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Uganda risks losing only international airport over Chinese loan.

On Tuesday, 17 November 2015, the Uganda government signed an agreement with Export-Import Bank of China (Exim Bank) to borrow $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 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 limbo.
Entebbe International Airport
Quoting The Citizens “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 Uganda government, in the 2015 deal, waived the immunity on airport assets.”
Highly-placed sources said the risk presented by the Financing Agreement on March 7, 2019, prompted Uganda to send an 11-member delegation to Beijing to plead with Exim Bank to renegotiate the clauses now impugned by Kampala.
The joint team from the Works, Foreign Affairs, and Finance ministries, as well as UCAA and Attorney General’s Chambers, was led by Dr Chrispus Kiyonga, Uganda’s Ambassador to China.
In the meeting, the four Exim Bank executives reportedly rejected any amendments to clauses of the signed Financing Agreement, and made it clear to the Ugandan executives that any attempts to make alterations would set a bad precedent. In addition, the Chinese told their guests that they saw no cause to warrant the amendment.
The lenders advised Dr Kiyonga and his team to accept “friendly consultations” from time to time, to ensure smooth implementation of the airport expansion project. They also agreed to keep the details of the meeting confidential.
Investigations done over several months show that Uganda dispatched a delegation to Beijing after Exim Bank suspended funding, citing violation of the loan agreement after UCAA failed to implement some of the clauses, which were not favourable to Uganda.
The loan agreement requires UCAA to set up an escrow account to hold all of the Authority’s revenues.
An escrow is a contractual arrangement in which a third party receives and disburses money or property for the primary transacting parties, with the disbursement dependent on conditions agreed to by the transacting parties, according to Wikipedia.
The agreement provides that UCAA cannot use any of the accrued money for whatever expenditure without approval from Beijing.
Realising that some of the loan agreement clauses were not being implemented, Exim Bank froze cash flow to the contractor, a Chinese company.
For instance, the construction firm’s payment certificate No.11 up to 23, amounting to $24.5m (Shs87b) for work done from December 2017 to February 2019, were not paid.
Lack of finances affected the contractor and work slowed down almost to a standstill. By the time the Chinese accepted to resume funding, the project had lost 361 days and the country was under lockdown.
“These conditions were not palatable for an international airport of a sovereign State whose operations are dynamic and sometimes unpredictable,” UCAA noted in its latest response to queries by Parliament.
The Chinese agreed to resume bankrolling the project, but refused to amend the problematic clauses that they signed with the government of Uganda.
They instead proposed a clarification of the contentious clauses, which UCAA now considers insufficient.
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