On Saturday (November 27), 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. 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 @UgandaCAA opened up a Sales Collection Account in @stanbicug 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 (@UCAA_Spokesman) November 27, 2021
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.
It does not mean that lending bank takes over your salary.
— Vianney M. Luggya (@UCAA_Spokesman) November 27, 2021
The loan terms provide a grace period of 7 years, and we are still within that grace period during which only interest is paid, and government has not defaulted on those obligations.
China dismisses reports of debt trap and airport confiscation
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.’
Media reports that claimed Uganda’s surrender of international airport to China
On Thursday (November 25), the Daily Monitor published an exclusive story suggesting that the Ugandan government had surrendered the Entebbe International Airport in exchange for Chinese money. It had claimed, “Our investigations over several months show that Uganda dispatched a delegation to Beijing after Exim Bank suspended funding, citing violation of the loan agreement after UCAA failed to implement some of the clauses, which were not favourable to Uganda.”
The Daily Monitor emphasised that attempts at revisioning the Financing Agreement terms with China had failed and how it posed a threat to Uganda’s sovereign assets, given that the government withdrew sovereign immunity on airport assets. “Among the controversial provisions is a surrendering under the airport loan agreement of the approval of UCAA budget, master and strategic plans, which ordinarily are the mandates of the aviation regulator’s board, to Exim Bank in Beijing,” it had claimed.
The Monitor report had said that the loan deal exposes the airport and other government assets to potential attachments and take-over by China upon arbitration awards in Beijing. It had talked about possible take over of the airport by China if the loan is not paid back in time, but had used a misleading headline saying “Uganda surrenders airport for China cash”. This led to other media houses claiming that Uganda has already taken over the airport.
Such distorted reports were published by many other media houses from several countries. Same wrong reports were also published by IANS and Indian media outlets such as WION, India Today and The Economic Times etc.
Uganda seeks amendment in loan clause
Even though both Uganda and China denied reports of China grabbing the airport using a debt trap, there is some truth about concerning clauses in the loan agreement. The original report by Daily Monitor sad that 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.
