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Lease of Entebbe Airport: Good or bad deal?

By Mubatsi Asinja Habati

In 2000, a proposal to privatise some services at Entebbe International Airport was hatched. This came after a study, Big Push Strategy, by the UN Conference on Trade and Development recommended that Entebbe be transformed into a modern cargo handling centre in Africa. The study was coordinated by the Uganda Investment Authority (UIA). According to Ignie Igundura, the Public Relations Manager for Civil Aviation Authority (CAA), the recommendation was informed by the airports strategic geographical location on the continent, Uganda’s fairly good road network as it feeds into the neighbouring countries and Uganda’s agriculture potential.

While the study was being carried out, CAA contracted a consultant to design a modern air cargo centre at the airport. The design delivered in 2000 would give the airport capacity to handle 100,000 metric tonnes of dry and wet cargo.

Following this design, the CAA started marketing the cargo centre project to the private sector and establishing the indicative costs and the required land acreage.

The mandate of the private partner in that project, according to Igundura, is to establish and develop warehousing facilities and courier associated services at the airport. In the venture, CAA was supposed to provide aeronautical facilities such as a paved way, parking apron for the aircrafts and taxi ways.This would happen either under the build-operate-and-transfer concept or a joint venture between CAA and the investor (public-private partnership), Mr Igundura said.

The CAA had a second proposal to develop an export processing zone that would be expanded and upgraded to an airport city. This, says Igundura, is the prevailing situation. “In this arrangement, you have a city with airport facilities for people to fly in and out. This means earning revenues from non-aeronautical activities. The airport city we are talking of should have recreational areas, internet cafes, hotels, swimming pools so that instead of people coming to park and wait at the airport  they can shop, eat, play games  as they wait for their relatives arriving or seeing them off.”

To realise these two objectives (cargo centre and export processing zone) CAA embarked on marketing them, publishing the information on the internet (CAA website) and sharing this information with UIA because of its capacity to mobilise investors in and outside the country.

“There is an investor (Dodsal Infrastructure Development), who has expressed interest. I cannot say that the investor who has come got to know that the opportunity was available through these approaches,” says Igundura. “We are yet to look at their proposal and see how they are to expand and modernise our infrastructure,” he added

Igundura says bringing in the third party to manage Uganda’s only airport is to bring in better competences, specialisation and skills.

“We want to expend more of our energies in regulating the industry and especially making sure it is safe. Those are the key elements of managing the aviation industry and facilities globally. There are areas where the private sector has better skills because of specialization. But also you need a lot of capital to develop some of these facilities,” he said.

The public has been saying Entebbe Airport does not meet international standards. Many observers say a private investor would cure this problem.

Is it a good idea?

Whereas Igundura agrees that it makes economic sense to privatise some services at Entebbe Airport, Capt. Mike Mukula, a pilot who is in flight business, says although privatisation is good since it is the modern management strategy, one must ensure that the timing and circumstances are right. “At this stage, for Uganda to privatise Entebbe airport is not good,” Capt. Mukula said, adding that “privatisation should not be a granted monopoly.

Some analysts have raised reservations about the way this private partnership is being handled. The investor, a United Arab Emirates firm Dodsal Infrastructure Development, but registered in the British Virgin Islands, has not gone through a competitive bidding process as required by law. They say it unilaterally struck a deal with government to do a feasibility study about what it would require to run the airport, without other alternative bids to compare with.

Mukula argues that the process should be competitive like has been the case in the telecommunications sector. “Privatisation should not be a monopoly. It should be competitive. We should see this in the other sectors like oil and as it was done in the Uganda Commercial Bank and others. The way they are doing it with Entebbe Airport seems to be granting monopoly because it dictates management of the airport in an uncompetitive way,” he said.

Mukula also believes privatising the airport is not politically prudent because “many people will not understand it.”

He says Entebbe Airport has been collecting about Shs62 billion per year which is separate from revenue collected at other airfields like Kasese, Arua and Soroti. However he dismissed speculation that when a private investor takes over the airport management this revenue won’t be going to the government.

How airports are run elsewhere

Igundura says airports across the world are managed differently depending on their needs. He says each airport carries out its own assessment on whether they need private partnerships. Otherwise, he says, there are no global set standards to follow in privatising an airport.  He says each airport decides which operations to cede to private firms. He says it also depends on what the individual country wants.

“What we observe here are the safety and security standards for the flight operations to continue. Those are the standards below which you cannot go in the area of civil aviation. Nonetheless, you can look at the concepts that have helped other airports to take off and then tailor them to your needs, challenges, conditions and environment,” Igundura says.

Asked whether there would not be a rise in airport fees like it has happened in the renewal of driving permits after the service was privatised, Igundura said that a liberalised economy does not mean one should wake up and increase flight fares and airport fees. He says there are competitors operating on the same routes who will charge differently and probably undercut the fees.

“If you make your service beyond what people can afford, they won’t consume the service. In quoting these charges I don’t think any investor would lose sight of those issues. We are in a liberalised economy but people must consume the service. There are other players. They may not be direct competitors but they give direction to what you serve,” he said.

The government has since come out to defend the privatization of the airport arguing that this would elevate it to the required international standards. Aston Kajara, state minister for investment, told journalists about two weeks ago that government has the right to do whatever it deems beneficial to the country. “If there is a better player who can bring in money and do a good job, why shouldn’t we study the proposal?” he asked. He added that, a free export zone for agricultural products would be one of the benefits, should the project be approved.

World over many airports are owned and managed by the government but are leased to private companies to supervise the airport’s operations. Since 1980s, private partners have been contracted to manage airports especially in developed countries. In the UK, a private company BAA manages Heathrow, Gatwick, Southampton, Glasgow, Edinburgh and Aberdeen airports.

In 1998, Tanzania Kirimanjaro International Airport became the first airport in Africa to be privatised. It is run by UK-based Kilimanjaro Airport Development Company. In South Africa, Australia, Malaysia, Italy and Singapore some airports are privately managed but overseen by the countries aviation authorities.

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