How Angola’s honeymoon with China came to an end

By Cláudio Silva
Posted on Tuesday, 10 May 2022 21:36

Chinese President Xi Jinping meets with Angolan president Joao Lourenco at the Great Hall of the People in Beijing, China 9 October 2018. Daisuke Suzuki/Pool via Reuters

In 2002, as Angola lay in ruins after a 27-year long civil war, its government desperately sought western help to rebuild the country. None was immediately forthcoming, however.

International financial institutions and the Paris Club of creditor countries were wary about working with a country with a well-known propensity for corruption and a glaring lack of transparency. Indeed, the International Monetary Fund had just discovered a $4.2bn hole in the country’s coffers that authorities could not readily explain.

As the calls for democratic reform, accountability, and the embrace of rule of law grew, Angola decided to look eastward. Thus began its highly pragmatic and initially lucrative — arrangement with China.

The Angola Model

Angola and China had not always seen eye to eye.

During the Angolan war for independence, the Chinese supported all three liberation movements but favoured the União Nacional para a Independência Total de Angola, the bitter rival of the Movimento Popular de Libertação de Angola (MPLA) that eventually came out on top in 1975.

The MPLA government established diplomatic relations with China in 1983. But it was not until 20 years later that both countries saw an opportunity to work together in earnest.

The end of Angola’s civil war coincided with an increase in the price of oil and a rise in production capacity. Meanwhile China had an urgent need for energy and raw materials to sustain its galloping economic growth.

Big deal

Their marriage of convenience officially began in 2004, when China’s trade ministry and Angola’s finance ministry signed a deal for China’s Exim Bank to provide a $2bn loan to aid with Angola’s reconstruction. Angola gambled and won, eschewing Western demands for good governance and transparency while simultaneously securing badly needed funding from an autocratic government that proudly said it had no business “meddling” in other countries’ internal affairs.

Not only could Angola placate its citizens by embarking on massive reconstruction projects, but it could do so on its own terms and at its own pace. This level of control and lack of accountability was crucial to the MPLA, a historical anti-colonial party intrinsically averse to being told what to do.

Over the next six years, China’s Exim Bank alone loaned the Angolan government a total of $10bn. By 2021, Chinese state-owned corporations had financed Angola to the tune of $60bn, according to diplomatic sources.

Good for oil

The vast majority of these loans were backed by oil, so much so that for a period at the turn of the last decade, Angola became China’s main oil supplier, surpassing Saudi Arabia.

This approach proved a boon for China. Not only did Chinese banks finance Angola’s infrastructure projects with cheap, oil-backed credit, but the Angolan government was also obliged to award 70% of their construction projects to Chinese companies chosen by Beijing.

The pattern of financing local infrastructure projects built by Chinese companies using Chinese labor, all in return for raw materials, became successful enough that the Asian giant implemented it in other African countries. It became known as the “Angola Model” and allowed China to become Africa’s largest trading partner.

Boom and bust

For a while, China’s influence in Angola was impossible to miss.

Chinese companies tackled the country’s largest infrastructure projects, building hundreds of miles of roads, revamping the national railway system and building four new stadiums for the 2010 African Cup of Nations. They’ve also erected the massive $3.5bn Kilamba New City outside of Luanda and have begun construction on the new Luanda International Airport, which is expected to support 15 million passengers a year as well as the world’s largest passenger airliner, the Airbus 380.

The Chinese have even dabbled in operating oil blocks, partnering with some of the world’s largest international oil companies through an opaque entity called China Sonangol, a joint venture between Chinese state-owned Sinopec and Angolan national oil company Sonangol.

However, faith in Chinese engineering proved to be short-lived.

The roads soon feel into disrepair and the Angolan government had to spend millions of dollars to rehabilitate them. The stadiums suffered a similar fate: Less than 10 years after they were built, three of the four could no longer host football matches, while the Luanda stadium was never actually completed.

The Kilamba project was also initially mired in controversy, with prospective buyers sleeping in the streets waiting for a chance to sign up for a house.

And billions of dollars have been spent on the airport with little to show for it. The fund hired to finance it was replaced by other Chinese state-owned enterprises after considerable delay. Over 15 years later, the airport remains unfinished.

Sinopec’s oil concessions haven’t fared much better. Outclassed by more experienced western competitors, Chinese investment in Angola’s oil blocks faded away after an initial profitable period.

Human flaws

At the root of China’s failures in Angola was one fatal flaw: Its engagement relied exclusively on President José Eduardo dos Santos and his well-connected clique. After Dos Santos finally relinquished power in 2017 after 38 years, China’s investment was exposed for the chimera that it was.

For all the billions of dollars that China poured into Angola, Beijing remained in hock to the immensely powerful triumvirate of President Dos Santos, Sonangol chairman turned Vice President Manuel Vicente, and General Manuel Hélder Vieira Dias “Kopelipa”, the head of the Cabinet of National Reconstruction. In a country mired in endemic corruption, China’s investments proved incredibly precarious as officials it had struck deals with lost power one after the other once Dos Santos left office.

The problems created by these Chinese loans was perhaps best encapsulated by the 88 Queensway Group, an opaque conglomerate that was deeply influential in China’s engagement with Angola and other African countries. The conglomerate, operating under several configurations including the notorious China International Fund (CIF), was headed by Sam Pa, a man of many aliases who became a catalyst for private investment in Angola, Guinea, Zimbabwe and other despotic states backed by state-owned Chinese companies.

Once the Queensway Group started reneging on deals with little to show for the billions of dollars they had pledged in investments, the Chinese state quickly sought to distance itself. But the damage was done. By then, unfinished and poorly executed projects had become China’s calling card.

New era

After President João Lourenço came to power in Angola in 2017 pledging to root out corruption, many of these projects were investigated by the state. This was most visible when the Angolan government seized both of CIF’s iconic golden-coloured skyscraper headquarters in downtown Luanda. By then, Chinese investment in Angola had become inextricably linked to the fallen triumvirate and its corruption scandals. The pyramid had collapsed.

After Dos Santos left office, public and political opinion started to turn against China. Angola is proud of its sovereignty and is loath to depend on just one international partner, an attitude best espoused by Lourenço’s newfound appreciation for foreign direct investment from the country’s multitude of international partners. Chinese influence has waned considerably since he took office.

Nonetheless, Lourenço continues to court China as part of his diversification goals. In 2018, he visited China in order to secure a $2bn loan to help with new infrastructure projects.

A new chapter

But it’s clear that the relationship is not what it once was.

The Chinese population in Angola has dwindled from 300,000 in its heyday to just 50,000 today. The Chinese also became fed up with Angola’s rampant corruption and were quick to disappear once it became clear how much Sam Pa had sabotaged their strategy in Angola. His whereabouts are currently unknown.

Further complicating matters, Angola still owes China more than $23bn, mostly from oil-backed loans. With declining production, that 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. That’s simply unacceptable to President Lourenço, whose government has vocally complained.

As Lourenço continues to court international partners, including the World Bank, the European Union and the IMF, China’s investments in Angola are now limited to state-owned enterprises that win the occasional infrastructure tender.

The honeymoon period is over and both countries are acutely aware of this. The Chinese lost a key political ally in Dos Santos and now have to make do with Lourenço, who is keen to turn the page on his predecessor’s corrupt practices.

Still, it’s too soon to write off the Chinese entirely, as their business model remains enticing to officials across the continent.

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