CTPD Executive Director Isaac Mwaipopo
CTPD Executive Director Isaac Mwaipopo

The Centre for Trade Policy and Development has advised the Zambian delegation attending the third Forum for China Africa Cooperation (FOCAC) summit to avoid contracting any fresh loans.

CTPD Executive Director Isaac Mwaipopo said Zambia should avoid at all costs acquiring more debt during out of this summit.

Mr Mwaipopo added that Zambia is at high risk of debt distress, and the Chinese government has time and again signaled that China might be open to supporting the Zambian Government to restructure its debt portfolio.

He said Zambia must therefore take advantage of this platform and bring to the table a conversation around the need to renegotiate its Chinese debt.

Mr Mwaipopo also noted the need for transparency and accountability in loan acquisitions, the terms and structure of Chinese loans to Zambia and that details about how they are secured must be transparent.

Below is the full statement from CTPD

FORUM FOR CHINA AFRICA COOPERATION (FOCAC) RECOMMENDATIONS

Since the turn of the century China has increasingly been interested in many African states, largely the result of the establishment of the Forum on China-Africa Cooperation (FOCAC). Zambia is no different, and Chinese investment in the infrastructure, natural resources and energy sectors are substantial.

Chinese financing and companies are responsible for the ongoing construction of airports (such as the new terminal at Kenneth Kaunda International Airport and the new Copperbelt Airport); roads (including the new Lusaka-Ndola dual carriageway project); and rail links (including extensions to TAZARA).

Such Chinese investment takes many forms, including (i) grants direct from the Chinese government; (ii) interest free loans from the Chinese government through the Commerce Ministry; (iii) concessional loans; and (iv) commercial loans.

However, in Zambia the bulk of Chinese lending is through direct project finance loans with either fully commercial or concessionary terms.

The scale of this Chinese lending is significant: speaking in October 2017, the then Chinese ambassador to Zambia said that over 600 Chinese enterprises are investing in Zambia and the total Chinese investment is close to US$4 billion, making Zambia one of the top ten destinations in Africa for Chinese investment.

95% of all of Zambia’s external debt from export and suppliers’ credit sources comes from China, with debt from Chinese sources equaling approximately US$3 billion (or 30% of Zambia’s total external debt stock) in 2017.

Additionally, in 2016 a staggering US$1.7 billion – 50% of all new loans contracted that year – was lent by Chinese sources. More importantly, according to a statement issued by the Minister of Finance on 21 February 2018, it was stated that China is a natural first creditor and accounts for 28% of Zambia’s debt.

Nonetheless, very little is known about the terms and structure of these loans. Much of the Chinese debt is relatively low-cost when compared to other sources of finance (at least in terms of interest rates), therefore permitting significant investment into projects designed to promote economic growth and development.

However, there is a severe lack of transparency over many key terms, including repayment, contracting obligations, project feasibility, and value for money and loan security. This lack of transparency makes it impossible to have a clear account of the implications of this borrowing for the public finances.

The Center for Trade Policy and Development recognizes the fact that FOCAC is the premier platform through which trade and investment is mediated between China and African countries.

Therefore, CTPD recommends the following to all the African Heads of States attending the summit running under the theme “Win-win cooperation and joining hands to build a closer community with a shared future for China and Africa.” Project financing, it is important to ensure that projects financed through FOCAC are integrated into and consistent with countries national development plans.

This will make FOCAC projects more coherent and focused. It should not be just be because China has resources to lend out and countries jump on them without taking into consideration how some of the projects fit in with national priorities.

Engagement strategy, While China has an Africa Policy, African countries should begin a conversation on the need to develop a strategy that can help them engage with China effectively.

Africa should eventually develop an African-grown comprehensive agenda or strategy going into negotiations with China that emphasizes policy co-ordination and sustainability. It is also recommended that African governments make sure that all projects supported by the FOCAC framework fully adhere to rigorous environmental and social sustainability standards and deploy best international standards and practices of planning, implementation and progress reporting.

In the Zambian case, Chinese investment has been cited to come with a host of environmental impacts and sustainability concerns. Even in the recently finalized study conducted by the Centre for Trade Policy and Development on the performance of Multi Facility Economic Zones also revealed the need to improve conditions of service of workers.

Renegotiation of Chinese Debt, Zambia is at high risk of debt distress, and the Chinese government has time and again signaled that China might be open to supporting the Zambian Government to restructure its debt portfolio.

Zambia must therefore take advantage of this platform and bring to the table a conversation around the need to renegotiate its Chinese debt.
Zambia should avoid at all costs acquiring more debt during out of this summit. Transparency and Accountability in loan acquisitions, the terms and structure of Chinese loans to Zambia – and details about how they are secured – must be transparent. Not only will this help to allay market concerns on the basis that investors should be provided with the key commercial terms of Zambia’s debt portfolio (thus reducing uncertainty), but it will permit greater oversight of the projects the government is promoting and will improve value for money.

The Centre for Trade Policy and Development remains deeply concerned about the growing negative publicity of Zambia which has now penetrated the international media space, there is need to come together as a country and find common ground that can help to resolve the current situation.

As the 2019 budget debates draw closer, there is serious need to put heads together in finding lasting solutions as the current debt situation might get severe. It is our sincere hope that the departure of the IMF representative to Zambia will not affect prospects for accessing the desperately needed support from the international monitory Fund as the failure to access that support could have severe implications for the country.
Isaac Mwaipopo
EXECUTIVE DIRECTOR

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24 COMMENTS

  1. Yes i agree with CTPD -no new loans …but then again Lungu was very quick to sign a grant of $30 which i think is okay.

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    • What Mwaipopo is saying does make sense and that is what a few reasonable persons here are all calling for. China pledged to invest US$60bil into Africa in next 3yrs, which means on aver. US$1bil for each of the 45countries represented at FOCAC, Zambia included. For now, Zambia is already guaranteed of a US$30mil. grant. Do you know now why DORA was so confident yesterday and urging you to give Maggie a chance? With that US$30mil, I doubt if any further grants or interest-free loans can be achieved, especially that Zambian position is so weak, practically cannot negotiate anything as they are going to the table as beggars. we are left with the option of concessional or commercial loans. Get new loans to refinance old loans, and in 3yrs have a fat US$5.4 bi debt

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    • Most Chinese loans are for vanity projects like stadiums and malls. They rarely sponsor industrial projects that support and grow economies. Sadly they have found a right partner in African men whose idea of wealth is the latest car at the slot, mistresses and bottles of expensive whiskey rather than investing money to help grow the economy and create employment for others!

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    • Chinese loans are a brain cancer that Lazy Lungu & his Pf00Lish 1diots need to be cured of. Useless White Elephant projects, which have no economic benefit, are not worth strangling our small economy in debt.
      – Chinese loans benefit chinese companies. Contracts are awarded to Chinese companies
      – Chinese contractors do not pay taxes
      – Chinese use equipment & raw materials
      – Chinese pay locals slave wages
      – Chinese bring in millions of Chinese prisoners to do simple manual jobs
      – Chinese corrupt our politicians from President. State house is busy; it’s one Chinese delegation after another. Locals can no longer see their head of state.
      – Chinese illegally loot local natural resources like mukula trees, copper, manganese & smuggle them back to China
      – Chinese buy prime land making…

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    • It is a known fact that the Chinese government uses hard to prove bribery to advance its political and economic interests in Africa. Since the formation of Forum on China-Africa Cooperation (FOCAC) in 2000 China has been offering “no string attached” loans and dishing out money to African presidents. A presidential trip to China like the one Lungu undertook is extremely lucrative. Many African presidents and political leaders have become beneficiaries and made massive fortunes. They prefer going to China than the U.S., and the more trips the better. Zambia’s president has joined them in the Venus Flytrap. Quoted from “Edgar Lungu in the Chinese Venus Flytrap” by Field Ruwe –2015

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  2. Zambia should emulate Malaysia on Debt Management. When Dr Mahatir Mohammed bounced back as PM he immediately assessed the Debt Situation in Malaysia. He concluded that Malaysia’s Debt Stock is no longer sustainable. Dr Mohammed took a bold and courageous decision to cancel Chinese Project Loans amounting to $23.5 Billion. An Agreement was reached between the Malaysian PM and the Chinese President JinPing to effect the Loan Cancellation. Dr Mohammed’s Priority is to reduce Malaysia’s Debt Stock to sustainable levels otherwise Malaysia was on a Path to Bankruptcy. Instead of seeking to borrow some more loans Lungu should negotiate with the Chinese govt to cancel some Project Loans like Dr Mohammed of Malaysia has done. The writing is on the Wall.

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  3. Too late, with cadre advisors like Freedom Sikazwe, who go into a meeting without a pen or writing pad to take notes,theirs is an excrrsise in Gluttony, & drinking.
    As we speak, loans have already been acquired, & they will disappear down an untracable black hole, & will be funding Eswatinigate, & Talu shopping malls in Uganda, while the docile & their children will pay back for generations to come.

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  4. The goal of loans and grants from cooperating partners is to fund development projects. The source is immaterial. It can be China. It can be India. The concern for civil society must be, using resources for the purpose for which the resources were intended for. There is no need to boycott loans and grants just to appease anti China lobby. National Development Plan is the basis of development project conception and execution.

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    • I agree with you @Dr.Makasa. Debt contraction and debt management are 2 sides of the same coin. We just need to do better in managing contraction, use of funds & repayment plans. One can’t be enjoying the new roads, the new hospitals, the new schools, new water supply system, etc, but at same time condeming gov’t for finding money to deliver these. Most of the projects have positively changed both urban & rural Zambia. What we need is simply more management. Stopping to borrow would be same as condeming the poor especially in rural areas where no private sector wants to go to hopelessness. God Bless in Zambia

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  5. If this government does not listen to what Mwaipopo is saying we will surely one day wake up only to find the Chinese have taken over this country in order to recover their money. We will fail to pay back these loans and some people building mansions abroad will flee this country

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    • Already certain government owned corporations like the media has been taken over by the Chinese. I understand even Zesco is also being given to the Chinese. In short Zambia is slowly loosing it sovereignty.

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  6. When we objectively try to advice and hold the government accountable, the “Judas Iscariot’ and others out of ignorance shoot us down. Where is your patriotism? The humiliation of Zambia is on the global wall. Selected extracts;
    Africa Confidential says Zambia risks losing its sovereignty to China as that country will seize national assets once government defaults on loans. It noted that government continues to spend lavishly despite Zambia being in debt distress. In a report titled ‘Bonds, bills and ever bigger debts’ published on September 3, Africa Confidential observed that fraud in government institutions was of concern to donors. “Financial management across the ministries is under scrutiny. Britain’s Department for International Development (DFID) is investigating fraud in three…

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    • I agree.The rates of our borrowing is not comensurate with rates and levels of our institutional development.In a country like ours were development is not private-sector driven,the public sector is the only vehicle for delivering most public goods and services.But government and quasi-government institutions capabilities and competencies have been eroding for many reasons.We can borrow billions but do we have institutional capabilities to effectively realize and deliver value from those loans

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  7. The more debt Africa has the better for CHina and they will ensure that we continue to have huge debt so that we continue to bow down before them with our begging bowls.. Our debt is sitting at 60 BILLION from almost zero in 2011. Can we honestly say that we are a proud Nation – no we cannot. We have become another African country begging CHina for money – they have reached their goal and we will be forever indebted to them.

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  8. It always difficult to develop when u have men n women without integrity.Ba Lungu is not thinking about the future but the papers he gonna get.Real money is land period.In land there are minerals which are real money according to the bible.The papers lungu is borrowing will sell the Real money to China and these european countries.Its scramble for africa coz intelligent people in Africa are not presidents.Europeans always want week presidents in order to manipulate them.Therefore we need to make education very important in this country.we need also to start doing our own things.Why should we get all machines from china and eaurope?Education should work in Africa.We can start making own on books instead of copying everything from Europe and USA.Its time pipo started thinking

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    • “Why should we get all machines from china and eaurope?”

      Hmmm….but why should we be copying even our names….Is “Moscow” Zambian or Russian?

      Just a thought, nothing against you.

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  9. Sometimes I wonder, does Lungu have any brain left at all?? does he even think when making decisions?? Bane who is he, to make the whole Zambia suffer like this??, are they not any better people who can govern this country better than Him, am sure he is always drunk when signing these loans, no wonder all this confusion now.

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    • Nope!
      Lungu knows nothing thats why he ducks from one on one interviews lest he is embarrassed.
      I dont believe there is a single thing he is good at.

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  10. “….Mr Mwaipopo added that Zambia is at high risk of debt distress, …”

    Not according to Dora siliya, chief GRZ spokes person, one of you is lying…

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  11. The country is broke, so it will continue to borrow to repay. it’s like digging one hole to fill another. It is said that when then Ugandan president Idi Amin was told that there was inflation in the country, he just ordered the bank governor:” Print more money!!”

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