There’s a good chance that Uganda will lose ownership of its only international airport, the Entebbe Airport, to China. This unfortunate event allegedly may happen due to the mishandling of a multimillion-dollar loan facility.
The East Africa nation signed away the control of the airport’s bank accounts to the Chinese Exim Bank, the lender, while acquiring the loan facility.
The East African reported late last week that the offending clauses were first picked up by the Uganda Civil Aviation Authority, which described some clauses in the deal as “unfriendly.”
“The most troubling for the aviation bosses was a clause that gave Exim Bank the sole authority to approve withdrawal of funds from the UCAA accounts,” as per the report. “The bank also had the power to approve annual and monthly operating budgets, which it could reject, and the rights to inspect the government and UCAA books of accounts. The China International Economic and Trade Arbitration Commission (CIETAC) in Beijing also had the mandate to resolve disputes.”
In 2015, Matia Kasaija, the Ugandan finance minister, pushed for parliament’s approval of a $207 million loan from Exim Bank of China. This loan facility was for upgrading the airport, included the modification of the main terminal building, a new cargo center, and a multi-story parking garage.
The loan had a maturity period of 20 years including a seven-year grace period during which time only interest is paid. However, Uganda’s public debt has increased to $18 billion in recent years, which would make repayment of the loan, as is, impossible.
Efforts were made in recent years to renegotiate the terms of the loan. Ugandan President Yoweri Museveni sent a delegation to Beijing for discussion with the Chinese government in 2019, and again in March of 2021. The teams were told on both occasions that there wouldn’t be any amendments or changes to the loan agreement. However the Ugandan government is currently seeking once again to amend the loan.
Among the clauses that the government wants to change is the need for the Uganda Civil Aviation Authority to seek approval from the Chinese lender for its budget and strategic plans, the Monitor reported. Another rule mandates that any dispute between the parties will have to be resolved by the China International Economic and Trade Arbitration Commission, according to the newspaper.
Reports of the alleged takeover come amid alarm over what is described as China’s “debt trap” diplomacy — offering loans to developing nations under terms that allow for the takeover of assets in case of default. Sri Lanka, for example, was forced to surrender its Hambantota Port on a 99-year lease after it failed to repay the loans taken to build it.
Despite discussions, the spokespeople for Uganda’s aviation regulator and China’s director general for African Affairs both denied in separate tweets that the Chinese lender had taken over the airport.
I wish to make it categorically clear that the allegation that Entebbe Airport has been given away for cash is false. @GovUganda can't give away such a national asset. We have said it before and repeat that it has not happened. There isn't an ounce of truth in it.
— Vianney M. Luggya (@UCAA_Spokesman) November 27, 2021
“Which of the Chinese projects in Africa have been confiscated in Africa? NONE! The hype surrounding Chinese ‘debt trap’ in Africa have NO factual basis and is being pushed on malicious grounds”, said @WuPeng_MFAChina, Director-General, Department of African Affairs, MoFA, China pic.twitter.com/Frqvme1frg
— Chinese Embassy in Uganda (@ChineseEmb_Uga) November 26, 2021
Of course, there’s a difference between “has taken over” and “is going to take over,” so watch this space, I guess?
Entebbe International Airport is Uganda’s only international airport and handles over 1.9 million passengers per year.
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