China is said to have imposed illegal conditions on Uganda when it lent funds for the expansion of Entebbe airport.
It is a file that is much talked about. Last November, the Ugandan press assured that China seized Entebbe airport, after Uganda defaulted on its debt to the Export and Import Bank of China (Exim Bank). A rumor that President Museveni had denied, claiming not to have “mortgaged the airport to anyone”.
While Ugandan Finance Minister Matia Kasaija apologized to Parliament at the time for "the mismanagement of the Entebbe airport expansion loan", the matter has returned to the center of the news. An American research center, AidData, has in fact studied the contract that binds the Chinese to Uganda, on this airport file. And the conclusions are terrible.
According to the center, China would have actually imposed leonine clauses in the contract for the expansion of Entebbe airport. According to France 24, Uganda was obliged, because of this contract, to “place all of the revenue from the infrastructure in an escrow account”.
What really happened? In 2015, the Exim Bank loaned $200 million for an expansion of the international airport. Objective: to modernize the facilities. But the contract would have been written in such a way that Uganda must now deposit all its revenues related to airport activities in a joint account between itself and the Chinese bank. And the state must fully repay the loan before spending any money on its airport.
Bad news for public finances
A legal aberration, according to AidData, which believes that "these are the most leonine clauses we have ever seen". By imposing such constraints, China has quite simply affected the budgetary sovereignty of the Ugandan state.
If the Chinese investment bank could impose clauses to receive part of the profits related to the expansion of the airport - which is why it agreed to make a loan - the contract actually includes the profits of all airport activities. .
Consequence: while the airport was once a beneficiary – 60 million euros in annual revenue, according to France 24 – it no longer allows Uganda to make a profit as long as the Chinese debt is not repaid.
With such practices, China is crippling an entire country. Because the revenues related to airport activities were dedicated to the financing of public services, assures AidData. Revelations which therefore show that Entebbe airport did not directly fall into the hands of China. But which prove that China has trapped the Ugandan state, which will certainly now look into the legality of the Chinese contract.