Zambia - Third Railway Project : Loan 1790 - Special Action Credit Agreement - Conformed

O C SPECIAL ACTION CREDIT NUMBER 40 ZA DOCUMENTS Special Action Credit Agreement (Third Railway Project) between THE R1'IBLIC OF ZAMBIA and INTERNATIONAL DEVELOPMENT ASSOCIATION as ADMINISTRATOR of the SPECIAL ACTION ACCOUNT established with funds contributed by the MEMBER STATES of the EUROPEAN ECONOMIC COMMUNITY Dated T w, 1980 SPECIAL ACTION CREDIT NUMBER 40 ZA SPECIAL ACTION CREDIT AGREEMENT AGREEMENT, dated _j"JL 1 , 1980, between THE REPUBLIC OF ZAMBIA (the Borrower) and INTERNATIONAL DEVELOP- MENT ASSOCIATION as ADMINISTRATOR of the Special Action Account established with funds contributed by the MEMBER STATES of the EUROPEAN ECONOMIC COMMUNITY. WHEREAS (A) by the Agreement, dated May 2, 1978, between the International Development Association (hereinafter called IDA) and the European Economic Community and its Member States there has been established by IDA a Special Action Account constituted by the funds which shall be contributed by the Member States of the European Economic Community and administered by IDA, acting as Administrator of such Special Action Account, for the purpose of, and in accordance with, the provisions of said Agreement; (B) the Borrower has requested the Administrator for assistance from the resources of the Special Action Account in the financing of a project described in Schedule 2 to this Agreement and the Administrator has determined that such assistance would be in accordance with the provisions of the Agreement of May 2, 1978 referred to above; (C) by a Development Credit Agreement of even date herewith (hereinafter called the Development Credit Agreement) between the Republic of Zambia (hereinafter called the Borrower) and IDA, and by a Loan Agreement of even date herewith (hereinafter called the Loan Agreement) between the Borrower and International Bank for Reconstruction and Development (hereinafter called the Bank), IDA and the Bank have agreed to make available to the Borrower an amount in various currencies equivalent to fifteen million dollars ($15,000,000), and twenty-five million dollars ($25,000,000), respectively, on terms and conditions set forth in the Development Credit Agreement and the Loan Agreement, respectively; (D) the Borrower also intends to contract from other financiers, loans, credits and grants in an aggregate amount equivalent to about eighty-nine million one hundred and fifty thousand dollars ($89,150,000) to assist in financing the Project on the terms and conditions set forth in agreements to be entered into between the Borrower and other financiers; (E) the Project will be carried out by Zambia Railways Board (hereinafter called ZR) with the assistance of the Zambia - 2 - Industrial and Mining Corporation Limited (hereinafter called ZIMCO), and the Borrower and, as part of such assistance, the Borrower will make available to ZR the proceeds of the Special Action Credit as hereinafter provided; and WHEREAS the Administrator has agreed, on the basis inter alia of the foregoing, to extend the Special Action Credit to the Borrower upon the terms and conditions set forth hereinafter and in a joint project agreement of even date herewith among the Bank, the Association, the Administrator, ZIMCO and ZR; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Development Credit Agreements of the International Development Association, dated March 15, 1974, with the same force and effect as if they were fully set forth herein, subject, however, to the following modifications thereof (said General Conditions Applicable to Development Credit Agreements of the International Development Association, as so modified, being hereinafter called the General Conditions): (a) the term "Association", wherever used in the General Conditions, means the International Development Association acting as the Administrator of the Special Action Account referred to in the Preamble to this Special Action Credit Agreement; (b) the terms "Development Credit Agreement" and "Credit", wherever used in the General Conditions are amended to read "Special Action Credit Agreement" and "Special Action Credit", respectively; (c) Sections 4.01, 4.02, 4.03, 4.04 and the second sentence of Section 5.01 are deleted; and (d) in Sections 6.02 and 7.01, the term "Association" shall also include the International Development Association acting in its own capacity. - 3 - Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the General Conditions and in the Preamble to this Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "Member States" means the Member States of the European Economic Community, i.e. Belgium, Denmark, The Federal Republic of Germany, France, Ireland, Italy, Luxembourg, The Netherlands and The United Kingdom; (b) "Administrator" means the International Development Association acting as Administrator of the Special Action Account referred to in the Preamble to this Special Action Credit Agree- ment; (c) "Joint Project Agreement" means the agreement among the Administrator, IDA, the Bank, ZIMCO and ZR of even date herewith, as the same may be amended from time to time, and such term includes all schedules to the Joint Project Agreement and all agreements supplemental to the Joint Project Agreement; (d) "Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and ZR pursuant to Section 3.01 (b) of this Agreement, Section 3.01 (b) of the Development Credit Agreement and Article III of the Loan Agreement,, the same may be amended from time to time, and such term includes all schedules to the Subsidiary Loan Agreement; (e) "Railways Act" means the Zambia Railways Act of the Borrower (Act No. 47 of 1967) as amended to the date of this Agreement, as the same may be further amended from time to time; (f) "MPTC" means the Borrower's Ministry of Power, Transport and Communications, or any successor thereto; and (g) "ZR" means Zambia Railways Board, a body established under the Railways Act or any successor thereto. ARTICLE II The Special Action Credit Section 2.01. The Administrator agrees to lend to the Bor- rower on the terms and conditions in the Special Action Credit Agreement set forth or referred to, the following currency amounts: -4- Five million nine hundred and sixty- three thousand Belgian francs (BF5,963,000); Seven hundred and forty-two thousand Danish kroner (DK742,000); Two million eight hundred and sixty- six thousand Deutsche marks (DM2,866,000); Three million and thirty thousand French francs (FF3,030,000); Six thousand six hundred Irish pounds (IrE6,600); Three hundred and fifty-one million five hundred and ninety thousand Italian lire (ItL351,590,000); One hundred and eighty-seven thou- sand Luxembourg francs (LF187,000); Seven hundred and ninety-two thou- sand Netherlands guilders (Dfl 792,000); and Seven hundred and thirty thousand seven hundred Pounds sterling (730,700). Section 2.02. (a) The proceeds of the Special Action Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule 1 to this Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Administrator, for expenditures made (or, if the Administrator shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project and to be financed out of the proceeds of the Special Action Credit. - 5 - (b) Withdrawals shall be made only on account of expendi- tures: (i) in the currency of the Borrower; or (ii) for goods produced in, or services supplied from, (A) any of the Member States and (B) any developing country which is a member of the International Development Association and could be the recipient of a special action credit, as determined by the Administrator.* (c) Withdrawals from the Credit Account shall be made in the respective currencies in which the expenditures to be financed out of the proceeds of the Special Action Credit have been paid or are payable or, at the option of the Administrator, in such currency or currencies as the Administrator shall from time to time select. Section 2.03. Except as the Administrator shall otherwise agree, procurement of the goods and civil works to be financed out of the proceeds of the Special Action Credit shall be governed by the provisions of Schedule 1 to the Joint Project Agreement. Section 2.04. The Closing Date shall be September 30, 1984, or such later date as the Administrator shall establish. The Administrator shall promptly notify the Borrower of such later date. Section 2.05. (a) The Borrower shall pay to the Administrator a service charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum, on each of the various currency amounts withdrawn from the Credit Account and outstanding from time to time. The amounts of service charge in various currencies so found, and additional service charges (if any) payable pursuant to Section 3.02 of the General Conditions, shall be payable in the currency of the United States of America, or in another currency selected by the Administrator in accordance with the provisions of paragraph (b) of this Section, after their conversion into such currency on the basis of exchange rates determined in accordance with the provisions of Section 4.05 of the General Conditions. (b) If the AdminisLrator shall at any time determine that the currency so specified or selected is not freely convertible or freely exchangeable by the International Development Associa- tion for currencies of other members of the International Develop- ment Association for the purposes of its operations, service * A list of such potential recipients will be given by the A;ainistrator to the Borrower at the time of the signing of each Special Action Credit Agreement. - 6 - charges shall be payable in such other currency as the Adminis- trator may select for such purposes and shall notify in writing to the Borrower, whereupon, commencing thirty days after the date of such notice, service charges shall be payable in such other currency. Section 2.06. Service charges shall be payable semiannually on May 1 and November 1 in each year. Section 2.07. (a) The Borrower shall repay the principal amount of the Special Action Credit in semiannual installments payable on each May 1 and November 1 commencing May 1, 1990, and ending November 1, 2029, each installment to and including the installment payable on November 1, 1999, to be one-half of one per cent (1/2 of 1%) of such principal amount, and each installment thereafter to be one and one-half per cent (1-1/2%) of such principal amount. (b) Each of the installments payable pursuant to paragraph (a) of this Section shall be the aggregate of such amounts in the various currencies withdrawn from the Credit Account as shall be found by multiplying the total amount in each currency so with- drawn by the applicable installment percentage as specified in paragraph (a) of this Section, unless the Administrator shall otherwise specify by notice to the Borrower prior to each payment date for the purpose of avoiding the payment of fractional cur- rency amounts. (c) If withdrawal shall have been made in a currency which the Administrator shall have purchased with one or more other currencies for the purpose of such withdrawal, the portion of the Special Action Credit so withdrawn shall, for the purpose of paragraph (b) of this Section, be deemed to have been withdrawn in the currency or currencies used by the Administrator for such purchase in the amounts of such currency or currencies so used. (d) The Administrator will, at the request of the Borrower and on such terms and conditions as the Administrator shall determine, use its best efforts to purchase any currency needed by the Borrower for payment of principal required under this Agree- ment upon payment by the Borrower of sufficient funds therefor in - 7 - a currency or currencies to be specified by the Administrator from time to time. In purchasing the currencies required the Adminis- trator shall be acting as agent of the Borrower and the Borrower shall be deemed to have made any payment required under this Agreement only when and to the extent that the Administrator has received such payment in the currency or currencies required. Section 2.08. The General Manager of ZR is designated as representative of the Borrower for the purposes of taking any action required or permitted to be taken under the provisions of Section 2.02 of this Agreement and Article V of the General Conditions. ARTICLE III Execution of the Project Section 3.01. (a) Without any limitation or restriction upon any of its other obligations under the Special Action Credit Agreement, the Borrower shall cause ZIMCO and ZR to perform in accordance with the provisions of the Joint Project Agreement and the Subsidiary Loan Agreement all their respective obligations therein set forth, shall take and cause to be taken all action, including the provision of funds, facilities, serv7ces and other resources, necessary or appropriate to enabl2 'IMCO and ZR to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such performance. (b) The Borrower shall relend the proceeds of the Special Action Credit to ZR, under a subsidiary loan agreement to be entered into between the Borrower and ZR under terms and condi- tions which shall have been approved by the Administrator which shall include the following: repayment of principal in 20 years, inclusive of 5 years of grace; interest at a rate of not less than seven and ninety-five hundredths per cent (7.95%) per annum; and ZR to bear the foreign exchange risk. (c) The Borrower shall exercise its rights under the Subsidiary Loan Agreement in such manner as to protect the interests of the Borrower and the Administrator and to accomplish the purposes of the Special Action Credit, and except as the Administrator shall otherwise agree, the Borrower shall not assign, amend, abrogate or waive the Subsidiary Loan Agreement or any provision thereof. -8- Section 3.02. The Borrower shall take or cause to be taken from time to time all measures required on its part in order to enable ZIMCO and ZR to adjust freight and other tariffs of ZR and to enable ZR to carry out its obligations under Section 4.05 of the Joint Project Agreement. Section 3.03. The Borrower shall take, or cause to be taken, all such measures as may be required to enable its departments and agencies, and all organizations, enterprises or corporations owned or controlled by the Borrower, to reduce all the outstanding dues and unpaid balances of debts owed by them to ZR, so that by December 31, 1980 and thereafter, ZR's average accounts receivable shall not exceed the equivalent of forty-five days revenue. Section 3.04. The Borrower shall continue to make funds available to ZR to cover ZR's operating deficits and the cost of construction of capital works arising out of operations undertaken by ZR at the direction of the Borrower. Section 3.05. The Borrower shall cause ZR to carry out, with the assistance of consultants, a feasibility study by December 31, 1981, to make recommendations concerning storage and handling facilities required by ZR and its major customers, to improve ZR's operations. Section 3.06. The Borrower shall take, or cause to be taken, all reasonable action required for the prompt issuance to ZR of such import and other permits and licenses as shall be necessary for the acquisition and importation of spare parts required for the maintenance and renewal of ZR's plant, equipment and property. ARTICLE IV Remedies of the Administrator Section 4.01. For the purposes of Section 6.02 of the General Conditions the following additional events are specified pursuant to paragraph (h) thereof: (a) ZIMCO or ZR shall have failed to perform any of their respective obligations under the Joint Project Agreement; (b) an extraordinary situation shall have arisen which shall make it improbable that ZR or ZIMCO will be able to perform their respective obligations under the Joint Project Agreement; - 9 - (c) a default shall occur in the performance of any obliga- tions under the Subsidiary Loan Agreement by the parties thereto; (d) the Railways Act shall have been amended, suspended, abrogated, repealed or waived or ZR shall have been incorporated under the Companies Act of the Borrower, in such a way as to materially and adversely affect the ability of ZR to carry out the covenants, agreements and obligations set forth in the Joint Project Agreement; (e) the Borrower shall have taken any action for the dissol- ution or disestablishment of ZR or for the suspension of its operations; and (f) (i) Subject to subparagraph (ii) of this paragraph: (A) The right of the Borrower to withdraw the proceeds of any grant, credit or loan made to the Borrower for the financing of the Project shall have been suspended, cancelled or terminated in whole or in part, pursuant to the terms of the agreement providing therefor, or (B) any such credit or loan shall have become due and payable prior to the agreed maturity thereof. (ii) Subparagraph (i) of this paragraph shall not apply if: (A) such suspension, cancellation, termination or prematuring is not caused by the failure of the Borrower to perform any of its obligations under such agreement, and (B) adequate funds for the Project are available to the Bor- rower, ZR or ZIMCO from other sources on terms and conditions consistent with the obligations of the Borrower under this Agreement. Section 4.02. For the purposes of Section 7.01 of the General Conditions, the following additional events are specified pursuant to paragraph (d) thereof: (a) any event specified in paragraphs (a) and (c) of Section 4.01 of this Agreement shall occur and shall continue - 10 - for a period of 60 days after notice thereof shall have been given by the Administrator to the Borrower, ZIMCO and ZR; and (b) any event specified in paragraphs (d), (e) and (f) (i) (B) of Section 4.01 of this Agreement shall occur. ARTICLE V Effective Date; Termination Section 5.01. The following event is specified as an addi- tional condition to the effectiveness of the Special Action Credit Agreement within the meaning of Section 12.01 (b) of the General Conditions, namely, that all conditions precedent to the effectiveness of the Development Credit Agreement, except for the effectiveness of this Agreement, have been fulfilled. Section 5.02. The following are specified as additional matters, within the meaning of Section 12.02 (b) of the General Conditions, to be included in the opinion or opinions to be furnished to the Administrator: (a) that the Joint Project Agreement has been duly autho- rized or ratified by ZIMCO and ZR, and is legally binding upon ZIMCO and ZR in accordance with its terms; and (b) that the Subsidiary Loan Agreement has been duly autho- rized or ratified by the Borrower and ZR and is legally binding upon the Borrower and ZR in accordance with its terms. Section 5.03. The date is hereby specified for the purposes of Section 12.04 of the General Con- ditions. Section 5.04. The obligations of the Borrower under the provisions of paragraphs (a) and (b) of Section 4.02 (excluding the reference to paragraph (f) (i) (B) of Section 4.01) of this Agreement shall cease and determine on the date on which the Special Action Credit Agreement shall terminate or on a date twenty years aiter the date of this Agreement, whichever shall be the earlier. - 11 - ARTICLE VI Representative of the Borrower; Addresses Section 6.01. Subject to the provisions of Section 2.08 of this Agreement, the Minister of the Borrower at the time respon- sible for Finance is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 6.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Ministry of Finance P.O. Box R.W. 62 Ridgeway Lusaka Zambia Cable address: Telex: FINANCE ZA 42221 Ridgeway Lusaka For the Administrator: Administrator of the Special Action Account (International Development Association) 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) - 12 - IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. THE REPUBLIC OF ZAMBIA By Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION as ADMINISTRATOR of the SPECIAL ACTION ACCOUNT established with funds contributed by the MEMBER STATES of the EUROPEAN ECONOMIC COMMUNITY By Regional Vice President Eastern Africa - 13 - SCHEDULE 1 Withdrawal of the Proceeds of the Special Action Credit 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Special Action Credit, the allocation of the amounts of the Special Action Credit to each Category and the percentage for items so to be financed in each Category: Amount of the Special Action Credit % of Allocated (Expressed Expenditures Category in Dollar Equivalents) to be Financed (1) Telecommuni- 4,500,000 cations equip- ment: (a) directly 100% of foreign imported expenditures (b) imported 75% of local but lo- expenditures cally procured (2) Unallocated 500,000 TOTAL 5,000,000 2. The total dollar amount shown in the foregoing table shall be adjusted from time to time as required to reflect the aggregate dollar equivalent of the unwithdrawn currency amounts in the Credit Account; the unallocated dollar amount shall be adjusted accordingly.* 3. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of, and for goods produced in or services supplied * The dollar amounts shown in the foregoing table are calcu- lated on the basis of the same exchange rates as the exchange rates on the basis of which the currency amounts specified in Section 2.01 are calculated, so that the dollar amounts shown represent the dollar equivalents of those currency amounts as of the date on which such exchange rates are in effect. - 14 - from, (i) any of the Member States and (ii) any developing coun- try, other than the Borrower, which is a member :f the Inter- national Development Association and could be the recipient of a Special Action Credit, as determined by the Administrator; and (b) the term "local expenditures" means expenditures in the currency of the Borrower and for goods or services supplied from the territory of the Borrower. 4. The disbursement percentages have been calculated in com- pliance with the policy of the Administrator that no proceeds of the Special Action Credit shall be disbursed on account of payments for taxes levied by, or in the territory of, the Borrower on goods or services, or on the importation, manufacture, procure- ment or supply thereof; to that end, if the amount of any such taxes levied on or in respect of any item to be financed out of the proceeds of the Special Action Credit decreases or increases, the Administrator may, by notice to the Borrower, increase or decrease the disbursement percentage then applicable to such item as required to be consistent with the aforementioned policy of the Administrator. 5. Notwithstanding the provisions of paragraph I above, no withdrawals shall be made in respect of payments made for expen- ditures prior to the date of this Agreement. 6. Notwithstanding the allocation of an amount of the Special Action Credit or the disbursement percentages set forth in the table in paragraph 1 above, if the Administrator has reasonably estimated that the amount of the Special Action Credit then allocated to any Category will be insufficient to finance the agreed percentage of all expenditures in that Category, the Administrator may, by notice to the Borrower: (i) reallocate to such Category, to the extent required to meet the estimated shortfall, proceeds of the Special Action Credit which are then allocated to another Category and which in the opinion of the Administrator are not needed to meet other expenditures; and (ii) if such reallocation cannot fully meet the estimated shortfall, reduce the disbursement percentage then applicable to such expen- ditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made. 7. If the Administrator shall have reasonably determined that the procurement of any item in any Category is inconsistent with the procedures set forth or referred to in this Special Action Credit Agreement, no expenditures for such item shall be financed - 15 - out of the proceeds of the Special Action Credit and the Admin- istrator may, without in any way restricting or limiting any other right, power or remedy of the Administrator under the Special Action Credit Agreement, by notice to the Borrower, cancel such currency amounts of the Special Action Credit as, in the Adminis- trator's reasonable opinion, represent the currency amounts which would otherwise have been eligible for withdrawal out of the proceeds of the Special Action Credit in respect of such expendi- tures. - 16 - SCHEDULE 2 Description of the Project The Project is a part of ZR's investment plan for 1979- 1983, for the modernization and improvement of its rollifng stock and rehabilitation and improvement of maintenance facilities and track and consists of the following: Part A: The renewal and improvement of about 112 kilometers of track on the line between Mookamunga and Livingstone, including extension and re-spacing of crossing loops, completion of a concrete sleeper plant and replacement of Kafue Bridge. Part B: Installation of a new centralized traffic control signalling system and extension of ZR's telecommunications system. Part C: The acquisition and placing in service of about 10 diesel locomotives and the repair of about 4 diesel locomotives. Part D: The acquisition and placing in service of about 915 wagons and 2 breakdown cranes. Part E: The acquisition of spare parts for use in ZR's rehabilitation and maintenance program for locomotives, wagons, passenger coaches and railcars. Part F: 1. The acquisition of workshop machinery and tools for the repair of traction motors, generators, a wheel lathe and assembly of new freight wagons. 2. The extension of the diesel locomotive depot in Kabwe. - 17 - 3. The rebuilding of repair track at Ndola, Kitwe, Kabwe and Livingstone, including equipping of such depots. Part G: The installation of handling equipment at major stations to improve the loading and unloading of wagons. Part H: The acquisition and installation of data processing facili- ties to improve the general operations of ZR. Part I: The construction of new housing for the staff of ZR and the improvement of existing housing. Part J: 1. The provision of technical advisory services to (i) ZR for operations and project implementation and (ii) MPTC and ZR for planning. 2. The carrying out of (i) a productivity study for a workshop for ZR, (ii) a railway electrification feasibility study, and (iii) a feasibility study to determine whether the railway line between Livingstone and Mulobezi should be upgraded or replaced by a road. 3. Staff training both locally and overseas, including the provision of equipment and materials for the Kabwe training school. The Project is expected to be completed by December 31, 1983. INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Development Association. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Association thereunto the I Lday of - , 198 12. FOR SECRETARY