China Eximbank provides $54.8 million loan to Government of Zimbabwe for ZISCO No. 4 Blast Furnace Refurbishment Project

Project narrative

In 1995, Shougang Corporation of China and Zimbabwe Iron and Steel Company (ZISCO or Ziscosteel) — a state-owned enterprise in Zimbabwe — signed a letter of intent to refurbish ZISCO’s No. 4 blast furnace. Then, in 1997, China Eximbank and ZISCO signed a $35 million buyer's credit loan agreement for the No. 4 Blast Furnace Refurbishment Project (津钢4号高炉修复). The borrower was expected to use the proceeds of the loan to partially finance a $50 million commercial contract that it signed with Shougang Corporation in March 1997. The buyer’s credit loan was insured by China Export and Credit Insurance Corporation (Sinosure). Shougang Group was responsible for project implementation. The refurbishment project officially commenced on December 1, 1997, and was completed as scheduled on May 26, 1999. Then, on August 2, 1999, Zimbabwe held a grand opening ceremony for No. 4 blast furnace. The buyer's credit loan reportedly had a repayment schedule of $5 million a year and the first repayment was due at the beginning of 2009. In 2010, ZISCO was not generating any income and was unable to service the debt. ZISCO managed to pay around $1 million at that time, prompting the Government of Zimbabwe to request for debt relief from China Eximbank. China Eximbank rescheduled the loan three times (in 2003, 2007, and 2010). On September 11, 2003, China Eximbank and ZISCO signed the first rescheduling agreement, which sought to reschedule $42 million of ZISCO’s outstanding obligations under the buyer’s credit loan that it originally contracted in 1997. The agreement came after Ziscosteel defaulted on the loan in question. China Eximbank agreed to reduce the interest rate of the loan from 7% to 4% and extend the maturity of the loan by 3 additional years. These changes reportedly allowed for Ziscosteel to make a reduced annual debt service payment of $8 million. The officials involved in the process of negotiating and formalizing the debt rescheduling deal were the Zimbabwean Ambassador to China, Chris Mutsvangwa; Zimbabwe's Minister of Industry and International Trade, Samuel Mumbengegwi; Permanent Secretary in Zimbabwe’s Ministry of Finance and Economic Development, Nicholas Ncube; and the Director General of the African Department in the Minister of Foreign Affairs of China, Du Qiwen. The 2003 rescheduling agreement also reportedly reopened Chinese credit lines to Zimbabwe, which were severed after ZISCO defaulted on the original loan. Then, in 2007, China Eximbank and ZISCO signed another rescheduling agreement, which sought to reschedule $55 million of ZISCO’s outstanding obligations under the buyer’s credit loan that it originally contracted in 1997. China Eximbank reportedly provided an additional 3-year grace period to Ziscosteel for this debt rescheduling. Then, on January 29, 2010, China Eximbank and ZISCO signed another rescheduling agreement, which sought to reschedule $54.684 million of ZISCO’s outstanding obligations under the buyer’s credit loan that it originally contracted in 1997. China Eximbank reportedly provided an additional 3-year grace period to Ziscosteel, and Sinosure agreed to insure the agreement. Two and a half years later, Sinosure and Zimbabwe’s Ministry of Finance assumed responsibility for the loan; they signed a $54,846,736.19 loan agreement (‘or ZISCO Steel facility agreement’) on August 15, 2012 (captured via Record ID#73000). The new loan agreement specified a final repayment date (maturity date) of 2020. However, as of 2018, the borrower had accumulated principal and interest arrears and penalties worth $6,621,310.95. By September 2021, the loan had reached maturity, but its amount outstanding (including principal, interest, and arrears) was $8,743,240.74. According to the 2022 Annual Public Debt Bulletin, by July 2023 the treasury had fully paid the debt owed to SINOSURE amounting to US$47.8 million. The original 1997 loan is captured via Record ID#63471. The 2003 rescheduling is captured via Record ID#17125. The 2007 rescheduling is captured via Record ID#72785. The 2010 rescheduling is captured via Record ID#20963.