Magazine article New African

Angola's New Friends: Angola Is Now China's Leading Oil Supplier, Outstripping Saudi Arabia. within the Next Decade, China Will Outpace the US as the Biggest Global Consumer of Oil. China, Thus, Sees Angola as a Partner Worthy of Special Attention. Kate Eshelby Reports

Magazine article New African

Angola's New Friends: Angola Is Now China's Leading Oil Supplier, Outstripping Saudi Arabia. within the Next Decade, China Will Outpace the US as the Biggest Global Consumer of Oil. China, Thus, Sees Angola as a Partner Worthy of Special Attention. Kate Eshelby Reports

Article excerpt

A string of Chinese workers, dressed in their native straw hats, are busy fixing an electricity pylon in the main street of Tombwa, a town on the edge of the desert in the south of Angola. Since the end of a 27-year civil war in 2002, Angola has entered a post-conflict transition period, in which it needs to quickly rebuild itself--and many have taken advantage of this.

China has formed a particularly strong relationship with oil-rich Angola, and is currently the biggest player in Angola's reconstruction. Chinese companies are expected to be the largest foreign commercial presence in Angola this year, and thousands more Chinese workers will flood in.

There has recently been a lot of attention to China's rapidly expanding presence throughout Africa--China's escalating economy is altering global economics. Angola desperately needs development, and the Chinese are helping the country to grow.

Before the war, Angola, a former Portuguese colony, had a strong infrastructure, but it was abandoned after independence. China has given enormous oil-backed credit to fund the rebuilding.

China's national export bank initially provided $3bn in low-interest credit and then increased this, giving a further $2bn. The debt will be repaid in oil, at a rate of 1.7%, over 17 years. China currently receives 10,000 barrels per day from Angola, which is rich in natural resources--especially oil and diamonds.

Angola's economy is accelerating; its GDP has one of the world's fastest growth rates. Therefore government spending on infrastructure has improved in the last few years. Resource revenues, however, are not sufficient to single-handedly rebuild this shattered country.

Foreign loans have played an integral part in Angola's reconstruction, the availability of credit expanding since peace was achieved. Apart from China, which provided the biggest loans, the leading lenders are Spain, Israel and Brazil.

More than $600m in loans has been given to Angola's Ministry of Finance by the Deutsche Bank, the first Western non-oil-backed credit, helping to fund reparation projects and 85% of export contracts. This agreement, signed in 2003, has facilitated an environment that could see Angola issue bonds as early as this year, a huge achievement for a country that was politically unstable for so long.

"Whereas the Chinese line is political, Deutsche Bank's interest is commercial, giving the Angolans access to finance without having to pledge their oil. Angola is still not a low-risk investment prospect but the situation is improving," says Ignacio Ramiro of Deutsche Bank Spain.

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The Chinese are building the infrastructure at the expense of Portuguese and Brazillian companies who used to do the majority of the work. China currently has the largest construction market in the world and since the 1990s its government has encouraged overseas expansion. Arguments are made that the Angolan government is wasting the money on "prestige" projects--the building of a new international airport, for example, which starts this year.

The "Bom Jesus" airport will be outside Lusanda, built at an estimated $450m, and scheduled to be finished in 2010, before Angola hosts the African Nations football cup. "The new airport is designed to be bigger than Johannesburg's airport--there is no need for this size," says Nuno Soares, an oil worker.

The new offices for Sonangol (Angola's state-owned oil company) are also seen as excessive in their grandeur. Infrastructure is vital to any country's economic improvement--big capital "status" projects, however, are less important and do not reduce poverty.

It is unquestionable that many of the Chinese-funded projects, such as the building of roads and bridges, will contribute to Angola's development. …

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