China Eximbank provides RMB 200 million government concessional loan for Cape Coast Kotokuraba Market Project

Project narrative

On November 22, 2012, the China Eximbank and the Government of Ghana signed an RMB 200 million ($32,060,000) government concessional loan (GCL) agreement for the Cape Coast Kotokuraba Market Project. The GCL carried the following borrowing terms: a 20 year maturity, a 5 year grace period, a 2% interest, and a 0.75% commitment fee. The final maturity date of the GCL is September 21, 2031. According to the terms of the loan agreement with China Eximbank, the borrower was to use the proceeds from the operation of the new Kotokuraba Market to repay the loan. A special account was established at the Bank of Ghana where the proceeds from the operation of the new Kotokuraba Market could be deposited and accessed by China Eximbank. The proceeds from the GCL were also on-lent from the Government of Ghana to Cape Coast Metropolitan Assembly (CCMA), a Ghanaian state-owned enterprise. To this end, a subsidiary loan agreement was signed by the Government of Ghana and CCMA on January 24, 2013. This subsidiary loan also carried an 2% interest rate, and according to the terms of the subsidiary loan agreement, CCMA is responsible for repaying the Government of Ghana the disbursed principal amount of the loan in semi-annual installments commencing on the first payment date in 2017 and ending on the last date of payment in 2042. According to the Government of Ghana’s Development Cooperation Management Information System (Gh-DCMIS), the $32,060,000 loan (GCL) achieved a 96.8% disbursement rate, with China Eximbank making 10 loan disbursements (worth $31,042,626.45) between 2016 and 2019: a $8,195,000.00 disbursement (for Invoice No. 1) on October 13, 2013, a $4,787,669.24 disbursement (for Invoice No. 2) on May 13, 2014, a $1,942,494.84 disbursement (for Invoice No. 3) on April 29, 2015, a $1,115,684.99 disbursement (for Invoice No. 4) on June 11, 2015, a $2,004,333.97 disbursement (for Invoice No. 5) on October 6, 2015, a $1,647,611.57 disbursement (for Invoice No. 6) on March 23, 2016, a $2,165,317.75 disbursement (for Invoice No. 7) on August 16, 2016, a $4,617,749.17 disbursement (for Invoice No. 8) on December 29, 2017, a $3,425,760.30 disbursement (for Invoice No. 9) on April 17, 2018, and a $1,141,004.62 disbursement (for Invoice No. 10) on January 31, 2019. The loan’s (principal) amount outstanding was GHS 166,130,000 ($29,666,071) as of December 31, 2020 and GHS 164,000,000 ($31,538,461) as of December 31, 2021. The Cape Coast Kotokuraba Market Project involved the construction of an ultramodern market that can accommodate 750 shops. The project also involved the construction of a 200-capacity car park, surface and overhead water tanks, a solar system for emergency lighting, a generator set, public address systems, and CCTV security cameras. A fire hydrant was also installed to deal with the outbreaks of fire. China Railway Construction Engineering Group was the contractor responsible for implementation. Construction began in October 2014 and the market was handed over on November 29, 2016. However, the Gh-DCMIS identifies the official project completion date as September 30, 2019. The originally expected project implementation start and end dates were November 22, 2012 and December 31, 2016, respectively. There are some indications that the China Eximbank loan for the Cape Coast Kotokuraba Market Project may have financially underperformed vis-a-vis the original expectations of the lender. According to the World Bank’s International Development Statistics, the Government of Ghana had accumulated principal and interest arrears to one or more official sector Chinese creditors worth $908,337,346.70) in 2020 ($763,228,526.60 in principal arrears and $145,108,820.10 in interest arrears). There are some indications that the China Eximbank loan for Phase 1 of the Kpong Water Expansion Supply Project may have financially underperformed vis-a-vis the original expectations of the lender. According to the World Bank’s International Development Statistics, the Government of Ghana had accumulated principal and interest arrears to one or more official sector Chinese creditors worth $908,337,346.70) in 2020 ($763,228,526.60 in principal arrears and $145,108,820.10 in interest arrears). Then, on December 19, 2022, the Government of Ghana announced a sovereign default, suspending debt service on its Eurobonds, its commercial loans, and most of its bilateral loans. On December 20, 2015, a Ghanaian firm Design Associates sued the Cape Cost Metropolitan Authority (CCMA), the Government of Ghana, and the implementing Chinese construction group for withholding payment for the pre-contracting services it had provided for the project. CCMA had already contracted Design Associates to complete the precontract services (design drawings), but in China Eximbank had actually intended for the Chinese construction company to complete the precontract services. Therefore, it was claimed that the concessional loan could not be used to pay Design Associates through the Chinese construction company. The provided reasoning was evidently untruthful, as a local politician stated that rather than an explanation "the Chinese [contractor] is saying that the drawings were not complete" (see Journal of Urban Affairs article).