Uganda's Airport: China's Control And Influence

There have been multiple reports claiming that the Chinese government is ready to take over Uganda's only international airport, Entebbe International Airport, due to the country's failure to honour a loan agreement. China has been accused by Western countries of luring poor countries into debt traps with stringent conditions that are impossible to repay. However, the Chinese and Ugandan governments have both denied these claims, stating that Uganda has not defaulted on its loan and that China has never seized any projects in Africa due to loan repayment issues.

China denies taking over Entebbe International Airport

China has denied allegations that it has taken over Uganda's Entebbe International Airport, the country's only international airport. The Chinese Embassy in Uganda refuted the claim, stating that no project in Africa has ever been seized due to loan defaults. Uganda's Civil Aviation Authority (UCAA) also denied the reports, describing them as false.

Speculation about China's potential takeover of the airport arose due to concerns over Uganda's ability to meet the loan terms. In 2015, Uganda secured a $200 million loan from China's Exim Bank to fund the expansion of the airport. The loan agreement included favourable conditions for Uganda, such as a low-interest rate of 2% and a seven-year grace period before the 20-year repayment period. However, a parliamentary probe in 2021 revealed that the loan also included onerous clauses that could potentially lead to the forfeiture of the airport if Uganda defaulted on its repayments.

The loan agreement grants China's Exim Bank oversight over the airport's annual budgets and requires revenues from airport operations to be deposited into an escrow account controlled by the bank. These clauses have sparked concerns about the erosion of Uganda's sovereignty and the potential loss of a national asset. Ugandan officials have sought to renegotiate the contract terms, but China has rejected these requests.

While China and Uganda deny any takeover of the airport, analysts note that the loan agreement could become problematic if Uganda faces difficulties in making repayments. The controversy surrounding the Entebbe International Airport deal highlights the complex nature of Chinese lending and its potential impact on borrower countries' sovereignty.

Uganda denies surrendering Entebbe International Airport

In November 2021, reports began circulating that Uganda was at risk of surrendering Entebbe International Airport—the country's only international airport—to China. This was due to the failure to repay a $200 million loan from the Export-Import Bank of China, which was taken out in 2015 to expand the airport. The loan agreement included a number of "toxic clauses", including the surrender of approval of the Uganda Civil Aviation Authority (UCAA) budget, master and strategic plans to Exim Bank in Beijing.

However, Uganda has denied these claims. Vianney M. Luggya, the spokesperson for the UCAA, said:

> I wish to make it categorically clear that the allegation that Entebbe Airport has been given away for cash is false. [...] We have said it before and repeat that it has not happened. There isn't an ounce of truth in it.

The Chinese government has also refuted the reports, with a spokesperson for the Chinese embassy in Kampala stating:

> The malicious allegation [...] has no factual basis and is ill-intended to distort the good relations that China enjoys with developing countries including Uganda.

The Chinese Embassy in Uganda also released a statement, saying:

> No project in Africa has ever been ‘seized’ by China because it could not repay its loan. On the contrary, China firmly supports and is willing to continue to make efforts to improve Africa’s capacity for independent development.

Uganda's Minister of Finance, Matia Kasaija, did admit that the country "shouldn’t have accepted some of the clauses" in the loan agreement. However, the country’s Attorney General, Kiryowa Kiwanuka, has said Uganda can meet the loan terms and keep the airport.

Uganda's debt to China

Despite these concerns, the Ugandan government has maintained that it can meet the loan terms and keep the airport. A senior Ugandan official stated that the negotiation of the loan and construction of the project began before the COVID-19 pandemic, which hit tourism-dependent countries particularly hard. The pandemic's impact may have contributed to the challenges in repaying the loan.

There were reports in 2021 and 2022 that China had taken over the Entebbe International Airport due to Uganda's failure to repay the loan. However, these claims were refuted by both the Ugandan and Chinese governments. The Chinese Embassy in Uganda stated that "no project in Africa has ever been 'seized' by China because it could not repay its loan". As of 2024, there are no reports indicating that China has taken over the airport or any other Ugandan assets.

China's lending to Uganda

China has been accused by Western countries of luring poor countries, including Uganda, into "debt traps" which they are unable to repay. China has been the biggest source of infrastructure funding to Africa, and critics have pointed to their predatory lending practices, although details of contracts are rarely made public.

Uganda has acquired many credit lines from China over the last 15 years to fund infrastructure projects, including roads and power plants. In 2015, the country secured a $200 million loan from China's Exim Bank to expand its Entebbe International Airport, its only international airport. The loan agreement has not been made public, but a parliamentary probe concluded that China had imposed onerous conditions on the loan, including potential forfeiture of the airport in case of default. The revenues from the airport's operations are to be deposited in an escrow account where all withdrawals have to be sanctioned by Exim Bank. The contract also requires any dispute arbitration or court proceedings to take place in China under Chinese law.

Uganda has pushed back against claims that it is at risk of defaulting on the loan and losing its airport. The country's Attorney General, Kiryowa Kiwanuka, has stated that Uganda can meet the loan terms and keep the airport. The Uganda Civil Aviation Authority (UCAA) has also refuted the claim, describing the news as false. China has also rejected the allegations, stating that no project in Africa has ever been confiscated due to failing to pay Chinese loans.

Uganda has an increasing reliance on credit from Chinese lenders, especially after the World Bank halted all new lending to Uganda in 2023 due to the passing of a new anti-homosexuality law. Uganda is in negotiations with Chinese export credit agency SINOSURE and Exim Bank for additional loans to finance the construction of a pipeline to help export its crude oil to international markets.

Entebbe International Airport's expansion deal

Uganda's Entebbe International Airport expansion deal with China has sparked controversy and raised questions about the potential loss of sovereignty for Uganda. The $200 million loan from China's Exim Bank for the airport's expansion has been the subject of debate due to its strict repayment terms and possible implications for Uganda's autonomy.

Entebbe International Airport, Uganda's only international airport, is undergoing a significant expansion to accommodate growing passenger traffic. The expansion includes constructing new passenger and cargo terminals, rehabilitating runways, and connecting the airport to a highway leading to Kampala, the capital. The project is partially funded by the Chinese government, with additional funding from the South Korean government and other sources.

The expansion deal with China has attracted scrutiny due to concerns about unfavourable loan terms and the potential risk of Uganda defaulting on its loan obligations. The loan agreement grants China's Exim Bank approval powers over the airport's annual budgets and requires all airport revenues to be deposited into an escrow account controlled by the bank. While escrow accounts are common in project finance, their use in sovereign lending is unusual. The repayment structure includes a seven-year grace period, followed by a 20-year repayment period with a low interest rate of 2%.

Ugandan officials have faced criticism for accepting loan clauses perceived as unfair and potentially detrimental to the country's sovereignty. A parliamentary probe revealed that some clauses could lead to the forfeiture of the airport in the event of default. However, Ugandan authorities have refuted claims of potential airport takeover by China, asserting their ability to meet loan obligations. The Chinese government has also denied allegations of seizing the airport, stating their commitment to supporting Africa's independent development.

The Entebbe International Airport expansion deal highlights the complex nature of Chinese lending and the challenges faced by developing countries in securing infrastructure funding. While the loan provides much-needed financing for Uganda's infrastructure development, the stringent repayment terms and potential consequences of default have sparked debates about the balance of power in such agreements. The outcome of this situation remains to be seen, but it underscores the importance of diligent scrutiny in international agreements to protect the interests of all involved parties.

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