Active Development AidData Chinese Aid

[Cancelled] China Eximbank cancelled $36.66 million for $302 million government concessional loan for Phase 2 of the Communication Towers Project (Linked to Record ID#53207)

$36.66M USD

Funder	Export-Import Bank of China (China Eximbank)
Recipient Organization	Government of Zambia
Country	Zambia
Start Date	Aug 04, 2017
End Date	Jul 06, 2033
Duration	5,815 days
Number of Grantees	1
Roles	Recipient
Data Source	AidData Chinese Aid
Grant ID	`107876`

Grant Description

[Cancelled] China Eximbank cancelled $36.66 million for $302 million government concessional loan for Phase 2 of the Communication Towers Project In April 2016, the Government of Zambia and Huawei Technologies Co., Ltd. signed an MOU on Phase 2 of the Communication Towers Project.

Then, on August 4, 2017, the Chinese Government and the Government of Zambia signed a preferential loan framework agreement for Phase 2 of the Communication Towers Project.

On the same day, China Eximbank and the Government of the Government of Zambia's Ministry of Finance also signed a $302,034,321.68 government concessional loan (GCL) agreement for Phase II of the Smart Zambia National ICT Development Project. The borrowing terms of the GCL are unknown. However, it is known that the Zambian Ministry of Finance on-lent the proceeds of the loan to Zamtel.

It is also known that the borrower was expected to use the proceeds of the loan to finance 100% of the cost of a commercial contract [ID#MTWSC/PSU/G/04/15] between the Government of Zambia's Ministry of Transport and Communication and Huawei Technologies Co., Ltd., which was signed on August 12, 2016.

According to Ministry of Transport and Communications of Zambia, by the fourth quarter of 2018, the loan had achieved an 30.3% disbursement rate ($91,637,435.75 out of $302,034,321.68).

As of July 2022, the Ministry of Finance & National Planning (MOFNP) of Zambia reported that the loan had achieved an 87.8% disbursement rate ($265,379,267.74 out of $302,034,321.68).

Phase 2 involved the construction of 808 communication towers, 1,009 2G, 3G and 4G wireless stations, as well as the installation of a matched transmission network and user access terminals in unserved and under-served areas. The broad objective is to improve communication services and reach 92 percent network coverage countrywide.

Another objective is to ensure that 40 percent of the country has access to data services (from a baseline level of 5 percent).

The targets of these communication towers will be relatively population dense villages and economically active areas like hospitals, schools, mines, and tourist areas.

This is in line with the country's goal to provide universal access to information via information and communications technology (ICT). Huawei Technologies Co., Ltd. is the contractor responsible for project implementation. Its work is being overseen by Zambia Telecommunications Company Limited (Zamtel).

Project implementation commenced in September 2017. 600 communication towers were erected in 2018 and 400 additional towers were scheduled for installation in 2019. As of June 2020, 708 communication towers were operational and project completion was scheduled for December 2020. As of March 2021, the project had achieved a 78% completion rate.

On July 29, 2022, the Ministry of Finance & National Planning (MOFNP) of Zambia announced that it was seeking lender approval to formally cancel the loan’s undisbursed balance ($36,655,053.94); however, it also noted that it had not yet secured formal lender approval for this action.

This announcement came approximately 21 months after the Government of Zambia defaulted on its repayment obligations to Eurobond holders and approximately 6 weeks after China, France, and 14 other countries formed a creditor committee to discuss the Zambian authorities’ request for a debt treatment under ‘the Common Framework for Debt Treatment beyond the DSSI’ endorsed by the G20 and the Paris Club.

MOFNP also announced on July 29, 2022 that it planned to finance the completion of Phase 2 of the Communication Towers Project with general government revenues.

Then, in 2024, the Zambia's Auditor General revealed that 'the [China Eximbank] loan was to be repaid using the funds to be generated from the same project.

However, the sites in question were in most instances deployed in areas that were not commercially viable and could not generate sufficient revenue to cover operations related to the project and service the loan.

Zamtel’s failure to service the on-lent [loan] had been on account of low revenue generation from the low-income areas which were being served by the sites that were deployed under the GRZ Communications Towers II project.'

📋 Staff Comments

This project is also known as the Communications Towers Project Phase II or Universal Access Coverage Phase II Project. The Chinese project title is 赞比亚偏远地区通信覆盖项目 or 农村通信塔项目 or 赞比亚偏远地区通信覆盖项目二期 or 偏远地区通信覆盖二期项目.
One official source (https://www.dropbox.com/s/3uyikwu9ub1ncfi/%E4%B8%AD%E5%9B%BD%E5%AF%B9%E5%A4%96%E6%89%BF%E5%8C%85%E5%B7%A5%E7%A8%8B%E5%9B%BD%E5%88%AB%EF%BC%88%E5%9C%B0%E5%8C%BA%EF%BC%89%E5%B8%82%E5%9C%BA%E6%8A%A5%E5%91%8A2019-2020.pdf?dl=0) indicates that this project reached completion in March 2020. This issue warrants further investigation.
The government concessional loan (GCL) that China Eximbank issued for Phase 2 of the Communication Towers Project should not be confused with the preferential buyer’s credit (PBC) that China Eximbank issued for Phase II of Smart Zambia National ICT Development Project (captured via Project ID#92219). SAIS-CARI and Boston University’s Global Development Policy Center treat Phase 2 of the Communication Towers Project and Phase II of Smart Zambia National ICT Development Project as one and the same. However, multiple sources confirm that they are two separate projects supported by two separate financing agreements with China Eximbank.
SAIS-CARI and Boston University’s Global Development Policy Center capture the GCL for the Phase 2 of the Communication Towers Project but not the PBC for Phase II of Smart Zambia National ICT Development Project.
The China Eximbank GCL was almost certainly denominated in RMB. However, AidData has thus far only managed to identify the USD equivalent value of the loan. This issue warrants further investigation.
Some sources refer to the USD value of the GCL as $280,764,601.
Others refer to the USD value of the GCL as $302,034,321.
AidData relies on the $302,034,321.68 figure reported by MOFNP in July 2022 (see https://www.dropbox.com/s/1m28edikpasu2nq/MEASURES-TAKEN-REGARDING-SOME-LOAN-FINANCED-PROJECTS.pdf?dl=0).
According to the World Bank's Debtor Reporting System (DRS), the weighted average grace period of all official sector lending from all Chinese creditors to government and government-guaranteed borrowing institutions in Zambia was 4.8654-years in 2017. AidData estimates the grace period of the China Eximbank loan that supported Phase 2 of the Communication Towers Project by using this figure. See https://www.dropbox.com/scl/fi/uyz6w7q31x2o8i6rna7ug/DRS-May-2024-Extraction-Official-Chinese-Loan-Commitments-to-Zambia.xlsx?rlkey=n0a6270w91pdmmfyaoqva419r&dl=0 8. According to the World Bank's Debtor Reporting System (DRS), the weighted average maturity of all official sector lending from all Chinese creditors to government and government-guaranteed borrowing institutions in Zambia was 18.0631-years in 2017. AidData estimates the maturity of the China Eximbank loan that supported Phase 2 of the Communication Towers Project by using this figure. See https://www.dropbox.com/scl/fi/uyz6w7q31x2o8i6rna7ug/DRS-May-2024-Extraction-Official-Chinese-Loan-Commitments-to-Zambia.xlsx?rlkey=n0a6270w91pdmmfyaoqva419r&dl=0 9. According to the World Bank's Debtor Reporting System (DRS), the weighted average interest rate of all official sector lending from all Chinese creditors to government and government-guaranteed borrowing institutions in Zambia was 3.6528% in 2017. AidData estimates the interest rate of the China Eximbank loan that supported Phase 2 of the Communication Towers Project by using this figure. See https://www.dropbox.com/scl/fi/uyz6w7q31x2o8i6rna7ug/DRS-May-2024-Extraction-Official-Chinese-Loan-Commitments-to-Zambia.xlsx?rlkey=n0a6270w91pdmmfyaoqva419r&dl=010. In July 2022, Zambia announced that it is cancelling certain projects in their entirety or cancelling undisbursed portions of certain Chinese loans unilaterally. 11 China Exim bank projects are cancelled, 3 ICBC projects are cancelled, 1 Jiangxi Bank project is cancelled. While it is unclear if the creditors agreed to this action, there is some evidence that shows the cancellation had ocurred. This issue warrants more investigation. The announcement can be accessed at https://www.dropbox.com/scl/fi/bxixfu3t97x14epaqayjv/MEASURES-TAKEN-REGARDING-SOME-LOAN-FINANCED-PROJECTS.pdf?rlkey=azvseog366a7ntoo93fjiatrj&e=3&dl=0

📚 Sources & References

Government gets $280 million loan from China bank to finance for communication towers
Infrastructure Financing Trends in Africa – 2017
China
Zambia reach deal for construction of more communication towers
MINISTERIAL STATEMENT
赞比亚偏远地区通信覆盖项目二期框架协议签约仪式在卢萨卡举行
MINISTERIAL STATEMENT, 2017 ANNUAL ECONOMIC REPORT
China and Zambia Sign the Framework Agreement of the Communications Towers Project Phase II
杨优明大使在赞比亚偏远地区通信覆盖项目二期项目框架协议签署仪式上的讲话
WEDNESDAY, 7 MARCH, 2018 1 MINISTERIAL STATEMENT CONSTRUCTION OF MOBILE COMMUNICATION TOWERS PHASE II, “SMART ZAMBIA” TARGETS 100% MOBILE VOICE COVERAGE
SPEECH BY HONOURABLE MUTOTWE KAFWAYA
MP MINISTER OF TRANSPORT & COMMUNICATIONS AT THE LAUNCH OF THE COMMUNICATION TOWER AT IMUSHO
SESHEKE ON TUESDAYJUNE 2ND 2020
Zambia says project to build over 1,000 communication towers on course
Construction of communication towers ahead of schedule – Mushimba, 2019 ANNUAL REPORT Advancing the Nation to a Digital Society
REPUBLIC OF ZAMBIA REPORT OF THE COMMITTEE ON PARASTATAL BODIES ON THE REVIEW OF OPERATIONS AND MANAGEMENT OF ZCCM –INVESTMENT HOLDINGS AND ZAMBIA TELECOMMUNICATIONS COMPANY LIMITED FOR THE THIRD SESSION OF THE TWELFTH NATIONAL ASSEMBLY
携手华为共建智慧赞比亚数字发展同创美好新生活
Republic of Zambia Rapid eTrade Readiness Assessment
Zambia fast-tracks building of China-funded communication towers: official
中国助赞比亚解决农村通信难题, “中非十大合作计划”谱写中赞友谊新篇章
SPEECH FOR THE OFFICIAL OPENING OF THE FOURTH SESSION OF THE TWELFTH NATIONAL ASSEMBLY BY HIS EXCELLENCY
MR. EDGAR CHAGWA LUNGU
PRESIDENT OF THE REPUBLIC OF ZAMBIA. ON FRIDAY, 13TH SEPTEMBER, 2019
MTC Annual Report 2018
Dipak drags Minister of Finance to court for contracting loans without parliament approval
REPORT OF THE COMMITTEE ON GOVERNMENT ASSURANCES FOR THE FIRST SESSION OF THE TWELFTH NATIONAL ASSEMBLY APPOINTED ON WEDNESDAY, 5TH OCTOBER 2016
Friday, 24th February, 2017 ANNOUNCEMENT BY MR SPEAKER
中国对外承包工程国别（地区）市场报告2019-2020.pdf
Zambia tech regulator confirms Huawei tower contract
Zambia’s Chinese Debt in the Pandemic Era
MEASURES TAKEN BY THE GOVERNMENT ON THE IMPLEMENTATION OF LOAN FINANCED PROJECTS
China Loans to Africa, annual report 2019
Special Audit Report of the Auditor General on External Public Debt of the Republic of Zambia
Republic of Zambia Report of the Parliamentary Select Committee on the Special Audit Report of the Auditor General on External Public Debt
Special Audit Report of the Auditor General on External Public Debt of the Republic of Zambia Loan applications and disbursements are still being received and processed as the projects continue to evolve. Ongoing monitoring and evaluation are in place to ensure project continuity.