Transnet and Germany’s KfW Development Bank on Monday signed a R2.8 billion loan to fund part of its locomotives acquisition programme.

Transnet will use the proceeds of the loan to fund the acquisition of 240 electric locomotives it will build with Bombardier in its manufacturing facilities in Durban. These are part of Transnet’s larger 1 064 locomotives acquisition programme.

The loan will mature in 15 years, with a five-year grace period in which Transnet will pay interest. The agreement was negotiated in rand terms and Transnet says there is no currency risk.

Siyabonga Gama, Acting Group Chief Executive and Dr Jan Martin Witte, KfW’s Head of Infrastructure in Southern Africa, signed the agreement at Transnet’s head office at the Carlton Centre, Johannesburg. The signing ceremony was attended by German Ambassador to South Africa, Dr Horst Freitag, emphasising the solid trade relations between the two countries. South Africa is Germany’s largest trading partner in Africa.

In March 2014, Transnet awarded a contract for the building of 1064 diesel and electric locomotives to four global original equipment manufacturers. The company awarded CSR Zhuzhou Electric Locomotive and Bombardier Transportation contracts to build 599 electric locomotives and; General Electric Technologies and CNR Rolling Stock to build 465 diesel locomotives.

Seventy locomotives are to be built at Transnet Engineering’s plants in Koedoespoort, Pretoria and Durban.

Transnet recently concluded a R30 billion loan facility agreement with China Development Bank (CDB) for funding 232 diesel and 359 electric locomotives it is building with China North Rail and China South Rail respectively.

The locomotive build programme is critical for the implementation of Transnet’s Market Demand Strategy and is intended to modernise the rail fleet in a drive to improve reliability and customer satisfaction and ultimately, realise the crucial goal of migrating rail-friendly cargo from the country’s roads.