Independent railways operator Traxtion has concluded an $86-million (R1.4-billion) equity capital raise, which the company says has created the financial platform for yet further investments into a South African market that is beginning to open up to competition.
The transaction involves STANLIB Infrastructure Investments and Standard Bank, which have acquired an undisclosed minority position in Traxtion, as well as Harith’s InfraCo and PAIDF2 funds, consolidating Harith’s long-standing shareholding in the company.
CEO James Holley tells Engineering News that the injection of fresh equity is a vote of confidence both in Traxtion’s strategy and the reforms under way in South Africa’s rail sector.
Following the vertical separation of Transnet Freight Rail and the launch of the Transnet Rail Infrastructure Manager, or TRIM, 11 private train operating companies (TOCs) have received slot allocations and are preparing to begin operating on a network hitherto monopolised by the State-owned freight logistics group.
Traxtion did not seek an allocation under Version 3 of TRIM’s Network Statement, which guides the slot allocations and pricing, but will consider seeking allocations should the upcoming Version 4 address the risks that it perceived as undermining the bankability of TOCs under the earlier statement.
Holley says the transaction, which was facilitated by Pallidus Capital, closes the equity required for Traxtion’s previously announced R3.4-billion rolling stock investment programme, and secures a further pool of capital for future investments.
“We previously said Traxtion was preparing to unlock significantly more investment into the sector; the backing of South Africa’s largest financial institutions sets us up perfectly to deliver that,” Holley adds.
Traxtion’s current R3.4-billion rolling-stock investment includes the acquisition and refurbishment of 46 second-hand locomotives for R1.8-billion, and the purchase of 920 wagons for R1.6-billion.
The locomotives, which are being bought from KiwiRail in New Zealand, will be upgraded and refurbished at Traxtion’s workshop complex in Rosslyn, in Gauteng, and the company is in advanced discussions with domestic manufacturers to supply it with wagons.
Holley says about 60% of its total spend on the refurbishment programme will be with South African suppliers, and notes that over the 20-year lifecycle of the assets Traxtion is likely to spend twice the initial budget in South Africa to maintain the fleet.
The locomotives will be delivered in four separate batches, with the first eight locomotives to arrive in Durban in August, and with the first refurbished locomotive scheduled to enter service in March 2027. Thereafter, Traxtion aims to release one refurbished locomotive every week thereafter from its Rosslyn facility until all 46 are operational.
Holley reports strong demand from TOCs to lease Traxtion’s rolling stock, and confirms that it is keeping its options open with regards to applying for slot allocations should Network Statement Version 4 address its concerns. These relate to the introduction of service level commitments from the TRIM, the introduction of reciprocal and balanced penalties and legal protections, as well as the recognition of lender rights.
“For now we are looking to support the train operating companies in various ways. In some instances we’re providing them with full maintenance leases, and in other instances we’re looking to provide them with full maintenance leases, together with train operating crews. The only issue on which we are inflexible, of course, is regarding the maintenance of our train sets,” Holley says, noting that Traxtion has built its business on extending the operational life of rail assets through refurbishments and maintenance.
The company has been active in the railways sector in other parts of Africa for 38 years, and currently has operations in ten countries. It has a 55-strong locomotive fleet outside of South Africa and a combination of wagons that it owns and wagons that it maintains on behalf of third-parties.
The new equity investors are supportive of Traxtion’s strategy of continued refurbishment programmes, fleet enhancement initiatives and operational expansion, as well as its vision for supporting localisation and supplier development.
STANLIB Infrastructure Investments principal Muhammed Munshi says the investment reflects its focus on backing scalable infrastructure platforms that support government-led reforms to improve logistics efficiency and economic growth, while Standard Bank VP for investment banking Willem Els highlights the importance of strategic investment and collaboration across the public and private sectors for improving the efficiency, resilience and long-term sustainability of the country’s freight logistics network.
InfraCo’s Frans Baleni adds that Traxtion’s continued investment into rail capacity and logistics infrastructure reflects the kind of long-term commitment needed to help reshape the future of freight and industrial growth in South Africa.
“This capital raise strengthens our future funding position and boosts our readiness for future fundraising opportunities and strategic expansion initiatives as rail demand and private-sector participation continue to evolve,” Holley concludes.