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TematicheAfrica SubsaharianaThe China-Angola Honeymoon is over, is Africa listening? 

The China-Angola Honeymoon is over, is Africa listening? 

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For a nation that was once considered to be the model for Chinese investments, Angola is today in retreat in terms of its relations with China. The so-called “Angola model” was premised on oil-backed loans to access Chinese funding for the building of roads, hydroelectric dams and railways as well as other infrastructures. This remained successful till oil prices fell in mid-2014, forcing Luanda to pump more oil to service its debts. When global oil prices plummeted to below US$50 a barrel from a high of US$115 per barrel, the Angolan economy collapsed and by 2016 it fell into recession and contracted for five consecutive years. With the Covid-19 pandemic further exacerbated the problem, the country has only narrowly managed to avoid a debt default. As we shall see, Angola’s honeymoon with China seems to be over. 

In the early 2000s, Angola received US$42.6 billion from Chinese lenders, more than a quarter of China’s total lending to African countries between 2000 and 2020, which made it the largest recipient of Chinese loans in all of Africa. When Angola’s civil war ended in 2002, China encouraged its state-owned and private companies to venture overseas and invest in Angola. In 2004, the EXIM Bank of China pledged US$ 2 billion in oil-backed loans to fund reconstruction. This resulted in an infrastructure boom, in areas like housing, roads, and power plants. The School of Advanced International Studies-China Africa Research Initiative (SAIS-CARI), estimates that Angola was the top recipient of Chinese infrastructure loans, with US$ 43 billion worth of loan commitments, between 2000 and 2018.

At that time, most leaders in Angola preferred to take loans from China rather than from the IMF and World Bank. However, Chinese loans were not devoid of conditionality, and were tied to the use of Chinese labour and contractors and the acceptance of the ‘One-China Policy’. Chinese credit lines also stipulated that 70 percent of the public tenders for the contracts under Angolan reconstruction would be awarded to Chinese companies. The flip side was that Angola’s economy grew by an average of 11 per cent a year between 2001 and 2010 under President Jose Eduardo dos Santos. At the same time, Angola’s oil production more than doubled from 44.6 million tonnes in 2003 to 92.2 million tonnes in 2008. China emerged as the largest importer of Angolan oil, replacing the US as the country’s largest export destination by 2007; its share in Angolan exports grew from 22.5 per cent in 2000 to 45.3 per cent in 2013.

João Manuel Gonçalves Lourenço (JLo), a former Defence Minister and freedom fighter and President since 2017, is witness to the exit of Chinese firms from his country. Experts attribute this to the end of employment contracts related to major construction projects. He says Chinese construction companies had maintained a notable presence in Angola during the past decade, with a particular focus on the construction of housing. President Joao Lourenco, on assuming office began to recalibrate his country’s relationship with China. JLo promised to reverse the nation’s dwindling fortunes, diversify the oil-dependent economy and reduce its reliance on China, describing economic diversification as “a matter of life or death”. In 2019, he admitted the concept behind the oil-backed loans the country had signed with China had not worked. The IMF and World Bank advised Angola that practices of taking loans for oil needed to be discontinued, because such credit lines had conditions that the debt would be switched out with oil as a collateral. Pertinently, Angola still owes China more than US$23billion, mostly from oil-backed loans. With declining production, this means that most of Angola’s output is going to China, preventing Africa’s second-largest oil producer from selling its major source of income on the open market.

A 2021 study co-authored by Dominik Kopinski, Associate Professor at the University of Wroclaw in Poland, revealed that “a great deal of uncertainty among the Chinese business community, who fear the cosy relations guaranteed by the dos Santos clique, may prove to be a thing of the past, given the volatility of oil prices and the allegedly corrupt nature of many of the deals in place”. Kopinski said that as loans ground to a halt, Chinese state-owned enterprises were cut off from financing and most had left or drastically curtailed their operations in Angola. The best illustration of a marked reduction of China’s presence in Angola can be seen from the number of Chinese living in Angola today. It is estimated to have dropped to less than 20,000 from a peak of more than 300,000 during a post-civil war construction boom, and according to most reporters barely any Chinese can be seen on the streets of Luanda these days, As an analyst put it, the honeymoon is over and the Sino-Angolan “marriage of convenience” has reached a turning point.

China’s relationship with Angola, both as the region’s top oil exporter and recipient of the highest amount of Chinese loans, is critical to understanding China’s strategy in Africa. The relationship, forged by China for purely serving strategic self-interest in the early 2000s, has been labelled a ‘marriage of convenience’. Today, the strategic environment in which China first made inroads into Angola has changed quite drastically; most notably in the approach of the post-2017 government to China and fall in the Angolan economy, due to the drop in global oil prices. The Angolan model is today viewed as an early example of Chinese debt-trap tactics that holds lessons for the rest of Africa. The international community needs to reaffirm a new commitment for Africa. 

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