China Eximbank provides RMB 1.045 billion government concessional loan for Robert Gabriel Mugabe International Airport Expansion Project

Project narrative

On December 6, 2017, the Chinese Government and the Government of Zimbabwe signed a Memorandum of Understanding (MOU) regarding the Robert Gabriel Mugabe International Airport Expansion Project. Then, on April 8, 2018, China Eximbank and the Government of Zimbabwe signed an RMB 1,045,139,500 ($153 million loan) government concessional loan (GCL) agreement for the Robert Gabriel Mugabe International Airport Expansion Project. The Government of Zimbabwe on-lent the proceeds of the loan to the Civil Aviation Authority of Zimbabwe (CAAZ). The GCL carries the following borrowing terms: a 20 year maturity period, a 7 grace period, an interest rate of 2% per year, a 0.25% commitment fee, and a 0.25% management fee. The borrower is expected to deposit the proceeds from the Air Infrastructure Development Fund and passenger services charges at Harare International Airport into an escrow account with Stanbic (to facilitate the repayment of the loan and as a source of de facto collateral). The escrow account is jointly monitored by the Government of Zimbabwe and China Eximbank. As of August 2022, the loan had achieved a 85.7% disbursement rate ($131.2 million out of $153 million). Additional disbursements worth $27.8 million took place in 2022, bringing the loan disbursement rate to at least 100%. The loan’s amount outstanding (including principal, interest, and arrears) was $81,231,518.01 as of 2021. The purpose of the project is to construct a new international terminal building at Robert Gabriel Mugabe International Airport with a construction area of 35,000 square meters, a new VIP building, and a satellite command center. It also involves maintenance on the existing 1.6 km runway, parking lot, and control tower, and the transformation of the existing terminal building and fire center. The project will also seek to increase the airport’s handling capacity from 2.5 million people per year to six million people per year. China Jiangsu International is the contractor responsible for project implementation. On July 23, 2018, an official project commencement ceremony was held. The project was originally expected to reach completion within 36 months (July 23, 2021). However, this project has been plagued by scandal, controversy, and delay. In 2019, the Reserve Bank of Zimbabwe diverted $10 million from the project’s escrow account. China Eximbank then halted disbursements for the project and said that it would not release additional funds until the $10 million withdrawal was returned. It appears that this condition was eventually met because project implementation continued in 2020 and 2021. On February 26, 2020, Chinese Ambassador Guo Shaochun visited Zimbabwe to inspect the airport reconstruction. As of July 2020, the project achieved a 27% completion rate. China Eximbank also made a $27.7 million loan disbursement in 2020. Then, on September 1, 2021, President Mnangagwa of Zimbabwe visited the project site. In mid-2022, the Debt Management Office of Zimbabwe’s Ministry of Finance released a report, which provided evidence that the China Eximbank loan for the Robert Gabriel Mugabe International Airport Expansion Project has financially underperformed. It noted that ‘[t]he low disbursements of loans is due to accumulation of arrears to active China Eximbank loans […] on projects such as the Victoria Falls International Airport ($54 million), NetOne network expansion ($61 million) and expansion of the Robert Gabriel Mugabe International Airport ($3 million).’ It also noted that, by the end of 2021, total external debt arrears to China Eximbank included $13 million for the NetOne Expansion Phase 1 Project, $47 million for the NetOne Expansion Phase 2 Project, $67 million for the Rehabilitation of Municipal Water and Sewage Treatment Works Project (City of Harare Project), $7 million for the National Defence College Project, $54 million for the Victoria Falls Airport Renovation and Expansion Project, $3 million for the Robert G. Mugabe International Airport Expansion Project, $0.5 million for Phase 2 of the TelOne Broadband Expansion Project, and $73 million for the Medical Equipment and Supplies Project. As of August 2022, the Robert Gabriel Mugabe International Airport Expansion Project had achieved a 67% completion rate and the Government of Zimbabwe had taken a delivery of 3 (out of 5) radars to support an air traffic control system. Furthermore, sometime in 2022, the rehabilitation of the runways and taxiways were completed. Near the end of 2022, major outstanding works included refurbishment of the existing building and the procurement of required equipment. On July 14, 2023, an opening ceremony was held in Harare for the completion and commissioning of the rehabilitated and expanded international terminal building. President Mnangagwa and Chinese Ambassador to Zimbabwe, Zhou Ding, spoke at the ceremony. Vice President Chiwenga, officials such as the Minister of Finance, the Minister of Transportation, and thousands of locals were also reported to have attended the ceremony.