Uganda faces the prospect of losing its Entebbe International airport as it has failed to pay back the $200 million loan that it has taken from China’s Exim Bank for expanding the airport.

Beijing has refused to relax the “toxic clause” in the financing agreement that allows China to take over the airport in case there is a default on the loan.

According to a report in Uganda’s news portal The Monitor, some of the unfavourable provisions in the loan agreement that Uganda signed with the Export-Import (Exim) Bank of China on March 31, 2015, if not amended, expose Uganda's sovereign assets to attachments and take-over upon arbitration awards in Beijing.

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.

The report 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.

However, the four Exim Bank executives at the meeting 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.

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.

China’s denial

The Chinese government has dismissed as “illogical propaganda” reports that they are confiscating facilities from African states because of indebtedness.

According to China’s Director-General for African Affairs Wu Peng, 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.

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