China Eximbank agrees to provide loan for Phase 2 of the Northern Railway Line Extension Project (Linked to Record IDs #1314, #61034, and #61036)

Project narrative

In December 2007, China Eximbank and the Government of Namibia signed an RMB 1 billion concessional loan framework (recorded in the linked Record ID#1314), which identified several projects that would be funded according to a consistent set of terms and conditions (including the following borrowing terms: 4.27% interest rate, 15 year maturity, and 5 year grace period). One of these projects was the Phase 2 of the Northern Railway Line Extension Project, which is recorded in this project. RMB 645 million was reportedly set aside for three projects: Phase 2 of the Northern Railway Line Extension Project (recorded in this project), the Oshakati State Hospital Renovation Project (recorded in the linked Record ID#61034), and the Namibian Broadcasting Corporation Renovation Project (recorded in the linked Record ID#61036). The breakdown of this funding between these three projects is unknown, so the RMB 645 million commitment for the three projects is recorded in this project. Phase 2 of the Northern Railway Line Extension Project involved a 62 km railway extension in Northern Namibia from Ondangwa to Oshikango. According to the Namibia’s Ministry of Works and Transport, Phase 2 of the Northern Railway Line Extension Project is now complete. However, it appears that this project was ultimately implemented without funding from China Eximbank. The project was ready for implementation and Namibia’s Ministry of Works and Transport entered into a rail supply contract with the China Machinery and Equipment Import and Export Corporation (CMEC), with Teko Trading CC as the local representative. However, after receiving an overpriced quote from CMEC for completion of the project, the Government of Namibia suspended its contract with CMEC. Then, in July 2009, Namibia’s Permanent Secretary of Finance Calle Schlettwein announced that he had notified the Chinese Government that the borrowing terms of the RMB 1 billion loan facility (recorded in Record ID#1314) were too financially onerous for the Government of Namibia. He told a local newspaper that 'We did not suspend any agreements, we just told them that the terms were too burdensome for our financial situation.’