How Chinese Development Loans ‘Captured’ Angola

Share this:

By Douglas Burton *

For years The Republic of Angola has been called Africa’s “richest poor country,” chock full of oil and diamonds, but wasted by 40 years of proxy wars and looted by native kleptocrats. 

After a bloody civil war ended in 2002, the government looked for international investors, and in two years bankers from the Chinese regime arrived in Luanda with the message, “We’re from Beijing, and we’re here to help.”

Yet, nearly 20 years of Chinese state-backed projects later, Angola is on the hook for $21 billion owed to China despite the fact that Angola has negative growth, and more than 50 percent of its population is desperately poor.

That’s the case presented by a panel of subject experts assessing Angola’s predicament at the Hudson Institute in Washington on Feb. 7.

Chief among them was journalist and anti-corruption activist Rafael Marques de Morais, 52, joined by Hudson economist Thomas J. Duesterberg,  Jenai Cox, an executive with International Republican Institute, and Nate Sibley, a Hudson research fellow.

The “Odious Legacy of Chinese Development Assistance in Africa: The Case of Angola,” is the position paper jointly authored by Marques and Duesterberg.

Much of Africa is plagued by “debt distress” due to China’s practice of debt-trap diplomacy, the Hudson scholars argue.

Angola is a cautionary tale, in the telling of Marques. Regardless of the intentions of the Chinese lenders, who operated from shell companies that were proxies for the Peoples Republic of China, the projects China has completed were poorly built, and substantial funds lent for Angolan development were actually paid to the family of Angola’s corrupt dictator, according to Marques. Therefore, he recommends that the repayment of the loans should be renegotiated.

“We calculate that 50 percent of Angola’s national debt is not owed by the government but by a handful of [Angolan] private citizens,” Marques said. “The Angolan citizens should not have to pay for the debts of these private citizens. We still don’t know how much of the borrowed funds went for infrastructure and how much was stolen,” he added.

What happened in Angola is part of a broader pattern of Chinese investment in Africa, according to Hudson Research Fellow Nate Sibley.

Throughout Africa where there is a corrupt collaboration between African leaders and Chinese funders, “China is the senior partner,” Sibley said.

Angola rejected a lending engagement with the International Monetary Fund in 2002, because Angolan officials rejected conditions of transparency, according to Marques, whereas Chinese lenders don’t require those conditions, leaving room for bribes. Nor does China reveal the terms of repayment, or whether nations risk forfeiture of national assets in case of non-payment.

“They are aggressively promoting a different development model. Sovereign-to-sovereign lending has changed to lending to private firms with quasi-governmental status. But if that private company fails, the [African] government inherits the debt,” Sibley said.

China began investing heavily in developing countries 30 years ago, choosing to prioritize nations that had poor records of rule of law, Sibley said. “China’s miraculous growth in the 1990s happened because of wild speculation and risk-taking which didn’t necessarily help development just as long as they helped the political agenda of the Chinese Communist Party (CCP).

“Trillions of dollars went into countries that couldn’t absorb them, and projects were poorly made,” he said.

China’s vaunted Belt and Road Initiative in Africa, financed by more than a trillion dollars, is a conveyor belt of CCP control, according to Marques. China’s Foreign Minister Qin Gang met with Angolan President João Lourenço on Jan. 12 to mark the 40th anniversary of China’s diplomatic relations, but he didn’t come empty-handed.

“Just recently we were visited by China’s foreign minister, who announced a new loan of $250 million for broadband coverage,” Marques told the audience at Hudson.

Angola’s finance minister, Vera Daves, told one media outlet: “this is ‘more favorable’ for Angola than market conditions with a maturity period of up to 20 years and without associated collateral.”

“Yet, has Angola done a proper risk assessment?” Marques asked.

“This project could be a Trojan horse, as there is considerable risk of surveillance,” Marques told the group.

“And we already owe China $21 billion, with the result that close to 50 percent of the national government’s budget is needed to service this debt. Why is Angola taking on more loans? ” Marques asked.

China’s investment in Angola is paralleled by its vast economic development projects in nearby Nigeria, the most populous and richest nation in Africa. Foreign Minister Gang dropped into Lagos on Jan. 23 at the debut of China’s $1.5 billion deep seaport, 75 percent of which China owns, which he said will be a “game changer” for the Nigerian economy. The logjams of ships seeking to unload cargoes into Lagos will be relieved, true.

At the same time, Lagos is expected to be the container hub not only for Nigeria but for all of Africa.

Critics frequently note that conditions on Chinese loans often stipulate that a high percentage of Chinese nationals will be employed by the resulting project. Large investments in Angola have seen the low-skilled jobs performed by Angolans at the lowest wage scales with high-wage paying employment handed to Chinese contractors.

It isn’t known how many of the thousands of jobs said to be created at the deep seaport in Nigeria or Angola’s broadband installation will go to citizens of those two nations, yet China’s position in Africa’s great game surely has advanced.


* Douglas Burton is a former U.S. State Department official who was stationed in Kirkuk, Iraq. He writes news and commentary from Washington, D.C.

Share this:

Leave a Reply

Your email address will not be published. Required fields are marked *