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Govt dismisses reports that Uganda could ‘lose’ Entebbe airport to China

Entebbe airport

Entebbe airport

Government has dismissed reports that China could take control of the country’s only international airport because of a failure to honour a loan agreement. China’s embassy in Uganda also dismissed the report. But analysts note the loan deal could become a problem if Uganda ever has trouble paying it back.

Daily Monitor reported last week that Uganda risked losing its only international airport to China over a $200 million loan to expand the facility. According to documents shared with Daily Monitor, China rejected Uganda’s request to re-negotiate some clauses in the 2015 loan deal.

This included a clause that required Uganda’s civil aviation authority to set up an escrow account to hold all of its revenues. Under the clause, the revenues in this account cannot be spent by the aviation authority without approval from Beijing.

"It is true that UCAA opened up a Sales Collection Account in Stanbic Bank 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 UCAA's finances. The Authority enjoys the freedom and liberty of spending what is collected (as per the budget). The arrangement is only similar to what happens when one gets a salary loan or any other loan for that matter, and the bank requests that the salary is channeled through their bank. It does not mean that the lending bank takes over the borrower's salary," said a statement released earlier by Uganda Civil Aviation Authority (UCAA)

Vianney Luggya, UCAA spokesperson said that the Ugandan government has no intention of defaulting on loan repayments to China.

“It is not true that Uganda is going to lose Entebbe International Airport in any way whatsoever. This is not the first time that this allegation is coming up. Uganda is not about to default in honoring the loan obligation. We are still within a grace period of seven years and during that period we have been paying interest,” said Luggya.

The loan agreement also gives China’s Export-Import Bank oversight over monthly operating budgets for the airport. The bank is also authorized to inspect both the Aviation Authority and Ugandan government books of accounts, which some see as eroding the sovereignty of the state.

When contacted the Chinese Embassy in Uganda, they said they were not in position to comment and referred VOA to a statement they issued yesterday Sunday.

In the statement, the embassy said the loan agreement between China Exim Bank and Uganda was signed voluntarily through dialogue and negotiation on equal footing without any hidden terms or political conditions attached.

They said China-Uganda economic and trade cooperation and financing in the field of large-scale infrastructure follows the principle of equality and mutual benefit and has been conducted in accordance with the laws and rules of the international market and strictly abided by the laws of the host country.

Economic analyst Fred Muhumza explains that technically, any loan received from an EXIM Bank is not treated as a loan but as an export, thus making it difficult to renegotiate. Muhumuza said it is time for the government and its lawyers to re-examine how it handles its agreements with donors.

“These loans are reviewed by solicitor general’s office, who are the lawyers. It also indicates, in case of arbitration, we go to China. We are really at the mercy of China. They have an upper hand on this,” he said.

Uganda currently owes China $1.6 billion in loans extended to the East African country for financing of major infrastructure development projects.

In a 2018 report, Uganda’s auditor general raised concern that Uganda had agreed to several stringent conditions in the loans and these had not only increased the cost of borrowing but also exposed Uganda’s sovereignty to risk. 

Comments

+2 #1 WADADA rogers 2021-11-29 20:29
These denials wont help any one. We are told one of the clauses of that none disclosure agreement was to the effect that China would take over the management of the airport until they realise their money.

I wonder who advised Government to take such unprecedented decisions that would eventually embarrass Government
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+4 #2 Akao 2021-11-29 22:29
I think it would be good for China to take over Entebbe. That way, it will give Africans countries (say despots) that borrowing heavily from China, and misusing the money for their self indulgence will not end well.

The only problem with African despots is that they don,t think beyond themselves. Otherwise, the way its going, most African countries will be under Chinese rule.

Its already happening in Zambia, the citizens of Zambia are now working in Chinese farms and factories as chinese slaves.
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+1 #3 Lakwena 2021-11-30 09:14
In other words, there is no smoke without fire! Because of the Megalomaniac in our State House, Uganda is a borrowed country.

SHAME! Ugandans urgently need a new government under a brand new leadership.

Otherwise, you can't curve anything out of a rotten wood, which can't even burn to cook anything.
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+2 #4 Lakwena 2021-11-30 09:36
Quoting Akao:
I think it would be good for China to take over Entebbe. That way, it will give Africans countries (say despots) that borrowing heavily from China, and misusing the money for their self indulgence will not end well.

The only problem with African despots is that they don,t think beyond themselves. Otherwise, the way its going, most African countries will be under Chinese rule.

Its already happening in Zambia, the citizens of Zambia are now working in Chinese farms and factories as chinese slaves.


Akao, because of our short memory, Ugandans must be reminded of what Kabaka, Mwenda Mutebi two months ago, told the country on the anniversary of his Coronation: That the regime in cahoot and vicious collaboration with foreigners sic Goofy Investors, are PLUNDERING the country.
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0 #5 Henry Baisi 2021-11-30 14:02
This is good news....but as the saying goes, there is no smoke without fire. In this case the govt has managed to extinguish the fire. Good Honourable Matia K.

Hon Matia K, a country's capacity to service debt depends of free cash flow / tax revenues. In Uganda's case, tax revenues are not sufficient to cover public expenditure.

The shortfall is filled by borrowing. That means that UG borrows to pay debt. That is not sustainable.

You must reign-in public spending. Cut it! What are you waiting for? If you do not do so now, UG could go the Zambia way anytime soon.
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+1 #6 kabayekka 2021-11-30 16:02
If the only job the NRM advises the youth to do is to join the Army, what other financial production is there to up grade the national economy?

With the corruption that is endemic in this governance, China is not stupid. It is indeed better to watch the lucrative account of the Entebbe Airport so that the Bank loan is paid up as soon as possible.

One understands that the loading and unloading of aircrafts is some big person's private company to do that?
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+1 #7 Lysol 2021-11-30 19:53
Uganda is now the victim of the Chinese Debt Trap, because of the corrupt leadership.

The fate of Entebbe airport still hangs in the balance. Thanks to the Russian's bailout.
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+1 #8 Lakwena 2021-12-01 08:15
Quoting Henry Baisi:
...Hon Matia K, a country's capacity to service debt depends of free cash flow / tax revenues. In Uganda's case, tax revenues are not sufficient to cover public expenditure.

The shortfall is filled by borrowing. That means that UG borrows to pay debt. That is not sustainable.

You must reign-in public spending. Cut it! What are you waiting for? If you do not do so now, UG could go the Zambia way anytime soon.

,
But Henry, don't you know that Kasaijja is just one of the many ibuhaburwa's Puppets or Mizindaro?

In other words, before you ask Hon Matayo to cut expenditure, ask Gen Tibuhaburwa whether he bought his current bed from Kubiri or Katanga in Wandegeya, and his Stainless Steel Bushera Mug from TUMPECO (U) Ltd.

Wachireba?
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