China Eximbank provides $65.4 million loan for Phase I of Smart Zambia National ICT Development Project (Linked to Record ID#92219)

Project narrative

In March 2015, the Government of Zambia and China Eximbank signed a concessional loan agreement worth $65,468,016.48 for Phase 1 of the Smart Zambia National ICT Development Project. The borrowing terms of the loan are unknown. However, it is known that some of the loan proceeds ($13,487,360.26) were on-lent to Zambia ICT College (later renamed Zambia University College of Technology) on September 1, 2015 (final maturity date: March 1, 2035). It is also known that the proceeds of the loan were used to be used by the borrower to finance 100% of the cost of a $65,468,016.48 commercial contract between the Government of Zambia and Huawei Technologies Co., Ltd. (ID#00Y8941213000A), which was signed in January 2015. The contract was to be paid in three installments: one advance payment of 30% of the contract value, one payment worth 50% of the contract value at delivery, and a final payment equivalent to 20% of the contract value as an acceptance payment upon completion. By December 31, 2022, Zambia ICT College had accumulated principal and interest arrears under its on-lending agreement with Zambia's Ministry of Finance worth $2,513,150.68. Phase 1 of Smart Zambia National ICT Development Project supported the creation of three data centers and an information and communications technology (ICT) talent training center (Chinese project name: 信息和通信技术人才培训中心). Zambia’s main national data center, managed by the Zambia Information and Communication Technology Authority (ZICTA), is located in Lusaka (exact locational coordinates: -15.423211184181552, 28.311501916335335). The ZICTA center covers an area about 450 square meters, with an equipment room containing 72 server cabinets, a power room, monitoring room, and two outdoor diesel-engine generators supported by underground fuel tanks. The ZICTA cloud platform was designed to provide processing, networking, and storage facilities for government and public institutions, and commercial enterprise services. The second data center is a a 400-square-meter backup facility located at the Roma switch office of Zamtel, the Zambian national telecommunications operator. The third data center is another 600-square meter backup facility situated at the Zamtel Kitwe switch office. All of the three centers are fully equipped with servers, power, monitoring, and communications equipment rooms. Project implementation commenced in January 2016. A The ICT talent training center began operations in July 2016. The project was officially completed and handed over the authorities on February 28, 2017. The ZICTA National Data Center was put into operation in February 2019. This project has become the source of local and international controversy. In 2015, Zambia’s Anti-Corruption Commission reportedly investigated the circumstance surrounding the issuance of a no-bid contract to Huawei Technologies Co., Ltd. Then, in August 2019, the Wall Street Journal reported that ‘in the country’s new $75 million data center, Huawei employees work with the Cybercrime Crack Squad, sitting in cubicles where they monitor and intercept digital communications from a broad spectrum that includes criminal suspects, as well as opposition groups, activists and journalists.’ It also reported that “on the second floor of Zicta’s gray-colored facility, behind biometric scanners, Huawei employees are embedded within Zambia’s new data center, which houses the Cybercrime Crack Squad, Zambian security officials said. Established in February [2019], around half of the 40-strong staff at the data center are Huawei employees, two Zambian officials there said. In April [2019], President Lungu’s office ordered a crackdown on news sites that had published a string of damaging stories. Zambia was for decades seen as one of Africa’s most stable and permissive democracies, but in recent years it has moved to muzzle opposition media, shuttering some of the country’s top newspapers and television channels and pushing antigovernment voices onto Facebook sites and WhatsApp forums. Mr. Lungu’s press secretary, Amos Chanda, called the head of the cyber squad, Mofya Chisala, and a senior chief Huawei technician for help, Zambian intelligence officers said. Mr. Chanda said he had “no recollection of the events or meetings” with the cyber squad or Huawei officials. Mr. Chisala didn’t respond to requests for comment. Huawei technicians helped intercept the communications of opposition bloggers running a news site named Koswe, or “The Rat,” which had repeatedly criticized Mr. Lungu, the two Zambian officials in the Cybercrime Crack Squad said. The Huawei staff accessed the bloggers’ Facebook pages, where they found their phone numbers, and then used spyware from another company to look into and locate the devices. On April 18, a team of cyber officials, police intelligence and Zicta experts huddled in Mr. Chanda’s office, on the ground floor of the presidential mansion. Two Huawei technicians opened their laptops to display screens showing live trace routes of several mobile phones linked to the targeted bloggers’ Facebook pages, on maps that also charted Huawei phone antennas, Zambian intelligence officials said. The cyber squad alerted the police in the northwestern provinces where Huawei had pinpointed the opposition bloggers. Over the next few days, Huawei experts helped Zambian officials track the targets from the Zicta data center offices, maintaining real-time contact with police officers in the field, the intelligence officials said. Finally, police swooped in on sites on the outskirts of the copper mining town Solwezi. One suspect was typing on his laptop when officers burst in and seized his electronic devices. “We found one of the suspects editing a long, malicious article which he was about to post,” one of the intelligence officials said. One official on the cyber squad said the Zambians have “nowhere near the expertise” of Huawei. There are also indications that the loan that supported financially underperformed vis-a-vis the original expectations of the lender. In November 2020, 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. Then, in 2024, Zambia's Auditor General revealed that Zambia ICT College's 'role was to manage the ICT Talent Training component of the project with the view that revenues raised from the training [program] would assist in the repayment of the [China Eximbank loan]. However, the training program did not have the envisaged uptake therefore rendering [Zambia ICT College] unable to service the loan.' A Zambian parliamentary select committee also determined that 'due diligence was not undertaken in order to ascertain whether the Zambia ICT College had the capacity to repay the loan in question.'