A brief look into Sino-Angolan relations

SATURDAY: Sino-African affairs


..a brief look

Due to the rapid post-conflict reconstruction, mainly aided by the Chinese, Angola has become one of the most successful economies in sub-Saharan Africa within the six years following 2002, year that marked the end of Angola’s twenty-seven year old civil war. At the end of the civil war Angola was in an emergency situation where schools and hospitals were destroyed and roads, bridges and rail lines were non-existent and the only willing to help and available country was China. With the end of the civil war, the IMF and many Western countries tried to get Angola to agree to the introduction of a Staff-Monitored Programme (SMP) and show a good and stable performance for three consecutive months before being eligible to receive financial support. The Angolan government, governing a country where support was needed immediately, felt it could not agree to such conditionalities and turned down the IMF. The Chinese government instead was able to guarantee Angola with what it necessitated, providing a new model of cooperation, based on credit lines, economy and commerce, contrasting with the Western efforts of cooperation based on aid attached to conditionality. As Angola was in desperate need for infrastructure development and China needed the resources for its thirsty economy, both countries were able to give each other what they needed through a pragmatic and strategic partnership.

From an Angolan point of view China provided them with the help Western donors did not want to give. The Chinese offered better conditions, lower interest rates and longer repayment time than commercial loans, while the non-Chinese credit lines Angola secured in 2004 demanded higher guarantees of oil, with no grace period and with high interest rates. What is however necessary to point out is that the West often plays by double standards, by imposing conditionalities as well as having their oil companies playing a major role in countries like Angola, which have actually turned down Western institutions. For instance soon after the 2004 China’s Eximbank $2 billion oil-backed loan used entirely for the rehabilitation of the Angolan infrastructure, allowing repayment over 17 years, with a grace period larger than the European banks, Barclays and the Royal Bank of Scotland offered Angola an even larger oil-backed loan of US$ 2.35 billion, with repayment over 5 year, far shorter than the one China made. In 2005 Caylon, the French group Crédit Agricole offered Angola a US$ 2 billion loan and the US Eximbank financed Angola $800 million to buy six Boeing aircraft, but the only loan to make the headlines was the two Chinese “resource-for-infrastructure” loans of US$ 2 billion and US$ 500 million offered between 2005 and 2007. Apart from the Chinese engagement being fast and effective, the Chinese loans are peculiar as the repayment of the loan is made through infrastructure rehabilitation. Such approach has been called the “Angola mode” or the “resource for infrastructure” approach, prioritizing key public investment projects benefiting directly the local citizens. China ensures the fast and effective completion of the work by directly financing the company in charge of the project, without passing through the host government’s bureaucracy, eliminating the risk of misusing the money China gives.

By offering Angola the three main financing packages for public investment, China has without doubts contributed to poverty reduction in Angola. The rehabilitation of electrical and hydro electrical infrastructure has expanded electricity across many regions of Angola, the rehabilitation of water supply systems have allowed thousands of people to access clean water, the rehabilitation of roads, bridges and rail networks have provided access to parts of the country which have remained disconnected during the long civil war, railways have allowed people to commune more easily between the peripheries and the main cities. The building of hospitals, schools and polytechnic institutes have been providing the Angolan people with the health care and education they were previously denied. Following this increased interdependence, in 2006 Angola became China’s largest trading partner, with a bilateral trade increased from US$ 150 million in the 1990s to US$ 25.3 billion in 2008. Angola accounts for one-fifth of China’s total trade in Africa, being the second-largest source of crude oil for China and China is second only to the US as importer of Angolan oil.

Exchanges among the Chinese and Angolan people have deepened, starting a deeply interconnected relationship. While in 2007 there were just over 22,000 Chinese in Angola, by 2008 the number had already risen to 50,000. An increasingly number of Angolans have applied for visas to China too, reaching 10,400 in 2008. In the same year Angola’s TAAG Airlines and Air China agreed to connect the two countries by regular flights in order to meet the increasing demand of travelers. Criticisms against the employment of mainly Chinese workers have led Chinese firms to recently pay more attention to the ratio of Chinese and local workers employed. Even though recent complaints by Chinese managers have emphasized the cultural difference towards work the Chinese and Africans seem to have, employing locals is essential in safeguarding the economic growth of the African countries. The Chinese economy favored immensely from the Western investments in China during the 1980s partly because it was the Chinese who were employed, expanding the range of opportunities for the Chinese people. However, it is also the responsibility of the African governments to make sure that China is not exploiting their countries and their workers. The government of Angola for example, requires that employers have at least 70% of Angolan staff, boosting employment and creating more opportunity for the young who were born in the dark days of the civil war.

The primary concerns in regards to the benefits Angola can gain from its engagement with China are the challenges posed by a lack of institutional framework and government capacity to monitor and encourage direct investment in terms of local skills development and technology transfer. A strong and effective institutionalization should be one of the priorities the Angolan government should address, as such a framework would be able to protect the country against exploitation. It is in the hands of each of the African government which trades with China to prepare the environment for China’s engagement as well as setting boundaries that China must respect in order to safeguard the local population. The setting up of supervision agencies such as the Angolan Gabinete de Apoio Tecnico de Gestate de Linha de Credito da China (GAT) and the Gabinete de Reconstucao Nacional (GRN) is fundamental to oversee that the investment projects are completed abiding by the laws of the host country and that local labor is respected and trained effectively as to not have to depend on Chinese workers in the future. Moreover, to be able to fully maximize from the engagement with China, Angola would require to diversify its economy beyond oil as for now for instance, Angola is more dependent on the revenue of the oil exported to China rather than China dependent on the Angolan oil imported. Even though Angola is one of the main contributor to the Chinese import of oil, China does still relay mainly on the Middle East. An environment where there is an over dependence on one partner and over reliance on one single source of income can be more prone to exploitation, Angola ought to take actions to protect itself against the intrusive force of the global economy.

The piece has not been published and cannot be quoted. If interested in obtaining further information or quoting rights please contact the author at roberta.cucchiaro [at] gmail.com

Written by Roberta Cucchiaro


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