11 July 2013
South African state company Transnet has secured US$108-million (approximately R1.1-billion) in financing from the Export-Import Bank of the United States to support its purchase of 53 locomotives from US company General Electric Transportation.
The grant, announced on Monday, follows Ex-Im Bank’s approval, in February 2011, of a R1.1-billion loan to Transnet for the purchase of 47 locomotive kits from General Electric (GE), adding up to a total of $230-million in financing for the purchase of 100 GE locomotives.
Ex-Im chairman Fred Hochberg, referring to US President Barack Obama’s recent trip to South Africa, said in a statement on Monday: “As the President highlighted on his recent trip, there are enormous opportunities for US exporters in South Africa and across the broader region.”
The bank, which provides below-market financing to facilitate sales of US goods abroad, would “continue to help American companies expand their reach into this dynamic market,” Hochberg said.
In April 2012, Transnet has announced the details of a R300-billion investment in infrastructure aimed at creating over half-a-million new jobs while making its freight rail division the fifth-largest in the world.
Transnet plans to spend the lion’s share of this capital investment, R205-billion, on rail projects – R151-billion of this on freight rail – as the company pushes to increase South African freight rail volumes from about 200-million to 350-million tons by 2019, while increasing its market share of container traffic from around 79% to 92%.
Achieving such an increase would significantly reduce the cost of doing business in South Africa, Transnet said last year, citing internal studies showing that rail in the country was on average 75% cheaper than road transport.
The 47 GE locomotive kits are due to be shipped to Transnet Rail Engineering’s facilities in Koedoespoort, Pretoria later this year, where they will be assembled by local workers to include up to 37% local content.
“I greatly appreciate Ex-Im’s financing arrangements for this sale, which supports jobs in the United States and South Africa,” GE Transportation CEO Lorenzo Simonelli said on Monday.
Ex-Im Bank said South Africa was “one of nine key markets Ex-Im Bank has identified as having strong opportunities for US exporters. In financial year 2012, Ex-Im Bank authorized approximately $130-million in financing to South Africa, and the bank’s current exposure is more than $1-billion.”