China Eximbank provides $244 million preferential buyer’s credit for Mongu-Tapo Section of Mongu-Kalabo Road Project

On July 4, 2011, China Eximbank and the Government of Zambia signed a $244 million preferential buyer’s credit (PBC) agreement for the Mongu-Tapo Section of Mongu-Kalabo Road Project. The borrowing terms of the PBC are unknown. The proceeds from the PBC were used to be used by the borrower finance 85% of the cost of a $286.94 million commercial civil works contract between the Government of Zambia and AVIC International, which was signed on December 31, 2009. The Government of Zambia was responsible for funding the remainder (15%) of the project cost. The purpose of the project was to construct a 34 km road section (D819) from Mongu to Tapo on the Mongu-Kalabo Road. It also involved the construction of twenty five bridges, the construction of 1022 meter bridges across Zambezi River, constructions of crushed stone base, bituminous surfacing, ancillaries like road markings, traffic signs, kilometer posts, guard rails, and erosion protection works. AVIC International Holding Corporation was the contractor responsible for implementation. A groundbreaking ceremony took place and October 17, 2010 and the project was officially completed and handed over to the authorities on April 27, 2016. The road has been open and operational ever since. However, this project has face accusations of corruption and overpricing. In a 2021 SAIS-CARI working paper (entitled "How Zambia and China Co-Created a Debt "Tragedy of the Commons"), Deborah Brautigam writes at some length about the project: “[t]he Zambezi River runs through Zambia’s Western Province. During the rainy season, the river spills across the Barotse floodplain, a seasonal wetland of some 550,000 hectares. Jill Kandel, an American who lived in rural Mongu for six years with her Dutch agronomist husband, told me what traveling from Mongu to the provincial capital of Kalabo, 57 km away as the crow flies, was like before the road. ‘It was a daunting, full-day, hot trip. For six months of the year the river would flood and you had to move north or south to a pontoon ferry. Each way it was a five-hour trip, just to get to the ferry. In the dry season, you could travel on the Zambezi, but it would take eight to ten hours on a banana boat with a 35 hp motor.’ A paved road through this section of the Western Province linking Zambia to Angola has been a dream for successive Zambian governments. In the late 1990s, the OPEC Fund provided US$ 27.3 million for a road. Launched in 2000 by a Kuwaiti firm, the project collapsed when floods in 2003 and 2004 washed out the embankments built by the company. In October 2010, leading up to a critical election year, AVIC--a Chinese firm with roots in the aviation industry, but with ambitious goals of adding global engineering, procurement, construction (EPC) projects to its portfolio--was able to negotiate funding from China Eximbank for its single-source bid to build the 34 km road for US$ 287 million. A well-known Chinese saying asserts ‘to become prosperous, first build a road.’ China Eximbank, which provided a preferential export buyer’s credit for the project, does not appear to have questioned the Zambian argument that the road had developmental benefits beyond those reflected in a traditional economic analysis. As a Zambian official told C. K. Lee: ‘It’s extremely expensive. No European bank would finance it, but with China, we agreed that it’s important for Zambia and Angola… You cannot drive from Zambia to Angola; you cannot because there is no road. For the benefit of SADC [Southern African Development Community] we have to open up this part of Africa.’ Rumors circulated in Lusaka that the project’s costs were padded to allow President Rupiah Banda and the MMD [ruling part] to finance the 2011 election campaign, which, ironically, he lost to China’s chief critic at the time: Michael Sata of the PF [an opposition part]. Yet the technical achievement of the road, with its 26 bridges, remained impressive. The road ‘totally blew me away,’ Jill Kandel recalled. ‘It’s like I was living on the moon and someone built a stairway.’ Still, videos of the road posted by travelers show little traffic aside from bicycles and pedestrians. Beyond Kalabo, a sandy track remains the only way to reach Angola.

Additional details

1. The Chinese project title is 芒古-卡拉博公路项目 or 芒古—卡拉博公路项目.

Number of official sources

17

Number of total sources

21