China Eximbank provides $306 million preferential buyer’s credit for Kenneth Kaunda International Airport (KKIA) Airport Expansion Project (Linked to Project ID#40890, #40889, #92156)

In June 2014, the Chinese Minister of Commerce and Zambian Minister of Finance signed a preferential loan framework agreement for the Kenneth Kaunda International Airport (KKIA) Airport Expansion Project. Then, on June 15, 2014, Chinese Vice President Li Yuanchao and Zambian Vice President Guy Scott witnessed the signing of two Economic and Technical Cooperation Agreements (ETCA). One committed a $32 million grant (captured via Project ID#40890) and the other committed $32 million interest-free loan (captured via Project ID#40889). Some of the funds from one or both of these ETCAs helped finance the KKIA Airport Expansion Project. Then, on September 16, 2014, China Eximbank and the Government of Zambia’s Ministry of Finance and National Planning signed two loan agreements for the Kenneth Kaunda International Airport (KKIA) Airport Expansion Project: a $306,000,000 preferential buyer’s credit (PBC) and a $54,000,000 government concessional loan (GCL) agreement. The PBC, captured via Project ID#40893, carried the following borrowing terms: a 20-year maturity, a 7-year grace period, a 2% interest rate, a 0.25% commitment fee, and a 0.25% management fee. The GCL, captured via Project ID#92156, carried the following borrowing terms: a 20-year maturity, a 7-year grace period, a 2% interest rate, a 0.25% commitment fee, and a 0.25% management fee. The proceeds of the GCL and the PBC were to be used by the borrower to partially finance a $385,000,000 (or $385,809,673) commercial contract between the Government of Zambia and China Jiangxi Corporation for International Economic and Cooperation, which was signed on June 3, 2013 and amended on September 5, 2013. As of July 2022, the PBC had achieved a 74.7% disbursement rate ($228,810,000 out of $306,000,000). The project involves the expansion of Kenneth Kaunda International Airport in Lusaka (exact locational coordinates: -15.325266732091906, 28.448490127571315). More specifically, the project involves the construction of a new presidential pavilion, passenger terminal, commercial complex, airport shopping mall, office park, warehousing facilities, fire station, control tower, and hotel. It also included the rehabilitation of the existing terminal into a new one to carter for domestic flights. China Jiangxi Corporation for International Economic and Technical Cooperation is the contractor responsible for design and works. The contract with Zambia Airports Corporation Ltd. (ZACL) came into force on March 10, 2015 and construction began on April 1, 2015. The project was originally expected to commenced on April 21, 2015 and conclude on October 20, 2019. The expected project completion date was later revised to June 2020 and then March 10, 2022. As of July 31, 2020, the project had achieved an 89% completion rate. As of April 30, 2021, the project had achieved a 93% completion rate. As of June 30, 2021, $271,900,000 had been paid to CJIC (representing 75.53% of the EPC contract value). As of August 31, 2021, the new airport terminal building had been handed over and commissioned, but, the following works were outstanding: bullet-proofing and finishing on the presidential pavilion (89% completion rate); steel structure installation on the corridor connecting the terminals (35% completion rate); a widening of the taxiway shoulder (98% completion rate); a rehabilitation of the existing terminal building (5% completion rate); and a rehabilitation of ZASTI (10% completion rate). A formal airport opening ceremony took place on August 9, 2021. This project has been plagued by corruption allegations and performance problems. In April 2015, media outlets reported that Zambian government officials and CJIC stole $25 million from the China Eximbank loan by unilaterally changing the original contract from $385 million to $360 million. This corruption allegation and contract renegotiations delayed project implementation by a few years. Then, in October 2019, China Eximbank reportedly halted loan disbursements due to concerns that the Government of Zambia would default on its repayment obligations. On July 29, 2022, the Ministry of Finance & National Planning (MOFNP) of Zambia announced that it was seeking lender approval to formally cancel the PBC’s undisbursed balance ($77,190,000.00); however, it also noted that it had not yet secured formal lender approval for this action. This announcement came approximately 21 months after the Government of Zambia defaulted on its repayment obligations to Eurobond holders and approximately 6 weeks after China, France, and 14 other countries formed a creditor committee to discuss the Zambian authorities’ request for a debt treatment under ‘the Common Framework for Debt Treatment beyond the DSSI’ endorsed by the G20 and the Paris Club. MOFNP also announced on July 29, 2022 that it planned to finance the completion of the Kenneth Kaunda International Airport (KKIA) Airport Expansion Project with general government revenues, and it signaled its intention to rescope the project to focus on the construction of the old terminal building and the extension of the runway and lighting system.

Additional details

1. This project is also known as the Upgrading of the Kenneth Kaunda International Airport and Copperbelt International Airport Project and the KKIA Expansion and Upgrading Project. The Chinese project title is 赞比亚卡翁达国际机场升级扩建项目 or 卢萨卡肯尼斯·卡翁达国际机场升级扩建项目. 2. Some official sources suggest that this project was supported by a single, $360 million preferential buyer’s credit (see https://www.mfa.gov.cn/ce/cezm//chn/sbgx/jm/t1588486.htm). Other official sources indicate that China Eximbank and the Government of Zambia signed two loan agreements: an RMB-denominated government concessional loan (GCL) agreement and an USD-denominated preferential buyer’s credit (PBC) (see source ID#66648 and source ID#116283). For the time being, AidData treats this project as though it was financed with a PBC and and GCL. However, this issue warrants further investigation. 3. A 54-month commercial contract between the Government of Zambia and China Jiangxi Corporation for International Economic and Cooperation (CJIC) was signed on June 3, 2013. Then, on August 15, 2013, CJIC requested that the Government of Zambia revise the price of the contract to $360,000,000 and redesign the contract as an Engineering Procurement and Construction Contract (EPC)/Turnkey Project. (Note: A turnkey project is a contract under which a firm agrees to fully design, construct and equip a service facility and turn the project over to the purchaser when it is ready for operation). On September 5, 2013, the commercial contract that was initially signed in June 2013 was revised to $360,000,000, resulting in the reduction of the initial contract price by $25,809,673. The contract was also changed from a Bill of Quantity (BoQ) Milestone Payment Schedule to an Engineering Procurement and Construction Contract (EPC)/Turnkey Project. The revised contract went into effect on March 10, 2015. According to the terms of the revised contract, the project was expected to commenced on April 21, 2015 and conclude on October 20, 2019. The expected project completion date was later revised to June 2020 and then March 10, 2022. 4. In September 2019, China Jiangxi Corporation for International Economic and Technical Cooperation broke ground on a Kenneth Kaunda International Airport Substation and Overhead Transmission Line Project (Chinese name: 实施的赞比亚肯尼思•卡翁达国际机场变电站及架空输电线路项目). However, it is unclear whether this project is financed with the same loan captured in this project record.

Number of official sources

32

Number of total sources

49