Uganda’s Only International Airport May Be Controlled By China

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There’s a good chance that Uganda will lose ownership of its only international airport, the Entebbe Airport, to China. This unfortunate event allegedly may happen due to the mishandling of a multimillion-dollar loan facility.

The East Africa nation signed away the control of the airport’s bank accounts to the Chinese Exim Bank, the lender, while acquiring the loan facility.

The East African reported late last week that the offending clauses were first picked up by the Uganda Civil Aviation Authority, which described some clauses in the deal as “unfriendly.”

“The most troubling for the aviation bosses was a clause that gave Exim Bank the sole authority to approve withdrawal of funds from the UCAA accounts,” as per the report. “The bank also had the power to approve annual and monthly operating budgets, which it could reject, and the rights to inspect the government and UCAA books of accounts. The China International Economic and Trade Arbitration Commission (CIETAC) in Beijing also had the mandate to resolve disputes.”

In 2015, Matia Kasaija, the Ugandan finance minister, pushed for parliament’s approval of a $207 million loan from Exim Bank of China. This loan facility was for upgrading the airport, included the modification of the main terminal building, a new cargo center, and a multi-story parking garage.

The loan had a maturity period of 20 years including a seven-year grace period during which time only interest is paid. However, Uganda’s public debt has increased to $18 billion in recent years, which would make repayment of the loan, as is, impossible.

Efforts were made in recent years to renegotiate the terms of the loan. Ugandan President Yoweri Museveni sent a delegation to Beijing for discussion with the Chinese government in 2019, and again in March of 2021. The teams were told on both occasions that there wouldn’t be any amendments or changes to the loan agreement. However the Ugandan government is currently seeking once again to amend the loan.

From Bloomberg:

Among the clauses that the government 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 Monitor reported. Another rule mandates that any dispute between the parties will have to be resolved by the China International Economic and Trade Arbitration Commission, according to the newspaper.