Entebbe Airport gone or not?

The facts versus what government says and what public believes

Kampala, Uganda | THE INDEPENDENT | Does Uganda stand to lose control of Entebbe International Airport to Chinese lenders over a $350 million loan?

The government says China cannot take the airport but the raised voices on the issue shows that many members of the public believe it possible that China can take the airport. So what are the facts?

The first fact is that the loan agreement for the Entebbe Airport money has not been made public.  According to experts in this area, keeping loans secret is standard for all Chinese loans to poor countries.

The result, as seen in this case, is that citizens of countries that borrow from China cannot know for a fact what is true and what is false about the debt. That means even parliament cannot hold the government accountable.

One of the most comprehensive analyses based on actual contracts seen of the lending terms of Chinese entities to poor governments is contained in a report titled “How China Lends: A Rare Look into 100 Debt Contracts with Foreign Governments”. Co-published by AidData at William & Mary, the Kiel Institute for the World Economy, and the Peterson Institute for International Economics, the report was released in March 2021.

It samples 100 contracts but says Chinese state-owned lenders have made over 2000 loan agreements with developing countries since the early 2000s and they are all made in the same way; either the CDB loan contract, the China Eximbank concessional loan contract, and the China Eximbank non-concessional loan contract.

The key financial characteristics of each contract refer to the principal, interest, currency, maturity, amortisation schedule, collateral, and guarantees. But there are key non-financial terms that have played important roles in contemporary sovereign debt contract practice. These include priority (status), events of default and their consequences (including cross-default and acceleration), termination and cancellation, enforcement (including waiver of immunity and governing law), and confidentiality. China Eximbank accounts for 76 of the 100 loan agreements in the sample. Out of these 76 loans, 66  are concessional lending instruments, similar to that of Entebbe Airport.  Although the CDB loans are fewer, they account for substantially larger financial commitment.

The Entebbe Airport case

Nakawa West MP Joel Ssenyonyi is that the centre of the raging debate as chairman of the parliament’s Committee on Commissions, Statutory Authorities and State Enterprises (COSASE); the committee that unearthed the muck around the Entebbe Airport loan.

During a COSASE sitting on Oct. 29, Ssenyonyi put numerous assertions to Minister of Finance, Matia Kasaija and his team regarding the Entebbe Airport loan. Ssenyonyi said the loan agreement gives the lender; China’s Export-Import (Exim) Bank power to take the airport in case the government fails to pay the debt, that revenues from the airport’s operations are to be deposited in an escrow account where all withdrawals have to be sanctioned by Exim Bank, and that the lender also gets approval powers over the airport’s annual budgets, and in case of any dispute arbitration or court proceedings to take place in China under Chinese law.

“So Uganda is locked out entirely, the contract is one-sided,” Ssenyonyi  said.

But when journalists attempted to have the Minister of Finance, Matia Kasaija, confirm or deny the truth of what Ssenyonyi said, Kasaija refused to answer.

Ssenyonyi also said that the terms of the loan are so bad that Ugandan attempted this year to renegotiate them but Exim Bank refused to change it. Again, Finance Minister Kasaija refused to say whether that is true or not.

But Molly Apio, a Legal Adviser at the Ministry of Finance ministry, told COSASE that President Museveni was aware of some of the bad conditions in the loan agreement and has spoken to the Chinese about them.

President Museveni comments on the issue in an interview with the Reuters news agency at the National Leadership Institute (NALI) in Kyankwanzi on Dec. 04 attempted to dismiss claims that the Airport had been “mortgaged” to Chinese lenders who can take control of it in case of default.

“I wonder which airport is to be taken and by who, “Museveni said, “I don’t remember mortgaging the airport for anything.”

Museveni also said firmly that Uganda has the capacity to pay the Chinese debt.

“Our terms of agreement are very clear,” he said, “There is no problem, they will be paid.”

The president’s remarks were seen by some to be vague, non-committal, and couched in conditionalities; including Uganda’s ability to pay the growing debt owed to the Chinese.

What if, many asked, for unforeseen reasons, the government fails to pay the Chinese; can they take control of Entebbe International Airport or any other national assets that are offered as collateral for loans?