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Chinese loans start to bite as Uganda stares at airport seizure

Chinese loans start to bite as Uganda stares at airport seizure

Kampala, Nov 28 (UNI) The east African country of Uganda is staring at possible seizure by China of its only international airport, besides other state assets, over the delayed repayment of a $200 million loan to Beijing, media reports said.
The loan for $207 million was taken by the Yoweri Museveni government in 2015 for expansion of the Entebbe International Airport airport. It had a seven-year grace period which has now passed.
According to the Daily Monitor newspaper of Uganda, China rejected the request to renegotiate “toxic clauses” in the $200 million loan picked up six years ago.
It says “Some of the unfavourable provisions in the loan agreement that Uganda signed with the EXIM Bank of China on March 31, 2015, if not amended, expose Uganda’s sovereign assets to attachment and takeover upon arbitration awards in Beijing.”
Eleven officials from Uganda had travelled to Beijing to plead with the Exim Bank of China to renegotiate the clauses in a bid to save sovereign assets to attachments.
"Our investigations found out that any proceedings against Uganda Civil Aviation Authority (UCAA) assets by the lender would not be protected by sovereign immunity since the Uganda government, in the 2015 deal, waived the immunity on airport assets," the Daily Monitor, a Ugandan daily, reported.
During the meeting, four Exim Bank of China executives noted that any alterations to the clause would "form a bad precedent in the future".
Prior to the trip to Beijing, the Exim Bank had suspended funding and cited violation of the loan agreement after UCAA failed to implement some of the clauses, which were not favourable to Uganda.
One such clause required UCAA to set up an escrow account which would hold the Civil Aviation Authority’s revenues and not use the money accrued in the account.
Exim Bank realised the loan agreement clauses were not being implemented, and hence, froze cash flow to the Chinese contractor.
Uganda Civil Aviation Authority officials have flagged 13 clauses in the agreement as “unfair and erode the sovereignty of Uganda”.
Last week, Uganda’s Finance Minister, Matia Kasaija, apologised to parliament for the “mishandling of the $207 million loan” from the China Exim Bank to expand Entebbe International Airport.
Progress of works at the airport, built in 1972, has reached 75.2 per cent, with two runways having reached overall completion of 100 per cent.
Entebbe International Airport is Uganda’s only international airport and handles over 1.9 million passengers per year. Its seizure by China would greatly dent the legacy of the 77-year-old Museveni, who came to power on the back of an armed uprising in 1986, and expose him to election defeat.
Ugandan Finance Minister Matia Kasaija told MPs that “they at the time in 2015 considered China loan offer as the “best possible alternative and jumped on it”, an admission that illuminates how countries walk into what academics and critics brand as Beijing’s debt trap”.
The Daily Monitor says “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 the new terminal, cargo and fuel centre works” at the Entebbe International Airport.
It cites Sri Lanka’s Hambantota Port which the country has leased to China for 99 years after failing to pay the loan. It says “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.”
Meanwhile, other debt-distressed African states are studying the fine print in their loan contracts with China as they prepare to head for Dakar, Senegal, where the 2021 Forum on China-Africa Co-operation (FOCAC) summit will be held on November 29-30, amid biting economic and social challenges fuelled by the Covid-19 crisis.
UNI/RN

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