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Why Angola’s Latest Visit to China Is Good for the G7

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Why Angola’s Latest Visit to China Is Good for the G7

President Lourenço’s visit took place amid the talk of growing global competition between the United States and China in the Southern African region.

Why Angola’s Latest Visit to China Is Good for the G7
Credit: Depositphotos

Whatever metric you are looking at, when it comes to Africa-China relations, Angola is typically close to (if not at) the top. As a result, President João Lourenço’s official visit to China last week, with stops in Beijing and Shandong, was one to watch, especially in terms of what it might offer regarding Angola’s 2050 vision. The president’s visit also represented the second visit of an African head of state to China this year, following Sierra Leone’s President Julius Maada Bio in early March. Both visits are important bellwethers as China prepares to host the ninth installment of the Forum on China-Africa Cooperation in Beijing. 

Moreover, Lourenço’s visit took place amidst the talk of growing global competition between the United States and China within the Southern African region, especially linked to a new project G-7 countries have been heavily promoting: the “Lobito Corridor” project.

In the past, international competition in Angola was more focused on oil resources. Angola has been acutely dependent on raw commodity exports (primarily oil and related products) for years, while in turn, importing most of its oil products from others such as the Netherlands.

That said, a key Angolan policy has been to invest much of the returns from oil exports into infrastructure, in particular through relatively well-negotiated natural resource-based loans with China. Now that much new infrastructure has been built, the country is trying to diversify its economy. The latest presidential visit confirms that China will remain central to Angola’s plans, for good strategic reasons on both sides.

Angola and China established diplomatic relations back in 1983. Since then, Angola’s presidents have  made five visits to China (in 1988, 1998, 2008, and 2015 by José dos Santos and in 2018 by current President João Lourenço). The current trip marks the sixth visit to China by an Angolan president, and the second for Lourenço. However, he is no newcomer to China. Lourenço has visited China many times before In other roles: in 2000, he visited as the general secretary of the MPLA, Angola’s long-time ruling party. He visited China again in 2015 as the minister of defense and in 2016 as the president’s special envoy. 

In 2010, China and Angola established a strategic partnership, and Angola joined the Belt and Road Initiative in 2018. On Lourenço’s current trip, Angola became the 16th African country to elevate its relationship to the level of a comprehensive strategic cooperative partnership with China. 

In some ways the upgrade was long overdue. Angola is China’s second largest trading partner in Africa, also making Angola one of the few African countries to have a trade surplus with China, at a ratio of almost 6:1. Angola, still classified as a Least Developed Country by the United Nations, enjoys zero-tariff treatment for 98 percent of its products exported to China. 

Furthermore, Angola is the top recipient of Chinese loans in Africa, accounting for around 27 percent of China’s total loans to the continent during 2000-2022. Of the $45 billion Angola has borrowed to date, around 58 percent has been for energy projects. The latest result, the Dr. Antonio Agostinho Neto (Luanda) International Airport, which opened for operation in November 2023, was the largest airport ever constructed by any Chinese enterprise outside of China. 

During the COVID-19 pandemic, Angola secured a three-year debt payment freeze from China, lasting up to May 2023, for a proportion of its outstanding loans. In stark contrast to countries that have turned to the G-20 Common Framework for debt relief, such as neighboring Zambia, Angola was able to achieve this outcome swiftly by utilizing its bilateral relationship with China. 

What does the presidential visit tells us about Angola’s strategy toward China? Importantly, how might these dynamics affect Angola’s relations with other countries, such as the G-7 members?

First, it is important to clarify that Angola’s current strategy is not a pivot from the old. It maintains the hallmark oil contracts and debt-funded infrastructure projects. Hence, one of the priorities for Lourenço was to reduce guarantee reserves and extend further credit lines for key projects. Similarly, Angola recently contracted the construction of Caculo-Cabaca Hydropower Station to China Gezhouba Group Company Limited. On completion, this will become Angola’s largest hydroelectric plant and – at over 2.1GW – the third largest in Africa. The project is expected to meet more than 50 percent of the country’s current electricity needs. The oil and infrastructure elements of Angola’s China strategy will continue.

However, building on an investment protection agreement signed in December 2023 – including a dispute settlement mechanism – and linking to Angola 2050, Angola’s government wants to explore the possibility of value-added processing and manufacturing as a new facet to Angola-China relations. According to statistics from the Chinese Embassy in Angola, more than 400 Chinese companies have a presence in Angola, but the reality is that most are not producing anything. The new strategy will aim to change this, and it is already being put into action.

Angola’s national oil company, Sonangol, recently signed a Memorandum of Understanding with the China National Chemical Engineering to raise funds for the completion of the Lobito Oil Refinery. During the visit, Lourenço visited two health products companies in Shandong – a province well known for its heavy manufacturing and industry. Shandong is the home of giants such as HiSense and Haier and many huge agricultural companies, many of which already sell products across Africa. Some even have operations in countries such as Egypt. Lourenço’s stop in Shandong may indicate interest in attracting the province’s firms to set up operations in Angola.

Thanks to recent infrastructure improvements, high expected returns from the increased trade with the Southern African region due to the African Continental Free Trade Area, as well as the planned Lobito Corridor railway improvements, plus returns from the Lobito port itself (now operated by AGL, a French conglomerate), the investment proposition that Angola presents to Chinese and other foreign investors should be significantly improved.

Renewable energy could be a particularly profitable opportunity. As a recent briefing from my firm, Development Reimagined, noted, although Angola already ranks high within the continent with 4 GW of installed renewable capacity, this is tiny compared to its potential. Angola has over 55 GW of solar potential plus another 13 GW of hydro. With the right transmission and storage, Angola’s renewable sector is a lucrative proposition.

Some will be keen to pitch the Angolan president’s visit to China as a concern to Washington and European allies, with the idea that the tenets of the Lobito corridor deal are weighted in favor of Washington and its allies. However, by cementing new deals with China, Lourenço’s visit can actually strengthen the business case for lending and investments by American and European firms, as well as African financial institutions such as the African Finance Corporation and African Development Bank, to support the Lobito Corridor. 

It’s worth remembering that after the end of Angola’s civil war, it was a Chinese firm, the China Railway 20 Bureau Group Corporation, that did the initial refurbishment of the 1,344-kilometer railway, over 10 years from 2006, including with a China EximBank loan signed in 2004.

Angola has not become one of China’s most important partners on the continent out of sheer luck or simply because it has oil. Angola has done so by being strategic, measured, and foresighted in its relations with China and others. This latest visit is no exception, and other African countries can take a leaf out of its book in pursuit of their own multilateral engagements.