China Eximbank provides $16.1 million buyer’s credit loan for Luanda and Benguela Secondary School Construction and Equipping Project (linked to #42029, #34802, #85457)

On 28 November, 2003, China and Angola signed a framework agreement pertaining to a special economic cooperation arrangement (Agreement name in Chinese: 中华人民共和国商务部与安哥拉共和国财政部关于两国经贸合作特殊安排的框架协议). Following the signing of the framework agreement, on 2 March, 2004, China Eximbank and the Government of Angola signed a $2 billion Master Loan Facility Agreement (MLFA). All of the subsidiary buyer’s credit loans approved through this MLFA carried the following terms: an interest rate of 3-month LIBOR (1.112% at the time that the MLFA was signed) plus a 1.5% margin- totaling 2.612%, a 22 year maturity period, and 5 year grace period (see linked Project ID#42029). According to the World Bank, this MLFA has a management commission fee of 0.3%, an installation commission fee of 1%; and an immobilization fee of 0.3% (See: Angola Public Expenditure Review (In Two Volumes) Volume II: Sectoral Review, p. 19).Sonangol provided a source of collateral for loans under the MLFA, and repayments were made with the proceeds of oil sales from Sonangol to UNIPEC (China international United Petroleum & Chemicals Co. Ltd, Sinopec group), which were deposited in an Angolan Ministry of Finance (MINFIN) account at China Eximbank (See: China’s Oil Diplomacy: Comparing Chinese Economic Statecraft in Angola and Brazil, p. 148). The volume of oil to be sold to UNIPEC each month for repayment of the loan varied according to market oil prices. Under the agreement, 70% of works have to be contracted with Chinese companies and the same proportion of construction material, equipment and labour has to be contracted in China (See: China’s Oil Diplomacy: Comparing Chinese Economic Statecraft in Angola and Brazil, p. 149).Then, in March 2005, China Eximbank and the Government of Angola signed a $16,163,641.55 subsidiary buyer’s credit loan agreement for the Luanda and Benguela Secondary School Construction and Equipping Project (See: UNCOVERING AGENCY: ANGOLA’S MANAGEMENT OF RELATIONS WITH CHINA, p. 278). The proceeds of this loan were used to partially finance a $17,959,601.79 commercial contract with China Machinery Engineering Corporation (CMEC), which was signed on 10 March, 2005. The purpose of this project was to construct and equip three secondary schools in the Viana [Sapú], Cacuaco and Nova Vida localities within Luanda Province, and construct and equip one secondary school in the Massangarala locality within Benguela Province (See: Angola: Education, water and power networks receive greatest amount of funding from China). 15 Angola workers and 39 Chinese workers were employed by this project.It was originally scheduled to commence on 20 March, 2006 and various components of the project were scheduled for completion on 30 April, 2007; 12 July, 2007; and 25 October, 2007 (See: LINHA DE CRÉDITO COM O EXIMBANK DA CHINA PROJECTOS CONCLUÍDOS).China Eximbank and the Government of Angola later signed an additional buyer’s credit loan agreement to support “complementary actions” related to the Luanda and Benguela Secondary School Construction and Equipping Project (see linked ProjectID#34802).The project was part of Phase I of the commercial contract between Sinomach and the Ministry of Education in Angola to construct 28 schools (captured in #85457). Phase 1 was started on April 17, 2006 and was completed by June 18, 2007.

Additional details

The Portuguese project title is Construção e Apetrechamento de 1 Escola Secundária na província de Benguela e de 3 Escolas Secundárias na província de Luanda.The 2003 framework agreement (中华人民共和国商务部与安哥拉共和国财政部关于两国经贸合作特殊安排的框架协议) specified that Sinosure will be signing relevant agreements with the Government of Angola, although the nature of the agreements is unclear. AidData has coded Sinosure as an accountable agency and providing insurance to the loan facility.AidData considers this loan to be collateralized in a de facto sense. The cash deposited by the Angolan Ministry of Finance into a bank account controlled by China Eximbank is, for all intents and purposes, a source of collateral. This is true even if the lender does not have a formal security interest in the account.

Number of official sources

3

Number of unofficial sources

3