July 18 (Reuters) – The African Development Bank (AfDB) has approved a $1 billion loan for South Africa’s Transnet to aid the troubled logistics firm’s recovery plan, the bank and the company said on Thursday.

State-owned Transnet has struggled to provide adequate freight rail and port services in South Africa due to equipment shortages and maintenance backlogs after years of under-investment.

This has impacted commodity exports and other sectors such as manufacturing and retail, weakening Africa’s most advanced economy.

Transnet and the AfDB said in a joint statement that the 25-year loan was fully guaranteed by the government of South Africa.

“It will facilitate the first phase of the company’s ZAR 152.8 billion rand ($8.1 billion) five-year capital investment plan to improve its existing capacity ahead of expansion for the priority segments throughout the transport value chain,” the statement said.

Transnet, which has debts of 130 billion rand, recorded a loss of 1.6 billion rand in the six months to Sept. 30 on the back of declining rail, port and pipeline volumes as well as higher costs.

It has seen freight volumes decline to 150 million metric tons in financial year 2022/23 from 226 million tons in 2017/18.

Transnet’s recovery plan, announced in October 2023, seeks to restore freight volumes and return the company to profitability over a period of 18 months.

The turnaround plan includes splitting the freight rail subsidiary into two – an infrastructure management company and an operating unit. It also targets reduced port backlogs and plans another attempt to open up parts of its rail network to private operators after a false start two years ago.

(Reporting by Nelson Banya; Editing by Alexander Winning and David Evans)