its member countries. These include South Africa, which has received $5.8bn (R102.3bn rand) in funding for 13 projects, including R3.2bn for Phase Two of the Lesotho Highlands Water Project, and R3.5bn for the Durban Container Berth Rebuild Project.
NDB president Dilma Rousseff said they were delighted to partner with Transnet in this “transformative initiative”.
“By modernising the freight rail sector, we aim to facilitate more efficient logistics operations that will benefit the entire region and align with our goal of investing in a sustainable future,” she said.
Transnet Group chief executive Michelle Phillips, who signed the loan for Transnet at the NDB meeting, said: “This investment is important for Transnet as we accelerate implementation of the Recovery Plan and economic reforms.”
The NDB was created in 2015 by Brazil, Russia, India, China and South Africa to mobilise resources for infrastructure and sustainable development projects in BRICS and other emerging market economies and developing countries.
Finance Minister Enoch Godongwana said the NDB needed to be “unwavering in its quest” to meet the UN’s Sustainable Development Goals, as developing countries were facing serious challenges in infrastructure and development funding in the context of the weak global growth environment, high interest rates, geopolitical tensions and climate change.
All these were exacerbating problems of poverty, unemployment and inequality in BRICS countries..
“As more African countries become members (of the NDB) we believe the bank can play an increasingly important role in provision of infrastructure,” said Godongwana.
“We look to the NDB to provide solutions aimed at de-risking infrastructure projects through its financial instruments to attract private capital. This will support infrastructure projects and provide technical assistance in designing innovative funding models and institutional arrangements that could accelerate infrastructure investments at a country-level.”
He said that if the NDB was to continue advancing the interests of the developing world and address challenges such as renewable energy, infrastructure development, digital access and job creation, then the bank should speed up disbursements of approved projects.
Godongwana said the NDB’s activities in developing and emerging markets would assist in addressing the large infrastructure financing gap that had been impeding economic growth and development, particularly in Africa.
“In this slow growth environment, where fiscal and monetary policy is limited, public and private role players need to collaborate to support growth,” he said.
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