More details are emerging about how the Ministry of Finance, Planning and Economic Development reportedly mortgaged Entebbe International Airport (EIA) to secure a loan from the Exim Bank of China.
The loan was meant to improve civil aviation infrastructure, including the improvement of Entebbe, the country’s major airport.
In the ninth Parliament, the finance ministry, headed by Matia Kasaija, sought parliamentary approval of a $325m (equivalent to Shs1.1tn) from the China Exim Bank to undertake expansion and improvement works at EIA.
Parliament went ahead and approved the loan request in 2015 to allow the works to begin months later in the year that followed.
But the country’s air transport regulator, the Uganda Civil Aviation Authority (UCAA) would later get shocked to learn that some of the terms of the loan agreement not only put Entebbe International Airport at risk of being taken over by China, but also put the country’s sovereign on the line.
Just over 10 clauses in the loan agreement gave Beijing an advantage over Kampala.
Some terms of the agreement clearly took over the management of the airport from UCAA to Exim Bank of China.
For example, Exim Bank of China was given the sole authority to make approvals for withdrawal of funds from the Authority’s accounts.
Exim Bank also reserved the rights and powers to approve annual and monthly operational budgets — approving some and rejecting others whenever it wanted.
Also of concern was that Exim Bank of China had powers to inspect books of accounts for both UCAA and government.
The agreement also gave the China International Economic and Trade Arbitration Commission (CIETAC) the powers to handle disputes between EXim Bank and UCAA (and Government).
Reports have also emerged that former UCAA managing director David Kakuba advised government to push through an amendment of the terms of the contract or continue to risk the country’s sovereignty and the future of EIA.
President Yoweri Kaguta Tibuhaburwa Museveni is said to have instructed Dr Chrispus Kiyonga, then the Kampala envoy to Beijing to start talks with China on revision of the sticky terms.
But China is said to have insisted that it was too late to amend the agreement.
This has left government with no option but to ensure that there is no non-compliance which could put EIA and state sovereignty at risk over the poorly negotiated loan.
Attorney General Kiwanuka Kiryowa has been quoted by The East African newspapers as saying the airport has not been mortgaged.
“When you borrow money, your obligation is to pay. If you do not pay, the other party can take you to court, in which case this would be CIETAC,” AG Kiwanuka said. “Let everyone do their part. The airport makes money and will meet its obligations.”