Beijing was a key player in the African country’s reconstruction after decades of civil war
But the oil-backed loans that drove that recovery are ebbing as both nations look for other partners
Jevans Nyabiage
+ myNEWS
Published: 6:00pm, 12 Feb, 2023
Angola’s dependence on oil leaves the country vulnerable whenever prices fall.
Photo: AFP
When Angolan President João Lourenço met Chinese Foreign Minister Qin Gang in Luanda last month, he was all praise for a series of landmark projects – from airports to hydropower stations – funded and built by China.
China had played “an indispensable role in Angola’s post-war reconstruction and economic and social development”, Lourenço said as the two countries marked four decades of diplomatic ties.
“Chinese enterprises have made positive contributions to the improvement of infrastructure and people’s livelihood in Angola.”
But even as the tributes flowed, the Chinese financing boom was already over.
Last year, Angola, which had once been Africa’s top destination for Chinese capital, did not receive any funding from Beijing’s massive infrastructure programme, the Belt and Road Initiative.
The shift is a result of a combination of factors, including commodity prices and changes within China and Angola, observers say.
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In 2002, as Angola emerged from a 27-year civil war, China was on hand to advance cheap money that the West was reluctant to give in exchange for oil – an approach that became known as the “Angola model”.
Between 2000 and 2020, Chinese lenders had advanced 254 loans worth US$42.6 billion to Angola – more than a quarter of China’s total lending to African countries, according to data compiled by the Boston University Global Development Policy Centre. The result was an infrastructure boom, especially in housing, roads and power plants.
Oil is central to the whole equation, making up 90 per cent of Luanda’s exports. In all, 70 per cent of Angola’s oil is exported to China and those sales are tied directly to debt repayments.
But in recent years, China has been buying more oil from the Middle East and less from Africa. For many years, Angola was neck and neck with Saudi Arabia as the main source of Chinese oil exports, but it has now been overtaken by Russia and Iraq.
When Angolan President João Lourenço met Chinese Foreign Minister Qin Gang in Luanda last month, he was all praise for a series of landmark projects – from airports to hydropower stations – funded and built by China.
China had played “an indispensable role in Angola’s post-war reconstruction and economic and social development”, Lourenço said as the two countries marked four decades of diplomatic ties.
“Chinese enterprises have made positive contributions to the improvement of infrastructure and people’s livelihood in Angola.”
But even as the tributes flowed, the Chinese financing boom was already over.
Last year, Angola, which had once been Africa’s top destination for Chinese capital, did not receive any funding from Beijing’s massive infrastructure programme, the Belt and Road Initiative.
The shift is a result of a combination of factors, including commodity prices and changes within China and Angola, observers say.
Angola looks at refinancing as it faces higher repayments on Chinese loans
11 Mar 2022
In 2002, as Angola emerged from a 27-year civil war, China was on hand to advance cheap money that the West was reluctant to give in exchange for oil – an approach that became known as the “Angola model”.
Between 2000 and 2020, Chinese lenders had advanced 254 loans worth US$42.6 billion to Angola – more than a quarter of China’s total lending to African countries, according to data compiled by the Boston University Global Development Policy Centre. The result was an infrastructure boom, especially in housing, roads and power plants.
Oil is central to the whole equation, making up 90 per cent of Luanda’s exports. In all, 70 per cent of Angola’s oil is exported to China and those sales are tied directly to debt repayments.
But in recent years, China has been buying more oil from the Middle East and less from Africa. For many years, Angola was neck and neck with Saudi Arabia as the main source of Chinese oil exports, but it has now been overtaken by Russia and Iraq.
Angola’s dependence on oil leaves the country vulnerable whenever prices fall – as they did in 2014, when prices plummeted to below US$50 per barrel from a high of US$115, pushing the economy into recession and a debt crisis from which it is still to emerge.
At the same time, Chinese policy lenders such as the Export-Import Bank of China have become more cautious in general as a growing number of African countries – from Zambia to Kenya – fell into debt troubles.
Dominik Kopinski, an associate professor at the University of Wroclaw in Poland who studies China’s dealings with Africa, said the low oil prices resulted in serious economic imbalances in Angola, weakening the currency, the kwanza, and plunging the country into economic recession.
“Then came Covid-19, China’s growing isolationism, and loans drying up,” he said.
Christoph Nedopil Wang, director of the Green Finance & Development Centre at the Shanghai-based Fudan University’s Fanhai International School of Finance, said Angola used to be one of the main partners in Africa for belt and road engagement, particularly in fossil fuel-related projects.
“[But] with more diversified sources of fossil fuels for China, such as the Middle Eastern countries or Russia, Chinese developers seem to spread these engagements also to other countries,” Wang said.
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Since becoming president in 2017, Lourenço has been trying to diversify the economy away from oil and to reduce Angola’s dependence on China. He has tried wooing investors from the West, especially the United States, which has pledged US$2 billion to build solar energy projects in the country.
Tim Zajontz, Research Fellow, Centre for International and Comparative Politics, Stellenbosch University in South Africa, said Chinese economic presence had waned markedly under Angola’s current government which had actively tried to diversify Angola’s international partnerships.
However, Zajontz said a rebound in Chinese investments in Angola was expected in coming years in strategic sectors, such as energy, transport and information technology. He said that a few weeks ago the Angolan government signed a US$249 million loan for its national broadband internet project with its Chinese counterpart.
Export-Import Bank of China will provide the funding to support the Angolan national broadband network project under a concessional loan framework agreement. It will fund the building of a 2,000km (1,240-mile) terrestrial optical cable in Angola as well as a submarine line connecting the enclave of Cabinda, and an upgrade to the country’s telecommunications network.
The funding is seen as a response to the US, which is backing Africell, an American company, to compete with Huawei for the control of 5G technology in the country.
Kopinski said Gang’s visit in January was meant to reassure Angola that it continued to be a strategic partner of China on the continent. He said the timing was particularly important, as the famous marriage of convenience had “experienced a marital burnout of sorts in the past years”.
“Chinese loans have dried up, Chinese state-owned enterprises switched to a standby mode and many of them left, and the Chinese community has shrunk from 350,000 in the peak time to a mere 20,000-30,000,” Kopinski said.
He said within this “business as unusual”, the visit indicated an emergence of the new normal in the Sino-Angolan ties with a less intrusive role for Chinese state actors backed by credit lines, and a more dominant role for private investors answering to the logic of capitalism rather than state-to-state policy.
Kopinski said Lourenço had signalled that the “Angola model” and heavy dependence on China were not in the country’s best interest – “and rightly so”.
But despite decoupling from China being sometimes depicted as Angola’s new master plan and a calculated shift in foreign affairs, there were various factors at play.
“We need to remember that in October 2018, Lourenço returned from his trip to China disillusioned as his Chinese friends did want to play along and bluntly said no to more loans that he had requested,” he said.
“There is, therefore, a combination of things behind this new development – Angolan internal politics, China’s policy recalibration, and a host of external factors, rather than an elaborately executed plan by Angola – or China for that matter.”
BMP-2 IFV of the armed forces of Angola / Illustrative photo from open sources
