Active Mixed AidData Chinese Aid

China Eximbank provides $68.325 million buyer’s credit loan for Huambo, Malanje, Benguela, and Huila Regional Hospitals Project (Linked to Record ID#34030)

$68.33M USD

Funder	Export-Import Bank of China (China Eximbank)
Recipient Organization	Government of Angola
Country	Angola
Start Date	Jul 19, 2007
End Date	Mar 16, 2029
Duration	7,911 days
Number of Grantees	1
Roles	Recipient
Data Source	AidData Chinese Aid
Grant ID	`34830`

Grant Description

China Eximbank provides $68.325 million buyer’s credit loan for Huambo, Malanje, Benguela, and Huila Regional Hospitals Project On November 28, 2003, the Chinese Government and the Angolan Government signed a framework agreement pertaining to a special economic cooperation arrangement (Agreement name in Chinese: 中华人民共和国商务部与安哥拉共和国财政部关于两国经贸合作特殊安排的框架协议).

Following the signing of the framework agreement, on March 2, 2004, China Eximbank entered into a $2 billion Master Loan Facility Agreement (MLFA) with the Government of Angola.

📋 Loan / Grant Terms

⏳ Grace Period1.5 years

The facility was split between a $1.0 billion Phase I facility and a $1.0 billion Phase II facility.

Availability of the Phase II facility was subject to confirmation by the lender on or prior to the date falling five years after satisfaction of the conditions precedent to the MLFA and was made available by China Eximbank during that period.

The MLFA is a framework agreement under which the Government of Angola and China Eximbank may conclude individual buyer’s credit loan agreements (ILAs or subsidiary loan agreements) for the purpose of financing up to 90% of the contract price owing to certain contractors in respect of certain contracts.

The first tranche of the facility was released in December 2004. The facility was fully drawn down as of December 31, 2017.

Sonangol provided a source of collateral under the MLFA, and repayments were made with the proceeds of oil sales from Sonangol to UNIPEC (China international United Petroleum & Chemicals Co. Ltd, Sinopec group), which were deposited in an Angolan Ministry of Finance (MINFIN) account at China Eximbank.

The volume of oil to be sold to UNIPEC each month for repayment of the loan varied according to market oil prices.

Under the agreement, 70% of works have to be contracted with Chinese companies and the same proportion of construction material, equipment and labour has to be contracted in China. Loan disbursements were made on a project-by-project basis.

Tendering, management and payments were jointly managed by the Chinese Ministry of Commerce and the Angolan Ministry of Finance (which coordinated the various Angolan line ministries responsible for supervising the projects).

The Angolan Ministry of Finance submitted the projects for tendering; China Eximbank selected Chinese candidate firms for the projects; and a joint commission made the final firm selections.

The process was managed by an office in the Angolan Ministry of Finance -- known as Gabinete de Apoio Técnico (GAT) -- that was specifically created to manage the MLFA with China Eximbank.

Then, on July 19, 2007, China Eximbank entered into another $500 million MLFA with the Government of Angola (captured via Record ID#34030). The MLFA was meant to finance 'complementary actions' to the 2004 MLFA (captured via Record ID#42029).

The 2007 MLFA facility financed a total of 18 contracts, which supported projects originally undertaken through the 2004 MLFA.

📋 Loan / Grant Terms

⏳ Grace Period1.5 years

Sonangol provided a source of collateral under the MLFA, and repayments were made with the proceeds of oil sales from Sonangol to UNIPEC (China international United Petroleum & Chemicals Co. Ltd, Sinopec group), which were deposited in an Angolan Ministry of Finance (MINFIN) account at China Eximbank.

The volume of oil to be sold to UNIPEC each month for repayment of the loan varied according to market oil prices.

On July 19, 2007, China Eximbank and the Government of Angola also signed a $68,325,951.92 buyer’s credit loan agreement under the July 2007 MLFA for 'complementary actions' related to the Huambo, Malanje, Benguela, and Huila Regional Hospitals Project.

The proceeds of the subsidiary loan were used to partially finance a $75,917,724.36 commercial (EPC) contract with Sinohydro.

The project supported the construction and equipping of regional hospitals in Huambo, Malanje, Benguela, and Huila provinces. Sinohydro was the EPC contractor responsible for implementation. The project reportedly entered implementation, but its precise implementation start and end dates are unknown.

📋 Staff Comments

In July 2020, AidData asked Dr. Lucy Corkin, a leading expert on Chinese lending to Angola, whether the second, third, and fourth master loan facility agreements (MLFAs) that the Angolan Government signed with China Eximbank in 2007 and 2009 were structured as a buyer’s credit loans like the first MLFA that the Angolan Government signed with China Eximbank in 2004. Dr. Corkin noted that the second, third and fourth MLFAs were treated more like ceiling increases to the initial facility. Therefore, for the time being, AidData categorizes the second, third, and fourth MLFAs as buyer's credit loans.
This project appears to be linked to a $26.26 million China Eximbank loan for rehabilitation and equipping of Malanje Hospital (captured via Project ID#34796), a $36.47 million China Eximbank loan for the rehabilitation and equipping of Benguela Regional Hospital (captured via Project ID#34798), a $43.254 million China Eximbank loan for construction and equipping of regional hospital in Lubango (captured via Project ID#34843); and a $3.6 million China Eximbank loan for the construction and equipping of Huambo Health Center (captured via Project ID#34845).
The 2003 framework agreement (中华人民共和国商务部与安哥拉共和国财政部关于两国经贸合作特殊安排的框架协议) specified that Sinosure would be signing relevant agreements with the Government of Angola. Therefore, AidData has coded Sinosure as an accountable agency and as providing insurance for the loan.
AidData considers this loan to be collateralized in a de facto sense. The cash deposited by the Angolan Ministry of Finance into a bank account controlled by China Eximbank is, for all intents and purposes, a source of collateral. This is true even if the lender does not have a formal security interest in the account.
For the time being, AidData assumes that the same maturities (21.5-years), grace periods (1.5-years), management fees (0.3%), and commitment fees (0.3%) that applied to the individual loan agreements under the March 2, 2004 MLFA also applied to individual loan agreements under the July 19, 2007 MLFA. This issue warrants further investigation.

📚 Sources & References

Uncovering African Agency: Angola’s Management of China’s Credit Lines
Chinese Loans to Africa Database
UNCOVERING AGENCY: ANGOLA’S MANAGEMENT OF RELATIONS WITH CHINA
LINHA DE CRÉDITO COM O EXIMBANK DA CHINA RELATÓRIO DAS ACTIVIDADES DESENVOLVIDAS II TRIMESTRE DE 2008 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.