UGANDA, Entebbe | Real Muloodi News | Reports in several Ugandan and international media publications went viral this week, suggesting China could take over the Entebbe International Airport, Uganda’s only international airport, over alleged default on a US$200 million (USh713 billion) loan to expand the airport. However, the Uganda’s civil aviation regulator and Beijing have both denied the reports.
The takeover reports refer to certain “toxic clauses” in the loan agreement with the Export-Import (Exim) Bank of China, signed by the Uganda government on 31 March 2015.
Under the headline ‘Uganda Surrenders Airport for China Cash’ published 25 November, Uganda’s Daily Monitor reported, “Some of the unfavourable provisions in the loan agreement that Uganda signed with the Export-Import (Exim) Bank of China on March 31, 2015, if not amended, expose Uganda’s sovereign assets to attachments and take-over upon arbitration awards in Beijing.”
The story sparked a firm rebuke from government officials and the Chinese Embassy in Uganda, both denying any truth to the allegations.
Vianney M. Luggya, Uganda Civil Aviation Authority Spokesman released a statement on Twitter decrying the media report:
THREAD:
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
Uganda Civil Aviation Authority also followed with an official Authority statement firmly denying the allegations:
𝗖𝗟𝗔𝗥𝗜𝗙𝗜𝗖𝗔𝗧𝗜𝗢𝗡 𝗢𝗡 𝗘𝗡𝗧𝗘𝗕𝗕𝗘 𝗜𝗡𝗧𝗘𝗥𝗡𝗔𝗧𝗜𝗢𝗡𝗔𝗟 𝗔𝗜𝗥𝗣𝗢𝗥𝗧 pic.twitter.com/0TbUNCLtZ1
— Government of Uganda (@GovUganda) November 29, 2021
Likewise, a firm statement was issued by the Spokesperson of the Chinese Embassy in Uganda:
🎙️Remarks by the Spokesperson of the Chinese Embassy in Uganda on Some Media Reports Alleging that“Uganda Surrenders Airport for China Cash” pic.twitter.com/BqR3Rw4eKd
— Chinese Embassy in Uganda (@ChineseEmb_Uga) November 28, 2021
“Why is money offered by Western countries to developing countries considered ‘assistance for development’, while the money offered by China is labelled as ‘debt trap’? This view is NOT logic or correct!“ said Wu Jianghao, Assistant Minister of Foreign Affairs, China.
“Which of the Chinese projects in Africa have been confiscated in Africa? NONE! The hype surrounding Chinese ‘debt trap’ in Africa has NO factual basis and is being pushed on malicious grounds,” said Wu Peng, Director-General, Department of African Affairs, MoFA, China.
The Daily Monitor report claims that according to their highly-placed sources, the danger posed by the Financing Agreement pushed the Ugandan government to send an 11-member team to Beijing on March 7, 2019 to appeal with Exim Bank to rework the sections currently being challenged by Kampala.
Dr Chrispus Kiyonga, Uganda’s Ambassador to China, is reported to have headed the combined team from the Ministries of Works, Foreign Affairs, and Finance, as well as UCAA and the Attorney General’s Chambers.
During the meeting, the four Exim Bank officials allegedly refused any changes to the signed Financing Agreement’s provisions and warned the Ugandan executives that any changes would establish a poor precedent. Furthermore, the Chinese informed their visitors that they saw no justification for alterations.
To facilitate the successful completion of the airport expansion project, the lenders instructed Dr Kiyonga and his staff to embrace “friendly consultations” on a regular basis. They also agreed to keep the meeting’s specifics private.
Are China’s Lending Terms the Best African Countries Can Get?
“The claim by some MPs that the loan terms in the agreement with Chinese EXIM Bank are unfair to Uganda and puts the Entebbe Airport at risk should Uganda fail to pay is UNTRUE“, said Dr. Allawi Ssemanda, founder of Development Watch Centre.
According to Sssemanda, many governments take the problem of regulating and lowering investment risks, as well as ensuring capital security, seriously when granting development loans.
Mr Sssemanda says: “The UNTRUE claim is dancing to some Western capital’s narrative driven by fear of growing Sino-Africa relations characterised by principles of mutual respect and benefit. What Chinese EXIM Bank does is a legitimate and commonly accepted commercial practice employed to ensure the capital safety of lenders. Indeed, it was adopted by some Organisation for Economic Co-operation and Development (OECD) creditors we look up to.“
“For the record, Chinese funding is the best deal any developing country can get to address growing infrastructure funding gaps. The commonly-accepted clauses like cross default and cross cancellation that Chinese creditors include in loan contracts should not be taken as tricks of loan sharks but rather devise used to ensure safety of their funds,” he added.
Ssemanda says the terminology used in Chinese loan agreements is market-accepted, and the conditions align with the concepts of balance, the rights and duties of the parties concerned.
He says, “Over time, China has proved to be a brotherly country to all African countries and promotes mutual trust and benefit that by all means, it cannot avoid good faith consultation where necessary. China considers African countries close allies and is not interested in seizing their properties but ensuring borrowing countries join China in growing and developing together so as to realise Chinese leadership philosophy of a shared future for mankind.“
What Led the Ugandan Government to Signing the Deal?
Challenged with the need to expand the transport sector alongside regional infrastructure development, Uganda pursued an aggressive and ambitious 20-year civil aviation national strategy of face-lifting its only international airport in Entebbe, located 43 kilometers south of the capital Kampala on Lake Victoria shores.
As Uganda considered making its major gateway a regional center, the rebuilt airport would handle around 150,000 operations per year.
On March 24, 2015, Finance Minister Matia Kasaija requested that Parliament authorise a US$325 million (USh1.1 trillion) loan from Exim Bank of China for airport construction projects. In his presentation to the MPs, Mr Kasaija stated it was the best deal available that needed a swift reaction act swiftly.
Alarms Set-off While Face-lifting Entebbe International Airport
The funds were authorised, and construction began in January of the following year. The airport entrance structure would be modified and modernised to accommodate the predicted spike in traffic, as well as a freight center and multi-story parking.
However, while construction was underway, Uganda Civil Aviation Authority (UCAA) personnel set off alarm bells about certain loan agreement conditions that got them concerned.
Thirteen clauses in the loan agreement were found unfavourable and equivalent to mortgaging the airport and undermining the sovereignty of the state. The most alarming clause for aviation executives was one that granted Exim Bank exclusive authority to authorise withdrawals from UCAA accounts.
In addition, Exim Bank had the authority to approve yearly and monthly operational budgets, which it may reject, as well as the authority to review the government and UCCA books of accounts. The China International Economic and Trade Arbitration Commission (CIETAC), based in Beijing, was also tasked with resolving conflicts.
Former UCAA managing director David Kakuba was the first to sound the alarm, warning that failure to alter the terms might subject government assets to attachment and takeover by China.
In 2019, a delegation led by former envoy to China, Dr Crispus Kiyonga, was advised categorically that the loan agreement will not be amended.
Minister of Planning Amos Lugoloobi stated that the loan was badly negotiated and agreement signed, but the ministry has put severe restrictions in place, including the establishment of an entire department to guarantee loans are properly monitored so that the country does not get into debt crisis.
“We have restricted borrowing to only critical projects, and we ensure our loan ratio does not go beyond 50 percent of the GDP,” Mr Lugoloobi said.
Uganda’s existing debt to GDP ratio is around 45.7 percent.
Mr Lugoloobi confirmed there wasn’t any bribery during the discussions, despite the fact that President Yoweri Museveni has in the recent past chastised technocrats for taking bribes, inflating project prices, and manipulating the negotiations.
No Cause for Concern
Attorney General Kiwanuka Kiryowa, brushing aside the airport takeover concerns, says there is no need for concern because no Ugandan property has been mortgaged. He said that the loan constituted a business transaction with obligations for both parties.
“When you borrow money, your obligation is to pay. If you do not pay, the other party can take you to court, in which case this would be CIETAC. “Let everyone do their part. The airport makes money and will meet its obligations,” he said.
According to the AG, the loan deal is not uncommon and does not require modification.
Finance Minister Kasaija stated that the government would step in if a loan went into default.
“In the unlikely event that UCAA were to fail to generate sufficient revenue to service the loan, the central government will step in,“ he said.
“Why is money offered by Western countries to developing countries considered ‘assistance for development’, while the money offered by China is labelled as ‘debt trap’? This view is NOT logic or correct!”, said Wu Jianghao, Assistant Minister of Foreign Affairs, China pic.twitter.com/ErKkHWJ43N
— Chinese Embassy in Uganda (@ChineseEmb_Uga) November 26, 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
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