Saturday 27 November, the spokesperson for the Uganda Civil Aviation Authority (UCAA) fired media reports, which claimed that China would take over the country’s only international airport due to non-payment of a loan taken to expand the airport. Uganda signed a loan agreement on March 31, 2015 with the Export-Import Bank (Exim) of China for the expansion of Entebbe International Airport. However, the authorities have admitted that there are problematic clauses in the loan agreement as Uganda seeks to modify some clauses of the agreement.
After multiple media across the world, including India, claimed that China had taken control of the airport, the Ugandan Civil Aviation Authority issued a statement denying the claim. In a Twitter thread, UCAA spokesperson Vianney M Luggya wrote: “I wish it was categorically clear that the allegation that Entebbe Airport was given against de the money is bogus. The Ugandan government cannot give up such a national asset. We have said it before and repeat that it did not happen. There is not a shred of truth in this.
He conceded that UCAA funds are deposited in a 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 a sales collection account in @stanbicug where all Authority income is deposited in accordance with the terms of the escrow account agreement, but that does not mean that anyone should control our finances.
– Vianney M. Luggya (@UCAA_Spokesman) November 27, 2021
Vianney M Luggya underlined: “The Authority enjoys the freedom and the freedom to spend what is collected (according to the budget). The lender’s oversight of the account is only similar to what happens when you get a payroll loan or any other loan, and the bank requests that the paycheck go through their bank. This does not mean that the lending bank supports your salary.
He added that the loan, sanctioned to Uganda, by the Export-Import Bank (Exim) of China provided for a 7-year grace period. During this period, the Ugandan government had to pay only the interest and not the principal. According to the UCAA spokesperson, the grace period is not yet over and the government has not defaulted on interest payments to date. Vianney M Luggya assured that Entebbe International Airport is in good hands.
This does not mean that the lending bank covers your salary.
The loan terms provide for a grace period of 7 years, and we are still in that grace period where only interest is paid, and the government has not defaulted on its obligations.
– Vianney M. Luggya (@UCAA_Spokesman) November 27, 2021
China dismisses allegations of debt trap, airport confiscation
Meanwhile, the Chinese government had also dismissed reports suggesting a forced takeover of the Ugandan airport by creating a “debt trap”. Speaking of the matter, China’s Managing Director for African Affairs Wu Peng claims, “Which of the Chinese projects in Africa have been confiscated in Africa?” NOTHING! The hype surrounding China’s “debt trap” in Africa has NO factual basis and is being pushed for malicious motives. Peng, who is China’s director general for African affairs, called such media reports “illogical propaganda.”
Media reports claiming the handover of Uganda’s international airport to China
Thursday (November 25), Daily monitor published an exclusive story suggesting the Ugandan government ceded Entebbe International Airport in exchange for Chinese money. He said: “Our investigations over several months show that Uganda sent a delegation to Beijing after the Exim Bank suspended funding, citing a breach of the loan agreement after the UCAA failed. implemented some of the clauses, which were not favorable to Uganda. ”
The Daily monitor stressed that attempts to revise the terms of the financing agreement with China had failed and posed a threat to Uganda’s sovereign assets, as the government removed sovereign immunity on the assets airport. “Among the controversial provisions is the handing over, as part of the airport loan agreement, of budget approval, UCAA master and strategic plans, which are usually the mandates of the board of directors. of the aviation regulator, at Exim Bank in Beijing, “he said.
The Monitor report said the loan deal exposes the airport and other government assets to potential foreclosures and a takeover by China in arbitral awards in Beijing. He had mentioned a possible takeover of the airport by China if the loan was not repaid on time, but used a misleading title that read “Uganda gives back the airport for Chinese money”. This has led other media to claim that Uganda has already taken control of the airport.
These distorted reports were published by many other media in several countries. The same erroneous reports were also published by IANS and Indian media such as WION, India today and Economic times etc.
Uganda calls for loan clause amendment
Even though Uganda and China have denied reports that China is taking over the airport using a debt trap, there is some truth to the terms of the loan deal. The original Daily Monitor report laments that Uganda is seeking to modify the loan deal it signed with China in 2015 to ensure the government does not lose control of the country’s only international airport.
One of the clauses Uganda 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 agreement also gives Exim Bank the exclusive authority to approve withdrawals of funds from 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.
No less than 13 clauses were deemed hostile to Uganda by people familiar with the subject. In addition to 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 books of government and UCCA.