- Uganda government has been boxed into a corner of bother after lenders in China rejected their request to re-negotiate ‘toxic clauses’ in a $200m loan picked six years ago
- The loan was to expand the country's only International Airport and now is at risk of losing it including other government assets
- Uganda Civil Aviation Authority has expressed worry that some clauses in the loan give China control of the country's assets
Uganda, an East African country is on the verge of losing its only International Airport and other government assets to China over a loan it secured in 2015.
This is after the lenders in China declined to renegotiate toxic clauses in the agreement when the $207 million was given to the country to expand the Entebbe International airport
On 17 November 2015, the Uganda government, represented by the finance ministry and the Civil Aviation Authority at the time, signed an agreement with the Export-Import Bank of China (Exim Bank) to borrow U$207 million at two percent upon disbursement, with a maturity period of 20 years including a seven-year grace period.
It has now emerged that the deal signed with the Chinese lenders contains some clauses which include a ‘surrendering’ of its most prominent airport if it can't pay back.
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The Uganda Civil Aviation Authority (UCAA) which raised the alarm says some provisions in the Financing Agreement expose Entebbe International Airport and other Ugandan assets to be attached and taken over by Chinese lenders upon arbitration in Beijing.
UCAA managing director, David Kakuba, also warned that failure to amend the clauses could expose government assets to attachment and take over by China.
"Some 13 clauses were deemed unfriendly and as good as mortgaging the airport and eroding the country’s sovereignty. The most troubling for the aviation bosses was a clause that gave Exim Bank the sole authority to approve withdraws of funds from the UCAA accounts.
"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 UCCA books of accounts. The China International Economic and Trade Arbitration Commission (CIETAC) in Beijing also had the mandate to resolve disputes."
Begging for renegotiation
Local media reports that China rejected pleas by Uganda to renegotiate the toxic clauses of the 2015 loan, leaving Ugandan President Yoweri Museveni’s administration in limbo.
According to the Daily Monitor of Uganda, the Ugandan government waived international immunity in the agreements it signed to secure the loans, exposing Entebbe International Airport to take over without international protection.
East Africa Newspaper also reports that in desperation, Uganda in March sent a delegation to Beijing hoping to renegotiate the toxic clauses, but the officials came back empty-handed as China would not allow the terms of the original deal to be varied.
On Monday 22, November 2021 Uganda’s Finance Minister, Matia Kasaija apologized to parliament for the ‘mishandling of the $207 million loans’ from the China Exim Bank to expand Entebbe International Airport.
“I apologize that we shouldn’t have accepted some of the clauses."
Call for calm
Ugandan's Attorney General Kiwanuka Kiryowa played down the fears of the airport takeover says there is no cause for alarm.
"When you borrow money, your obligation is to pay. If you do not pay, the other party can take you to court, in which case this would be CIETAC.
"Let everyone do their part. The airport makes money and will meet its obligations.”
Built in 1972, Entebbe International Airport is Uganda’s only international airport and handles over 1.9 million passengers per year.
China says no plan to take over Nigeria’s sovereignty over $500m loans
The government of the Asian nation also stated that it has no plan to overtake Nigeria's sovereignty.
In a statement, China said it is only committed to the development of Nigeria and other African countries.