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Transnet in talks with Chinese banks for train finance

To negotiate a reduction in financing costs.

South African freight and logistics group Transnet has raised R13 billion to help pay for new locomotives, as part of an expansion designed to help speed delivery of commodities for export.

Transnet is investing about R312.2 billion by 2019 to expand the railways, ports and pipelines that handle commodities in Africa’s most advanced economy and last year said it would order locos from General Electric (GE), Bombardier and two Chinese firms as part of that plan.

Barclays Africa, Investec, Standard Bank , Old Mutual and Export Development Canada are funding the locomotives, Transnet said, though Chief Executive Brian Molefe said the group was negotiating with Chinese banks to reduce the financing costs for trains to be built by China’s CSR Corp and China CNR Corp.

The 1,064 locos are being built under a R50 billion contract announced last year.

The first new locos will be rolled out in July after GE, Bombardier and China South Railways complete technical designs. The fourth company, China CNR Corp , is 90% done with its portion of the technical design.

Transnet has already spent R90 billion from its own coffers on new infrastructure since 2012.

Agreeing funds from Chinese financial institutions could be beneficial as these lenders often offer finance to companies in other emerging markets at more favourable rates than they would get from western banks.

Chief financial officer Anoj Singh told Reuters talks over the financing of the rest of the locos should conclude in the next three to four months.

He said the volatility of the rand made borrowing foreign debt more expensive. “Our main focus is understanding at what cost we can get the funding at and that is the main driver”, he said.

The company transports coal, iron ore and other commodities from companies such as Sasol, BHP Billiton and Exxaro.

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