ICBC provides $191.25 million buyer’s credit for FTJ Luapula University Construction Project

On January 24, 2018, the Industrial and Commercial Bank of China (ICBC) and the Government of Zambia signed a $191,250,000 buyer’s credit (loan) agreement for the FTJ Luapula University Construction Project. The borrowing terms of the loan are unknown. However, it is known that the borrower was expected to use the loan proceeds to finance 85% of the cost of a $225 million commercial (EPC) contract between Zambia’s Ministry of Higher Education and China Energy Engineering Group (CEEG), which was signed in August 2017. As of July 2022, the loan from ICBC had achieved a 0% disbursement rate ($0 out of $191,250,000). The purpose of the project is to construct facilities at two locations of Frederick Titus Jacob (FTJ) Chiluba University (formerly named Luapula University) in the cities of Mansa and Kasama. China Energy Engineering Group (CEEG) is the general (EPC) contractor responsible for implementation. However, 15 MCC Africa and Ndilia Associates are also involved in the project. In November 2013, the then-President of Zambia, Michael Sata, laid a foundation stone for the construction of the Luapula University which President Edgar Lungu later renamed after late second Republican President Fredrick Titus Jacob Chiluba. The Government of Zambia handed over the project site in Mansa to contractors in November 2015. It was originally anticipated that construction would take place between March 2016 and March 2018. However, this project encountered several implementation challenges and delays. Chief among them was the fact that the Government of Zambia decided to suspend construction projects that had achieved a completion rate of 80% or less due to its public financial management problems. However, between July 2019 and December 2019, the Zambian Government undertook an exercise to determine which projects should be canceled or postponed. It was decided at that time that the FTJ Luapula University Construction Project would proceed. However, in April 2020, project implementation stalled again due to funding problems. At that time, the project had only achieved a 5% completion rate. On April 21, 2020, Zambia’s Minister of Foreign Affairs Joe Malanji wrote to the Chinese Ambassador to Zambia to ask for loan disbursements to be expedited. Joe Malanji emphasized in his letter that the Government of Zambia had already honored its commitment to finance 15% of the total cost of the commercial contract with CEEG (through an advance payment to the contractor). By June 9, 2021, the project component in Mansa had still only achieved a 20% completion rate. According to a 2021 report to Parliament, Zambia’s Ministry of Finance was in negotiations with the contractor to re-scope the project as this would enable the release of the funds by the financier [ICBC]. Then, on July 29, 2022, the Ministry of Finance & National Planning (MOFNP) of Zambia announced that it was seeking lender approval to formally cancel the ICBC loan’s undisbursed balance ($191,250,000); 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.

Additional details

1. The university was originally known as Luapula University. 2. A China Banking and Insurance News article identifies the loan as syndicated and claims that it was disbursed by Industrial Bank Co. Ltd (兴业银行), which is not ICBC and may be a reference to the Industrial Development Bank of Zambia. The Zambian Ministry of Finance and SAIS-CARI report the loan was disbursed by ICBC, so AidData has identified ICBC as the lender for the time being. AidData has not identified any evidence that ICBC and Industrial Bank Co. Ltd. issued a syndicated loan. 3. This project is also known as the FTJ Chiluba University Project in Mansa and Kasama Project. The Chinese project title is 赞比亚F.T.J.Chiluba大学城项目 or 赞比亚FTJ Chiluba大学城项目. 4. One official source (https://www.mndp.gov.zm/wp-content/uploads/filebase/2017-Annual-Progress-Report-Detailed-Report.pdf) suggests that the loan agreement was signed in 2017 rather than 2018. This issue warrants further investigation.

Number of official sources

13

Number of total sources

25