Uganda denies Chinese takeover of Entebbe airport over indebtedness, as China urges Nigeria, others to disregard ‘debt trap propaganda’

Amid growing reports that the Entebbe International Airport has finally been taken over by China following failure of the East African country to repay loan accessed to refurbish it, Uganda has dismissed as untrue any planned confiscation of its national asset.

This is just as China described as ‘illogical propaganda’ reports making the rounds that the Asian nation has commenced the process of confiscating assets of African states over indebtedness.

The loan taken by Uganda from China was supposedly used to facilitate the expansion of the Entebbe airport.

According to unconfirmed statistics, China owns three-quarters of Djibouti (75%), while countries like Ethiopia ($13.7bn) Kenya ($9.8b), Nigeria ($4bn), Zambia ($6.3bn), and DRC ($7.4bn) continue to struggle to repay the huge Chinese debts.

China remains Nigeria’s biggest lender, with the President Muhammadu Buhari administration’s infrastructural development agenda heavily anchored on Chinese financing.

In the particular case of Nigeria, Director- General of the Debt Management Office (DMO), Ms. Patience Oniha, has revealed that as of June 30th 2021, the country’s public debt profile stood at N35.465 trillion.

According to Oniha, in a virtual media chat, the country risked the debt sustainability issue if it failed to grow the current low revenue profile, which places the country in the poorest category among its peers.

“We should focus on revenue. The good thing about it is that the Minister of Finance, Budget and National Planning has started a programme aimed at growing the revenue profile. We must discipline ourselves to follow through to grow our revenue. If we continue to borrow and do nothing about growing our revenue base as other countries have done, we may have a debt sustainability challenge, ” she said.

Out of the total debt profile, Nigeria owed the Chinese government the total sum of $3.402 billion as of March 31 2021, according to the Debt Management Office.

Responding to China takeover reports, the Uganda Civil Aviation Authority dismissed as untrue reports that the Entebbe International Airport was about to be taken over by China over a loan the government took to facilitate its expansion.

Media reports this week had claimed that there are some unfavourable provisions in the loan agreement that Uganda signed with the Export-Import (Exim) Bank of China in 2015 and that if   not amended, it would expose the country’s sovereign assets to attachments and take-over of Entebbe Airport by the Chinese government.

The reports have since raised dust from members of the public, especially on social media who blasted government for signing the agreement that might see the country’s only international airport taken over by the Chinese government.

However, in a statement released last Saturday, the Uganda Civil Aviation Authority(UCAA) dismissed the reports as untrue.

“I wish to make it categorically clear that the allegation that Entebbe Airport has been given away for cash is false. The government of Uganda can’t give away such a national asset .We have said it before and repeat that it has not happened. There isn’t an ounce of truth in it,” UCAA spokesperson, Vianney Luggya said.

In the report, it was indicated that the loan agreement between the two countries, UCCA is required to set up an “escrow account to hold all of the authority’s revenues.”

It was further said that as part of the agreement, the government body mandated to regulate civil aviation in Uganda is not allowed to use money on the said account without approval from the Chinese government.

The UCAA, however, admitted that whereas they opened up a sales collection account in Stanbic Bank where all its revenues are deposited in line with the Escrow Account Agreement terms, no one else controls the account as reported.

“The Authority enjoys the freedom and liberty of spending what is collected (as per the budget). The lender’s monitoring of the account is only similar to what happens when one gets a salary loan or any other loan and the bank requests that the salary is channeled through their bank. It does not mean that lending bank takes over your salary.

“The loan terms provide a grace period of 7 years, and we are still within that grace period during which only interest is paid, and government has not defaulted on those obligations,” Luggya said.

The reports which have already gone viral, compelled China to officially issue its statement, last Friday, as it also denied confiscating assets of African countries over loan default.

According to China’s Director-General for African Affairs Wu Peng, the claims are untrue.

Wu Peng said the money offered to African states for projects is not a debt trap as has been reported by people seeking to put China in a bad light.

“Which of the Chinese projects in Africa have been confiscated in Africa? NONE! The hype surrounding the Chinese ‘debt trap’ in Africa have NO factual basis and is being pushed on malicious grounds”, Peng said.

Today, China is the biggest lender to African economies, sinking a staggering $150 billion in different African economies through its Belt and Road Initiative.

The situation could be worsened by the Coronavirus pandemic which has left many African economies on their knees, which statistics show China could invest another $180 billion in African economies in the next five years.

“Facts and data fully show that this accusation is purely politically driven,” he said. “Its real intention is to drive a wedge between China and Africa’s friendly and cooperative relations,” Zhou Liujun, vice chairman of China International Development Cooperation Agency said.

Speaking about the same situation, Wu Jianghao, the Assistant Minister of Foreign Affairs, China wondered why money given by Western countries is considered as assistance for development while that given by China is a debt trap.

“Why is money offered by Western countries to developing countries considered ‘assistance for development, while the money offered by China is labeled as ‘debt trap’? This view is NOT logic or correct!”, Jianghao said.

It would be recalled that two years ago, Ugandan Government dismissed reports that China (one of its biggest lenders) was planning to confiscate its assets over repayment hurdles.

According to the Auditor General’s report, Uganda’s Public Debt rose from $9.1billion in 2017 to $11.1billion in 2018. The same report indicated some loans were risky due to hard conditions placed on them.

China apparently owns $3.1billion from Uganda’s public debt, however, the Minister of Finance Matia Kasaijja has recently reiterated it is impossible for China to confiscate Uganda’s assets.

“China taking over assets? … in Uganda, I have told you, as long as some of us are still in charge, unless there is really a catastrophe, and which I don’t see at all, that will make this economy go behind. So, … I’m not worried about China taking assets. They can do it elsewhere, I don’t know. But here, I don’t think it will come,” Kasaijja said during an interview with Voice of America in 2019.

However, in April this year, Kasaijja indicated he will approach major creditors like China and negotiate a possible loan repayment suspension as the country’s public debt shot to $18billion as of last year.

“I will not hesitate to approach them and say, you guys can suspend servicing these loans for say, maybe two years?” Kasaijja told Reuters.

This notwithstanding, the Uganda government has still failed to negotiate a $2.2billion debt from China’s Exim Bank after failing to agree on a condition to repay the loan from revenue accrued from the sale of its crude oil.

In a reply to China on this, Kasaijja said “we totally refused that, we cannot mortgage our oil.”

Kasaijja however was at the forefront as Uganda negotiated a Shs1.1trillion with Chinese Exim Bank for the expansion and upgrading of Entebbe International Airport.

While the loan was approved, many officials in government were not comfortable with the clauses of the loan repayment agreement, mostly those that gave China Bank so much power to determine budgets, inspect Civil Aviation Accounts and approve withdrawals from Civil Aviation accounts.

Indeed, the state minister for Finance, Amos Lugoloobi confirmed that that loan was poorly negotiated but added there was no cause for alarm as the airport would not be attached.

Civil Aviation officials called for the amendment of the debt repayment provisions, citing that the airport risked potential attachment by China.

China has recently been accused of using bad debt policies in Africa, citing a lack of transparency in loan agreements and consequent pressure from China to debtors to forcibly support their geostrategic interests in case they fail to service their debts.

China has also been accused of entering secret negotiations in which contracts on projects must be awarded to China-government-owned companies who charge far higher than the available market price.

These reports, China has dismissed as politically motivated.