ICBC provides ZAR 4 billion loan to Transnet for operating expenses

On July 24, 2018, during a meeting between the South African President Cyril Ramaphosa and the Chinese President Xi Jinping, the Industrial and Commercial Bank of China (ICBC) signed an agreement with President Ramaphosa to give a loan worth ZAR 4 billion (about $300 million) to Transnet, a state-owned rail, port, and pipeline company in South Africa. The proceeds of the loan were to be used by the borrower for short-term liquidity purposes (i.e. to cover its general operating expenses as well as some capital expenditures). The loan has a maturity of five and a half years. The Government of South Africa issued a sovereign guarantee in support of the loan. President Cyril Ramaphosa stated the facility was a ‘rand-denominated, quarterly amortising loan, at a floating and competitive interest rate,’ although the precise interest rate was never made public. No additional information about project implementation or use of the loan proceeds has been made public. Transnet’s annual financial statements report from 2019 shows that the ICBC loan had achieved a 95% disbursement rate by the end of 2019 (ZAR 3.8 billion out of ZAR 4 billion).

Additional details

1. In the Chinese Loans to Africa Database produced by SAIS-CARI and Boston University, the loan commitment year is identified as 2019 rather than 2018. This issue warrants further investigation. 2. Prior to issuing the loan, ICBC provided a term sheet (TS) to Transnet that indicated its willingness to issue a ZAR-denominated loan at a floating market interest rate plus 275 basis points (see http://www.treasury.gov.za/comm_media/press/2018/Final%20Report%20-%20National%20Treasury%20-%20Mckinsey%20Regiments%20Trillian%2015112018.pdf). For the time being, AidData has estimated the all-in interest rate that applies to the ZAR 4 billion loan by adding 2.75% to the average 6-month LIBOR rate in July 2018 (2.520%).

Number of official sources

7

Number of total sources

17