Active Development AidData Chinese Aid

[Cancelled] ICBC cancelled $106.49 million for $169.64 million loan for Phase II of the Nkana Water and Sanitation Project (Linked to Record ID#53039)

$106.49M USD

Funder	Industrial and Commercial Bank of China (ICBC)
Recipient Organization	Government of Zambia
Country	Zambia
Start Date	Dec 01, 2015
End Date	Jan 27, 2028
Duration	4,440 days
Number of Grantees	1
Roles	Recipient
Data Source	AidData Chinese Aid
Grant ID	`107881`

Grant Description

[Cancelled] ICBC cancelled $106.49 million for $169.64 million loan for Phase II of the Nkana Water and Sanitation Project In December 2015, the Industrial and Commercial Bank of China (ICBC) and the Government of Zambia signed a $169,642,996.60 loan agreement for Phase II of the Nkana Water And Sanitation Project (NWSSP II).

📋 Loan / Grant Terms

💰 Loan Amountare unknown

However, it is known that the proceeds of the loan were to be used by the borrower to finance 85% of the cost of a $199,579,996.00 commercial (EPC) contract between the Government of Zambia and China Henan International Cooperation Group (CHICO), which was signed on September 5, 2012 and amended in January 2015.

As of July 2022, the loan had achieved a 37.2% disbursement rate ($63,156,958.23 out of $169,642,996.60).

The purpose of this project is to improve access to adequate water supply and sanitation services in the urban and peri-urban areas of Kitwe, Kalulushi, and Chambishi through rehabilitation and extension of the existing water supply and sanitation facilities in these areas. Upon completion, the project is expected to benefit 750,000 people.

CHICO is the EPC contractor responsible for implementation. Construction began in June 2017. By the end of 2018, the project had achieve an overall completion rate of 36%.

More specifically, it had achieved the following milestones: replacement of water transmission mains (81.6% completion rate with 19.17 km of rising mains installed out of the planned 23.5 km in Kitwe Kalulushi and Chambishi); 30.6 km of distribution mains installed in Kitwe, Kalulushi and Chambishi; 67.5km of trunk sewers replaced out of 80 km new planned total in Kitwe, Kalulushi and Chambishi (84.4% completion rate); and 13,740 prepaid meters installed out of the 14,100 planned and installed in Buchi, Kamitondo and other low-cost areas in Kitwe (97.75% completion rate); and the replacement of worn out sewer trunk mains and networks in Kalulushi (100% completion rate).

However, CHICO reportedly abandoned the project for a period of time in 2019 due to inconsistent payments from the Government of Zambia. CHICO was reportedly owed $30 million for work that it had performed. The project was originally expected to reach completion by June 2021. However, as of February 2022, AidData had not identified any evidence of project completion.

On July 29, 2022, the Ministry of Finance & National Planning (MOFNP) of Zambia announced that it was seeking lender approval to formally cancel the ICBC loan’s undisbursed balance ($106,486,038.37); 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 II of the Nkana Water and Sanitation Project with general government revenues, but it also signaled its intention to rescope the project to focus on ‘critical works’.

📋 Staff Comments

This project is also known as the Kitwe & Kalulushi Water Supply Project.
One official source (ID#66608) records the face value of the ICBC loan as $199,576,996. However, AidData has not yet identified any corroborating sources, so for the time being it relies on the $169,642,996.60 figure from the Zambia Ministry of Finance.
This project is also known as the Nkana Water Supply Sanitation Project Phase II. The Chinese project title is 恩卡纳给排水项目二期.
According to the World Bank's Debtor Reporting System (DRS), the weighted average grace period of all ‘private’ sector lending from all Chinese creditors to government and government-guaranteed borrowing institutions in Zambia was 3.89-years in 2016. AidData estimates the grace period of the ICBC loan that supported Phase II of the Nkana Water and Sanitation Project by using this figure. See https://www.dropbox.com/scl/fi/ef7q4y9pxjk6q3syuqmjy/May-2024-DRS-Extraction-of-Data-on-Official-and-Private-Chinese-Loans-to-Iran-and-Borrowing-Terms.xlsx?rlkey=wiqjmhuwunp3jelz3jyfepny8&dl=0 5. According to the World Bank's Debtor Reporting System (DRS), the weighted average maturity of all ‘private’ sector lending from all Chinese creditors to government and government-guaranteed borrowing institutions in Zambia was 16.5015-years in 2016. AidData estimates the maturity of the ICBC loan that supported Phase II of the Nkana Water and Sanitation Project by using this figure. See https://www.dropbox.com/scl/fi/ef7q4y9pxjk6q3syuqmjy/May-2024-DRS-Extraction-of-Data-on-Official-and-Private-Chinese-Loans-to-Iran-and-Borrowing-Terms.xlsx?rlkey=wiqjmhuwunp3jelz3jyfepny8&dl=0 6. According to the World Bank's Debtor Reporting System (DRS), the weighted average interest rate of all ‘private’ sector lending from all Chinese creditors to government and government-guaranteed borrowing institutions in Zambia was 4.2602% in 2016. AidData estimates the interest rate of the ICBC loan that supported Phase II of the Nkana Water and Sanitation Project by using this figure. See https://www.dropbox.com/scl/fi/ef7q4y9pxjk6q3syuqmjy/May-2024-DRS-Extraction-of-Data-on-Official-and-Private-Chinese-Loans-to-Iran-and-Borrowing-Terms.xlsx?rlkey=wiqjmhuwunp3jelz3jyfepny8&dl=07. 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

Mid-Year Economic Review
Zambia Awards USD 200 Million To Boost Water Supply And Sanitation And Sewer Coverage In The Copperbelt
GOVT CONVERTS 4 PARASTATALS’ DEBT
NKANA WATER SUPPLY AND SANITATION PROJECT PHASE II REQUEST FOR EXPRESSIONS OF INTEREST
Chairperson's Statement
Kitwe & Kalulushi Water Supply Project in Zambia Commenced
Nkana Water Secures Funds
EXPRESSION OF INTEREST FOR THE SUPERVISING CONSULTANT 2
Poor townships sanitation worries Kitwe mayor
SANITATION IN KITWE
NKANA WATER SUPPLY AND SANITATION PROJECT PHASE II REQUEST FOR EXPRESSIONS OF INTEREST
Kitwe Water Supply Project Signed in Zambia
Dismantle water debt
Grant-aided told
Nkana Water Supply and Sanitation Project II
How Chikwanda borrowed over US$9 billion for Zambia
ANNUAL ECONOMIC REPORT 2016, 2018 ANNUAL PROGRESS REPORT SEVENTH NATIONAL DEVELOPMENT PLAN (7NDP: 2017-2021)
REPORT OF THE COMMITTEE ON ENERGY
WATER DEVELOPMENT AND TOURISM FOR THE SECOND SESSION OF THE TWELFTH NATIONAL ASSEMBLY APPOINTED ON WEDNESDAY, 20TH SEPTEMBER, 2017
中国对外承包工程国别（地区）市场报告2019-2020.pdf
China Henan International - NKANA WATER SUPPLY
China Henan Abandons Nkana’s $200m Water Project
MEASURES TAKEN BY THE GOVERNMENT ON THE IMPLEMENTATION OF LOAN FINANCED PROJECTS 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.

All Grantees

Government of Zambia

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