China Eximbank provides $155.5 million preferential buyer's credit for Construction of National Emergency Telecommunications System Project

Project narrative

On October 29, 2013, China Eximbank and Cameroon's Ministry of Economy, Planning, and Regional Development (MINEPAT) signed a preferential buyer credit (PBC) agreement [CHINA EXIMBANK PBC NO. (2013) 39 TOTAL NO. (283)] worth $155,550,000 for the National Emergency Telecommunications System Project. The PBC (loan) carried the following borrowing terms: a maturity of 20 years, a grace period of 5 years, an interest rate of 2%, a default (penalty) interest rate of 0%, a commitment fee of 0.25%, and a management fee of 0.25%. The borrower was expected to use the proceeds of the PBC to finance 85% of the cost of a $183,000,000 commercial contract between Cameroon’s Ministry of Posts and Telecommunications of Cameroon and ZTE Corporation, which was signed on December 21, 2012. As of December 31, 2020, the loan (PBC) had achieved a 95.8% disbursement rate (with an undisbursed balance of CFA 3.5 billion) and its outstanding amount was equivalent to CFA 77.5 billion. The purpose of the project was to construct a national emergency telecommunications network (RTNU) to transmit sensitive public administration and national security security information for military, police, civil defense, and emergency response institutions. The RTNU consists of a National Emergency Operations Center in Yaounde (the heart of the network), a back-up center in Douala, and eight regional operations centers in the main towns of Cameroon’s regions. The project consisted of 5 components. The first component was the installation of a trunked radio network that was designed to allow government teams to manage emergencies confidentially and securely without the need for a public network. The second component was the installation of an emergency communications system, which was designed to handle distress calls from any subscriber with a mobile terminal with or without a chip. The third component was the installation of a video surveillance system, which was designed to ensure the protection of goods and people by conveying, recording and exploiting the images taken by a set of cameras. These cameras, used to record video of incidents, allow for large-scale indoor and outdoor surveillance applications: river, forest, airport, railway station, port, oil field, square, park, landscape, school, street, prison, large gym and warehouse, etc. Video surveillance cameras were to be installed in all the regional capitals of Cameroon with visualization, supervision and data processing screens housed in the emergency telecommunications centers. The fourth component involved the installation of videoconferencing systems to allow people to communicate with a distant interlocutor from a microcomputer and to see him or her in real time in a virtual window on the screen. The final component involved the introduction of an e-police system, which is a centralized technological platform for managing security operations. The main services offered are: police information management, criminal information management, criminal case management, wanted persons management, system management portal, police capacity building. ZTE Corporation was the contractor responsible for project implementation. The project commenced on January 5, 2017 and it was completed on July 13, 2022.. There are some indications that the China Eximbank loan for the Construction of National Emergency Telecommunications System Project may have financially underperformed vis-a-vis the original expectations of the lender. In January 2019, Cameroon unilaterally withheld debt service payments to China Eximbank. The lender responded by withholding new loan disbursements. Then, in July 2019, China Eximbank and the Government of Cameroon signed a debt rescheduling agreement (as captured via Record ID#88213). Under the terms of the agreement, China Eximbank agreed to reschedule 18 loans previously contracted by the Government of Cameroon — with scheduled principal repayments between July 2019 and March 2022 — by allowing the borrower to defer scheduled principal repayments between July 2019 and March 2022 to later dates but without any maturity extensions. The total amount of restructured debt was equivalent CFA 148 billion ($253 million) — or 70% of the loan principal that was scheduled for repayment between July 2019 and March 2022. Under the terms of the agreement, the Government of Cameroon agreed to repay 30% of the loan principal according to the original July 2019-March 2022 schedule (i.e. without any payment deferrals). The lender and the borrower also agreed to cancel the committed but undisbursed loan balances worth approximately CFA 10 billion (for certain loans with disbursement deadlines that had already passed). Then, in January 2020, the International Monetary Fund (IMF) classified the Government Cameroon as facing a high risk of debt distress. Eighteen months later, during an address before Cameroon’s National Assembly on June 28, 2021, the Minister of Water and Energy (MINEE) Gaston Eloundou Esommba provided an update on the ICBC-financed Bini à Warak Hydroelectric Power Plant Project. He noted that the project had been 'on hold' since November 2019 because ICBC suspended the loan agreement, even though the Government of Cameroon had already mobilized XAF 22 billion of counterpart funding. He also explained that 'the reason for this suspension is that Cameroon did not settle some of its debts towards China on time, so, it is in a cross-default situation.’