By Spy Uganda
Kampala: November 2015 is the year Ugandan ”blinded” leaders surrendered Entebbe Airport to the Chinese for loans…yes it worked out for China and now Ugandans are in regrets!
On the above date, the Uganda government represented by the finance ministry and the Civil Aviation Authority, signed an agreement with Export-Import Bank of China (Exim Bank) to borrow U$207 million at two per cent upon disbursement. The loan had a maturity period of 20 years including a seven-year grace period.
It has now emerged that the deal signed with the Chinese lenders virtually means Uganda “surrendered” its most prominent and only international airport.
The Uganda Civil Aviation Authority (UCAA) says some provisions in the Financing Agreement with China expose Entebbe International Airport and other Ugandan assets to be attached and taken over by Chinese lenders upon arbitration in Beijing.
It also emerged that China has rejected recent pleas by Uganda to renegotiate the toxic clauses of the 2015 loan, leaving Ugandan President Yoweri Museveni’s administration in confusion mode.
Last week, Uganda’s Finance Minister Matia Kasaija apologized to parliament for the “mishandling of the $207 million loan” from the China Exim Bank to expand Entebbe International Airport.
“I apologize that we shouldn’t have accepted some of the clauses,” Kasaija told members of the committee in response to questions asked by the legislators. There were also questions over the interest rate that was set by the China Exim Bank for the funds placed in an off-shore Standard Bank account that was used as collateral for the project.
Three weeks ago, Uganda Parliament’s Committee on Commissions, Statutory Authorities and State Enterprises raised concern over terms of the loan acquired to upgrade and expand Entebbe International Airport.
Committee members led by chairperson Joel Ssenyonyi demanded the Minister for Finance, Planning and Economic Development Maria Kasaija, to explain whether due diligence had been made prior to government signing the agreement with the Chinese bank.
Ssenyonyi asked the finance minister to explain at what stage the due diligence had been done on the loan financing terms, noting that the terms were not in favour of the tax payer.
“It is right to understand how China has done this. But then, how has Uganda always done its loan agreements? This would have provided a meeting point between the two parties,” said Ssenyonyi.
A Legal Advisor at the finance ministry told the committee that they reviewed the agreement, especially on the waiver of immunity. He admitted that some conditions could not be negotiated.
“The President on his trip to China, raised this as one of the challenges that China ought to address in our agreement,” the advisor told the committee while under oath.
Progress of works at the airport has reached 75.2 per cent, with two runways having reached overall completion of 100 per cent.
The phase one project that commenced on 10 May 2016, was expected to have been completed by 09 May 2021. It was extended to 05 December 2022. But still, there are genuine fears the airport could be lost as Kampala is struggling to meet the strict loan repayment regimen.
China Closes Ugandan Leaders’ Eyes With Dangerous Clauses In Agreement
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.
The Government Concessional Loan Agreement provides conditions for signing three other agreements: On-lending agreement between Uganda and UCAA; Repayment Mechanism Agreement between Exim Bank and Uganda and [U]CAA and then, Escrow Account Agreement between Uganda, UCAA and Exim Bank.
Under Section 3 of the Repayment Mechanism Agreement and Section 3.1 (a) of the Escrow Account Agreement, it’s required that Annual Operating Budgets for UCAA will be prepared and submitted for approval to both government and Exim Bank. Under subsection (b), Exim Bank has the right to reject or approve the budgets.
Similarly, monthly operating budgets are to be approved to the escrow account in a form acceptable to Exim Bank. The bank is also authorised to inspect both UCAA and government Books of Accounts, which erodes the sovereignty of the State.
Whereas Section 14.1 of Repayment Mechanism Agreement provides that the governing laws shall be the laws of Uganda, Section 14.2 provides that all disputes shall, where mutual discussions fail, be resolved by the China International Economic and Trade Arbitration Commission (CIETAC) in Beijing. This, according to UCAA directly undermines the legal regime to which the entire agreement is subject to.
Section 11.1 (f) of the Escrow Account Agreement put emphasis on the fact that the arbitration in Beijing court is legal, valid, binding and enforceable to the extent that any award obtained in CIETAC will, if introduced, be received and accepted for enforcement in any proceedings against the borrower, end-user and the Exim Bank and their respective assets in Uganda.
A number of countries, some in Africa, have had to forfeit national assets for direct control by China after failing to repay commercial loans signed with haste or without proper scrutiny, such as the Financing Agreement to bankroll new terminal, cargo and fuel centre works.
For instance, in December 2017, Sri Lanka lost its Hambantota Port to China for a 99-year lease after failing to show commitment in the payment of billions of dollars in loans.
The transfer gave China full control of the territory just a few hundred miles off the shores of rival India.
In September 2018, Zambia also lost Kenneth Kaunda International Airport to China over debt gone wrong. The Chinese lenders were already in control of the country’s state broadcasting company, ZNBC.