ZTE did not pay any tax for its $93 million fibre optic contract with Zesco

ZTE Corporation, China´s largest listed telecoms equipment company, which was offered a $93 million contract by Zambia Electricity Supply Corporation Limited( ZESCO ) to deploy fiber-optic lines country wide did not pay  any tax to the Zambian government, ZRA sources have revealed.

The contract to  manufacture and install the equipment for Zambia’s national backbone fibre optic network was in three phases and was completed in  2013.

ZTE carried out the first phase between 2006 and  2008.  The first phase of the project was completed in 2008 and launched over ZESCO’s power transmission network. The 1700 km network coverd six provinces and 15 districts in Zambia. The total value of the project was  $11.7 million USD, $8 million dollars of this amount was borrowed from China CITIC Bank.

On July 30, 2010, Zesco and ZTE signed the second contract for implementing Phase II of the fiber project in Zambia. The cost of Phase II was $60 million USD. ZESCO made an advance payment of about 6.9 million USD to ZTE. The balance of 37 million USD was to be financed with a loan from the Bank of China. This money has since been paid to ZTE and forms parts of Zambia’s current international debt.  Along with phase I, this project represents 2600 km of optic fiber network covering 46 districts, including rural districts and two international connections to Namibia and Tanzania.

The third phase extended the network by a further 900 km to Mbala, Mpulungu, Petauke, Mfuwe, Siavonga, Kalabo, Kasempa, Mpongwe and Kaoma. This phase was completed in March 2013.

Sources close to the case said that it’s a shame that ZTE after being paid more hundreds of millions of dollars from ZESCO’s huge investment and other government ICT infrastructure failed to pay the taxes toambia Revenue Authority .

‘The amount of unpaid tax by ZTE is a significant percentage of the country’s annual budget and is more than the total amount allocated annually to building roads, hospitals, and schools in some parts of the country,’ said a source. 

It is not clear how the ZTE was allowed to participate in ZESCO projects without obtaining a tax clearance from ZRA which is a key precondition to participate in any government project. ‘How ZTE signed these projects without a tax clearance from ZRA is more like a mystery,’ said a source.

An official from ZRA who wants to remain anonymous said ZTE’s tax debacle is not just starving the country of much needed finance but a stark contrast to the Zambia and China good relationship. China is supporting Zambia financing the country’s major infrastructural projects and the behavior of ZTE is unbecoming to a company with a significant share being held by the Chinese government.

‘ZTE should stop thinking it can do whatever it wants because of its relationship with the Chinese government, and concentrate in its delivery and compliance to the law in Zambia including paying its due share of tax and stop to be an embarrassment to the good relationship of the two countries,’ the ZRA source said. 

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