By John V Sserwaniko
We reported two weeks ago that Uganda was on the verge of losing Canadian funding for Uganda Airlines purchase of 4 aircrafts meant for regional flights (See Canada Cuts Uganda Airlines Funding over Bobi as His Lawyer Begins Biting Uganda). And as of that time, the representatives of the Export Development Canada (EDC the export promotion agency) had just signaled the finance ministry officials that they were reviewing the appropriateness of their decision to extend the $108m loan the national carrier required for the purchase of the four aircrafts categorized as CRJ-900s. Back then, at the height of the Bobi Wine political hysteria, the GoU had been asked to wait for the final decision within two weeks. Finally the bad news came on Friday with EDC’s External Communications Advisor Shelley Maclean confirming that the Canadians have cancelled their funding offer. “We had been approached [by GoU] for financial support but we are not participating in the transaction,” she says an emailed response. A report in the regional weekly newspaper the East African shows that the crestfallen Ugandan officials have resorted to consoling themselves by saying that at 3.5% interest, the ECD/Canada Exim Bank’s funding offer was after all not the cheapest. The confirmation of the Canadian cancellation has turned out to be a blessing in disguise for the local commission agents who thrive on brokering deals for such loans. Already 12 potential financiers have made their offers to the officials at the finance ministry with each of them offering to lend the GoU the required $108m at less than 3.5% interest. The 12 offerors include two local banks operating in Kampala but with foreign ownership based in South Africa. The other representatives making juicy offers are fund managers from Australia, Europe and Middle East. Quite unusually, the Chinese aren’t anywhere in the picture trying to cash in on the $108m loan deal. Whereas officially the Canadian diplomatic sources say the cancellation resulted from realization that the funding partnership was financially unviable because it doesn’t make economic sense to finance an airline that is yet to launch operations in a market that is so much congested, there is speculation the decision could have been prompted by concerns on governance and Kampala’s bad human rights record that worsened recently with MPs claiming torture by state security agencies.
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According to Works & Transport Minister Monica Azuba Ntege, the purchase of the four CRJ-900 aircrafts is a very important transaction because they are meant to facilitate regional flights to the 15 destinations the national carrier (Uganda Airlines) will be beginning with in July 2019 when it finally returns to the skies after almost 20 years of absence. Azuba says the regional flights will initially account for 60% revenue for the airline in the first years of restoration. The Canadian manufacturer, to whom the GoU already paid $400,000 as commitment fees, is promising to deliver the 1st CRJ-900 aircraft by January 2019 and another three by April 2019. Uganda Airlines CEO Ephraim Bagyenda is optimistic that with the 4 aircrafts, the national carrier will compete favorably because the CRJ-900s are the most popular passenger aircrafts in the region. The Ugandan commercial aviation business boasts of 1.6m passengers that annually travel through Entebbe international airport. The GoU anticipates that, of this Uganda Airlines can in the first 12 months of restoration capture at least 400,000 passengers and gradually grow this market share. Besides the region, there will be international flights initially to destinations like London, Mumbai in India and the Chinese mainland. There is also another 15,000 passengers travelling in the domestic market flights a year. To avoid killing the local aviation industry, Uganda Airlines will sign MoUs to keep handling these in partnership with domestic airlines operated by the likes of Capt Mike Mukula. For comments, call, text or whatsapp us on 0703164755.
