Unpacking Angola’s Beijing connection

Vanguard’s documentary Chinatown, Africa , which premiered in late 2008 is a well-informed and multi-faceted commentary on China’s growing role in Africa. Given the heightened and often fever-pitch media commentary that reflects on China-Africa relations, it is refreshing to find a documentary that attempts to presents a multidimensional perspective to what has become parochial and controversial mainstream reporting. With Angola as its case study, the production team ambitiously sought to unpack the various elements of Luanda’s relations with Beijing.

Chinese companies’ engagement in construction and infrastructure projects across Angola are widely documented, together with the speed at which these public works contracts are raised and completed. Indeed, one of the difficulties often cited with such projects is keeping pace and tracking of the Chinese construction workers who enter Angola as migrant labourers on these projects. While this is certainly true in many cases, there are some projects that do not seem to fare so well. From the documentary I recognised several building sites that have stood deserted and half-finished since 2006. Another, more recent example of delays is the phenomenal glass and metal confection that will serve as the head offices of China International Fund in Luanda and which featured prominently in the documentary. According to the Chinese site manager interviewed, the project was due for completion five months hence. When I interviewed Chinese managers on the same site a year previously, I was confidently told that President Eduardo dos Santos himself would be opening the building in February 2008. This is possibly because China International Fund Limited, having extended loans totalling, according to official records, US$ 2.9 billion, experienced severe financial difficulties in late 2007. The Angolan Ministry of Finance , according to a press release circulated in October last year, was obliged to raise US$ 3.5 billion in domestic capital from the sale of treasury bonds.

This is the first time that the Angolan Ministry of Finance became involved in the China International Fund credit line. Accordingly, then, the documentary misrepresents slightly the convoluted nature of Chinese loans to Angola. In fact there are two parallel structures of separate Chinese funds being administered by different Angolan departments. While seemingly unnecessarily complicated, it is illustrative of the internal struggle among political elites to access the Chinese capital.

Loans from China International Fund Ltd have been placed under the auspices of a specially created National Office for Reconstruction, known by its Portuguese acronym GRN and headed by General Helder Vieira Dias “Kopelipa”. Kopelipa is also Minister in Chief of the Presidency and a close ally of President dos Santos. The GRN was created in late 2004 specially to manage the CIF Chinese credit line and the large construction projects it was to finance. It is an instrument of the executive, as are the various other gabinetes created by the executive. The CIF loans, despite the official figure mentioned above are estimated in some quarters to be in excess of US$ 9 billion. The result of such a structure is that the money from this loan is centrally controlled by the Angolan Government executive. The NGO, Global Witness, has raised concerns about the transparency of the procurement process of construction tenders managed by the Office for National Reconstruction. This is despite the fact that the GRN was created in response to Chinese intelligence that the original Exim Bank loans (see below) were being misappropriated by Angolan officials from the Ministry of Finance.

In 2004, during Chinese Vice-premier Zhang Peiyang’s visit to Angola, China’s Exim Bank extended an oil-backed US$2-billion credit line to the Angolan Government; the first tranche was payable in September 2004 and the second tranche in March 2005. . This loan was later increased by US$1 billion in March 2006 rendering China the biggest player in Angola’s post-war reconstruction process.

In May 2007, an additional US$500 million was negotiated to assist with ‘complementary actions’. This, according to a representative of the Angolan Ministry of Finance, encompasses further incidental expenditures that will facilitate the integration of the newly built infrastructural projects into the national economy. For example, the purchase of school buses to transport schoolchildren to the newly constructed schools is planned for the interior provinces.

The loan is intended to assist Angola in the rebuilding of vital infrastructure and is managed by the Angolan Ministry of Finance. In exchange for the loan, payable at Libor + 1.5 percent over 17 years, including a grace period of 5 years, China has secured 10,000 barrels of oil per day from Angola. The loan, which operates like a current account held in China under the name of the Angolan Government, is paid directly to the Chinese companies responsible for the construction work. The loan has placed China in a favourable position with the Angolan Government, especially as a much smaller amount of oil must be put up for collateral, as compared to traditional expensive oil-backed loans.
Tied to the China Exim Bank loan, is the agreement that the public tenders for the construction and civil engineering contracts tabled for Angola’s reconstruction will be awarded primarily (70 percent) to Chinese enterprises approved by the Chinese Government. Of the tenders, 30 percent have been allocated to the Angolan private sector, to encourage Angolan participation in the tender process. As noted in the documentary, there are complaints that consequently not enough Angolans are afforded the chance to participate in the constructions works, thus mitigating the effects such large-scale infrastructure projects will have on local unemployment levels. Furthermore, in principle, at least 50 percent of all procurement for China Exim Bank funded projects must come from China. Given the expense of Angolan manufactured goods, everything down to the cement and nails for these works, as discovered by the correspondent, are imported from China

As the loan is not classified as investment, Chinese companies tendering for contracts financed by the China Exim Bank loan do not have to register with the Angolan National Agency for Private Investment (ANIP) according to the Ministry of Finance. Instead, the projects financed by the loan fall under a Program of Public Investments (PIP) in the sectors of public works, health, energy and water, agriculture, telecommunications, the fishing industry and education.

According to the Angolan Ministry of Finance, the projects allocated to each sector are managed by their respective ministries while the Ministry of Finance co-ordinates the process of fund allocation. Applications for projects to be financed by the loan are submitted by the various ministries, under the guidance of the Presidency. According to the Chinese Economic Counselor in Angola, Chang Hexi, the money is managed through a co-operation agreement between the Angolan Ministry of Finance and the Chinese Ministry of Foreign and Commercial Affairs (MOFCOM). Projects are determined by the Angolan Government, who must then present a proposal to the joint-committee of MOFCOM and the Angolan Ministry of Finance before it can be put out to tender. According to various observers from civil society, however, the Presidency has the overriding say as to where the money is allocated.

Officially, monies from China Exim Bank managed by the Angolan Ministry of Finance total US$ 4.5 billion. According to the OECD , US$1.8 billion of the original US$2 billion loan from China Exim Bank had been spent by April 2006.
Linked to this circuitous method of financing, is the recurring issue of transparency and accountability, mentioned by several of the documentary’s interviewees, representative, notably of Angola’s civil society. The concern is that the closed-door nature of the bilateral relations preferred by China with African countries allows no chance of public access to information surrounding the transfer of oil-backed wealth. This is exacerbated by Angola’s context as an oil state, where the government largely neglects its population, oil receipts more than compensating for the lack of a tax base, which would imply the need for public accountability. Furthermore, the IMF has famously reported that between 1997 and 2002, US$ 4.2 billion of oil revenue disappeared inexplicably from state coffers.

What the documentary touches on is the cultural divide between Chinese and Angolans. Particularly as the relationship between China and Angola was initiated at a government to government level, less attention has been paid to the day-today interactions between Chinese workers and the Angolan man on the street. Casual exchanges are difficult, due to the language barrier, as evidenced by the comical and mutually unintelligible exchange between an Angolan and a Chinese barrier in the documentary. This has practical consequences, in terms of communication difficulties on a building site. Perhaps more seriously, it points to a lack of a common frame of reference which is both mutually isolating and frustrating and may exacerbate social tensions. Despite the reportedly high number of Chinese in Angola and Beijing’s evident engagement in the country, Angola is not one of the reportedly 16 African countries boasting a Confucius Institute , China’s answer to France’s Alliance Française.

This is perhaps because Chinese construction workers are generally discouraged from mixing with the local population. With the increase of Chinese entrepreneurs and private individuals coming to Angola, this issue may come to the fore. Rumours of cross-cultural liaisons have been circulating and this is seemingly corroborated by an interviewee on the documentary. The elderly woman describes a young girl who was made allegedly made pregnant by a Chinese worker. The cultural difficulties experienced in a situation such as this are thrown into sharp relief when the girl in question could reportedly not pick out the father of her unborn child from a line of Chinese workers when asked to do so by their manager. Considered taboo by both sides, such liaisons point to the unexpected social consequences of a growing Chinese presence in African countries. Such incidents are not without precedent; several Chinese workers from the aid projects of the 1960’s are known to have settled down in Africa. Jean Ping, current Chairman of the Commission of the African Union has a Chinese father, a forester who came to Gabon in the 1930’s.

The meta-issue with which the documentary grapples, is whether China’s engagement on balance, will be beneficial or detrimental to Africa’s development. Rather than impose her own analysis, the Vanguard correspondent looks to voices to be found within Angola. The Vanguard documentary interviews a wide variety of Angolans, ranging from Minister for Tourism Eduardo Chingunji in his air-conditioned office to locals in a rural southern village. Unsurprisingly, opinions as to Chinese involvement in their country are mixed. Minister Chingunji suggests that Angolan can be an ‘example’ for Africa. Indeed it is, although not perhaps quite in the way he imagined. Resource-rich countries, from the Democratic Republic of Congo, to Gabon and Equatorial Guinea have pursued China Exim Bank financing for infrastructure, using their natural resources as collateral.

Some see this as falling into the pattern of colonial relations and mortgaging the future of countries desperately in need of sustainable economic growth. Others argue that such arrangements allow countries to finally access and exploit their resources in order to finance development. The net result? It may be appropriate here to quote Mao Zedong on his thoughts of the effect of the French Revolution on European history : “It’s too early to tell”.

* Ms Corkin is a Phd candidate at the School of Oriental and African Studies in London.

* Please send comments to [email protected] or comment online at http://www.pambazuka.org/.

Notes:

1. Press Release distributed by the Angolan Embassy in the United Kingdom ‘Ministry of Finance Denies Misuse of Chinese Loans’, 17 October 2007
2. Interview with a director of a foreign-invested bank in Luanda, 7 June 2006.
3. Integrated Regional Information Network, 2005, “Angola: Oil-backed loan will finance recover projects”, 21 February, available: http://www.irinnews.org/report.aspx?reportid=53112
4. Vines, Alex (2006), ‘The Scramble for Resources: African Case Studies” South African Journal of International Affairs, 13(1), Summer/Autumn, p. 71.
5. According to Agora (6 May 2007), Chinese companies have been contracted to construct a total of 53 schools across Angola.
6. Interest rate is quoted according to the Angolan Ministry of Finance. Libor, according to the British Banker’s Association, is the most widely used benchmark or reference rate for short term interest rates.
7. Chatham House (2005), “Angola: Drivers of Change, Position Paper Two: Politics”, London: Royal Institute of International Affairs, April.
8. Aguilar, Renato & Goldstein, Andrea (2007) The Asian Drivers and Angola”, Draft Paper, OECD Development Centre, p. 13.
9. http://www.confuciusinstitute.net/confucius_institutes/search?continent=2&page=3 (9 December 2008)