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China in Angola: win-win partnership or marriage of convenience?

Article - November 26, 2014

Chinese companies, bankrolled by a generous program of government financing, have made great inroads in Angola, which China values as a source of oil and a market for its export goods. More than 500 companies and 100,000 workers bear witness to China’s growing influence in Angola. However, their business and labor practices have often made for an uneasy friendship.

CHINESE PREMIER LI KEQIANG MET WITH ANGOLAN PRESIDENT JOSÉ EDUARDO DOS SANTOS DURING A VISIT BY THE FORMER TO ANGOLA IN MAY, 2014.

Following independence and its emergence from the grip of a 27-year civil war in 2002, Angola was as much in need of foreign assistance to rebuild as any other young African nation. In the late 1970s, when the colonial powers were performing a gradual withdrawal from the old continent amid a clamor for independence that was reaching fever pitch, few African countries were looking to the East for partnership opportunities. But at the same time China was experiencing steady GDP growth on the back of vast public spending commitments, while simultaneously entering the international markets in a variety of sectors. The opportunity was apparent: oil-rich Angola faced the task of rebuilding a national infrastructure devastated by conflict; industry-heavy China needed to be powered.

This led to the widening of economic and political ties throughout the following decade. In 1984, Angolan Foreign Trade Minister Ismael Gaspar Martins travelled to Beijing to sign the first Bilateral Trade Agreement between the two countries. A Joint Economic and Trade Commission followed in 1988. Cooperation between the two countries expanded to the extent that in 2010 bilateral trade stood at more than $120 billion, making Angola China’s largest trade partner in Africa.  

At the same time, Angola became China’s largest source of oil, which the People’s Republic reciprocated with massive loans for infrastructure and development. The agreements signed between the nations stipulated that 70 percent of development projects in Angola be awarded to Chinese companies. The China International Fund (CIF), a private company based in Hong Kong, is at the forefront of Angola’s development drive. However, former Minister for Economic Coordination Manuel Vicente told the Financial Times in 2012, that the CIF was completely detached from the estimated $10billion oil-for-loans deal between the two countries from 2004 to 2010. Vicente, now Angola’s Vice President, was CEO of Sonangol, Angola’s state oil company, until his appointment to the Cabinet on September 26, 2012.

The bulk of Chinese lending to Angola has been carried out by the Export-Import Bank, a state-owned entity. The loans are repayable over 17 years, a much better deal for Angola than similar credit lines offered by European lenders, which demand repayment within four to five years. Although the credit lines were first extended to help Chinese companies investing in Angola, these soon were able to branch out on their own and signed a combined total of $22 billion in contracts in 2009 alone.

 “Angola is a credible partner,” Chinese Premier Li Keqiang, told reporters during a two-day visit to Angola in May, 2014. “Angola has the biggest Chinese community and number of companies from China in Africa.”

Through Sonangol, CIF’s involvement in Angola has led to billions of dollars of investment in roads, infrastructure, and construction, including of hospitals and schools. The vast majority of these projects are carried out by Chinese companies, which prefer to import their own workers rather than hire locally. This has led in turn to conflict, with Chinese companies occasionally the target of hostility from Angolans. But it is also a signal of China’s commitment to Portuguese-speaking countries. In response to tensions created by drafting in Chinese workers for jobs Angolans are perfectly capable of doing themselves, Sonangol has now imposed limits on the number of foreign workers that can be on its payroll; it seems likely that others will follow suit.

In late 2013, Chinese Deputy Premier Wang Yang announced, at the Fourth Forum for Economic and Trade Cooperation between China and Portuguese-speaking countries, that a new raft of credit lines would be opened and economic and development zones set up wherever they were desired. The Forum was inaugurated in 2003 and is based in Macau, Portugal’s former trading outpost in the China Sea. Trade between China and the Forum’s member nations -- Angola, Brazil, Cape Verde, Guinea-Bissau, East Timor and Mozambique, reached $128.8 billion in 2012, and $98.5 billion in the first three quarters of 2013.  

In Angola, the presence of Chinese companies has been steadily expanding, resulting in the creation of a services center by the Chinese Chamber of Commerce in Angola (CCCA) this year. It is estimated that there are around 500 Chinese businesses in Angola, employing some 100,000 expatriate Chinese nationals. The center’s mission is to ease visa problems faced by workers and facilitate permits for Chinese enterprises.

Among the members of the CCCA are ZTE Corporation, Huawei, Sinosteel Corporation, China Petroleum & Chemical Corporation (Sinopec), China National Overseas Engineering Corporation (COVEC) and the China State Shipbuilding Corporation (CSSC).

Of these, telecoms equipment manufacturer Huawei stands out for its expansion program in Angola, which encompasses a vast roll-out of digital connectivity across the country to grant 18,000 young Angolans access to the internet, as well as providing online resources for schools. It is estimated Angola currently has around 19 percent internet penetration, a much higher figure than the continent-wide average.

Also present on the ground is the China International Trust and Development Corporation (CITIC), which has been responsible for some of the keystone development projects undertaken in Angola, such as the Kilamba Kiaxi social housing area 18 kilometers outside of the capital, Luanda. CITIC is also behind the Angola National Tourist Area Project, which aims to capitalize on the prospects inherent in the country’s rich but not fully exploited tourism offer.

A significant part of the task facing the Angolan tourism industry is the fact that large swaths of the country outside Luanda remain all but inaccessible to foreign visitors. That is where CITIC has focused its efforts. Earlier this year, Chinese Ambassador to Angola Gao Kexiang paid a visit to southern Angola to see for himself the effort being made to complete the Moçamedes Railway project, which aims to extend the line in southern Angola from Menongue to Cuito Cuanavale to connect with the Eastern Transversal line that links the Democratic Republic of the Congo with Namibia, and could help to boost tourism in Angola.

Contained within Angola’s borders are soaring peaks, dense tropical rainforests, white sand beaches and vast, open plains. The allure of Angola’s natural resources is seen as a key driver of the country’s economic resurgence. In 2002, when the civil war finally ended, tourism receipts in Angola were zero. But after just a few years the country witnessed an influx of visitors, drawn to the exceptional beauty of the country. Currently, the tourism industry employs some 50,000 Angolans, but there is a chronic lack of hotel beds. Little wonder, then, that the tourism industry has turned to Chinese expertise to bridge that gap.

Construction of the first four-star hotel in Ondjiva, the capital of Cunene province, was undertaken by Chinese company Guangdong Group Ltd., in cooperation with Angolan firm OOS Construçoes. The Pricila hotel was constructed at a cost of $14 million dollars and has 64 rooms and several suites. But that’s just the tip of the iceberg. Angola has a rare and exquisite tourism offer, which encompasses the best of the African continent in a single country. It’s clear that there’s a goldmine to be tapped.

In Luanda alone, the current shortfall in hotel beds is estimated to stand at 3,000. “This situation is expected to improve in coming years with the opening of a number of new hotels,” ANIP stated earlier this year.

Chinese companies do not just provide the infrastructure for increased tourism. They, along with other foreign nations sending expatriates over, particularly Portugal, provide a ready-made middle class able to take advantage of the new routes and hotel offers. Much of the population of Angola, as in so many other emerging African nations, lives on roughly two dollars a day, so the middle-class is augmented by itinerant workers on higher wages. While that might not sit well with Angolan unemployed, the fact remains that other than remittances, much of the money earned by Chinese and Portuguese workers goes straight back into the Angolan economy. It is not ideal – a vast influx of foreign workers into an alien country is rarely a recipe for cordial relations – but in the case of the Chinese, integration is steadily becoming the rule, rather than the exception. In some countries – Dubai, notably, and also Zambia - foreign nationals live in compounds and do not interact with the people of their host country. But in Angola, Chinese guest workers have already branched out into fields other than big construction projects.

On the streets of Luanda, it is not uncommon to hear Chinese street vendors hawking their wares, or to see signs offering traditional oriental massages. Chinese real estate entrepreneurs, retail salespeople and shop owners also abound.

But in turn, concerns over the influence – and indeed Angola’s self-perpetuated reliance on Chinese loans – has also had the middle and upper classes peering over their broadsheets with mild concern. In the past two years, several contracts that were initially to go to Chinese companies have been given to Indian, Brazilian, American and European companies. While China remains, and is likely to remain, the country’s main economic partner, the government of President José Eduardo do Santos has strengthened diplomatic and security ties with the United States, Europe, Brazil and other Asian powers, such as India, according to a TradeMark Southern Africa report. The same study notes that US firms such as Chevron employ Angolans to staff their plants, in contrast to the Chinese policy.

Is China’s influence in Angola sustainable?  Given China’s dependence on oil from Angola and the importance the African country has for Chinese exports, the union looks set to be a lasting one. But with other countries taking a far from altruistic interest in Angola’s natural resources, China will have to pull out all the stops to maintain its pre-eminence.

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