Uganda is seeking to amend the loan agreement it signed with China in 2015 to ensure that the government doesn

Uganda Civil Aviation Authority,China taking over Entebbe Airport,Bank of China,an escrow account,Uganda

Wednesday, 26 January 2022
Chairman and Chief Editor
Bedour Ibrahim

Uganda is seeking to amend the loan agreement with China

Uganda dismisses reports of China taking over Entebbe Airport

The spokesperson of the Uganda Civil Aviation Authority (UCAA) dismissed media reports, which claimed that China was going to take over the country’s only international airport due to non-payment of a loan taken to expand the airport.

Signing a loan agreement in 2015

Uganda had signed a loan agreement on March 31, 2015, with the Export-Import (Exim) Bank of China for the expansion of the Entebbe International Airport. However, the authorities have admitted that there are problematic clauses in the loan agreement, as Uganda is seeking to amend some clauses in the agreement.

After several media reports across the world, including India, claimed that China has taken over the airport, the Uganda Civil Aviation Authority issued a statement to deny the claim.

In a Twitter thread, UCAA spokesperson Vianney M Luggya wrote, “I wish to make it categorically clear that the allegation that Entebbe Airport has been given away for cash is false. The Government of Uganda 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.”

He conceded that UCAA funds are deposited in an escrow account (an asset held by a third party on behalf of two other parties during the transaction process) but clarified that none other than the Ugandan government has control over it.

It is true that UCCA opened up a Sales Collection Account where all the Authority’s revenues are deposited in line with the Escrow Account Agreement terms, but it does not mean that anyone is to control our finances.

Vianney M Luggya emphasised, “The Authority enjoys the freedom & liberty of spending what is collected (as per the budget). The lender’s monitoring of the account is only similar to what happens when one gets a salary loan or any other loan, & the bank requests that the salary is channeled through their bank. It does not mean that lending bank takes over your salary.”

He added that the loan, sanctioned to Uganda, by the Export-Import (Exim) Bank of China provided a grace period of 7 years. During the said period, the Ugandan government had to pay only the interest and not the principal amount, According to the UCAA spokesperson, the grace period is not over yet and the government has not defaulted on interest repayment to date. Vianney M Luggya assured that the Entebbe International Airport was in safe hands.

Illogical propaganda 

Meanwhile, the Chinese government had also rejected reports, that suggested a forcible takeover of Ugandan airport by creating a ‘debt trap.’ While speaking about the matter, China’s Director-General for African Affairs Wu Peng  claimed, “Which of the Chinese projects in Africa have been confiscated in Africa? NONE! The hype surrounding the Chinese ‘debt trap’ in Africa have NO factual basis and is being pushed on malicious grounds.” Peng, who serves as China’s Director-General for African Affairs, dismissed such media reports as ‘illogical propaganda.’

In the meantime, Uganda is seeking to amend the loan agreement it signed with China in 2015 to ensure that the government doesn’t lose control of the nation’s only international airport.

One of the clauses that Uganda wants to amend is the need for the Uganda Civil Aviation Authority to seek approval from the Chinese lender for its budget and strategic plans. The agreement also gives Exim Bank the sole authority to approve withdraws of funds from the UCAA accounts. Another problematic clause is that any dispute between the parties will have to be resolved by the China International Economic and Trade Arbitration Commission.

As many as 13 clauses have been deemed unfriendly to Uganda by people with knowledge about the matter. Apart from having the power to approve annual and monthly operating budgets, which it can reject, the Exim Bank of China also has the right to inspect the government and UCCA books of accounts.