Zambia cancels $1.2bn Chinese road project linking Lusaka and Ndola

By Chiwoyu Sinyangwe
Posted on Monday, 21 March 2022 15:11

Zambia's President Hakainde Hichilema addresses the 76th Session of the United Nations General Assembly, Tuesday, Sept. 21, 2021, at U.N. headquarters.
Zambia's President Hakainde Hichilema addresses the 76th Session of the United Nations General Assembly, Tuesday, Sept. 21, 2021, at U.N. headquarters. (Spencer Platt/Pool Photo via AP)

Zambia has cancelled a $1.2bn contract awarded to a Chinese company for the expansion of part of a key road linking the capital Lusaka to the copper-rich regions and Southern Africa’s sole access corridor to Democratic Republic of Congo, citing “overpricing” of the project signed under the previous Patriotic Front regime.

The unprecedented move reflects a change in approach to Zambia’s dealings with Chinese projects. Previous regimes were accused of being overly cosy with the Chinese as some of the projects seemed disadvantageous to the country.

In 2017, former President Edgar Lungu “flagged off” the reconstruction and expansion into a dual carriage of the 321 km Lusaka-Ndola road. China Jiangxi Corporation for International Economic and Technical Cooperation (CJIC) was to implement the 327km project, which was expected to be complete in approximately four years.

The project, which was to be one of the biggest in Zambia’s history, was expected to create more than 3,000 jobs during the construction phase.

China’s Zambia focus

In 2015, Chinese President Xi Jinping said his country would plough $60bn into African infrastructure projects to boost agriculture, build roads, ports and railways.

With the Lusaka-Ndola dual carriageway, CJIC projects in Zambia were expected to jump to over $1.5bn:

  • The company has already built some key infrastructure projects like the $360m Kenneth Kaunda International Airport in Lusaka.
  • CJIC has also built a number of key road projects and is currently constructing a government university in Kitwe, the economic hub of the Copperbelt. It is also building a pineapple processing plant in Mwinilunga, North Western Province.

The stretch between Lusaka and Ndola carries up to 42% of Zambia’s traffic, according to official figures, and is the country’s sole access to copper mines on the Copperbelt and North-Western provinces.

The road, which also provides a link between Southern Africa and East Africa through Zambia, is currently in a deplorable condition, with many road deaths reported each year.

Still no go

Four years into the project implementation, however, construction works have failed to take-off.

Multiple sources from the Treasury cite reluctance by former finance ministers Margaret Mwanakatwe and Bwalya Ng’andu to raise counter-part funding as they believed the project was overpriced and would lead to bloating of Zambia’s external debt.

Despite firm commitment from Lungu, the cash-strapped Zambia failed to raise the 15% “counterparty” funding to trigger the Export-Import Bank of China to release the loan for the project.

“Former finance minister Bwalya Ng’andu repeatedly told China Jiangxi Corporation to relook at the numbers and find a way of reducing the contract sum… He was worried about Zambia’s foreign debt position, especially to Chinese companies,” says an anonymous source within the Treasury.

Zambia owes external lenders almost $17bn, including liabilities of state-owned companies, with another $6bn owed to Chinese companies who in the last 15 years have built roads, power stations, bridges and government buildings, according to the official information from the Zambian finance ministry.

The Southern African nation became the continent’s first pandemic-era defaulter in 2020 after Chinese lenders demanded that Zambia treats all lenders equally. Before defaulting, Zambia had consistently been servicing its interest payments to Western lenders, a move that unnerved the Chinese lenders.

Zambia reached a staff level agreement with the IMF last December and is currently awaiting board approval – expected in June – to aid the country restructure its foreign debt.

How will Hichilema approach China?

Then in opposition, President Hakainde Hichilema called for the contract to be cancelled, alleging that it was “full of corruption”. He said: “We can’t allow such things to keep happening. This project needs fresh bidding. There is no way we can allow such a huge contract to be single-sourced.”

Hichilema constantly accused top PF officials of being complicit with Chinese contractors to inflate contract sums and share kick-backs.

Following his landslide victory in the August 2021 general elections, few in Zambia expected President Hichilema to uphold his electioneering messages of cancelling some of the Chinese projects as a similar precedent has been set. Since then, he has not publicly commented on the project.

Former President Michael Sata, now deceased, was very critical of China’s influence in Zambia and consistently accused Chinese businesses of treating Zambian workers poorly.

Sata also accused the PF party of funding the former ruling Movement for Multi-Party Democracy of former president Rupiah Banda, who died in 2022. However, Sata later toned down his rhetoric after his PF party swept to victory and embraced Chinese commercial interests in the country.

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However, Hichilema seems determined to maintain his strong stance against Chinese interests that he believes disadvantages Zambia.

In February, the Road Development Agency put out a public tenders announcing intentions to “undertake the development and operational/maintenance of 327 km Lusaka to Ndola road through a Public Private Partnership on the design, build, finance, operate and transfer basis”.

The contract bid is worth $40,000 and sources within RDA say up to 10 companies, including CJIC, are interested in undertaking the project.

Infrastructure minister Charles Milupi, a strong ally of Hichilema, is leading the call to re-price the road.

“The $1.2bn for the Lusaka Ndola Dual Carriage Road is what we found on the table (but) we have people already offering much less than that, so the country is already bearing fruits in terms of our stance,” Milupi said.

Re-pricing the road

RDA insiders say construction of the road is expected to cost between $600m and $700m, and construction works are expected to commence this year.

CJIC declined to comment on the development, but sources within RDA say “diplomatic efforts” are currently underway to renegotiate the price.

“The company has invested way above $100m in works, such as feasibility study, resettlement of affected people and the stretch that has been done so far […], but you know Chinese will not engage in public spat with its clients,” the source says.

Multiple sources say the CJIC does not intend to sue the government because of the cancellation, but instead wants to focus on diplomatic negotiation to reclaim the project.

The outgoing Chinese Ambassador to Zambia, Li Jie, is leading diplomatic efforts to have the contract reinstated. China changes top diplomatic officials each time Zambia undergoes a regime change.

Abel Ng’andu, head of the local engineering think-tank Engineering Institution of Zambia (EIZ), supports the cancellation of the contract. “We welcome the development which we think is very positive because the earlier contract was […] overpriced. We are hoping now the correct price will be procured,” he tells The Africa Report.

Re-aligning the Beijing relationship

Boyd Muleya, head of research at the Lusaka-based trade policy think-tank Centre for Trade and Policy Development, says Zambia should realign its relationship with China, which according to him has – for a long time – been precarious due to the country’s heavy-indebtedness.

Muleya says Zambia, under Hichilema, was in a stronger position to enable CJIC to construct the road at a cheaper cost, but the contract was inflated and constituted an odious debt.

He says although Hichilema is seen to favour stronger ties with the West, a stark departure from some of his predecessors, there is need for Zambia to balance its geopolitical position, as the country is heavily indebted to both divides.

“If we still had the PF government in power, that contract would definitely not have been cancelled – it would have gone ahead because of the nature of the relationship Zambia had with China,” Muleya says. “The cancellation of this deal is a true reflection that [a] ‘new dawn’ will not tolerate lack of prudence in the utilisation of resources and this is good for the country that we have more resources for productivity.”

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