Sino-Angolan relations: Old oil and new politics

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The China–Angola relationship was forged for purely pragmatic reasons at an opportune moment of mutual need in the early 2000s. For that reason, it has been famously labelled a ‘marriage of convenience’. Yet, many things have changed since China first ventured into Angola. Two factors have been particularly impactful: a decline in oil prices starting in 2014 and the decision of President José Eduardo Dos Santos to relinquish power in 2017 after 38 years at the helm.

The first significantly dented the government coffers, provided a huge blow to kwanza, the local currency, and sent the Angolan economy into a downward spiral. According to the World Bank the economy shrunk by 10% since 2016. The second brought hope among ordinary citizens and abroad, that the Angolan regime, notorious for its corruption and malgovernance, is willing to reimagine itself, including fixing increasingly unbalanced relations with China.

Those developments combined provided a fresh impetus to the Angolan political economy. Not only they have affected the government’s strategic calculations but arguably shifted relations with China into yet uncharted territory.

The old oil problem and the new president

Angola’s dependence on oil is legendary. According to IMF Angola is the second least diversified economy in the world, after Iraq, with over 90% of its export earnings and 60% of its budget revenues coming from the extraction of the crude. These are clearly alarming figures, yet for many years high prices of the commodity effectively insulated the government against many perils and odds. Angola even earned a reputation of a “successful failed state”, not because it was particularly successful, but because the regime was able to penetrate society and extract and appropriate resources.

The ruling party Movimento Popular de Libertação de Angola (MPLA) has been in power since the country’s independence, which led to the growth of an entrenched and powerful political elite, centralized around President Jose Dos Santos and its office, the so-called “Futungo” clique (after Futungo de Belas, the old presidential palace, nowadays, the Cidade Alta clique).  The  figure  of  Dos  Santos,  Angola’s  all-powerful  oil  czar, sidestepping  the  state bureaucracy, and replacing them with cronies to sensitive positions, is key to understanding the power dynamic in the country and the paradox of being weak and strong at the same time.

The oil markets, however, threw a wrench in this machinery and undercut the regime confidence – a scenario that was long in the making. Moreover, this overlapped with Angola’s maturing oil fields passing their production peak. In the golden years Angola produced more than 2 million barrels daily, now it produces slightly more than half of it.

Against this background, João Lourenço’s ascent to power in 2017 took many by surprise. The new president swiftly and decisively moved to tackle the Futungistas. A number of major public institutions were restructured and some of the most controversial figures of the Dos Santos period were tackled, most notably the leader’s children: Isabel Dos Santos, the eldest daughter coincidentally the richest African woman in the world and the head of the state-owned oil parastatal, Sonangol, and the son, José Filomeno Dos Santos, who headed the Fundo Soberano de Angola (FSDEA), Angola’s sovereign wealth fund.

Other political figures, such as the powerful former Vice-President, Manuel Vicente, once considered to be a possible successor of Dos Santos, were side-lined. As pledged at multiple rallies Lourenço indeed “put salt in the soft drink” (bribes in Angola are often referred to as “gasosa” or soft drink). The debate whether the anti-corruption drive has been a mere window dressing, political vendetta against old party comrades, or a genuine policy shift, or all of the above, is still in the open, yet the wind of change has been clearly felt on the streets of Luanda.     

With the economy in turmoil and reformist zeal, the new Lourenço’s government has also moved to diversify its international ties, mounting a charm offensive abroad, arguably at the expense of closer ties with China. João Baptista Borges, Angola’s minister of energy and water, has admitted that Angola is now planning to ‘receive loans from other countries in order to cut back on credit from China’.

The president himself on several occasion suggested that the ‘Angola model’ of Chinese loans guaranteed by oil would be discontinued, as they pose an existential threat to the stability of the Angolan economy. One report notes that 10,000 barrels of oil are due for payment every single day and given the drastic decline in oil production levels at the Angolan offshore rigs, after servicing its debt in oil, Luanda is left with little oil to sell on the global market.

Our research shows that the power shift also instilled fear and uncertainty among those 50,000 Chinese that decided to stay, as reportedly close to 300,000 left Angola in the midst of the currency crisis. This is not surprising as Beijing placed all its ‘bets on Dos Santos’. Because the Futungistas were inherently corrupt, yet Chinese companies signed contracts with such office-holders (as did all other investors in Angola at the time), this is likely to affect some Chinese operations.

If Angola is moving beyond its past governance model of mixing ‘Afro-Stalinism’ with ‘Petro-Diamond Capitalism’ to something arguably more ‘normal’, those who profited from the previous dispensation may have indeed cause for concern.

Change in China

Things have also changed from the Beijing perspective. Over the years China has become much more cautious about its lending practices in Africa vis-à-vis supporting business ventures and infrastructure deals. Angola is a vivid manifestation of this trend.

The 2004 loan in Angola was one of the first major examples of this practice in Africa, thus giving the label the ‘Angola model’ to similar agreements elsewhere across the continent as Sino–African relations burgeoned in the 2000s. Yet such lending practices have now become routinely criticized and Beijing has responded by introducing a new degree of caution to its activities.

The days of wildly generous lending to African countries, with little concern for their sustainability and political side-effects, is over. Furthermore, China’s voracious appetite for crude (and other commodities) has its limits, which in the medium- to long-term will be determined by the ongoing rebalancing of the Chinese economy away from being resource intensive, export driven and reliant on smokestack manufacturing industries, towards a more consumption-based and sustainable approach.

With the increasing role of services in China and a shifting of the fuel sources it demands, there will be less – not more – oil pouring into the country, something that Angola must come to grips with.

Angolan agency: at the margins or marginalised?

The current developments may offer some insights for the question of Angola’s agency. For many years Luanda has continuously sought to balance the leverage that China might have over the Angolan economy. Although the Futungo implemented an ‘Easternisation’ of its foreign policy in the early 2000s, after turning down the IMF assistance and the perception cultivated in Luanda that it had been abandoned by the West, it has never stopped trying to diversify partners and navigating new options in international relations.

The fact that pressed against the wall, with ailing economy and kwanza nose-diving, Angola turned to IMF for help shows exactly this. Over time, on many instances the Angolan elites demonstrated that they are not mere passive ‘terms-takers’, and cannot be bullied into a framework that could pose an existential threat to regime longevity, for example when restricting or outright denying Chinese firms access to oil fields, and now embracing IMF, ending oil-collateralization and reversing on some of the bad deals. Instead, they have skilfully managed relations with China and other foreign partners on their own terms.

The real question is, however, whether recent developments have not exposed the problems of agency at the margins. Certainly, the regime has proved its skills at controlling the negotiating process, but at the same time it lacked the capacity to effect any real structural change.

The Angolan elites are now facing the glaring consequences of this failure as the country continues to slide towards economic malaise, ultimately challenging the benefits of the ‘marriage of convenience’. This development within Angola’s politics once again highlights the dangers, long warned about, of Beijing and its various public and private actors fostering close relationships with highly personalised and intrinsically dishonest regimes in Africa.

In Luanda, there is a broad realisation that the relationship with China had got to a point where the price to be paid was too steep and continuing with business as usual might pose a real threat to the regime’s longevity.

 

This blog post recaps some of the findings published in the article A Marriage of Convenience on the Rocks? Revisiting the Sino–Angolan Relationship co-authored by Paulo de Carvalho and Ian Taylor in Africa Spectrum.   

Dominik Kopiński (@dkopinski) works as Associate Professor in the Institute of Economics at the University of Wroclaw. A cofounder of the Polish Centre for African Studies, he has published on African development and China–Africa relations. His work has appeared in African Affairs, Journal of Contemporary African Studies, Africa Spectrum, Global Governance and Third World Quarterly. He is currently leading an international project on Chinese FDI in Zambia and Angola.

This research was funded by the National Science Centre, Poland, under grant number UMO-2017/26/M/HS4/00150.

 

 

 

 

 

 

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