Africa Growing Together Fund provides $50 million loan for Chinsali-Nakonde Road Rehabilitation Project (Linked to Record ID#36104)

Project narrative

On May 22, 2014, the African Development Bank (AfDB) and the People's Bank of China (PBOC) signed an agreement for the Africa Growing Together Fund (AGTF) (see Umbrella Record ID#36104). The purpose of this $2 billion loan facility was to finance large development projects in Africa between 2014 and 2024. The AGTF is sponsored by the PBOC and the administered by AfDB. In March 2015, an Environmental and Social Impact Assessment (ESIA) for the project was completed by the Road Development Agency of Zambia. Then, on January 28, 2016, AGTF signed a $50 million loan agreement (ID#5050130000051) with the Government of Zambia for the Chinsali-Nakonde Road Rehabilitation Project. On the same day, the African Development Bank’s African Development Fund (ADF) issued a $193 million loan agreement (ID#2000130013830) to the Government of Zambia for the same project. The borrowing terms of the AGTF, which entered into force on October 4, 2016, is as follows: a 20-year maturity, a 5-year grace period, an interest rate of 6-month LIBOR plus a 0.6% margin, no commitment fee, and no management fee. The first AfDB, ADF, and AGTF loan disbursements took place on August 16, 2016. As of December 2020, the AGTF loan had achieved an 8% disbursement rate ($4.43 million out of $50 million). As of June 2021, the AGTF loan had achieved a 23% completion rate ($11,500,000 our to $50 million). The aggregate amount outstanding under the AGTF loan for the Integrated Small Towns Water Supply and Sanitation Program (captured via Record ID#92095) and the AGTF loan for the Chinsali-Nakonde Road Rehabilitation Project (captured via Record ID#87029) was $16,954,890 as of June 30, 2021, $39,179,790 as of June 30, 2022, and $40,559,709 as of December 31, 2022. The purpose of the project is the rehabilitation of the Chinsali – Nakonde road (210 km) in two lots: Lot 1: Chinsali – Isoka (100 km) and Lot 2: Isoka – Nakonde (110 km). These two lots are to be implemented concurrently over a period of 40 months with due cognisance taken of the rain patterns in the region. The project also includes consultancy services for the supervision of the civil works, and technical audits to foster quality and enhance sustainability. The Chinsali – Nakonde Road Section forms a part of the Zambian Great North Road (T2) that is a section of international routes: the Trans-Africa Highway and the North-South Corridor (NSC). The NSC is a joint COMESA/EAC/SADC Aid for Trade initiative, the primary aim of which is to reduce the transport costs along this priority Corridor which links the port of Dar-es-Salaam in Tanzania to the Copper-belt (Southern DRC and Northern Zambia) and connects to the southern ports of South Africa (Durban). The Corridor system, with its spurs, services eight countries in the region- Tanzania, DR Congo, Zambia, Malawi, Botswana, Zimbabwe, Mozambique, and South Africa. The contractor for Lot 1 is China State Construction Engineering Corporation while for Lot 2 the contractor is China Railway Seventh Group Company Limited. Lot 1 commenced on April 15, 2019. Lot 2 commenced on April 23, 2019. Roughly on year later, in June 2020, Lot 1 had achieved a 13.56% completion rate and Lot 2 had achieved a 13.08% completion rate. As of June 2021, the project still had a low loan disbursement rate (30% on the ADB loan and 23% on the AGTF loan). The main reason for the low loan disbursement rate was the lower than originally expected cost of the civil works contracts, resulting in a commitment rate of 67% and thus a large uncommitted balance on the loans. Secondly, the civil works contracts commenced later than expected due to delays in procurement. COVID-19 also disrupted progress for 10 months. Despite this constraint, civil works had achieved a 48% completion rate as of June 2021. Consulting services and institutional capacity building were also ‘progressing well’ as of June 2021. Counterpart financing for project-affected persons (PAPs), although largely covered (70%), slowed down due to Government of Zambia’s difficulty in financing its budget. However, as a mitigating measure, the African Development Bank approved 100% financing of civil works and Government of Zambia agreed to concentrate on resettlement and compensation of PAPs. The project’s originally expected completion date is June 30, 2023.