Challenges lie ahead for Angola to reform its oil-driven economy away from China’s influence.
After years of economic struggle, Angola President João Lourenço announced that he would divorce the country from dependency on its biggest lender, China.
Yet, Angola will still have to rely on China to execute the plan during the transition, Dr. Ana Cristina Alves, an assistant professor at Nanyang Technological University in Singapore, suggested, according to South China Morning Post.
Over the past two decades, China has been Angola’s biggest financer to rebuild itself from the end of the 27 years of civil war in 2002. But, like many other African nations, Angola repays its loans via oil shipments, determined by the changing oil price.
The oil-backed loans system has tightly bound the nation’s economic growth under its biggest lender. However, Angola is usually left with little crude to offer on global markets due to loan payment obligations.
As Dr. Alves said, at present, Angola is left with no other major client besides China. India, their listed second-biggest customer, only imports 5% of Angola’s total available oil.
Western investors are deterred because of downward trending oil prices since 2014, in addition to the impact of COVID-19, per the Financial Times (FT). Angola also has a lousy profile of corruption.
While that situation might require time to change, Dr. Alves said, “Chinese interest in the Angolan economy will continue albeit more moderate in its scope.”
Nonetheless, the years-long recession is still forcing Angola to ask for further loans from China. FT noted that the African country is expected to negotiate $4.4 billion more from its principal lender this year.
“So, Angola is not only highly reliant on China for development funding but also its whole economy depends on the stability of the current terms of the relationship,” the assistant professor said.
But as an associate professor at the University of Wroclaw, and the Polish Centre for African studies co-founder, Dominik Kopiński observed, Angola is determined to move away from the now proven failing oil-loaning approach. That would mean appealing for foreign aid from others and not China.
“There are also clear indications that Angola will further move to diversify its international partners to avoid putting all eggs in the same basket,” said Kopiński. But, he added, “since the struggle for independence, diversification has always been the bread and butter of Luanda’s [capital of Angola] calculations.”
Angola President Lourenço has already reached out to the International Monetary Fund for resources to fund its economic reforms. He has also introduced a series of other measures to make amends for his nation’s dark history of corruption and mismanagement.