Thelo Group’s management plans to buy Deutsche Bahn AG’s 49% shareholding and is in talks with financiers to raise $250 million to help the South African company transform into a developer of rail lines and ports in sub-Saharan Africa. 

The capital will be used “to expand our capacity quite aggressively,” fund “project preparation on some of the projects that we’ve already secured” and inject equity into them, Thelo’s Chairman Ronnie Ntuli said in an interview, adding that the company may ultimately seek to list on a stock exchange. Talks are being held with African financiers, including development finance institutions, as well as international investors over both debt and equity investment, he said.

The firm’s plans come as African countries from South Africa to Ghana seek to attract investment in rail and ports to boost exports of metals and agricultural products and cut costs as 80% of the goods on the continent are currently transported by road. The company currently has a unit that runs trains and has advised on a number of government plans to revive rail networks. 

The company - which currently runs trains in Tanzania, Zambia, Eswatini and Mozambique - is in talks to win contracts to develop multibillion dollar rail and port networks in two African nations, which Ntuli declined to identify. Those would add to a $3.2 billion project that the company is part of to develop and upgrade Ghana’s Western Railway Line and then manage it for 25 years. That line will help the country export bauxite, manganese and iron ore as well as transporting passengers.  

It’s also part of groups who have been shortlisted to develop the Trans-Kalahari Railway project, which will connect Botswana to Namibia’s Walvis Bay, and the Boegoebaai project, a 50 billion rand ($2.7 billion) green hydrogen-focused port and rail network in South Africa should they go ahead. 

Thelo, which was founded more than a decade ago, sees an opportunity to benefit from Africa’s Continental Free Trade Area - which when fully operational will be the largest single market by area since the formation of the World Trade Organization. 

“As a result of AfCFTA, the transport sector is expected to expand by nearly 50%, significantly boosting intra-African trade” the company said. “But its success hinges on improving Africa’s road, rail and transport infrastructure,” it said.

The company also sees possibilities for doing business in South Africa where the state logistics firm, Transnet SOC Ltd., is preparing to let privately owned trains run on its tracks for the first time and to invite private investment in infrastructure. South Africa has 23,000 kilometers (14,300 miles) of rail tracks, accounting for 85% of Africa’s rail network.

While Ntuli wouldn’t say how much Deutsche Bahn, which is owned by Germany’s government, will be paid for its stake, he said the company will remain a technical adviser and won’t compete with Thelo in Sub-Saharan Africa.