China's Takeover Of Uganda's Airport: What's The Deal?

In 2021, there were reports that China had taken over Uganda's Entebbe International Airport due to a loan default. The Ugandan government had signed an agreement with China's Exim Bank to borrow $200 million to expand the airport, with a maturity period of 20 years and a seven-year grace period. However, both the Chinese and Ugandan authorities denied the reports, stating that Uganda had not surrendered the airport and that China had not confiscated any projects in Africa due to loan defaults. The Entebbe International Airport expansion project, carried out by a Chinese state-owned company, was expected to be completed by the end of 2022.

China denies allegations of taking over Uganda's Entebbe International Airport

China has denied allegations that it took over Uganda's Entebbe International Airport, stating that such claims are "malicious" and intended to "distort the good relations" between the two countries. This response comes after media reports suggested that Uganda could surrender its airport to China in the event of a loan default.

Ugandan President Yoweri Museveni had sent a delegation to Beijing to renegotiate the terms of a $207 million loan from China's Exim Bank, which was used to expand the Entebbe International Airport. The loan agreement, signed in 2015, included a maturity period of 20 years with a seven-year grace period. However, it was alleged that the deal meant Uganda had effectively surrendered its airport, as it granted China approval powers over the airport's annual budgets and allowed for potential forfeiture in case of default.

The Chinese embassy in Uganda refuted these claims, stating that China has never confiscated any projects in Africa due to loan defaults. They accused the media of spreading misinformation and affirmed their positive relationship with developing countries.

Uganda's Civil Aviation Authority also denied the reports, asserting that the government could not surrender a national asset in such a manner. They reiterated that the airport had not been surrendered and would not be surrendered in the future.

The controversy surrounding the Entebbe International Airport is part of a broader debate about China's lending practices in Africa. Some critics argue that China lures poor countries into "debt traps," offering loans that borrowers are unable to repay, which then leads to the forfeiture of national assets. However, China has pushed back against these accusations, offering economic incentives and emphasizing its commitment to opposing external interference in domestic affairs.

Uganda denies surrendering Entebbe International Airport to China

Ugandan authorities have denied reports that Entebbe International Airport in the capital could be surrendered to China. The reports were sparked by an article in the Daily Monitor newspaper, which suggested that if Uganda were to default on its debt repayment, the Export-Import Bank of China (Exim Bank) could take over the airport.

The Loan Agreement

In 2015, Uganda took out a $200 million loan from Exim Bank to expand Entebbe International Airport, its only international airport. The loan had a maturity period of 20 years, including a seven-year grace period, which has not yet lapsed.

Problematic Clauses

The loan agreement included several clauses that have been flagged as problematic and potentially threatening to Uganda's sovereignty. One such clause waived immunity for Uganda's sovereign assets, meaning that in the event of arbitration awards in Beijing, Uganda's assets could be seized. Additionally, the agreement requires the Uganda Civil Aviation Authority (UCAA) to set up an escrow account to hold all revenues, which cannot be accessed without approval from Beijing.

Attempts at Renegotiation

Uganda has attempted to renegotiate the loan terms, citing the problematic clauses. However, these attempts have been rebuffed by Exim Bank, which has refused to amend the signed agreement. Ugandan officials have expressed concern over the potential risk to Entebbe International Airport and other national assets.

Reactions to Reports

The story sparked reactions from both the Ugandan government and the Chinese Embassy in Uganda, who denied the allegations. The Chinese Embassy referred to the allegations as "malicious" and stated that China has never confiscated any projects in Africa due to a failure to repay loans.

Parliamentary Probe

A parliamentary probe in Uganda concluded that China had imposed onerous conditions on the loan, including the potential forfeiture of the airport in case of default. This conclusion sparked public outrage. However, the loan agreement itself has not been made public, and the specific details of the clauses remain unclear.

China rejects claims of debt traps in Uganda

In November 2021, China rejected allegations that it would seize Entebbe International Airport, Uganda's only international airport, if the country defaulted on a $200 million loan for the airport's expansion. The Chinese embassy in Uganda called the claim "malicious" and stated that it had "no factual basis", adding that China had never confiscated any assets in Africa because of loan defaults.

Uganda had secured the loan in 2015 from China's Exim Bank, one of many credit lines acquired from China over the years to fund infrastructure projects. A parliamentary probe in Uganda concluded that the loan agreement included onerous conditions, such as granting approval powers over the airport's annual budgets to Exim Bank and allowing China to take over the airport in case of default. The agreement also stipulated that revenues from the airport's operations would be deposited into an escrow account controlled by Exim Bank and that any dispute arbitration would occur in China under Chinese law.

Uganda attempted to renegotiate the loan terms in 2021 but was rebuffed by Exim Bank. The country was still within a seven-year grace period at the time of the dispute, with the total loan to be paid over 20 years.

China has been accused by Western countries of engaging in "debt-trap diplomacy", luring poor countries into loans that they cannot repay and then seizing strategic assets such as ports and airports when they default. China has reacted differently to individual countries' debt crises. In the case of Sri Lanka, China allegedly gained control of the Hambantota Port for 99 years after the country was unable to service its debt. In contrast, China renegotiated loan terms with Ethiopia, extending the repayment period and forgiving past interest payments.

Based on China's approach to Ethiopia and the nature of its infrastructure projects in Uganda, it is speculated that China is more likely to work with Uganda to extend the repayment terms of the loans rather than seize control of the airport.

Uganda's loan agreement with China

In 2015, Uganda acquired a $200 million loan from China's Exim Bank to fund the expansion of Entebbe International Airport, Uganda's only international airport. The loan was to be paid over 20 years, with a seven-year grace period. The loan agreement included a number of stringent conditions, including approval powers for Exim Bank over the airport's annual budgets and the requirement for revenues from airport operations to be deposited into an escrow account controlled by the bank. Additionally, the agreement stipulated that any dispute arbitration or court proceedings must take place in China under Chinese law.

In 2021, a parliamentary probe in Uganda concluded that China had imposed onerous conditions on the loan, including the potential forfeiture of the airport in the case of default. This sparked public outrage and concerns about the level of scrutiny and due diligence conducted by Ugandan bureaucrats before committing to such agreements. Uganda attempted to renegotiate the loan terms, but these efforts were rebuffed by Exim Bank. As a result, the Ugandan government sent a delegation to Beijing to plead for a renegotiation of the "toxic clauses" in the loan agreement. However, the Chinese lenders rejected any amendments and advised the Ugandan executives to accept "friendly consultations" to ensure the smooth implementation of the airport expansion project.

China has been accused by Western countries of luring poor countries into "debt traps" with unfavourable loan agreements. In some cases, cash-strapped borrowers have been pushed to stake sovereign assets, such as airports and seaports, to access credit. There have been instances where countries in Africa and other regions have had to forfeit national assets to China after failing to repay commercial loans.

Uganda has also sought additional loans from China for other infrastructure projects, such as a new railway line connecting Kenya's Mombasa seaport with Kampala. In 2018, Uganda announced that it expected to finalise a $2.2 billion loan deal with China's Exim Bank for this project, further deepening its financial relationship with China.

China announces economic incentives for Africa

In 2024, China offered Africa $51 billion in fresh funding, promising to create at least 1 million jobs. This funding is part of a three-year plan to increase financial support for Africa, with a focus on infrastructure projects. China has also committed to providing 1.2 billion doses of COVID-19 vaccines to the continent.

China's economic relations with Africa date back to the 7th century and continue to the present day. China seeks resources to fuel its growing consumption, while African countries seek funds to develop their infrastructure. China commonly funds the construction of roads, railroads, dams, ports, and airports in Africa, often accompanied by soft loans. In exchange, Chinese state-owned firms may gain access to minerals or hydrocarbons.

In recent years, China has been accused of luring poor countries, including those in Africa, into "debt traps." For example, in 2021, there were allegations that China had taken over Uganda's Entebbe International Airport due to a loan default. However, these allegations were rejected by both the Ugandan and Chinese governments.

China's influence in Africa has grown significantly, and it is now the continent's biggest trading partner, with Sino-African trade exceeding $200 billion per year. Over 10,000 Chinese firms operate in Africa, and the value of Chinese business there since 2005 amounts to more than $2 trillion. China has also established special economic zones in Africa and provided scholarships for African students to study in China.

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