China Eximbank provides $129.7 million buyer’s credit for 122 km Kawambwa to Mporokoso (D019) Road Upgrade Project

On June 27, 2018, China Eximbank and the Government of Zambia signed a $129,734,105.49 million buyer’s credit (loan) agreement for the 122 km Kawambwa to Mporokoso (D019) Road Upgrade Project. The borrowing terms of the loan are unknown. However, it is known that the borrower was expected to use the proceeds of the loan to finance 85% of a $142.28 million commercial contact between Zambia's Road Development Agency and China Harbour Engineering Limited, Ltd (CHEC), which was signed in July 2016. As of July 2022, the loan from China Eximbank had achieved a 10.1% disbursement rate ($13,219,206.11 out of $129,734,105.49). The purpose of the project is to upgrade a 122 km stretch of the D019 road between Kawambwa to Mporokoso from gravel to the bituminous standard. CHEC is the general EPC contractor responsible for project implementation. A groundbreaking ceremony took place on July 27, 2017. However, virtually no progress was made during 2018, with a project completion rate of 2%. Consequently, the project’s intended completion date was pushed back until July 23, 2021. According the Zambian Road Development Agency's 2020 Work Plan, construction is ongoing, but a March 9, 2020 media report says the project experienced further delays due to the COVID-19 pandemic. This project has also been plagued by allegations of corruption. In June 2019, Christopher Siwakwi, an investigations officer from Zambia’s Anti-Corruption Commission (ACC), told the Lusaka Magistrates’ Court that foreign currency (USD) moved from a CHEC bank account to purchase two properties allegedly owned by Zambian Infrastructure and Housing Minister Ronald Chitotela. Siwakwi, however, testified that the properties — lot number 148 of farm 50A and subdivision A of lot 22183 /M Ibex Hill — were established to be in the names of the previous owners, Mary Lubinga and Former Labour Minister Austin Liato. Ronald Chitotela, Gregory Chibanga and Brut Holdings were charged with two counts of concealing the two properties while Diris Mukange was charged with two counts of possession of the same properties, which are suspected to be proceeds of crime. They all pled not guilty. During the trial before principal resident magistrate David Simusamba, Christopher Siwakwi said his investigations established that the contract for the sale of the properties was in the name of Diris Mukange (as a buyer for both properties), while the negotiations for the prices were done by Ronald Chitotela and his wife when he was Deputy Minister for Sports and Youth Development. Siwakwi said the price of the property in Makeni was K1.6 million while the Ibex Hill one was purchased at K1.8 million, adding that the source of income to buy the same was tracked back to CHEC. Siwakwi recounted how ACC in June 2017 received a complaint that Ronald Chitotela was in possession of property suspected to have been proceeds of crime and had received a bribe from CHEC. Siwakwi said ACC also received additional information that the money used to purchase the properties originated from CHEC. Siwakwi said the ACC team embarked on investigations to establish whether the allegations were founded. Siwakwi said he visited the Bank of China where he established that China Harbour had a U.S. dollar account with the bank which transferred $300,000 to Andrews and Partners on July 27, 2016 at its FNB bank account which was payment for legal services and attached to the bank statement was a contract for the upgrading of Kawambwa-Mporokoso road. 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 ($116,514,899.38); 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. This project is also known as the Kawambwa-Mporokoso Road Upgrade Project. The Chinese project title is 赞比亚D19公路升级改造 or 卡万布瓦-姆波洛科索（D19）公路项目 or Kawambwa-Mporokoso（D19）公路项目 or 卡万布瓦至姆波 洛科索（D019) 公路升级改造项 目. 2. Due to the fact that the China Eximbank loan was used to finance 85% of the total cost of a commercial contract with CHEC, AidData assumes that it was provided in the form of an export buyer’s credit. It is unclear if the export buyer’s credit is of a preferential nature or non-preferential nature. This issue warrants further investigation. 3. According to the 2018 Zambia Mid-Year Economic Review, China Eximbank issued the loan agreement for this project between January 2018 and June 2018. However, the precise loan commitment date is unknown. This issue merits further investigation.

Number of official sources

14

Number of total sources

27