Narrative
Full Description
Project narrative
In April 2016, the Government of Zambia and Huawei Technologies Co., Ltd. signed an MOU on Phase 2 of the Communication Towers Project. Then, on August 4, 2017, the Chinese Government and the Government of Zambia signed a preferential loan framework agreement for Phase 2 of the Communication Towers Project. On the same day, China Eximbank and the Government of the Government of Zambia's Ministry of Finance also signed a $302,034,321.68 government concessional loan (GCL) agreement for Phase II of the Smart Zambia National ICT Development Project. The borrowing terms of the GCL are unknown. However, it is known that the Zambian Ministry of Finance on-lent the proceeds of the loan to Zamtel. It is also known that the borrower was expected to use the proceeds of the loan to finance 100% of the cost of a commercial contract [ID#MTWSC/PSU/G/04/15] between the Government of Zambia's Ministry of Transport and Communication and Huawei Technologies Co., Ltd., which was signed on August 12, 2016. According to Ministry of Transport and Communications of Zambia, by the fourth quarter of 2018, the loan had achieved an 30.3% disbursement rate ($91,637,435.75 out of $302,034,321.68). As of July 2022, the Ministry of Finance & National Planning (MOFNP) of Zambia reported that the loan had achieved an 87.8% disbursement rate ($265,379,267.74 out of $302,034,321.68). Phase 2 involved the construction of 808 communication towers, 1,009 2G, 3G and 4G wireless stations, as well as the installation of a matched transmission network and user access terminals in unserved and under-served areas. The broad objective is to improve communication services and reach 92 percent network coverage countrywide. Another objective is to ensure that 40 percent of the country has access to data services (from a baseline level of 5 percent). The targets of these communication towers will be relatively population dense villages and economically active areas like hospitals, schools, mines, and tourist areas. This is in line with the country's goal to provide universal access to information via information and communications technology (ICT). Huawei Technologies Co., Ltd. is the contractor responsible for project implementation. Its work is being overseen by Zambia Telecommunications Company Limited (Zamtel). Project implementation commenced in September 2017. 600 communication towers were erected in 2018 and 400 additional towers were scheduled for installation in 2019. As of June 2020, 708 communication towers were operational and project completion was scheduled for December 2020. As of March 2021, the project had achieved a 78% completion rate. On July 29, 2022, the Ministry of Finance & National Planning (MOFNP) of Zambia announced that it was seeking lender approval to formally cancel the loan’s undisbursed balance ($36,655,053.94); 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 Phase 2 of the Communication Towers Project with general government revenues. Then, in 2024, the Zambia's Auditor General revealed that 'the [China Eximbank] loan was to be repaid using the funds to be generated from the same project. However, the sites in question were in most instances deployed in areas that were not commercially viable and could not generate sufficient revenue to cover operations related to the project and service the loan. Zamtel’s failure to service the on-lent [loan] had been on account of low revenue generation from the low-income areas which were being served by the sites that were deployed under the GRZ Communications Towers II project.'
Staff comments
1. This project is also known as the Communications Towers Project Phase II or Universal Access Coverage Phase II Project. The Chinese project title is 赞比亚偏远地区通信覆盖项目 or 农村通信塔项目 or 赞比亚偏远地区通信覆盖项目二期 or 偏远地区通信覆 盖二期项目. 2. One official source (https://www.dropbox.com/s/3uyikwu9ub1ncfi/%E4%B8%AD%E5%9B%BD%E5%AF%B9%E5%A4%96%E6%89%BF%E5%8C%85%E5%B7%A5%E7%A8%8B%E5%9B%BD%E5%88%AB%EF%BC%88%E5%9C%B0%E5%8C%BA%EF%BC%89%E5%B8%82%E5%9C%BA%E6%8A%A5%E5%91%8A2019-2020.pdf?dl=0) indicates that this project reached completion in March 2020. This issue warrants further investigation. 3. The government concessional loan (GCL) that China Eximbank issued for Phase 2 of the Communication Towers Project should not be confused with the preferential buyer’s credit (PBC) that China Eximbank issued for Phase II of Smart Zambia National ICT Development Project (captured via Record ID#92219). SAIS-CARI and Boston University’s Global Development Policy Center treat Phase 2 of the Communication Towers Project and Phase II of Smart Zambia National ICT Development Project as one and the same. However, multiple sources confirm that they are two separate projects supported by two separate financing agreements with China Eximbank. 4. SAIS-CARI and Boston University’s Global Development Policy Center capture the GCL for the Phase 2 of the Communication Towers Project but not the PBC for Phase II of Smart Zambia National ICT Development Project. 5. The China Eximbank GCL was almost certainly denominated in RMB. However, AidData has thus far only managed to identify the USD equivalent value of the loan. This issue warrants further investigation. 6. Some sources refer to the USD value of the GCL as $280,764,601.55. Others refer to the USD value of the GCL as $302,034,321.68. AidData relies on the $302,034,321.68 figure reported by MOFNP in July 2022 (see https://www.dropbox.com/s/1m28edikpasu2nq/MEASURES-TAKEN-REGARDING-SOME-LOAN-FINANCED-PROJECTS.pdf?dl=0). 7. According to the World Bank's Debtor Reporting System (DRS), the weighted average grace period of all official sector lending from all Chinese creditors to government and government-guaranteed borrowing institutions in Zambia was 4.8654 years in 2017. AidData estimates the grace period of the China Eximbank loan that supported Phase 2 of the Communication Towers Project by using this figure. See https://www.dropbox.com/scl/fi/uyz6w7q31x2o8i6rna7ug/DRS-May-2024-Extraction-Official-Chinese-Loan-Commitments-to-Zambia.xlsx?rlkey=n0a6270w91pdmmfyaoqva419r&dl=0 8. According to the World Bank's Debtor Reporting System (DRS), the weighted average maturity of all official sector lending from all Chinese creditors to government and government-guaranteed borrowing institutions in Zambia was 18.0631 years in 2017. AidData estimates the maturity of the China Eximbank loan that supported Phase 2 of the Communication Towers Project by using this figure. See https://www.dropbox.com/scl/fi/uyz6w7q31x2o8i6rna7ug/DRS-May-2024-Extraction-Official-Chinese-Loan-Commitments-to-Zambia.xlsx?rlkey=n0a6270w91pdmmfyaoqva419r&dl=0 9. According to the World Bank's Debtor Reporting System (DRS), the weighted average interest rate of all official sector lending from all Chinese creditors to government and government-guaranteed borrowing institutions in Zambia was 3.6528% in 2017. AidData estimates the interest rate of the China Eximbank loan that supported Phase 2 of the Communication Towers Project by using this figure. See https://www.dropbox.com/scl/fi/uyz6w7q31x2o8i6rna7ug/DRS-May-2024-Extraction-Official-Chinese-Loan-Commitments-to-Zambia.xlsx?rlkey=n0a6270w91pdmmfyaoqva419r&dl=0 10. In July 2022, Zambia announced that it is cancelling certain projects in their entirety or cancelling undisbursed portions of certain Chinese loans unilaterally. 11 China Exim bank projects are cancelled, 3 ICBC projects are cancelled, 1 Jiangxi Bank project is cancelled. While it is unclear if the creditors agreed to this action, there is some evidence that shows the cancellation had ocurred. This issue warrants more investigation. The announcement can be accessed at https://www.dropbox.com/scl/fi/bxixfu3t97x14epaqayjv/MEASURES-TAKEN-REGARDING-SOME-LOAN-FINANCED-PROJECTS.pdf?rlkey=azvseog366a7ntoo93fjiatrj&e=3&dl=0