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Overview

Bank of China contributes ZAR 1.5 billion to Tranche 1 of R12 billion club loan for Transnet's locomotive fleet acquisition program (Linked to Record ID#70774, #58599)

Commitments (Constant USD, 2023)$122,913,417
Commitment Year•2015Country of Activity•South AfricaDirect Recipient Country of Incorporation•South AfricaSector•Transport And StorageFlow Type•Loan

Status

Project lifecycle

Implementation

Pipeline: PledgePipeline: CommitmentImplementationCompletion

Timeline

Key dates

Commitment date
Nov 23, 2015
Start (actual)
Dec 1, 2015
First repayment (originally scheduled)
May 22, 2020
Last repayment (originally scheduled)
Nov 19, 2030

Stakeholders

Organizations involved in projects and activities supported by financial and in-kind transfers from Chinese government and state-owned entities

Ultimate beneficial owners

At least 25% host country ownership

Funding agencies

State-owned Commercial Banks

  • Bank of China (BOC)

Cofinancing agencies

Private Sector

  • Absa Group Ltd. (ABGL) (Formerly Barclays Africa Group Limited)
  • Futuregrowth Asset Managers
  • Nedbank Ltd
  • Old Mutual Group

Receiving agencies

State-owned companies

  • Transnet SOC Ltd

Implementing agencies

State-owned companies

  • CRRC Group Corporation Limited

Loan description

In 2015, Bank of China contributes to ZAR 12 billion dual-tranche club loan for Transnet's locomotive fleet acquisition program, South Africa

Grace period•4.5 yearsGrant element•0%Interest rate (t₀)•11.83%Interest type•Fixed Interest RateMaturity•15 years

Narrative

Full Description

Project narrative

On November 23, 2015, Transnet SOC Ltd (or “Transnet”), a South African state-owned railway company, signed a syndicated loan agreement worth ZAR 12 billion with five financial institutions, including ZAR 3 billion from the Bank of China for it locomotive fleet acquisition programme (Transnet老旧机车升级计划). The other institutions participating in the club loan were Absa (ZAR 3 billion), Nedbank (ZAR 3 billion), Futuregrowth Asset Managers (ZAR 1.5 billion), and Old Mutual Specialised Finance (ZAR 1.5 billion). All loans for this project were concluded separately with each lender. Each loan reportedly carried a maturity of 15 years and grace period of 4.5 years. According to "Presentation on MNS Report", the Transnet entered into the facility on a floating exchange rate, but shortly thereafter performed a cross-currency interest rate swap on December 4, 2015 that essentially set a fixed interest rate of 11.83%. On December 1, 2015, Transnet drew down a first tranche of ZAR 4.5 billion from the ZAR 12 billion club loan. Bank of China (BOC) contributed ZAR 1.5 billion to the first tranche, which represented half of its total committed contribution of ZAR 3 billion. Record ID#58603 captures BOC’s contribution to the first tranche. Then, on March 1, 2016, Transnet fully drew down the ZAR 7.5 billion second tranche of the ZAR 12 billion club loan. Record ID#70774 captures BOC’s ZAR 1.5 billion contribution to Tranche 2. Transnet was allowed use the proceeds of the first and second loan tranches to finance up to 85% (eighty five percent) of two commercial contracts: a March 17, 2014 commercial contract that it signed with CSR for the acquisition of 459 new dual voltage electric locomotives (“electric locomotives") and a March 17, 2014 commercial contract that it signed with CNR for the acquisition of 232 diesel locomotives. According to CDB, Transnet had procured 591 of these locomotives as of 2016. This project was plagued by controversy and allegations that Transet agreed to overpay CSR and CNR for their equipment in exchange for kickbacks to businesses owned by the wealthy Gupta family. This project is linked to Record ID#58599, which records a $1.5 billion loan that Transnet contracted from China Development Bank in June 2015 for the same project.

Staff comments

1. In 2015, CNR and CSR merged to form China Railway Rolling Stock Corporation (CRRC). 2. As this project has both development and commercial elements in funding Transnet and a cross-currency interest rate swap, it is coded as having 'mixed intent'.