Completed Mixed AidData Chinese Aid

China Eximbank provides $25.9 million loan for Mulungushi Textile Mill Project (Linked to Record ID#57376, #66667)

¥25.9M RMB

Funder	Export-Import Bank of China (China Eximbank)
Recipient Organization	Zambia-China Mulungushi Textile Joint Venture Ltd. (ZCMT)
Country	Zambia
Start Date	Jan 01, 2007
End Date	Aug 18, 2026
Duration	7,169 days
Number of Grantees	1
Roles	Recipient
Data Source	AidData Chinese Aid
Grant ID	`72990`

Grant Description

China Eximbank provides $25.9 million loan for Mulungushi Textile Mill Project A Zambian state-owned enterprise known as Mulungushi Textiles Ltd was incorporated in 1982, after the signing of an Economic and Technical Cooperation Agreement (ECTA) by the Chinese and Zambian governments on June 23, 1976 and the subsequent provision of bilateral funding by the two governments.

Construction of the plant by the Chinese civil engineering team started in 1977 and was completed in 1981 and handed over to the Zambian government in 1983 for trial production.

Then, in 1996, Qingdao Textiles Holding Group and the Zambia Ministry of Defense established a joint venture called the Zambia-China Mulungushi Textiles Joint Venture Ltd. (ZCMT) as a way of taking over the assets of Mulungushi Textiles Ltd (see Record ID#66667). Qingdao Textiles holds a 66% equity stake and the Zambia Ministry of Defense holds a 34% equity stake.

China Eximbank issued two loans worth RMB 200 million (one worth RMB 150 million and another worth RMB 50 million) in 1996 -- through the Development Bank of Zambia (DBZ) -- to the joint venture for the rehabilitation of the Mulungushi Textile Mill (see Record ID#57376). These loans were to be used by the borrower to re-capitalize and provide working capital.

However, the loans were ultimately issued in U.S. dollars and foreign exchange losses amounting to 5,175,095,643 kwacha were incurred as at December 31, 2003, due to the continuous depreciation of the Kwacha against the U.S. dollar from 1996 to 2003. Then, in 2007, China Eximbank issued another $25.9 million loan for the Mulungushi Textile Mill Project.

📋 Loan / Grant Terms

💰 Loan Amountare unknown

According to the 2009 and 2010 Development Cooperation Reports from the Government of Zambia, the loan fully disbursed.

The proceeds of the loan apparently supported efforts to reopen the Mulungushi Textile Mill after it went bankrupt and ceased operations in early 2007.

In the 2000s, ZCMT encountered a variety of financial and operational problems, including (a) old equipment and machinery that affected production efficiency; (b) a fluctuating exchange rate that made planning difficult; (c) competition from imported cheap cotton fabrics that flooded the local market; and (d) the erratic supply of coal, which was the main source of energy for the boilers at the textile mill.

The mill went bankrupt and closed in January 2007, laying off more than 800 employees.

However, from January 26-30, 2007, the Chinese shareholders in ZCMT traveled to Zambia for consultations with the company’s management team and discussed a 'survival plan' that would include, among other things, liquidating all of the debts owed to ZCMT and clearing all outstanding salary arrears (with 600 million Zambian Kwacha — or approximately $33 million — of financial support from the Chinese shareholders).

The Government of Zambia subsequently announced plans to reopen the mothballed Zambia-China Mulungushi textile mill before the end of 2012 to provide employment for youth workers. However, it was not reopened until August 1, 2016.

Then, in June 2022, the Government of Zambia announced that it was seeking $100 million to recapitalize the ailing Mulungushi Textile Mill.

Zambia's Minister of Defence, Ambrose Lufuma, said that his government has faced problems in revamping the textile mill due to its outstanding debt stock.

📋 Staff Comments

The Chinese project title is 穆隆古希纺织厂.
This 2007 loan is omitted from the database of Chinese loan commitments that SAIS-CARI released in July 2020. AidData includes this loan in its dataset because it is recorded as a loan that was fully disbursed in 2007 in the Republic of Zambia’s Development Cooperation Report 2009 and Development Cooperation Report 2010.
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 4.6309-years in 2007. AidData estimates the grace period of the China Eximbank loan that supported the Mulungushi Textile Mill 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 4. 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 13.1666-years in 2007. AidData estimates the maturity of the China Eximbank loan that supported the Mulungushi Textile Mill 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 interest rate of all official sector lending from all Chinese creditors to government and government-guaranteed borrowing institutions in Zambia was 2% in 2007. AidData estimates the interest rate of the China Eximbank loan that supported the Mulungushi Textile Mill 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

📚 Sources & References

赞比亚中资轧花厂建成投产
ZCMT-JV to contribute to the economic revival of Kabwe
New form of Chinese aid revives Zambia's largest textile company
The Impact of Chinese Investment on Skill Development and Technology Transfer in Zambia and Malawi’s Cotton Sector
Debates- Tuesday, 12th October, 2010
Management denies ZCMT textiles still operational
Unsettled $24m loan hinders ZCMT talks
DAILY PARLIAMENTARY DEBATES FOR THE FIRST SESSION OF THE TENTH ASSEMBLY Thursday, 15th February, 2007
Thursday, 11th July, 2019 The House met at 1430 hours [MR SPEAKER in the Chair] NATIONAL ANTHEM
ZCMT board to chalk out survival plan
Zambia to Invest USD15m in Mulungushi Textile Factory
China in Africa
Kabwe textiles to open by the end of June
Development Cooperation Report 2009
Development Cooperation Report 2010
Government looking for $100 million to recapitalize the ailing Mulungushi Textiles in Kabwe
PUBLIC ACCOUNTS COMMITTEE on the REPORT OF THE AUDITOR-GENERAL ON THE ACCOUNTS OF PARASTATAL BODIES FOR 2004
HH is misleading people on Mulungushi Textiles-State House
IDC targeting to inject US$15 million in Mulungushi Textiles in Kabwe 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

Zambia-China Mulungushi Textile Joint Venture Ltd. (ZCMT)

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