China Development Bank provides $170 million loan for Solar-Powered Milling Plants Project (Linked to Project ID#87538)

In 2015 during Zambian President Edgar Lungu's state visit to China, the Chinese Government and the Government of Zambia signed a memorandum of understanding (MOU) on a Solar-Powered Milling Plant Project. Then, on July 22, 2016, China Development Bank (CDB) and the Government of Zambia’s Ministry of Finance signed a $170 million loan agreement for the Solar-Powered Milling Plants Project. The loan reportedly carries a 12-year maturity and an interest rate of LIBOR plus 350 basis points. It is backed by a Sinsoure credit insurance policy. In order to facilitate loan repayment, Zambia Cooperative Federation (ZCF) created a special account into which various agricultural cooperatives (participating in the project and benefiting from the solar-powered milling plants) were required to deposit 1,700 kwachas (about $100) per month for a period of 15 years. At the end of the 15-year period, the solar-powered milling plants will become the property of the various agricultural cooperatives. The borrower is expected to use the proceeds of the loan to finance 85% of the cost of $200 million commercial contract between ZCF and Shandong Dejian Group (also known as Shandong Dejian Group Co., Ltd.). The Government of Zambia is responsible for providing the remaining $30 million in counterpart financing. As of December 2018, CDB had released $150 million and the Government of Zambia had released $20 million in support of this project. The project involves the construction of 1,000-2,000 milling plants — using solar-powered equipment purchased from China — in remote areas without electricity in eight Zambian provinces (Lusaka, Muchinga, Central Province, Luapula, Copperbelt, North Western, Western and Southern Provinces). The project was also expected to create 4,749 long-term stable jobs. Shandong Dejian Group is the contractor responsible for project implementation and its work is being overseen by Zambia Cooperative Federation (ZCF), which is the project owner. Construction began on March 6, 2017. However, a formal groundbreaking ceremony did not place until April 17, 2019. As of December 2016, 250 milling plants had been constructed. As of December 2018, 1,300 milling plants had been constructed. Ultimately, it is expected that 2,000 milling plants will be constructed. These milling plants are expected to create about 3,000 jobs and help stabilize the price of mealie-meal, from which the Zambians prepare their staple food, nshima. In January 2019, Xinhua reported that 1,830 solar-powered milling plants out of the planned 2,000 had been constructed. However, in October 2020, ZCF project director Derek Sokoni reported that 1,571 milling plants were up and running (in 79 regions across 10 provinces). Official Chinese sources characterize the project as a major success, arguing that it “brought an end to the current state of producing cornmeal by manual labor and guaranteed local food supply” and “its success […] led to a drop of 1/3 in the price of food.” They also note that the project’s solar power technologies have resulted in “annual average reduction of 27,633 tons of carbon dioxide.” However Zambian media have reported that many of the plants were ‘white elephants’ and provided poor value-for-money. In December 2021, one Zambian media outlet reported that half of the 307 Zambia Cooperative Federation (ZCF) solar-powered milling plants in Eastern Province had stopped working, several were abandoned by cooperatives, and 30% had solar panels stolen. This project has reportedly reached completion, but its precise completion date is unknown.

Additional details

1. This project is also known as the Zambia Solar Milling Plants Project and the Zambia Cooperative Federation Milling Plant Project. The Chinese project title is 赞比亚阳光磨坊项目 or 赞比亚太阳能磨坊厂项目 or 施的赞比亚2000套太阳能磨坊项目 or 赞比亚1683座太阳能磨坊项目. 2. AidData estimated the ‘all-in’ interest rate in the following manner: 0.999% (Average 6-month USD LIBOR from July 2016) + 3.5% (350 basis points) = 4.499%. 3. In June 2017, the Chinese Government provided a separate RMB 250 million grant for the Three Maize Flour Milling Plants Construction Project (captured via Project ID#87538). 4. One official source (https://www.cnsddj.com/news/132.html) suggests that this project was finance on an EPC+F basis. This issue warrants further investigation.

Number of official sources

13

Number of total sources

32