By Simon Kaiser
Since the 1990s, China has become a major economic and political force on the African continent. Economists, policymakers and African populations are divided in their views as to how this ever-expanding relationship has rather helped or hindered development. For the case of Angola, too, it is hard to pass a final judgement. If the consequences of Chinese influence will be a positive force ultimately depends on Angolans’ ability to use it to their advantage.
One of the criticisms often made of Chinese engagement in Africa is that it reinforces resource dependency. Crude oil constitutes over 90 percent of Angolan export earnings, the bulk of government revenue and more than half of its GDP. Over 50 percent of Angolan exports go to China, all but exclusively oil, while mainly manufactured products such as machines, vehicles and textiles are imported from the country. Another form of resource dependency is resource-backed credit: Since 2004, large-scale Chinese loans have been provided through public and private channels, amounting to an estimated 25 billion USD in 2016.
Reliance on commodity exports makes Angola vulnerable to a fluctuating world market and, in fact, steeply falling oil prices have recently made debt-repayment much more resource-consuming. Oil price volatility has been one of the main reasons for erratic growth rates in recent years. Also, resource dependency can lead to the ‘Dutch disease’, a phenomenon whereby foreign demand for resources drives up currency exchange rates, lessening the chances for the emergence of an export-driven manufacturing industry.
For several years prior to the recent oil price slump, however, Chinese loans had enabled Angola to access funds more cheaply and with longer repayment periods. They had improved Angola’s credit rating and helped the country to reduce its debt. Thus, the country could circumvent the structural adjustment programmes demanded by the International Monetary Fund as loan conditionality.
Additionally, most of the Chinese credit was conditional on being spent on improving Angola’s infrastructure that had been devastated by a 1975 to 2002 civil war. Railways, roads, bridges and communication networks were built. Infrastructure investment is vital for economic development, laying the foundation for commerce and industry.
Another common criticism of Chinese (and Western) trade with Africa is that of foreign appropriation of economic surplus. Here, again, the case is not clear-cut. Despite having established joint ventures with the Angolan state-owned oil company Sonangol, China remains a minor partner in extractive industries. The fact that most resources are exploited by domestic operators means that the bulk of economic surplus remains in the country. On the other hand, most construction contracts have been awarded to Chinese companies, using Chinese labour and materials. This means that profits generated in construction leave Angola.
There is evidence that the exchange encourages industrialisation. Imports of manufactured products such as electric generators and means of transportation have raised living standards. Chinese productive capacity has grown quickly and the country looks for new markets to realise surplus production. It therefore has an interest in emerging African middle classes. Also, although the nature of construction deals limits the scope of possible technology transfer, Chinese aid has transferred agricultural expertise, provided training to Angolans at Chinese universities and set-up training facilities. Joint ventures in cement production and automotive assembly promote industrial learning and the formation of an indigenous entrepreneurial class. And in spite of China protecting its economy with tariffs, the emergence of more global supply chains combined with Chinese access to markets elsewhere, offer opportunities for Angolan industrial development.
While Angola has experienced significant economic growth in recent years, the spoils are unevenly distributed: rampant inequality and poverty persist. Rural areas lag behind on many human development indicators, while Luanda, Angola’s capital, has in the past been ranked the most expensive city in the world. The fact that national income is overwhelmingly channelled through the government makes it easier for ruling elites to amass private wealth and silences popular demands for equality. Most Angolans remain politically and economically peripheral. Beijing, by the purchase of raw materials, strengthens this unjust and authoritarian system.
It must, however, be said that Chinese aid and credit have also restored and built hospitals, provided ambulances and medical doctors, helped restore the school system and constructed more than 20 schools and colleges. Angola’s life expectancy at birth has increased by 12.1 and expected years of schooling by 7.3 years between 1980 and 2014.
Chinese engagement in Angola has its perks and perils for the country’s development. Considering the scope of its involvement, it must be careful not to reproduce the exploitative patterns established by Western colonialism that still scar African societies. This is, however, not to neglect country agency. According to the World Bank, Angola is among the world’s ten worst places to do business in. Bureaucratic inefficiencies, corruption and nepotism hamper the country’s growth prospects. The commissioning of Chinese firms for construction projects has not least been a response to the wastefulness of local structures and a shortage of skilled labour and Chinese institutions remain wary of genuine commitment in the country due to a perceived high level of risk.
Openness to the world market has in the past been successful in delivering development results in other countries. This is, nonetheless, conditional on a domestic environment that facilitates the international transfer of knowledge, an environment that could be called a developmental state.
In summary, exchange relations between Angola and China exacerbate Angolan resource dependence, accumulation of debt and uneven development. A lack of employment opportunities and technology transfer create real obstacles. Undeniably, Chinese engagement in Angola serves Chinese interests first.
On the other hand, Chinese finance, infrastructure investment and expertise offer real opportunities to the country. Ultimately, it is the Angolan state’s responsibility to build institutions and implement policies facilitating industrial learning, inclusive growth and the utilisation of foreign capital and expertise to Angolan advantage. That way, the Chinese engagement can promote sustainable development in the long-term.