Active Development AidData Chinese Aid

[Cancelled] Bank of China cancelled $136.7 million out of $332 million contribution to $381.7 million syndicated loan tranche — via EPC+F arrangement — for Kafulafuta Water Supply System Project (Linked to Record ID#56970))

$136.66M USD

Funder	Bank of China (BOC)
Recipient Organization	China National Complete Engineering Corporation (CNCEC)
Country	Zambia
Start Date	Jul 11, 2016
End Date	Jun 08, 2030
Duration	5,080 days
Number of Grantees	1
Roles	Recipient
Data Source	AidData Chinese Aid
Grant ID	`108550`

Grant Description

BOC contribution to $381.7 million syndicated loan tranche to Kafulafuta Water Supply System Project On June 5, 2013, China National Complete Engineering Corporation — a subsidiary of China National Chemical Engineering Corporation (CNCEC) — signed a memorandum of understanding (MOU) with the Government of Zambia for water supply projects in Copperbelt Province.

One of these projects was the Kafulafuta Water Supply System Project.

Then, on July 11, 2016, Bank of China and Standard Chartered signed a $449,090,629.71 syndicated (EPC+F) loan agreement with CNCEC for the Kafulafuta Water Supply System Project.

The loan was provided in two separate tranches and backed by a sovereign repayment guarantee from the Government of Zambia’s Ministry of Finance & National Planning (MOFNP).

As part of the first ($381,727,035.28) tranche, Bank of China contributed approximately $332 million (captured via Record ID#56970) and Standard Chartered contributed approximately $50 million. This loan tranche has a 15-year maturity.

Sinosure provided political and commercial risk insurance for 95% of the principal and interest under this loan tranche.

As of July 2022, the $381,727,035.28 syndicated loan tranche had achieved a 58.8% disbursement rate ($224,609,249.30 out of $381,727,035.28). Standard Chartered also provided the second tranche worth $67.3 million with a 4-year maturity.

The proceeds of these two loan tranches were use to finance 100% of the cost of a $449,090,629.71 commercial (EPC) contract between Zambia’s Ministry of Local Government and Housing with China National Complete Engineering Corporation (CNCEC), which was signed in February 2016.

This project involves the construction of a reservoir dam at Kafulafuta with a 125 million cubic meter storage capacity, a water intake pumping station, a midway booster pumping station, an independent water supply system in Mupenggui region, a transmission main line from the dam to Ndola, and waterlines from the Kafulafuta dam to Msayiti (V.), Luanshya and Ndola water works.

It also involves the upgrading and reconstruction of a city pipe network, the procurement of domestic water meters and regional water meters, and resettlement engineering activities.

The project is expected to create 3,000 jobs and improve water access and quality for 700,000 people in the Ndola, Luanshya and Masaiti districts. The dam site is located in Ibenga area of Masaiti District of the Copperbelt Province of Zambia. It lies 50km west of Ndola City. The site is within Her Royal Highness Chieftainess Malembeka and His Royal Highness Senior Chief Mushili.

Project implementation began in August 2017. However, a formal project commencement ceremony did not take place until September 21, 2018.

Then, in June 2019, a shipment of 3,336 tons of building materials — including water pipelines — arrived via the Port of Walvis Bay in Namibia.

According to Zambia's Ministry of Water and Sanitation Development as of September 11, 2019, the project had achieved a 55% completion rate.

On February 5, 2020, CNCEC notified the Zambian Government that it was halting work on the project due to overdue payments, which would leave 450 employees and 50 subcontractors out of work.

Japhen Mwakalombe, Zambia’s Minister of the Copperbelt province, disputed this point, arguing that the work stoppage was because of heavy rains in the area.

Then, in November 2021, Kafubu Water and Sanitation Company (KWSC) Director of Engineering Bernard Phiri reported that the stalled project was being affected by rampant vandalism and theft. Valves and other water installations from the project site were reportedly stolen and vandalized. The project was originally scheduled for completion in January 2021.

On July 29, 2022, the Ministry of Finance & National Planning (MOFNP) of Zambia announced that it was seeking lender approval to formally cancel the undisbursed balance ($157,117,785.98) of the $381,727,035.28 syndicated loan tranche; 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 the Kafulafuta Water Supply System Project with general government revenues. As of March 30 2025, the dam flow target was achieved and entered full operation stage.

📋 Staff Comments

This project is also known as the Kafulafuta Reservoir Dam Water Supply Project or Kafulafuta Water Supply Systems Project. The Chinese project title is 赞比亚卡夫拉夫塔供水系统项目 or 卡夫拉夫塔供水系统 or 卡夫拉夫塔供水项目.
Corpus Legal Practitioners Zambia, Dentons China, Dentons UK served as transaction advisers.
Under most EPC+F contractual arrangements, a loan is extended to the EPC contractor but with a sovereign guarantee from the host government. Therefore, AidData assumes that the loan issued to CMEC is backed by a repayment guarantee from the Government of Zambia (i.e. a sovereign guarantee)3. 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 3.7841-years in 2016. AidData estimates the grace period of the Bank of China loan tranche that supported the Kafulafuta Water Supply System Project by using this figure. See https://www.dropbox.com/scl/fi/iymnqwd205mvs5h8crtv8/DRS-May-2024-Extraction-Private-Chinese-Loan-Commitments-to-Zambia.xlsx?rlkey=bi71wlqbrbnfienx75a7bq1g2&dl=0 4. 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 4.2599% in 2016. AidData estimates the interest rate of the Bank of China loan tranche that supported the Kafulafuta Water Supply System Project by using this figure. See https://www.dropbox.com/scl/fi/iymnqwd205mvs5h8crtv8/DRS-May-2024-Extraction-Private-Chinese-Loan-Commitments-to-Zambia.xlsx?rlkey=bi71wlqbrbnfienx75a7bq1g2&dl=05. There is evidence that Sinohydro Bureau 1 (中国水利水电第一工程局有限公司) is also an implementing partner on the project. Whether or not Sinohydro Bureau 1 was a part of the original EPC + F or joined the project at a later date warrants further investigation.
Bank of China contributed $332 million USD out of $381.7 million USD for this syndicated loan with Standard Charter (~86.98%). By July 2022, $224,609,249.30 USD was disbursed. Hence, BOC's share is proximately (0.8698*224,609,249.30=$195,365,125.04). In addition, undisbursed amount $157,117,785.98 was cancelled, with $136.7 million aproximately being BOC's portion. This issue requires further investigation.

📚 Sources & References

伦古总统出席卡夫拉夫塔供水项目开工仪式
KAFUBU WATER AND SEWERAGE COMPANY WATER SUPPLY
SPEECH BY HIS EXCELLENCY
MR EDGAR CHAGWA LUNGU
PRESIDENT OF THE REPUBLIC OF ZAMBIA AT THE LAUNCH OF THE KAFULAFUTA WATER SUPPLY SYSTEM PROJECT
中行北分：打造“一带一路”金融服务网络为企业“走出去”注入“中行力量”【新华网、腾讯财经】
Kafulafuta Water Supply System Project advances
Kafrafta water supply project is gradually taking shape
Chinese-built 449-mln-USD water project 55 pct complete in Zambia
Bank of China the Belt and Road Financial Services
中国银行为境外项目发动金融引擎【新京报】
Best Deals 2016
Zambia Annual Economic Report 2016
The KAFULAFUTA Water Supply System Project in Zambia Come Into Effect Formally
Zambian president attends groundbreaking of Kafulafuta project
CCEC Won the 6th “Business Innovation Award” of China Chamber of Commerce In Zambia
Delivery Ceremony of Pipe Material for Zambia Kafulafuta Water Supply System Project Contracted by CCEC Held Successfully
Opportunity2030 The Standard Chartered SDG Investment Map
赞比亚总统出席卡夫拉夫塔供水工程项目开工典礼
李杰大使出席卡夫拉夫塔供水项目开工仪式
Environmental Impact Statement FOR THE PROPOSED CONSTRUCTION OF KAFULAFUTA DAM AND WATER SUPPLY SYSTEM PROJECT BY MINISTRY OF LOCAL GOVERNMENT AND HOUSING IN MASAITI DISTRIC T
COPPERBELT PROVINCE OF ZAMBIA
Feature: China-funded mega dam in Zambia set to uplift people's living standards
机电安装分局赞比亚卡夫拉夫塔供水工程埋件集中发货
赞比亚卡夫拉夫塔供水项目首节钢栈桥顺利吊运、安装完成
赞比亚卡夫拉夫塔供水系统项目大坝枢纽工程导截流顺利完成
赞比亚总统出席由中国成套承建的卡夫拉夫塔供水系统项目开工典礼
ANNUAL ECONOMIC REPORT 2016
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WATER DEVELOPMENT AND TOURISM FOR THE SECOND SESSION OF THE TWELFTH NATIONAL ASSEMBLY APPOINTED ON WEDNESDAY, 20TH SEPTEMBER, 2017
The $449 million Kafulafuta Dam Project on the Copperbelt 9 months ahead of schedule
ZAMBIA: CCEC suspends work on Kafulafuta Dam construction site, 2018 ANNUAL PROGRESS REPORT SEVENTH NATIONAL DEVELOPMENT PLAN (7NDP: 2017-2021)
KAFULAFUTA DAM CONSTRUCTION ABANDONED
Chinese firm hailed over progress in construction of dam in Zambia
China Machinery Engineering Corporation 2018 Social Responsibility Report
ANNUAL REPORT 2018/19
Zambia raises Sinosure-covered loan for Kafulafuta water project
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中国对外承包工程国别（地区）市场报告2019-2020.pdf
China National Complete - KAFULAFUTA WATER
Zambia’s Chinese Debt in the Pandemic Era
MEASURES TAKEN BY THE GOVERNMENT ON THE IMPLEMENTATION OF LOAN FINANCED PROJECTS
践行“一带一路”倡议中国银行北京市分行为“走出去”企业添助力【金融时报】
新里程！赞比亚卡夫拉夫塔大坝首次实现过流
中企海外项目周报（2024.10.19-2024.10.25）
顺利打响第一枪——水电一局赞比亚卡夫拉夫塔项目部右岸主体工程顺利开挖 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.