Active Mixed AidData Chinese Aid

[Disbursed] China Eximbank disbursed $13.22 million for $129.73 million buyer’s credit for 122 km Kawambwa to Mporokoso (D019) Road Upgrade Project (Linked to Record ID#107868)

$13.22M USD

Funder	Export-Import Bank of China (China Eximbank)
Recipient Organization	Government of Zambia
Country	Zambia
Start Date	Jun 27, 2018
End Date	Oct 05, 2032
Duration	5,214 days
Number of Grantees	1
Roles	Recipient
Data Source	AidData Chinese Aid
Grant ID	`57288`

Grant Description

[Disbursed] China Eximbank disbursed $13.22 million for $129.73 million buyer’s credit for 122 km Kawambwa to Mporokoso (D019) Road Upgrade Project On June 27, 2018, China Eximbank and the Government of Zambia signed a $129,734,105.49 million buyer’s credit (loan) agreement for the 122 km Kawambwa to Mporokoso (D019) Road Upgrade Project.

📋 Loan / Grant Terms

💰 Loan Amountare unknown

However, it is known that the borrower was expected to use the proceeds of the loan to finance 85% of a $142.28 million commercial contact between Zambia's Road Development Agency and China Harbour Engineering Limited, Ltd (CHEC), which was signed in July 2016.

As of July 2022, the loan from China Eximbank had achieved a 10.1% disbursement rate ($13,219,206.11 out of $129,734,105.49).

The purpose of the project is to upgrade a 122 km stretch of the D019 road between Kawambwa to Mporokoso from gravel to the bituminous standard. CHEC is the general EPC contractor responsible for project implementation. A groundbreaking ceremony took place on July 27, 2017. However, virtually no progress was made during 2018, with a project completion rate of 2%.

Consequently, the project’s intended completion date was pushed back until July 23, 2021.

According the Zambian Road Development Agency's 2020 Work Plan, construction is ongoing, but a March 9, 2020 media report says the project experienced further delays due to the COVID-19 pandemic. This project has also been plagued by allegations of corruption.

In June 2019, Christopher Siwakwi, an investigations officer from Zambia’s Anti-Corruption Commission (ACC), told the Lusaka Magistrates’ Court that foreign currency (USD) moved from a CHEC bank account to purchase two properties allegedly owned by Zambian Infrastructure and Housing Minister Ronald Chitotela.

Siwakwi, however, testified that the properties — lot number 148 of farm 50A and subdivision A of lot 22183 /M Ibex Hill — were established to be in the names of the previous owners, Mary Lubinga and Former Labour Minister Austin Liato.

Ronald Chitotela, Gregory Chibanga and Brut Holdings were charged with two counts of concealing the two properties while Diris Mukange was charged with two counts of possession of the same properties, which are suspected to be proceeds of crime. They all pled not guilty.

During the trial before principal resident magistrate David Simusamba, Christopher Siwakwi said his investigations established that the contract for the sale of the properties was in the name of Diris Mukange (as a buyer for both properties), while the negotiations for the prices were done by Ronald Chitotela and his wife when he was Deputy Minister for Sports and Youth Development.

Siwakwi said the price of the property in Makeni was K1.6 million while the Ibex Hill one was purchased at K1.8 million, adding that the source of income to buy the same was tracked back to CHEC.

Siwakwi recounted how ACC in June 2017 received a complaint that Ronald Chitotela was in possession of property suspected to have been proceeds of crime and had received a bribe from CHEC.

Siwakwi said ACC also received additional information that the money used to purchase the properties originated from CHEC. Siwakwi said the ACC team embarked on investigations to establish whether the allegations were founded.

Siwakwi said he visited the Bank of China where he established that China Harbour had a U.S. dollar account with the bank which transferred $300,000 to Andrews and Partners on July 27, 2016 at its FNB bank account which was payment for legal services and attached to the bank statement was a contract for the upgrading of Kawambwa-Mporokoso road.

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 ($116,514,899.38); 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.

📋 Staff Comments

This project is also known as the Kawambwa-Mporokoso Road Upgrade Project. The Chinese project title is 赞比亚D19公路升级改造 or 卡万布瓦-姆波洛科索（D19）公路项目 or Kawambwa-Mporokoso（D19）公路项目 or 卡万布瓦至姆波洛科索（D019) 公路升级改造项目.
Due to the fact that the China Eximbank loan was used to finance 85% of the total cost of a commercial contract with CHEC, AidData assumes that it was provided in the form of an export buyer’s credit. It is unclear if the export buyer’s credit is of a preferential nature or non-preferential nature. This issue warrants further investigation.
According to the 2018 Zambia Mid-Year Economic Review, China Eximbank issued the loan agreement for this project between January 2018 and June 2018. However, the precise loan commitment date is unknown. This issue merits further investigation.
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 3.4733-years in 2018. AidData estimates the grace period of the China Eximbank loan that supported the 122 km Kawambwa to Mporokoso (D019) Road Upgrade 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 5. 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 12.8605-years in 2018. AidData estimates the maturity of the China Eximbank loan that supported the 122 km Kawambwa to Mporokoso (D019) Road Upgrade 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 6. 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 5.728% in 2018. AidData estimates the interest rate of the China Eximbank loan that supported the 122 km Kawambwa to Mporokoso (D019) Road Upgrade 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=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

More Better Roads Coming, 2017 Annual Report
Ambassador Yang Youming's Article 'The Outcomes of the Johannesburg Summit of the Forum on China-Africa Cooperation (FOCAC) Briskly and Comprehensively Implemented in Zambia' Published by Zambian Mainstream Media
赞比亚D019公路项目举行开工典礼, “WORKS ON KAWAMBWA-MPOROKOSO ROAD ON COURSE” - RDA
Coronavirus delays Luapula projects
Dare not, 2020 Road Sector Road Development Agency (RSAWP)
EXIM BANK OF CHINA RELEASES FUNDS FOR KAWAMBWA-MPOROKOSO ROAD, 2019 Road Sector Annual Work Plan, 2020 Road Sector Annual Work Plan
RDA Annual Report 2018
Chinese Loans to Africa Database
SAIS-CARI Loans China, 2018 Mid-Year Economic Review
中国对外承包工程国别（地区）市场报告 2019-2020
中国对外承包工程国别（地区）市场报告2019-2020.pdf
Zambia’s Chinese Debt in the Pandemic Era - Briefing Paper
China Harbour sent $299,985 to Chitotela’s lawyers – FNB tells court
Expedite Road Works-Chitotela
Brut Engineering claimed to have gotten paid for ‘feasibility studies’ before RDA awarded contract – ACC
Works on Mporokoso – Kawambwa road to commence this week
Chitotela probe implicates Chinese, lawyers, fellow MP, ministers, and others
MEASURES TAKEN BY THE GOVERNMENT ON THE IMPLEMENTATION OF LOAN FINANCED PROJECTS
Annual Economic Report 2018
Dipak drags Minister of Finance to court for contracting loans without parliament approval
China Eximbank Loans to Zambia 2018 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.