The current economic situation in China and Angola

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China’s economic crisis: facts and causes

There is a problem in the Chinese economy that appears to be structural and could affect relations with debtor countries such as Angola. Various factors are contributing to a decline in economic growth in China and an increase in unemployment, especially among young people, which could also imply some political instability within China itself.

Let’s start with some recent figures[1] :

-The July credit data released on 11 August showed a drop in demand for loans from companies.

-Retail sales rose by just 2.5 per cent in July compared to the previous year, below expectations of a 4.5 per cent increase.

-Industrial production only rose by 3.7 per cent in July compared to the previous year, below the 4.4 per cent increase that analysts were expecting.

The truth is that recent statistics published by China have caused severe concern.  In addition to the aforementioned statistics, consumer prices in July were lower than a year ago, suggesting that we may be on the verge of deflation, which reflects a chronic shortage of demand in the economy. China’s foreign trade in the same month of July showed a sharp drop in exports due to weak global demand, accompanied by a sharper decline in imports, signifying the aforementioned weakness in domestic demand. Chinese companies and families are “shrinking”[2] . The seriousness of the situation led China’s leaders at a Politburo meeting last month to refer to this year’s economic recovery as “torture[3] .”

This poor performance raises several thoughts. The first is that we shouldn’t exaggerate. Just as there was an exaggeration in previous announcements about China as an economic superpower, when its GDP per capita will not exceed 13,000 USD in 2021,[4] while the GDP per capita in the United States is more than 70,000 USD, or even 25,000 USD in Portugal, the opposite exaggeration should not be made either, that China has entered an insurmountable abyss. What is clear is that the Chinese economy is in a moment of correction, as is the case with all economies, possibly requiring profound reforms and political adjustments.

Therefore, the context we have adopted in this work is to consider a crisis in the Chinese economy, but to believe that the right policy choices can overcome this crisis.

At this very moment, hopes of a Chinese recovery from the pandemic have faded, as consumption has generally been very subdued, especially for expensive items such as cars and houses, and private investment, the backbone of China’s economy, fell in the first half of this year for the first time since such data was published. Private companies and entrepreneurs aren’t spending much on investment or hiring staff. Youth unemployment has reached 21 per cent. The annual graduation of 11 to 12 million students this summer will exacerbate an already difficult situation because of the problems of finding suitable work and also because the Chinese labour market has become one in which most jobs are low-paid, low-skilled or in the informal economy.

It seems wrong to attribute all this to the pandemic. Most of the threats to China’s economy were growing a few years ago. The fundamental problem is that China has generated, over the last decade or more, a mountain of bad debts, unprofitable and uncommercial infrastructure and real estate, empty flat blocks, underused transport facilities and overcapacity, for example in coal, steel, solar panels and electric vehicles. Productivity growth has stagnated and China can boast one of the highest levels of inequality in the world[5] .

Furthermore, under Xi Jinping, it developed a more intense, state-centred and controlling system of governance, both for political reasons and to deal with the effects of its ailing development model.

We wonder to what extent the political interventions to limit billionaires like Jack Ma[6] have been positive for the economic environment. Whilst it’s true that they have averted the Russian danger of oligarchic state domination and signalled to the general population that power is concerned about excesses, it’s also true that they have sent a chill down the entrepreneurial spirit necessary for a competitive economy. Everyone will be afraid of growing too much, of being too conspicuous and, ultimately, of innovating. Because innovation and excessive attention can have negative repercussions.

In a way, the “animal spirit” that Keynes spoke of as the engine of any healthy economy has been “tamed” in China and this may be the main problem of its economy, which is neither measurable nor solvable with technical measures.

Chinese reaction and other possible directions

For the time being, China has announced the suspension of the release of the official unemployment rate among China’s urban youth aged between 16 and 24, which reached a new all-time high of 21.3 per cent in June. The State Council published new guidelines for stepping up efforts to attract foreign investment. And the central bank lowered interest rates[7] .
 None of these measures seem to have the strength to reverse the cycle of decline in the Chinese economy.

Many authors argue that a huge fiscal stimulus would be needed to energise the economy, which should not be translated into more debt, but into pure “printing” of money, which makes sense in a situation of deflation. A kind of “helicopters with money” flying over the cities and dropping it off.[8]

It is also possible that this crisis will force the Chinese president to revise his policy towards the large economic groups and the business community in general, opting, like Lenin a century ago, for a new liberalisation and flexibilisation, while also seeking to ease the tension that has been building up between China and the United States.

In fact, we believe that a good part of the solution to China’s current economic problems lies in politics rather than economics, and in both domestic and foreign policy. Probably the best way out of the crisis would be to reintroduce the more ambiguous and flexible system of Jiang Zemin’s time. Jiang Zemin, president of China from 1993 to 2003, is considered “the man who changed China”. Many Chinese who grew up in the 1990s remember Jiang Zemin for overseeing China’s entry into the World Trade Organisation, and also for allowing the film Titanic to be broadcast. During the Asian financial crisis, Jiang emphasised the importance of finance and financial security for China’s national security and the building of a modern economy. At the same time, this did not imply a lessening of the power of the Chinese Communist Party and its political control. Some authors point to his tarnished record in relation to human rights and freedom of expression. Zemin oversaw the repression of national dissidents, the banning of religious groups such as Falun Gong and the suppression of the press and the Internet, and also maintained an uncompromising stance on Taiwan[9] .

The advantage for Jiang Zemin’s China is that he was able to maintain a balance between liberating market forces and innovation, and the Communist Party’s control of China.

And our opinion is that a large part of the Chinese crisis is not the result of economic factors alone or above all, but of the loss of that balance point that needs to be recovered.

Obviously, this doesn’t just depend on the Chinese leadership, but also on a change in the external situation of quasi-confrontation between the United States and China.

It’s well known that since the time of Donald Trump there has been a shift in US foreign policy towards China. What seemed like “Trumpism” became a central US policy under Joe Biden and today the United States sees and treats China as a potential future enemy that must be contained. Naturally, this coincided with Xi Jinping’s nationalist assertion, which abandoned the previous external caution, and began to want a strong China in the world context and without complexes, wanting the country to be a post-hegemonic alternative to the United States. So on both sides we had a voluntary confrontational initiative.

The question that arises is whether it is possible to retract and create a new space for US-China collaboration, which will certainly increase China’s prosperity, or whether the course is definitely strategic confrontation? In this confrontation, China will tend to compartmentalise and close itself off, losing the capacity for innovation linked to entrepreneurship, which increases the chances of conflict (more or less direct war) and hinders any Chinese economic recovery.

Impacts in Angola

This is the real situation of the Chinese economy at the moment. As mentioned, the fundamental “brakes” on growth seem to be twofold: from an economic point of view, excessive debt, and from a political point of view, which seems more important to us for the medium and long term, the accentuation of the force of political power in the economy and society, and the political condemnation of entrepreneurship and innovation.

Faced with this scenario, Angola is confronted with advantages and disadvantages that act dynamically.

One advantage is Luanda’s rapprochement with the United States and its relations with China. Angola could be a bridge country for a reunion between the two powers, a kind of proving ground where both can co-operate, compete and survive for mutual benefit. However, it could also become a disadvantage for the same reason, with Angola becoming one of the areas of dispute between the two powers, both wanting to pull it into their sphere of influence. This would be another difficult balance for João Lourenço to maintain.

In economic terms, there will be a possible tendency for the Chinese authorities to become more inflexible in relation to foreign debts, and this may already be happening with Angola, or could happen in the future. This is the normal reaction of countries in a “squeeze.” There is therefore the danger of greater Chinese pressure in economic terms on Angola, which could jeopardise Angola’s once again perilous public finances.

The “tree of patacas” spirit that prevailed in China-Angola financial relations from 2002 onwards is definitely over and will not be recovered. China will behave towards Angola, in greater or lesser detail, like any other international creditor, and its pressure will increase as the Chinese domestic economic situation deteriorates. Another challenge for João Lourenço.

One advantage that Angola could offer China is the creation of a large labour market for its young graduates. Cooperation agreements could be made to put Chinese people in Angola to train Angolan staff and help implement policies in areas such as public administration, in which China has millennia of experience, or telecommunications and information technology.

The Chinese civil service system has provided stability for the Chinese empire for more than 2,000 years and has provided one of the main outlets for social mobility in Chinese society. Today, in the 1980s, it has made a successful transition from a centralised Marxist economy to a mixed economy with strong growth.

China has also become one of the largest telecoms markets in the world, with more than one billion Internet users and monthly revenues of more than 130 billion yuan from the telecoms sector. The country has undergone several waves of reforms over the last three decades to liberalise and privatise its telecommunications industry. It is the experience gained in this immensity that can be put at the service of Angolans.

In these terms, the current phase of China-Angola relations could partly leave physical capital behind and centre on human capital, showing that relations between countries can mature. Angola could provide an outlet for Chinese companies and their young people.

What we have to realise is that the relationship is entering a “mature” phase in which each country has its own interests to defend.  China will no longer bring “rains of money”, but rational investments, and this is what Angola must count on and counter. In fact, in terms of future markets, investment opportunities and an escape from China’s problems, Angola has a lot to offer and can be the “bargaining chip” in various negotiations.

[1] https://www.cnbc.com/2023/08/14/china-economy-new-loans-fall-property-fears-low-consumer-sentiment-.html

[2] https://www.cnbc.com/2023/08/17/david-roche-chinas-economic-model-is-washed-up-on-the-beach.html

[3] https://www.theguardian.com/business/2023/aug/11/china-economic-problems-show-things-are-seriously-amiss

[4] https://www.ceicdata.com/pt/indicator/china/gdp-per-capita

[5] On the structural and long-term problems of the Chinese economy see Frank Dikotter, China after Mao – The rise of a superpower, 2023.

[6] https://www.forbes.com/sites/georgecalhoun/2021/06/07/the-sad-end-of-jack-ma-inc/

[7] https://www.nytimes.com/2023/08/15/business/china-economy-downturn-unemployment.html, https://www.bloomberg.com/news/features/2023-08-20/xi-jinping-is-running-china-s-economy-cold-on-purpose?in_source=embedded-checkout-banner,

[8] Rui Verde, Helicópteros com dinheiro, 2013

[9] https://www.cfr.org/blog/jiang-zemin-put-chinas-economic-opening-practice

The “Russian belt” in the Sahel and Angola

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The coup in Niger

Mr Mohamed Bazoum was the freely elected president of Niger in 2021. He was deposed in July 2023 by the Presidential Guard, joined by the army. At the time of writing, General Abdourahmane Tchiani, who had led the presidential guard since 2011, announced that he was the top leader of the military junta that took power in that African country[1] .

The formal pattern of seizure of power by a “National Council for the Safeguarding of the Homeland” (NCSH), seems to follow the coup of Assimi Goïta in Mali in 2020. In fact, the methods are the same: suspension of the constitutional order, establishment of a curfew, closure of borders. A state of exception that recent experiences among Sahelian neighbours affected by this military epidemic show can last for months or even years.

Most interestingly, however, the first Russian flags began to appear in the hands of some of the pro-junta demonstrators on the streets of the Nigerian capital,[2] as has happened in other coups in Francophone African countries.

Indeed, the fall of Bazoum may possibly represent the fall of one of the last French bastions in the Sahel, and most likely, another step by Russia in the creation of a “red” belt in this African region, although at this point there are still disagreements about the existence or extent of Russian intervention in the coup[3] . Even if Russia did not have a direct role in the coup, it may, in line with what has been its recent opportunistic policy in Africa, seize the moment.

Let’s look at recent military coups, African geography, and how Russia establishes its belt.

The formation of the “Russian belt”

Starting on the Atlantic coast, in 2021, we have the coup d’état in Guinea Conakry carried out by a military man, Colonel Mamady Doumbouya, who for the moment has established an authoritarian regime, albeit with the promise of elections in 2025. Although, there was no Russian appearance at the genesis of the coup, as Russia had a good relationship with Alpha Condé, the deposed president, apparently, after the coup relations between Guinea and Russia have been intensifying with several Russian visits to the presidential palace in 2022. In any case, Mamady Doumbouya seems, for the moment, to be the typical populist nationalist military man who is still looking for a way forward, and the truth is that one cannot yet speak of manifest Russian influence in Guinea-Conakry.

Unlike in Mali and Burkina Faso, it is not the head of the ruling military junta in Conakry who will go to St Petersburg. Colonel Mamadi Doumbouya was represented by Dr Dansa Kourouma (President of the National Transitional Council) and Dr Morissanda Kouyaté (Minister of Foreign Affairs). Thus, in Guinea Conakry a clear pro-Russian regime does not yet seem to be established, but it is unique in the recent coup movements in the Sahel/Central African zone.

Bordering Guinea-Conakry is Mali, here the situation is quite clear and marks the effective beginning of what we will call the “Russian belt”. In Mali there was a coup d’état in 2021, in which Colonel Assimi Goïta took power. Russian military personnel have been in Mali since mid-2022, and the presence of the Wagner group is also confirmed. Mali and Russia have signed a cooperation agreement on security, intelligence, risk and disaster management, counter-narcotics and personnel training. The Russian presence is undeniable, as is France’s loss of influence in the country, which has withdrawn militarily, with some of its forces going to Niger (where they may now be leaving). Mali’s president was at the Russia Africa Forum.

Next to Mali is Burkina Faso. Here, the military coup took place in 2022, in fact there were two coups that year. In the final coup, the officer Ibrahim Traoré took power. The result of the takeover was the expulsion of the French military contingent in the country and rapprochement with Russia. Traoré also went to St Petersburg.

If you look at Niger, if the coup and the rapprochement with Russia materialize, it adds a large territory to the Russian belt. Chad is actually missing, as Sudan and Eritrea are next.

Eritrea is a fearsome dictatorship, where there have never been elections. Along with Belarus, Syria and North Korea, Eritrea was one of four countries, not including Russia, to vote against a UN General Assembly resolution condemning Russia’s invasion of Ukraine in 2022.

As for Sudan, the presence of the Wagner group has been recorded since 2017. Sudan is among the few countries that officially recognized the annexation of Crimea by the Russian Federation and voted against UN General Assembly Resolution 68/262 (which condemned the Russian annexation of the Ukrainian territory), which demonstrated the close relations between Russia and Sudan. In July 2022, Russia obtained gold from Wagner facilities near Abidiya in Sudan to support the war in Ukraine. Russia is the main arms supplier to Sudan.

In February 2023, Russian Foreign Minister Sergey Lavrov met with Sudanese officials in Khartoum, including Sudanese Armed Forces Commander-in-Chief Abdel Fattah al-Burhan, Rapid Support Forces leader Mohamed Hamdan Dagalo, and Acting Foreign Minister Ali Al-Sadiq Ali to strengthen relations and to finalize the review of an agreement to build a naval base in Port Sudan, which awaits ratification by Sudan’s yet-to-be-formed legislative body. As we know, the situation in Sudan is very turbulent, but there is a lot of Russian influence.

The “Russian belt”

Therefore, we have an almost continuous line from east to west Africa where a “Russian belt” is forming.

In practice, Chad remains, where French influence is strong, but instability and the existence of guerrilla groups are noticeable. And it is enough to mention that Chad could be totally surrounded, as to the north in Libya there is a strong presence of the Wagner group, as on the southern border in the Central African Republic, taking into account that to the west there is Niger and to the east Sudan, one can anticipate that Chad is surrounded and could soon complete the “Russian belt”.

Roughly speaking, the “Russian belt” can be said to correspond to the Sahel region. There are some exceptions, such as Mauritania and Senegal, and some additions such as the Central African Republic. But what is certain is that a line is being drawn in the sand that divides Africa, precisely in the area where sub-Saharan Africa meets North Africa.

Possibly, the Russian intervention did not follow a pre-established plan, but opportunistically took advantage of various events in the area, in which the French ineptitude in developing the countries and securing the support of the population of the region, and the Islamic incursions stand out.

It is also true that Russian control is not homogeneous in all countries and the situation is perilous. There is no hard data, other than the peoples’ search for ways out of the neo-colonial recipes offered by France and the West’s general inattention to the suffering of this area of the globe, despite politically correct discourses.

The space occupied by Russia is not so much the result of the call for any solution from Moscow, but the displeasure at the lack of solutions from the West.

But that a “Russian order” is being established is a fact. Recent proof of this is Vladimir Putin’s offer of grain to six African countries. Among them are members of this “belt”, four to be precise: Burkina Faso, Mali, Central African Republic and Eritrea. The remaining two are Zimbabwe and Somalia[4] . It is clear to see the weight that the “Russian belt” already has in defining Russian policy.

Fig. 1- Sahel in Africa where the “Russian belt” passes. Photo published by the BBC at https://www.bbc.com/news/world-africa-66322914

Fig. 2- Ongoing “Russian belt”. Libya is not part of the belt, but it is an area where Russia participates with the Wagner group in the civil war

The global effects of the ‘Russian belt’

Having established the construction of the “Russian belt” in the African Sahel, it is worth noting the main consequences both globally and for Angola.

The first global consequence is Russia’s political reassertion. The country is demonstrating that it knows how to globalize a dispute, not by situating it only in Ukraine, but by globalizing it, bringing together a set of supports that may seem weak individually, but together achieve extreme strategic relevance, already calling into question French influence in the region. For the moment, the big loser is France, but Russia can project other losses or gains, depending on the perspective, both strategic and economic.

In strategic terms, it is well known that the Sahel region has a strong and direct strategic importance for Europe in two areas, in the fight against terrorism and migration. In fact, António Costa, Prime Minister of Portugal when the country held the presidency of the European Union, emphasized that “The Sahel is a strategic region for the European Union, taking into account the security challenges and its role in the broader regional context, including Libya, the Gulf of Guinea and the Central African Republic” and added that the security of the Sahel “is undeniably linked to the security of Europe; that is why we must work together, as equals, with a very clear objective: to achieve lasting peace and build shared prosperity together”.[5]

From now on, Russia has a pressure valve on the EU in terms of terrorism and migration, and can in practice increase or decrease migration flows from Africa to European shores.

As for Islamist terrorism, Russia has been its enemy, but recent events have made it a de facto ally of Iran and sometimes the “enemy of our enemy is our friend”. It should not be forgotten that the Islamist insurgency in Afghanistan in the 1980s was initially funded by the United States as a way of weakening the Soviet Union. Nothing prevents the reverse from happening.

Moreover, this “belt” allows for easier projection of force, whether political or military, whether in formal terms or in what is called “asymmetric warfare”. Below is the Democratic Republic of Congo, a source of immense wealth that arouses global greed. Above and beside Libya is Egypt and its Suez Canal. These are two “prizes” that will get closer the moment Russia draws a straight line of dominance coast to coast in Africa.

From an economic point of view, although they are countries in extreme poverty, often, in terms of mineral and natural resources they have something to note. In very brief terms, Mali has gold, Burkina Faso has various non-ferrous and industrial metals, Niger oil and uranium, the Central African Republic gold, and so on. There is a wealth of resources to exploit.

Angola and the “Russian belt”

Finally, it is worth reflecting on Angola’s role vis-à-vis a “Russian belt”. Angola was traditionally a Russian ally, one of the main ones in Africa. It no longer is.

The current President is trying to position the country as a regional power close to the West and with good relations with China and Russia, but trying to solve African problems in Africa. It is clear that the creation of the “Russian belt” poses major obstacles to this desire for Angola. With a strong Russia mediating between North and South Africa, Angola’s role as a regional power is emptied, and everything returns to the clashes of the Cold War, now renewed.

Thus, the “Russian belt” clashes directly with Angola’s regional prospective interests and its desire for peace and stability on the continent.

And there is a second aspect, which is João Lourenço’s promotion of constitutional normality. The Angolan President has condemned all non-constitutional changes in Africa. The fact is that the changes promoted by Russia are non-constitutional, based on coups d’état promoted by the military.

And directly, Angola’s national stability and security would be jeopardised if there were any kind of intervention in the Democratic Republic of Congo that would agitate the country even more than it already is.

To this extent, Angola is not currently likely to take a favourable view of the extension of the “Russian belt” in the Sahel, despite the cordial relations that exist between the two countries.

[1] https://www.publico.pt/2023/07/28/mundo/noticia/golpe-niger-chefe-guarda-presidencial-declarase-lider-junta-militar-2058484

[2] https://euobserver.com/world/157310

[3] https://www.bbc.com/news/world-africa-66322914

[4] https://www.dn.pt/internacional/putin-diz-que-a-russia-esta-a-fazer-tudo-para-evitar-uma-crise-alimentar-global-16762635.html

[5] https://www.portugal.gov.pt/pt/gc22/comunicacao/noticia?i=primeiro-ministro-sublinha-importancia-para-a-europa-da-estabilidade-em-africa

The economic situation in Angola and Agenda 2050

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Recent economic turmoil

The results of Angola’s economic policy, which had been favourably received by international institutions and public opinion in recent times, namely low inflation, fiscal consolidation, control of public debt and the success of foreign exchange liberalisation, seemed to suffer a blow in June.

The trigger for this change in perception was the abrupt announcement of the rise of more than 80% in the price of commercial petrol, due to the partial withdrawal of the state subsidy (without the necessary focus on the mitigation measures that had been well thought out), which was followed by a series of cascading events, the resignation of Manuel Nunes Júnior as Minister of State for Economic Coordination, some rumours about delayed public service salaries, and inevitably the announcement by a rating agency that Angola’s economic outlook had been downgraded from “positive” to “stable”.[1]In addition, the Kwanza is depreciating rapidly against the dollar and the euro. At the end of June, the Angolan national currency passed 800 kwanzas to the dollar for the first time.[2]

The depreciation of the kwanza has raised renewed fears of inflation, in a country still heavily dependent on imports for its daily life. Last February, the National Bank of Angola said that the country would spend over US$2 billion (1.8 billion euros) on food imports in 2022, representing a 40 percent increase over the previous year.[3] A lower value of the national currency and a rise in food import requirements obviously results in higher prices.

In turn, the statement that the new Minister of State and Economic Coordination made about the delays in some public salaries in May, did not reassure, since Lima Massano assured that this was due to “a time lag between the time of receipt of the funds resulting from tax collection and the period of payments.”[4] The minister’s explanation is not contested, the problem is that even if we accept it, it contains a problem, which is that of the government’s lack of cash reserves, indicating that the budgetary restraint imposed by the International Monetary Fund (IMF) has not created any space for Angolan public finances. It should be noted that although the price of oil is not very high, over the last six months it has fluctuated between USD 70 and 80, with prevalence at USD 75/76. As the State Budget was based on 75 USD (which we criticised at the time[5] ), the truth is that the price has been in line with the forecast, although with no margin for manoeuvre.

The possible effect of oil prices

In the light of the above, in theory, the price of oil will not yet have a negative effect on the State Budget in the immediate future.

However, this could happen in the second half of the year. We have formed the opinion that there is a strong downward pressure on the price resulting from the oil embargoes on Russia and probably Iran. Our thesis is that these Western oil embargoes do not have the effect of significantly restricting the supply of that product by Russia, which would push up the price of oil, but rather of selling it at a discount to intermediaries who act as “laundromats”. This means that the longer the oil embargo on Russia lasts, the more Russia will make the circumvention mechanisms efficient and the more it will sell oil at a discount. Thus, it is very possible that there will continue to be downward pressure on the price of oil, especially if China’s economy continues not to show the strength of the past.

Consequently, it may be that fiscal tightening will intensify in the second half of this year if oil prices succumb to these pressures.

The doctrinal and practical problem

The concrete fact is that IMF “recipes” in Angola seem to have failed, and once again the application of classical economic doctrines does not work.

It is increasingly clear that a universal theory of economics based on the classical thinking disseminated by North American universities may work in mature developed economies or in places with relatively solid institutions (market, government, courts), but it does not work in countries still suffering from extreme imbalances and under institutional construction. It cannot speak of true markets functioning freely according to the rules of supply and demand, nor of efficient governance or even of a justice system approaching that which works in Angola. For various reasons, these are unfinished processes in the making. To that extent, any economic model that takes them as preconditions will fail. That is why the IMF measures fail, failing to bring prosperity to Angola and making the country go from one crisis to another. It should be stressed that since 2009 the IMF has been monitoring and agreeing with Angola’s economic policies.

There is a doctrinal problem underlying the negative impact of economic policy in Angola that is linked to the fact that the main decision-makers are trained in foreign universities that adopt institutional models of the market economy, with greater or lesser state intervention, but always assuming that the situation is operating normally. The truth is that Angola is in a pre-institutional situation, so the models to be applied should be those of development and institutional building rather than stabilization. This problem, while seemingly very theoretical, has real practical relevance, since something is being applied that has little to do with reality.

Furthermore, some fundamental structural reforms were not undertaken by the government. A system marked by the interference of politicians in the running of companies was maintained, with continued investment in oligopolies that are essentially importers, justice was not speeded up and bureaucracy was clearly not reduced.

The combination of these factors means that the Angolan economy has not yet emerged from the oil cycle and from repeating past mistakes.

The questioning of Agenda 2050

It is these basic deficiencies that appear to limit the effect of Agenda 2050. In a previous report we praised the unassuming and honest way in which the authors of the Agenda made the diagnosis of the past and present situation[6] , and we had some anticipation in reading the proposals for the future.

It is evident that Agenda 2050[7] has many interesting objectives and profound analyses that stimulate the debate, which should be broadened in Angolan society. However, at its core the document does not bring us the necessary ambition and has the defect of being based, as we have mentioned, on generalist models.

If we notice the essential core of the strategic objectives is hardly mobilising. The predicted increase until 2050 of the GDP is 2.4 times, which in terms of GDP per capita, assuming that the population growth is only 2.1 times (and may be much more) results in an increase from USD 3,675 to USD 4,215 of the mentioned GDP per capita. If we look at this, it is a rise in population welfare of only 14% in 27 years[8] . Add that unemployment will still be around 20%. An extremely high figure, although the statistical formula used by the National Statistics Institute of Angola (INEA) cannot be compared with others because it is more demanding and therefore presents more negative results .[9]

It is very discouraging. In fact, in view of the increase in population, what Agenda 2050 is putting as a goal is a quasi-progression. Is it not possible to do differently?

Angola in 2050 is supposed to be similar to what today are countries like Paraguay, Jordan, Sri Lanka, Essuatini or Mongolia[10] . We cannot subscribe to this vision, which in practice envisages a stagnant country where a sharper rise in population will pose severe problems.

Conclusions

In all independence and objectivity, we believe that this future Agenda should be fundamentally revised and substantially altered with the participation of the Economic and Social Council, the various study centres working on Angola in universities and elsewhere, and the country’s living forces, with a view to presenting a model that is both ambitious and feasible for Angola’s future. Only in this way will the current problems resulting from bad doctrinal models and little structural reformism be overcome.

Further and faster has to be the motto of the future.

[1] https://www.noticiasaominuto.com/economia/2347975/fitch-piora-perspetiva-de-evolucao-de-angola-para-estavel

[2] https://www.dw.com/pt-002/angola-queda-hist%C3%B3rica-do-kwanza/a-66037342

[3] https://www.jornaldenegocios.pt/economia/mundo/africa/angola/detalhe/angola-importou-mais-40-de-alimentos-no-valor-de-mais-de-dois-mil-milhoes-de-dolares-em-2022

[4] https://www.angonoticias.com/Artigos/item/74007/ministro-de-estado-esclarece-atrasos-salarias-no-pais

[5] https://www.cedesa.pt/2022/12/20/analise-da-proposta-de-orcamento-geral-do-estado-de-angola-para-2023/

[6] https://www.cedesa.pt/2023/06/11/estrategia-angola-2050-uma-analise-i/

[7] https://www.mep.gov.ao/angola-2050

[8] Idem, note 7, p. 22.

[9] https://www.makaangola.org/2023/05/desemprego-o-erro-das-politicas/

[10] Countries that currently have a GDP per capita close to 4125 USD. GDP, Per Capita GDP – US Dollars”, and 2018 to generate the table), United Nations Statistical Division.

Angola 2050 Strategy – an analysis (I)

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Angola 2050

Angola 2050[1] is the name of the strategic plan recently presented by the Angolan government containing the country’s long-term vision.

In general, surprisingly, the reception to the document was lukewarm, it did not arouse particular enthusiasm or was quickly dismissed as lacking in rigour, not having an adequate methodology, or being nothing more than the work of academic consultants.[2]

In our opinion, this document is too important for the future of Angola to be hurriedly put aside, especially given the fact that it has been put out for public consultation, which we applaud.

To that extent, we went to read and analyse the document. It is a work of 432 pages and 11 chapters, elaborated in a professional and systematic way. We understand that even when criticising, the first correct attitude is to study and reflect on the document, besides making it known. Only by knowing the document can one criticise or present alternatives.

The role of civil society, academics and public opinion in general must cease to be mere deconstruction and become one of demand and attentive criticism. Only if we know what we are talking about can we call on the leaders to comply or to present other solutions.

It is our aim to present two papers on the document, the first of which is this one on the methodology, diagnoses and reference scenarios (p.7 to p.19). The second will be on the programmatic content of the plan.

Methodology and principles

The strategy presented by the government claims to be a “bifocal plan, with a clear vision of what is intended for the Country in the future, but articulating in a clear and decisive manner the short-term initiatives that ensure the right direction” (p.7).

It seems to be the best methodology, since there is no point in creating expectations for 30 years from now, without concretizing the steps to get there, and to that extent, the insertion of short-term measures is positive, having the advantage of being able to syndicate the evolution of the path outlined by the plan. It will be easy to conclude whether there is a need for correction or not, by looking at the short term and the plan’s recommendations.

In fact, there is no point in making long-term plans without constant evaluation and correction, there has to be sliding planning.

This was one of the main methodological failures of the previous plan, Angola 2025[3] . It did not materialize, and now (as we shall see below) it is said to have essentially failed.

Also to avoid the shortcomings of the previous plan, the government claims to propose a realistic plan, based on facts. It also informs us that the plan is aspirational, having resulted from extensive consultations that included civil society, academia and the private sector. As a principle, it is clear that this inclusiveness is desirable and conducive to the construction of an adequate plan.

However, taking into account the reaction of Heitor Carvalho, economist and coordinator of the Centre for Studies and Research of the Universidade Lusíada de Angola, or the lack of knowledge of the debate on the subject in the Economic and Social Council created by the President of the Republic, and also the public ignorance of the collaboration of prominent economists such as Yuri Quixina or Carlos Rosado de Carvalho, or even the fact that we, who have been publishing a volume on the Economy and Politics of Angola since 2020, which always sells out, were not called upon to give an opinion, all these facts raise questions about the non-state sectors that were heard. The consultation should have been more comprehensive.

As we will see, one of the main criticisms that this plan makes to the previous one is the excessive nationalization. Now, de-statisation should start at the genesis of these works, seeking the largest number of contributions, even to create consensus from the largest number of actors in civil society and academia.

Finally, the document ensures that it sought sustainability, following a holistic approach, which “integrates solutions for the various sectors, and recognises the interdependence of economic development, social inclusion and environmental sustainability” (p. 8), focusing on feasibility so that the proposed initiatives are achieved.

The failure of Angola 2025

One of the most interesting aspects of the initial part of the document is the courageous assumption of the failure of the previous Angola 2025 plan, all the more courageous because some of those responsible then are the same as now.

The government states that in relation to the Long Term Strategy 2025 (“Angola 2025”) “an important part of the economic and social goals fell short of what was expected, with the previous strategy inadvertently promoting policies that had negative impacts on our development”. (p.9).

Therefore, the current government, besides admitting the flaws of the previous plan, additionally recognises that some of the policies implemented were harmful to the country.

This assumption of responsibility and guilt is important because it should allow the same mistakes not to be repeated.

Essentially, the government points out that one of the main mistakes of the past was the promotion of the state “as the main economic agent, dominating most sectors of the economy and leaving a minor role for the private sector.” (p.9).

Moreover, the ‘state has unintentionally discouraged long-term, high-quality investment at times’ (p.9).  Those familiar with the difficulties of investing in Angola in the past, from the need for local partners to the difficulties of expatriating capital, understand these statements. Indeed, it seemed that Angola did not want foreign investment. Indeed the document itself acknowledges this, when it writes “[the] Foreign Direct Investment, which outside the oil sector was mostly incipient, was sometimes seen as a threat to national investors rather than as a boost to the economic fabric.” (p.9).

Obviously, the risk of corruption also kept many investors away. While there is no doubt about the new presidential discourse on combating corruption, the doubt that remains is about the effectiveness of the mechanisms adopted. It is a fundamental point for the future.

Another aspect raised was that in most sectors of the economy, “competition was harmed, with higher prices and lower quality goods or services often being provided to our citizens, making the country too dependent on the oil sector for exports and for access to foreign currency.

This is another point to which particular attention must now be paid. Many observers speak of new economic actors taking the place of old actors, but only replacing them, and not fostering real competition. What is crucial is to abolish market barriers and promote real internal competition (on free external competition we have a position reserved for another work).

The summary of the previous plan is that more than 60% of the indicators set for 2015 were not achieved. This says it all.

Human development, capital and productivity

The initial part focuses on some themes that we consider important. The first of which is human development. Although it highlights some progress, it recognises that “Human Development is very dependent on the income dimension and penalised by the degree of economic and social inequality, reflected in one of the lowest Human Capital Indices in the world (Angola is in the 4th quartile, below Sub-Saharan Africa and SADC)” (p.10). As we have been saying, and it is important to emphasize, the diagnosis made by the authorities is courageous and objective, not “sugarcoating” reality. It may be that the acknowledgement of failure is the first step towards a successful policy.

At the same time, labour productivity is also found to have declined, largely due to the reduced contribution of ‘capital accumulation’. In turn this lack of capital was “largely related to the fact that Private Capital was allocated to, on average, unproductive purposes and Public Capital was responsible for a very considerable level of investment in infrastructure, but which did not have the expected economic return.” (p. 14).

Once again we have objectivity in our analysis. José Eduardo dos Santos’ policy of ‘primitive accumulation of capital’ was a fiasco, because those who accumulated capital did not invest it in Angola. As we know, capital flight to Europe and assorted offshores was the rule, thus sabotaging what might have been the best intentions. That is why the fight against corruption has a strong economic impact. It is necessary to repatriate capital and guarantee its investment in Angola, whether capital obtained in the past or in the present.

In turn, public investment must stop obeying obscure interests and be seen from a cost-benefit perspective.

Challenges

In light of the above, the government identifies three key issues to be taken into account (p.15):

“Firstly, a set of implicit and explicit disincentives to private investment (e.g., the over-dimensioning of the State’s presence in the economy; difficult access to credit; poor infrastructure quality; lack of human capital quality) that justify the reduced contribution of this item to the country’s economy (excluding the oil sector) and explain the fact that the weight of foreign direct investment in Angola is among the lowest among peers.” We could not agree more.

“Secondly, a two-speed model of economic development, where there is an urban cluster of productive and developed and / or limited competition service sectors employing about 20% of the population, contrasted with informal and / poorly productive sectors employing 80% of the population.”

We have many doubts about this assertion, especially about the so-called “formalisation” policies of the economy. And, also, we do not see ourselves in a model of balanced growth of the economy. It seems more appropriate to follow a path of unbalanced development, since development manifests itself in specific points or poles of growth and then spreads throughout the economy (cf. for example Albert Hirschman )[4]

“Third, an under-investment in human capital, with the ‘quality factor’ (representing productivity potential) comparing particularly negatively with countries of similar income, placing Angola as one of the worst performers on the World Bank’s Human Capital Index.”

It is true that human capital is fundamental, but above all it is necessary to obtain capital. It is a mistake to think that qualifications are enough for a country to grow. A direct link between education and the economy has not been established. “The direct and simple relationship that delights commentators and politicians – expenditure between education and economic growth – simply does not exist”[5] .  The question arises more at the level of practical training. The population must have adequate levels of practical and vocational training, and educational attainment should not be confused with the quality of human capital.

Education

The report states that “the biggest social gap – which could significantly constrain future productivity – is in education, especially in the quality component (where Angola has some of the worst performances in the world, below the average for SADC or sub-Saharan Africa)” (p.12). In this regard, it points the focus to the “profound improvement in the quality of the education system, which today is one of the most serious constraints on the country’s growth (Angola is currently in the 4th quartile in this dimension – World Bank classification, having one of the lowest results in the world)” (p.16).

This is a truth, which, however, should not lead to wrong policies. Wrong policies can be exemplified by believing that it is enough to graduate people en masse from university to achieve economic growth. There is no relationship between one fact and the other. The issue is deeper and implies a complete review of the current Angolan education system, from teaching methods to degrees and preference for social and human areas, in addition to the lack of rigour and commitment in many universities. It is a whole programme.

Conclusions

This is a courageous report in its diagnosis of past economic policy mistakes and Angola’s lack of significant progress in many areas essential to human development and capital accumulation.

Once the diagnosis is made, the question is whether the right policies are being chosen and, above all, whether there is the political will to implement them.

[1] MEP, (2023), Angola 2050, https://www.mep.gov.ao/angola-2050

[2] Cfr. VOA, (2023) Estratégia “Angola 2050” ante dúvidas sobre sua elaboração e resultados expectativas, https://www.voaportugues.com/a/estrat%C3%A9gia-angola-2050-ante-d%C3%BAvidas-sobre-sua-elabora%C3%A7%C3%A3o-e-resultados-esperados/7103882.html

[3] MP (2007), ANGOLA 2025. Angola – a country with a future. S u s t e n t a b i l i t y, e q u i d a t y, m o d e r n i- t y. http://www.ucm.minfin.gov.ao/cs/groups/public/documents/document/zmlu/mdmz/~edisp/minfin033818.pdf

[4] HIRSCHMAN, A. O. The strategy of economic development. New Haven: Yale University Press, 1958 and also PERROUX, F. Note sur la notion de Pôle de Croissance. Economie Appliquée, v. 7, pp. 307-320, 1955.

[5] WOLF, A. (2002) Does Education Matter?: Myths About Education and Economic Growth. London, Penguin.

China and Angola: understanding a complex relationship in times of world polarisation

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Rui Verde ( African Studies Centre, University of Oxford) – Palestra proferida da Fundação Rui Cunha em Macau, 22 de Maio de 2023.

This is a summary of some of the findings of a work in progress about the relations between Angola and China since the beginning of the 2000s that I am developing at the University of Oxford. It will deal with three themes: the beginning of the strong economic relations between the two countries, the perceptible consequences and the present-day situation.

The beginning

It would not be correct to begin an analysis of the relations between China and Angola at the beginning of the 21st century without briefly considering the countries’ previous interactions.

Referring just to the People’s Republic of China, and not Imperial China and the endeavours of Admiral Zheng He in the fifteenth century, it should be noted that at least from the 1960s, China had some interest and influence in Angola, and vice versa. The famous trip that Chou En-Lai made to Africa in 1963–1964, which WAC Adie referred to as ‘Chou En-Lai’s Safari, resulted in the first intense contemporary Chinese approach to the African continent and gave rise to two types of movement regarding Angola, then a Portuguese colony under a liberation war.

Portugal, the authoritarian colonial power at war in Angola, entertained the notion of ​​establishing diplomatic relations with communist China. The Portuguese leaders tried to advance into a kind of Nixon–Kissinger avant la lettre, but in the end, they were held back by opposition from the US.

The Angolan liberation movements, meanwhile, started to count on the support of China in terms of arms and training. In the initial phase, China had no strong preference and helped all of the movements, including the MPLA, FNLA and UNITA.

From a certain point onwards, given that the Soviet Union had ‘put all its eggs in the MPLA basket’, China mainly opted to support UNITA as a form of counterbalance to the Soviets. Nevertheless, China’s diplomatic actions were mostly pragmatic, and its attempts to create relations with the FNLA and MPLA continued over the years.

With Angola’s independence in 1975, and the country’s transformation into a Cold War camp, Chinese diplomacy found itself in a dilemma. China did not want to support the United States, but it certainly considered the Soviets to be its primary enemy. It therefore adopted a public discourse of peace and fraternity and turned against the MPLA, since it considered the organisation too pro-Soviet.

Relations with the new government in Luanda were uninspiring; in fact, Beijing ignored it for a time.

The resumption of relations was gradual and without special intensity. The final step in the process of the normalisation of Sino–Angolan relations was the visit of President Jose Eduardo dos Santos to Beijing in October 1988. Although the visit was cordial, it was not received with warmth. During the 1990s, China was undergoing a significant domestic reformist process, and interactions with Angola were not a priority.

Accordingly, there is no historical basis on which to predict that China would become Angola’s most important economic partner and to define a possible model for intervention in Africa.

From initially being very poor, China’s relationship with the MPLA government went on to became lukewarm, although there was no indication of closeness.

However, quite surprisingly, with the end of the civil war in Angola in 2002, the country turned to China for economic support, which China delivered in what became an ongoing relationship.

The official explanation for this sudden seemingly close relationship is usually framed within the paradigm of a rational state that makes institutional decisions. It has been explained by some academics that the Angolan regime turned to the IMF to finance the country’s post-war reconstruction; however, dissatisfied with the IMF’s demands of accountability and transparency and the unwillingness of the fund to compromise and accommodate Angolan wishes, Angola opted to obtain financing from China in a state-to-state agreement.

The reality seems more complex, however. When it ended the civil war, Angola did not have a functional and institutional state, and a good part of the state functions were ‘privatised’ and handed over to external entities, thereby enabling what is now called ‘state capture’. For example, diamond security was ensured by Arkady Gaydamak (Russian-born French Israeli businessman, and perhaps spy from several agencies), the supply of weapons by Pierre Falcone (French businessman) and various real estate and financial aspects by the Espírito Santo Financial Group, in which the company ESCOM and its strongman Hélder Bataglia stood out.

Alongside this ‘privatisation’ of state functions, José Eduardo dos Santos, as with other members of the Angolan elite, distrusted the West and its institutions.

This is the context of the understanding with China.

The relationship was a kind of private venture that met the wishes of Dos Santos, who did not want to be dependent on the IMF or the West. For him, the approach to China was a matter of national security.

Therefore, two points should be made. The first is that Dos Santos chose not to resort to the IMF due to considerations of national security; that is, the Angolan President did not want to be too dependent on the West.

The second and most crucial point is that Angola managed some of the advantages brought by China largely as a private fiefdom. Apparently, the initial contacts for this purpose had been promoted by the then-president of ESCOM, Bataglia, and the international arms trafficker, Pierre Falcone, of the famous Angolagate case.

However, Angola presented an official façade to China. Initially, a financing agreement was established between EximBank and the Angolan Ministry of Finance for the amount of US$2 billion, which was approved by the Angolan Council of Ministers in March 2004. At the same time, the Angolan Ministry of Public Works signed a contract with a Chinese company, Jinagsu International, for the construction of the Palace of Justice in Luanda. These two moves are the first to have been referenced by the government’s official gazette, Diário da República, within the scope of this new Sino–Angolan relationship.

On the Chinese side, its interest in Angola was not specific, according to the Chinese sources we have interviewed, but it was based on the following three essential aspects:

  • Its international economic policy, which was designed by Mao Zedong in ‘On the Ten Major Relationships’, in which he declared: ‘We must learn to do economic work from all who know how, no matter who they are.’ Obviously, it was also a result of the Four Modernisations that ended in Jiang Zemin’s policy of Go Out and China’s accession to the WTO in 2001.
  • Its need for oil and raw materials (which Angola had in abundance) to sustain Chinese growth.
  • Its surplus of people and capital that was ready to be invested.

For Angola’s part, the criminal case that was launched in the summer of 2022 against Generals Kopelipa and Dino, the former strongmen of Dos Santos, made clear the private mechanisms that gave rise to the intense relations between Angola and China. It was explained that on the Angolan side, Bataglia of ESCOM, with Manuel Vicente (the CEO of Sonangol and the future vice-president of the country) and Eugénio Neto, another man from ESCOM, conducted a famous first visit to China. It was during this visit that the whole strategy of collaboration between the two countries was outlined.

A multitude of companies were established with the Angolan leaders Vicente, Kopelipa and Dino at their head (the latter is said to have been a figurehead for Dos Santos). For instance, the China International Fund (CIF) and China Sonangol are private entities created at that time by Vicente, Kopelipa and Dino, albeit with supposedly official designations.

The point is that aside from the official agreements, there was a parallel relationship that became substantively relevant because the actions were not conducted between states but by private entities between them.

The perceptible consequences

Naturally, the consequences of the China’s engagement in Angola have been extremely positive for the reconstruction of the country after the civil war (1975–2002). Chinese companies have built 2800 kilometres of railways, 20,000 kilometres of roads, more than 100,000 social housing projects, more than 100 schools and more than 50 hospitals in Angola. The Kaculo Kabaça Hydroelectric Power Plant, Agostinho Neto International Airport, cities of Kilamba Kiaxi and Zango 5, Benguela railway, port of Caio, Soyo power plant and many other cooperation projects have been successfully implemented. Many Chinese companies have invested in Angola and made important contributions to the country’s economic diversification and industrialisation[1].

Nevertheless, some iconic works and activities that have resulted from this Sino–Angolan collaboration have become symbols of rampant corruption, since some of Angola’s high public officials took advantage of and siphoned off various funds into corrupt activities.

Two examples illustrate this. The first naturally concerns the purchase and sale of oil. According to the findings of the current Angolan authorities, between 2004 and 2007, when Manuel Vicente led the Angolan oil company Sonangol, he authorised the sale of oil to China amounting to at least €1.5 billion, which was paid by China but diverted. During this period, Sonangol sold huge numbers of   barrels of crude oil to China Sonangol International Holding Limited as a consignment sale for the constitution of a national reconstruction fund. Sonangol delivered the oil to the company but did not receive payment following its delivery. The intermediary company sold the oil and kept the money from the sale, which was then credited to its accounts at the Bank of China. The intermediary company belonged to Vicente and Kopelipa and some other partners.

Documents still under study, to which I had access, indicate that from 2005 to 2010, the sale of Angolan oil to China generated more than US$85 billion. Of this amount, probably at least US$25.7 billion was reported to have been split between Angolan leaders through a web of schemes woven by various intermediaries.

In another situation, the company CIF Limited, which was apparently mostly owned by Angolan ministers, appropriated 24 state buildings built by the company Guangxi in the centrality of Zango. The state paid for the construction, but it was Delta Imobiliária (a company owned by Vicente, Dino and Kopelipa) that sold the buildings to Sonangol EP through Sonip Lda under Vicente’s guidance for a total amount of US$475,347,200[2].

What is certain is that from the U$2 billion dollars of credit in 2005, Angola held US$23 billion of public debt stock in China in 2017[3].

After Xi Jinping assumed the Chinese leadership, steps were taken to root out corruption, and Chinese authorities neutralised the corrupt elements, such as Sam Pa (a business magnate who is believed to be the head of the 88 Queensway Group) that would have aided Angolans in these schemes. Chinese authorities also send auditing teams to Angola to survey the oil purchases.

Present-day situation

The advent of João Lourenço’s presidency encompassed an attempt to reopen Angola to the West. Nevertheless, this did not imply a downgrading of relations with China, as some recent studies have suggested, expounding a certain uneasiness from the Angolan perspective towards China. Carvalho et al. spoke of a ‘marriage of convenience’; Silva stated that ‘Angola’s honeymoon with China [had come] to an end’; and Fabri said ‘The China–Angola Honeymoon is over; is Africa listening?[4]”

Again, the reality is not so straightforward. There has surely been a rebalancing of the relations, but this has come from both parties and has not signalled an end to their relationship.

The opening act of Lourenço’s presidency towards China in 2017–2018 was apparently to ask for more money. There had initially been an alleged new loan from China worth US$11 billion, which later turned out to be US$2 billion, but this only served to pay Angola’s debts to Chinese companies.

However, China’s containment was not new to Angola and had nothing to do with João Lourenço, as some now claim. In 2016, the China Development Bank had suspended funds from credit lines to Angola, namely to Sonangol, accusing the company and the Angolan Ministry of Finance of non-compliance with the contracts. Previously, in 2015, as mentioned earlier, Chinese auditors were said to have been in Angola to ascertain the extent of the Sinopec’s spending there. They suspected several items of wrongdoing, for instance that the Chinese oil company had paid an additional almost US$1 billion to finance a quota that Sam Pa, through China Sonangol International, had acquired in certain Angolan oil blocks that did not bear profits.

These attitudes seem to indicate that there was some prudence or restraint on the part of China vis-a-vis Angola businesses.

Nevertheless, afterwards, China was generous in suspending the payment of the Angolan external debt due to the pandemic. Also, Chinese banks agreed to some form of debt renegotiation.

Trade between China and Angola grew by 42% in 2021 and continued at a good pace in the first six months of 2022, with a homologous increase of 33%. In this way, China continued to be Angola’s main economic partner.

Moreover, figures from Angola’s central bank show that since 2020, the country has paid as much as US$2 billion of capital to China. Presently, according to the most recent numbers put forward by the Angolan Minister of Finance, Angola is taking advantage of higher oil prices to accelerate its debt-reduction plans and smooth out repayments to China, its largest creditor. 

Angola now owes China $18 billion, or about 40% of its total external debt, after it settled loans totalling $1.32 billion in 2022[5].

All these data show that Angola’s relations with China are now entering a new phase—one that is mature but not ending.

 It turns out that this new phase does not depend only on Lourenço’s willingness to open up to the West or on Angola’s uneasiness with China, as some have argued; it also depends on Chinese engagements and worldwide strategy.

It is important to address first the question of the so-called ‘debt trap’ and then the most recent developments in the Sino–Angolan relationship.

The truth is that, like the Western creditors of the past in relation to Africa and Latin America, China is on a learning curve, and given the pragmatism that seems to guide its relations, it will be necessary for China to avoid dramatic scenarios and instead consider the usual remedies of debt renegotiation and forgiveness.

There is no room to mention a ‘debt trap’. It is known that in the 19th century, Great Britain was faced with debt problems from third countries, namely in Latin America and Egypt. The solution was often to send gunboats or to control the governance of the indebted countries.

By the end of the 20th century, the United States had large debt problems with countries of the so-called Third World. In this case, the solution was more rational, with its emphasis on the Brady Plan (Brady Bonds).

Obviously, it is now China’s turn to face the same issue, but there is no talk of gunboats or the creation of any protectorate.

Also, some parallel could be draw with the relations of the Soviet Union with President Nasser of Egypt. It is known that under Khrushchev, the Soviet Union largely financed Nasser and the Aswan Dam; however, afterwards, with Brezhnev, a new attitude prevailed that called for austerity and denied the postponement of debts payments. This, in the end, led to Sadat and the waning of Soviet influence in Egypt.

With such historical examples in mind, China is surely balancing its options, not opting for a disengagement. It is carefully assessing the situation and searching for the right economic and financial mechanisms to solve the problem, as the United States did in the 1980s.

In relation to Angola, it should be noted that one of the first trips of China’s new foreign minister, Qin Gang, was to Angola, last January, and at the same time, the respective governments signed an agreement whereby China would spend US$249 million to finance a national broadband project in Angola.

In short, it is apparent that the relations between China and Angola are evolving, not ending or reaching a dead-end, as some have argued. This is the time for careful calibration and renewal of the friendship.

If I can use a metaphor based on my favourite Portuguese wine, Palácio da Brejoeira, it can be said that Sino–Angolan relations enjoyed an initial phase of pure joy, then there was the hangover and now it is the time for some moderate drinking and sophistication among true connoisseurs.

[1] Shang, João (2023), A parceria estratégica entre China e Angola tem perspectivas amplas, coexistindo oportunidades e riscos. Communication to the III Congressso Internacional de Angolanística (not yet published)

[2] Summary of the legal case in Verde, Rui (2022), Delfins de JES acusados na hora da sua morte, https://www.makaangola.org/2022/07/delfins-de-jes-acusados-na-hora-da-sua-morte/

[3] Data from the National Bank of Angola, https://www.bna.ao/

[4] de Carvalho, P., Kopiński, D., & Taylor, I. (2022). A Marriage of Convenience on the Rocks? Revisiting the Sino–Angolan Relationship. Africa Spectrum, 57(1), 5–29.

Silva, Cláudio (2022), How Angola’s honeymoon with China came to an end, The Africa Report, https://www.theafricareport.com/202465/how-angolas-honeymoon-with-china-came-to-an-end/.

Fabri, Valerio, (2022), The China-Angola Honeymoon is over, is Africa listening?, Geopolitica.info,https://www.geopolitica.info/china-angola-honeymoon-over/

[5][5] Idem, see note 3.

João Lourenço’s macroeconomic achievements and the problem of youth unemployment: a financing proposal

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The recent macroeconomic achievements of the João Lourenço government

After years of crisis, recession and almost economic despair, which, of course, translate into the electoral results of the past August and the constant unrest of social networks, the Angolan government has a very encouraging macroeconomic framework.

Gross Domestic Product (GDP) growth designed by the International Monetary Fund (IMF) to 2023 is 3,5%, a robust number[1], mainly, bearing in mind that the country has been in recession since 2016, with a peak negative in 2020 of -5.6%.

The recent predictions of the IMF foreign debt point to a 63.3% ratio of GDP. Once again, it should be noted that by 2020, this ratio corresponded to 138.9% of GDP. There are several factors that explain this fall, some nominal, but it is impressive.

In turn, the state’s general budget for 2023 has a global surplus tax balance of 0.9% of GDP, and proposes to create a positive primary balance in the order of 4.9% of GDP.

In inflation, the homologous variation of March 2023 is 10.81%[2], demonstrating a fast and consistent drop.

Fig. No. 1-decreasing inflation (source: BNA)

Consequently, there is no doubt that the Angolan economy has changed since 2016, and from an uncontrolled country and on the brink of bankruptcy, we have a healthy macroeconomic situation.

Youth unemployment: a serious and persistent problem

Despite the good news in the macroeconomic front, the population still looks alien to success and popular feeling is not corresponding to the numbers.

An explanation for such a phenomenon is the persistence of high unemployment, especially youth unemployment. According to the Instituto Nacional de Estatísticas(INEA) in the IV quarter of 2022, the total unemployment rate was 29.6%, which represented a slight drop from previous quarters, but meaningless.

In relation to the young population (between 15-24 years) the unemployment rate is 52.9%[3].

This number is not acceptable and there is no economy that can be considered healthy as long as such a phenomenon persists.

The consequences of a high unemployment rate are known and are numbered here. It is a waste of resources, showing that the economy is not working at its potential level, but in an inefficient way. Of course, it is a situation that has the potential to generate an increase in poverty and also social unrest.

Certainly, a good part of the social unrest that exists in Angola, whether on the streets or on social networks, directly and inappropriately results from youth unemployment. Therefore, the consequences are extremely and inappropriately negative.

Fig. No. 2- Consequences of the high youth unemployment rate in Angola

Youth unemployment: social resilience rate and dangerous systemic instability

From the constitutional order and stability of the state point of view, there is a systemic point for youth unemployment that must take into account and be underlined.

There will be a threshold where the unemployment rate becomes unbearable and leads people to political action to modify the situation, it will be a kind of trigger that gives rise to revolutions, subversions, regime changes, etc. We will call this a social rate of resilience to unemployment, as constituting the unemployment threshold that a society supports without revolt.

Therefore, the point is that a youth unemployment rate above 50%, in an essentially young country and with an expansive demographic growth rate, is an explosive rate and may be very close to the social resilience rate. This means that the present rate of youth unemployment is perhaps the largest factor of political destabilization of Angola and has the potential of overthrowing constitutional orders and crying out by elements of extra-legal action.

It is at this time “that fighting unemployment becomes the priority of priorities. … When the threshold of tolerance to unemployment is reached, it is necessary to act quickly and in strength. Temporization serves nothing, nor does it serve to develop an apology speech based on economic difficulties.[4]”

It is never too much to note that Hitler’s rise to power and his subsequent popularity in the 1930s with the German people was due to unemployment and the solution he gave to the problem. German unemployment dictated the fall of the Weimar Republic in Germany and the establishment of the Nazi dictatorship. Unemployment is the provocative of extremism and agitations, superior to any other.

Therefore, it is considered that in the present Angolan economic state, the fight against youth unemployment has become the priority of priorities.

Fighting Youth Unemployment and Financing: The Autonomous Financial Instrument (AFI)

It is evident that the Angolan private economy does not have the ability at this time to create the jobs needed to make the unemployment rate of its crisis threshold. It is obvious that mass intervention of the state is necessary to create employment to an acceptable social level.

State programs must be traditional, based on the massive construction of infrastructure, roads, ports, and strategic industry, as well as in specialized technical training and sending young people to several provinces for social support tasks in the area of basic sanitation, housing, primary health and agriculture.

They do not serve the palliatives that market economies adopt in these situations: unemployment allowance, internships, vocational training for conversion, tax benefits. These policies only work in the face of short oscillations of supply and job search curves, they do not operate in structural and permanent unemployment situations.

The fight against youth unemployment has to be the object of a massive national program with rapid effects that leads into employment offer to several million young people.

Classic economists will counteract that the state has no funds for such comprehensive and massive programs. It is at this time of reasoning that the fight against corruption comes in. According to figures now presented, “Angola recovered six billion dollars and seized another 21 billion in the context of the asset confiscation, half of which abroad[5]. It is not known exactly how much of these values are merely provisional seizures and how many are already available to the state. The truth is that they are appreciable amounts.

The concept that proposes to finance mass programs against youth unemployment is simple: all youth employment financing programs will be funded by a mechanism outside classic credit, creating an exceptional vehicle based on seized assets.

Some of the assets seized, for example, up to an amount of $ 5 billion will serve as a capital or guarantee of an autonomous financial instrument (AFI) that will launch employment promotion programs. The financing of this program will be based on the seized assets and will be paid through securities issued by AFI.

AFI either will pay the programs directly with securities that issue based on seized assets or issues debt securities to raise funds for this payment. What is certain is that it would create money outside the classic system and thus allow to create hope for the unemployed, making the fundamental connection between the fight against corruption and the fight against unemployment, which we consider primordial.

Fig. n. º3- Simplified scheme of the financing of unemployment programs

Conclusions

Youth unemployment is the greatest threat to Angolan political stability. The theme must be seen and create massive state intervention mechanisms funded by an autonomous financial instrument supported by the assets seized in the fight against corruption.

AFI would pay employment programs with securities based on these actives.

[1] https://www.imf.org/en/Countries/AGO (accessed at 19th April 2023)

[2] https://www.bna.ao/#/pt (accessed at 19th April 2023)

[3] Folha de Informação Rápida _ Inquérito ao Emprego em Angola _ IV Trimestre 2022, (INEA 2023), p.9

[4] Jean-François Bouchard, O Banqueiro de Hitler, 2023, p. 2022.

[5] https://observador.pt/2023/04/18/angola-recuperou-6-mil-milhoes-em-dinheiro-e-apreendeu-mais-21-mil-milhoes-em-ativos/ (accessed at 19th April 2023)

Conditions and solutions for the removal of fuel subsidy in Angola

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Summary of the proposed policy

In this document there are necessary conditions and possible solutions for the removal of the subsidy to fuel in Angola.

1-The necessary conditions are:

a) Creation of transparency mechanism of budgetary financial flows. The fate of savings made with the withdrawal of subsidies, emphasizing social aspects;

b) Modification of the oligopolistic market structure. Promotion of competition in the fuel distribution market. One hypothesis is the split of Sonangol distribuição in three entities and privatization of two of them.

2-The possible solutions are:

a) Focus on the subject

AA) direct subsidy to the most disadvantaged and social pass

AB) direct allowance to companies

AC) Tax Benefit /Negative Tax to AA) and AB)

b) Focus on the object

BA) Subsidized fuel prices continues for lower displacement vehicles

BB) subsidized fuel prices continue for transportation companies and similar

c) Composite systems

***

Elimination Fuel Subsidies: IMF and Vera Daves

It is an integral part of any intervention of the International Monetary Fund (IMF) to have fuel subsidies withdrawn, where they exist. Of course, the same booklet was followed in Angola creating this burden on the Angolan government.

In terms of fiscal policy, in the recent Staff Report according to article IV the fund makes this the main measure to take at the level of fiscal policy, prescribing that: “Authorities need to take political action to increase non-oil tax revenues and gradually eliminate fuel subsidies while increasing support for vulnerable. These measures should help reduce vulnerabilities debt, create tax space and achieve their fiscal and medium-term debt goals. ”[1] (emphasis added).

Minister Vera Daves tunes for the same tuning fork, and in a recent interview said that the removal of fuel subsidies is “the elephant in the middle of the room, and with ballerina shoes”, stating that the political decision was made and was not implemented only because it is lacking to find the mechanism that reduces the impact on the most disadvantaged. And she explained that: “It is a blind subsidy, which everyone accesses, and with this revenue we could have a more directed policy instead of subsidizing those who do not need.” Adding arguments for the elimination of this measure as “fuel leakage to neighboring countries, lack of market share and the consequent loss of tax revenue, beyond the issue of inequality of treatment. There are several distortions to the market, but we are aware that the impact, especially through transport, is considerable. “It also recognized the negative impact on municipalities, industries and farms and the price of freight to transport food. And concluded by saying:” We have everything mapped, now the challenge is to take the dancer’s shoe thinking of measures that can mitigate the removal “from this allowance that costs between $ 3 and 4 billion, about $ 2.8 to 3.7 billion euros, per year. “It is a considerable value, given that the Integration and Intervention Program in the municipalities (PIIM) has 2 billion, so it would be two PIIM. ”[2]

It seems, therefore, that the IMF and Vera Daves are determined to eliminate fuel subsidies, apparently they do not know yet is how.

The political issue and the mechanism of transparency

It is evident that these eliminations, even making sense economically, and we will already address doubts in this context, have a large political impact and cannot be viewed as a “lightweight”. From Egypt to Iran to Sudan, France, changes in fuel prices have impacts on political stability, so the first assessment to do is political.

The great argument advanced by Vera Daves is the one that technically is called Crowding Out. By spending 2.8 to 3.7 billion euros, a year on fuel subsidies, the government does not spend them in the social sector, in education and health, for example. In fact, she argues, what is put in the lowering of the price of gasoline is taken from the well-being of the people. Accepting the argument, it must be sustained and convince the population. Accordingly, the first task would be to create a transparency mechanism (perhaps in the form of a digital site) that explained to the population how the background of subsidies would be channeled to other sectors, clarifying government plans. 1000 million for schools, 500 million for teachers, etc. Making a simple scheme and spreading it, everyone would realize the fate of money, and then over the early years there should be a public presentation of this flow. It would be explained by a scheme where the savings had gone with the removal of fuel subsidies. Consequently, the population would see that it had not been invented by the Minister of Finance, but that it was effectively happening.

A first preparatory measure of political nature is the creation of a transparency mechanism for all consultable to explain the path of money, how much it comes out of fuel subsidies and where it will end up in the various sectors of the budget. Thus, the population sees the benefits.

Fig. No. 1- Example of the transparency mechanism of the flow of funds taken from the subsidy to fuels, to be presented annually to the population

The problem of market structure

Entering the economic area there is a question that is raised and should be confronted. It is evident that the termination of fuel allowance will increase their prices.

In 2021, there were 951 gas stations in Angola, of which 432, would be controlled by small operators without brand. Sonangol Distribuidora is the largest in the distribution segment with a market share (sales) of 64%, Pumangol is the second largest player with 24% and the remaining 16% are distributed by Sonangalp and Tomsa (Total Marketing and Services Angola)[3].

The question is the definition of the structure of this market. A first analysis could appear to be facing a competitive market, but the weight of Sonangol and Pumangol, representing a total of 78% of sales market quota indicates that we are facing an oligopolistic type market, where few companies dominate the sector. It is known to price theory that oligopolistic markets have higher prices than perfect competition markets, where no one dominates the market. The oligopoly price is fixed by companies above the price level that would prevail in competition and below the monopoly profit maximizing price level. It is a market structure that constitutes a intermediate case, where there are few companies that compete with each other.[4] Consequently, removing the subsidy of fuel prices in an oligopoly situation would be equivalent at a higher price than the market equilibrium price and to put the population to finance higher profits from fuel distribution companies.

It is fundamental while the gradual withdrawal of prices begins to increase the number of relevant operators in the market and put them to compete with each other, without anyone mastering the market.

The most advisable was to split Sonangol Distribuidora in three different companies and immediately privatize two of them. Thus, we would have at least 5 relevant operators in competition.

Fig. No. 2- Sonangol Distribuição Scheme to ensure competition in the market

Forms of compensation/mitigation of the removal of subsidies

Described was the need to create a fund flow transparency mechanism for political consensus purposes, as well as the need to reform the market structure of the Downstream segment as a way to prevent oligopoly price formation, that is, higher than normal, it is time to make suggestions for compensation for the removal of subsidies.

The starting point is that there will be no savings of all values pointed out as a cost, 2.8 to 3.7 billion euros per year, and that there are sectors and populations that must be protected. We speak, of course, the populations with less income and the areas of transport and food and agricultural distribution.

Measures can start from various focuses:

a) Focus on the subject

AA) direct subsidy to the most disadvantaged and social pass

AB) direct allowance to companies

AC) Tax Benefit /Negative Tax to AA) and AB)

b) Focus on the object

BA) Subsidized fuel prices continues for lower displacement vehicles

BB) subsidized fuel prices continue for transportation companies and similar

c) Composite systems

Explaining each of the items and possibilities. We would have the following:

a) Focus on the subject

AA) direct subsidy to the most disadvantaged and social pass

A first hypothesis would be the granting of a fuel subsidy to all those who had a vehicle and/or used fuel in a given activity and showed an income below a given level. This wanted to say that the citizen who used fuel and had low income would receive a direct subsidy of the state in order to alleviating the negative effects of the price of fuel climbing.

In addition, a reduced social pass could be created, allowing any citizen to use transport without repercussion of the amount of fuel climb.

AB) direct allowance to companies

Another hypothesis would be that of direct allowance to transport and distribution companies. So that they did not reverberate the price of fuel in prices charged to the public, there would be compensation paid by the state that would cover the differential. Companies would receive funds so as not to increase prices.

AC) Tax Benefit /Negative Tax to AA) and AB)

In this situation, the instrument used for compensation would be the fiscal system, not the direct transfers of subsidies. It would be allowed to natural persons to a certain level of income and the companies of the affected sectors presented as tax deduction the value of the differential paid with the rise of prices. For example, if they previously paid 5 and then they would pay 10, they would have the opportunity to present an amount of 5 as a fiscal deduction, paying a lower tax.

In a superficial situation, such a deductive possibility would only apply to entities who paid tax, leaving out those who do not pay or are exempt. In these cases, a negative tax should be made, that is, a system through which low-income people would receive supplementary government payments rather than pay taxes. These supplementary payments would be equal to the additional amounts spent on fuel by these people.

b) Focus on the object

BA) Prices of subsidized fuel continues for lower displacement vehicles

In this hypothesis, what would happen would be the establishment of different levels of price for fuel according to the displacement of vehicles. Low-displacement vehicles would pay a lower price and vice versa. It would be a kind of progressive price.

BB) subsidized fuel prices continue for transportation companies and similar

In this case, the system would be the same as indicated above, with the difference that the beneficial price would be applied to the vehicles of transport companies and similar.

c) composite system

It is evident that the above systems can be mixed or complemented by each other, and it is up to the political decision-making to find the best technical combination.

Fig. No. 3- Possible compensatory solutions for the removal of subsidies to fuels

Need for financial calculations

There are no financial calculations in this work because the numbers are not known. The Minister of Finance presents an order of magnitude of current spending quantity with fuel subsidy, which is between 2.8 and 3.7 billion euros per year. Easily it is found that the differential is too large (900 million euros) to do a finer arithmetic of the situation.

[1] IMF, STAFF REPORT FOR THE 2022 ARTICLE IV CONSULTATION, February 7, 2023, p. 7.

[2] https://angola24horas.com/component/k2/item/26418-governo-angolano-prepara-fundo-de-investimento-imobiliario-para-gerir-ativos-recuperados

[3] Data from Expansão: https://expansao.co.ao/expansao-mercados/interior/sao-951-postos-de-combustivel-e-454-de-bandeira-branca-101135.html

[4] See for example, George J. Stigler, https://cooperative-individualism.org/stigler-george_a-theory-of-oligopoly-1964-feb.pdf

Angolan Economy trends, necessary reforms and national employment plan

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Social life in Angola is very alive and, at this moment, political and judicial matters dominate the country’s agenda. However, it is in the domain of the economy that there is an extremely significant evolution on which it is important to reflect and proceed to a careful analysis.

The recent (February 2023)[1] International Monetary Fund (IMF) report on the country underlines the favorable advances of the Angolan economy and also the necessary reforms. It is based on this report that we will enunciate Angola’s main trends in the economic field and the neuralgic points to avoid relapses such as the last long recession that began in the presidency of José Eduardo dos Santos.

Positive Trends

Angola’s economy is in full recovery after the five-year recession (2016-2020). By 2022, supported by higher oil prices and resilient non-oil activity, it has already reached growth of more than 3%, estimating the IMF that by 2023 the country continues to see the GDP increase in the order of 3.5%.

Therefore, we see growths of over 3% per year, which by our calculations, maintaining the price of oil and accelerating the liberalization of Angolan markets and foreign investment, could accelerate to numbers of 4% or 5%, adopted that are the right policies.

The optimism we share here results from the fact that non-oil growth has been widespread, despite a difficult external environment, as it means that the non-oil sector is reviving, as well as the attention that several developed countries with market economies are providing Angola, as is the case of US, Spain, France and Germany. Mentions should be made to recent visits to Angola of the King of Spain and the President of the French Republic, Emmanuel Macron (February and March 2023).

It should be noted that the debt that the public debt/GDP ratio has dropped about 17.5 percentage points of GDP, for an estimated 66.1% of GDP, aided by a stronger exchange rate. It is estimated that the checking account remained with a large surplus in 2022, while coverage of foreign currency reserves remained adequate (IMF data).

The fact is that the Angolan government has, according to the IMF, to adopt and maintain solid macroeconomic policies and maintained a commitment to structural reforms that are vital to Angola’s economy.

Necessary reforms

We understand that it is in the verification of fundamental structural reforms that resides the future of the Angolan economy. We highlight some reforms that are necessary to take and/or continue.

1-First renovation, with impact on the medium and long term, is to foster training for the economy of young people. Training not only means, and perhaps not in most, university education, but solid training in basic education and in professional aspects. We argue, therefore, that there must be an effective bet on vocational and technical education in Angola, before any other. A real bet on professional and technical schools and institutes, which are seen as valuable alternatives to academism and not mere university imitations (tragic error of Portuguese polytechnics).

2-Second renovation entails the creation of more conditions for investment, no longer at the legal level, where there is a modern framing and updated twice during the presidency of João Lourenço, but at the judicial, administrative and good practices level. The investor must feel safe to arrive in Angola and apply his money. One should not be afraid of being without the money due to any interference from an oligarch, or see any process dragging on in court. The speed and impartiality of justice is linked to good investment.

3-Third reform is dedicated to the financial sector, there is a special emphasis on increase credit to private persons and and the resolution of banking weaknesses. Quickly we must merge and capitalize banks, creating a banking sector not dependent on the state, clientelism or mere public debt management.

Finally, among other reforms, we highlight the true imperative of making more progress in strengthening governance and transparency, to improve the business environment and promote private investment.

Of course, continuing and accelerating anti-corruption strategy is also important.

National Employment Plan

All these news should be framed with the well-being of the population and the serious problems still pending. The one we highlight is unemployment, which although noting a slight descent, is still very high, about 30% [2]. This is an area in which we advocate direct state intervention. It is evident that the increase in GDP corresponds to an unemployment decrease, however, we believe that in the face of such high unemployment, in the short term the immediate action of the government is fundamental.

In this sense, the recent announcement of the World Bank of US $ 300 million for a project to accelerate economic diversification and job creation[3] is to greet. Not knowing in detail the design of this acceleration program, its existence should be underlined, as well as the previous announcement of the Angolan Labor Minister of the creation of a National Employment Program, with the aim of creating more opportunities for insertion of young people in job market[4]. Also, in this case, the data are scarce about the design of the plan, and it is certain that the President of the Republic had declared in the discourse of the State of the Nation of 2022, the creation of the referred plan.

So far, these initiatives related to unemployment, although positive, seem uncoordinated and poorly implemented. Therefore, the truth is that Angola would win to see a comprehensive national employment plan, specific and directly coordinated by the President of the Republic, without the risk of not properly implemented a plan, which in the short term is fundamental to the economy and Angolan population.

Fig.N. º1- Key Numbers of the Angolan Economy

[1] https://www.imf.org/en/News/Articles/2023/02/23/pr2352-angola-imf-executive-board-concludes-2022-article-iv-consultation-with-angola

[2] https://www.ine.gov.ao/

[3] https://correiokianda.info/banco-mundial-financia-usd-300-milhoes-para-fomento-do-emprego-em-angola/

[4] https://www.jornaldeangola.ao/ao/noticias/programa-nacional-de-emprego-e-implementado-este-ano/

The Angolan economy and the need for a new constitution

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Constitutions do not solve problems, but give powerful signs. It is of these powerful signs that Angola’s economy needs at this time.

If we look at the great macroeconomic data, we come across an encouraging picture. Inflation since March 2022 slowed from 27.66% to 13.86% in December 2022, an impressive data, Kwanza, the national currency, oscillates freely in the international market, the State General Budget has a surplus, public debt came down markedly, for a value close to 60% of GDP. The economy grew again in the orbit of 3% by 2022, predicting an increase of 2.7% in 2023. However, oil continues to rise, 86.27 the barrel/brent (25-01-2023).

Therefore, those who can be considered the “fundamental” of the Angolan economy are healthy after a long shortage which began in 2015/2016.

However, the international investment that should flow to Angola is not reality yet, and the threat of instability is latent, as the interview of opposition leader Adalberto da Costa Júnior demonstrates to a Portuguese newspaper [1] last week, not recognizing Electoral results, courts and, therefore, and from what one apprehends any institution of the State; in practice, assuming as possible a power outlet by force.

Consequently, we have a work of meritorious economic stabilization that for political reasons, as well as those that Keynes called “Animal Spirits” (emotions that determine human behaviour), does not produce the desired effects and usually described on economics manuals.

Now, it is precisely this need to unleash the “animal spirit” that does not move in the Angolan economy and the threats of political instability that gives rise to the urgency of discussing a new Constitution to Angola.

It is well known that the Angolan Constitution approved in 2010 is not consensual and was designed in a legal tailoring taking into account the figure of José Eduardo dos Santos, introducing, what Jorge Miranda, the famous Portuguese constitutionalist, dubbed “simple representative government system, to which, diverse configurations were reappointed  the French Cesarian Monarchy of Bonaparte, the Corporate Republic of Salazar according to the 1933 Constitution, the Brazilian Military Government according to the 1967-1969 Constitution, several African authoritarian regimes.”[2]

Although having suffered a review in a more democratizing and open sense in 2021, in which the autonomization of the Central Bank stands out and the creation of a constitutional system of supervision of the executive branch by the legislature, it is certain that the constitutional genesis prevents always whenever this is a symbol of an open society and a free economy and on the other hand, it contains no mechanisms of constitutional protection as proposed by Karl Loewenstein and adopted in the German Basic Postwar Law. These mechanisms protect the constitution of internal threats to the constitution itself and are a fundamental element for political stability.

In addition, it is important to reinforce the mechanisms of defense of private and foreign investment. If we notice, private investment is only mentioned once in the Constitution in Article 38, and the history of opportunism and true “theft” of foreign investors in Angola was a reality that requires special normative attention. Also the provisions on the land (article 15) must be updated and rationalized, as well as the guarantee of justice with rapid and impartial judgments.

Justice is admittedly one of the essential aspects of a proper functioning of the economy, expecting predictable and timely decisions. There is no doubt that the Angolan judicial system needs a large “aggiornamento” that would be introduced by a new constitution.

In a mere economic perspective, it is clear that a new constitution would be a sign, a symbol of a new time that would attract investors and give hopes of political and legal stability.

As mentioned at the beginning, a new constitution does not solve all problems, its role is to announce a new time open to investment, market economy and progress and development of the country. It would be the culmination of economic reforms recently enclosed.

[1] Adalberto da Costa Júnior, 2023, Nascer do Sol, https://sol.sapo.pt/artigo/790625/houve-muita-pressao-para-tomar-as-instituicoes

[2] Jorge Miranda, A Constituição de Angola de 2010, CJP-CIDP, p. 42

Angola: new Constitution, new Republic?

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REFLECTION PAPER

Current situation and anocratic regimes

In a usual situation, the agitation and tension that was felt in the months preceding the general elections of August 2022 in Angola, it would have given rise to the normality and quiet functioning of the institutions until the following electoral act occurred in 2027. However, the strong divisions that were felt and that kind of almost global strife that existed until August does not seem to decrease, creating a situation of constant aggression, without an end to the sight in the present system. Symptom of this is the recent interview given by the opposition leader to a Portuguese newspaper, which declares “neither I nor the party recognize MPLA’s victory, because we know that Unita had more votes. We heard people across the country. Society wanted us to take over the institutions, but we didn’t want chaos.[1] ”

Consequently, on the one hand, the main opposition party has assumed a policy that we will call the “double road.” Such a policy disputes government within the institutions, although not recognizing its legitimacy, also challenging the institutions themselves. The “double road” accepts that the opposition is made within institutions and outside them; In a way, institutions are seen as another instrument of a broader project of confrontation with the government. It is evident that this posture leads to a difficult manichaeism to manage and undermines any openness and respectability that is intended with the investment. The lack of respect for institutions makes everything too dependent on the will of the political decision makers and the conjuncture.

On the other hand, the government party is embarrassed to lead its announced reforms, it is as if the party were not one but two parties. A party mass is dissatisfied with the proposed changes, it wanted that João Lourenço to be just a more skilled manager than José Eduardo dos Santos, but not to introduce background reforms, another sector wants to be taken effective reforms and is bothered by the eventual slowness of these reforms. They have the notion that without a deep reformist process, Angola can become a state with no future.

There is thus a strong instability, for various reasons, in parties that form the sustainment of the political system.

The National Assembly does not seem to be a deliberative chamber of the nation’s feeling, but a mere stage of a broader dispute, becoming in a means and not an end, removing it the sovereign weight that would be inherent.

With a more frightening record the justice arises. The one who is the basic pillar of a democratic rule of law offers more doubts than certainties. In combating corruption, with honorable exceptions, the judicial system has been based on inefficiency and slowness, not already realizing where this structuring program of the state is walking. As we have already written: “It is true that the supreme court’s design contained in the 2010 Constitution helps to its dysfunctionality. In fact, the Angolan constitutional legislator wanted to make a court following the model of the US Supreme Court grafted in a judicial system of Roman-Germanic type, that is, Portuguese. Now a top court in the Portuguese, German or French judicial system has nothing to do with a top court in an Anglo-American system. They are different concepts and structures. What is asked for an American supreme court is not what one asks for a Portuguese Supreme Court. In the first case, only large and innovative law issues arrive there. It is already a kind of court of reflection, while in the second Roman-German case-the Supreme acts as a last instance of appeal for almost all cases. However, in Angola, a court was thought in the American way to operate in a Portuguese manner. Therefore, a light structure that was only dedicated to a small number of cases had to face the task of being a usual court of appeal for a myriad of cases. That could only give bad result, as it gave. In addition to the dysfunctionality of constitutional design, it has been understood that the judges of the Supreme Court do not have adequate preparation to deal with the complexities of economic and financial crime, not having throughout their career came across with these issues at the sophisticated level to which they have been appearing, which has led to some much criticized decisions and to a large procedural default.

“Beginning the country simultaneously a phase of great appeal to foreign investment, as well as betting on the fight against corruption, is well to see that a poorly designed and thought court has to be reformed and remodeled. [2]”

Overall, justice has not offered guarantees of speed and technical impartiality, and its actors have had a surprising tendency to get involved in consecutive scandals.

On the part of the population there is a timid idea, but discussed in many outside, that current institutions and political parties were designed for a war and confrontation environment, and these characteristics are in their core, and therefore are not able in dealing with a new Angola, where the central objectives are the development and well-being of the population. This means that it is considered that the “old” parties no longer correspond to the wishes and interests of the population, not offering consistent and appealing solutions. The abstention rate of the last general elections (54%) is a mirror of this situation.

A National Assembly that has become a mere-instrument-power and counterpower instrument, an inept justice and an anacronic party system, define this Angolan institutional system.

This whole situation, a little diffuse, but whose signs abound, can make the country in an ancracy. What is an ancracy? The ancracy has been defined as an unstable regime that combines elements of authoritarianism and democracy. The ancracy has an incomplete development of mechanisms of dissension and consensualization and is associated with permanent agitation or ingenability, which make the political process difficult[3]. The existence of an annocratic situation increases the likelihood[4] of a civil war. Putting the theme in another way, what it seeks to question is whether the Angolan situation is inherently unstable and can it resort to a civil war?

The answer is simple, although having two parts. No, Angola has not yet experienced an anocracy situation. However, structuring measures are required to exceed present blockages and dissatisfaction.

New Constitution and New Republic

It is necessary to create an agile state, with respected institutions, a functional public administration and a market economy with free and competitive actors, all contributing to the progress and well-being of the population.

The structures inherited from colonialism and wars must be transformed and exchanged for structures of modernity and development, taking into account the culture and history of Angola.

A new historical cycle with a new structure is critical.

The first measure is to establish a new constitution. The current 2010 Constitution is not consensual and, to some extent, is a legal misconception designed to please the personal desires of José Eduardo dos Santos. Fundamental will be to propose a new constitution, more Angolan and more protective of institutions, which marks a fresh start.

It is understood that this new constitution should address aspects as different as the possibility of separate (direct or indirect) election of the President of the Republic, giving him his own legitimacy and ensuring that the president presents himself as a national leader and not a party leader , the creation of a Second Legislative Chamber composed by the traditional authorities (allowing the introduction of different and plural voices in the legislative process, recovering African culture), the introduction of militant democracy mechanisms as the German fundamental law has (such as Karl Loewenstein[5] wrote Democracy should be able to resist those political agents who use democratic instruments to ensure the triumph of totalitarian or authoritarian projects of power, meaning that the Constitution must contain mechanisms of defense and repression of attempts to overthrow the constitutional regime, which now does not exist with sufficient strength in the Angolan Constitution). Obviously, that the reformulation of judicial power, the change in the symbology of the republic, would be other aspects of this new constitution.

A constitutional change is not enough without the organization and administration of the state. Also here the transformation project has to be comprehensive and seeking the release of colonial and Marxist models, introducing a public administration suitable for the new times. Examples may come from Asia, such as China and Singapore[6], or neighboring countries like Botswana or South Africa. The paradigm must be a merit -based administration based on effectiveness and service to the population. Of course, this implies the end of the clientelist influence on administration, deconcentration with autonomy and decision-making capacity, a completely new way of seeing the administrative procedure, not as a set of rules, but a set of good practices and goals dedicated for the common good and effectiveness.

It is evident that only a few topics are left here about advisable structural changes, according to our perspective, to transform Angola into a modern and prosperous state.

[1] Adalberto da Costa Júnior, interview to Nascer do Sol, 20-01-23

[2] CEDESA (2022). A necessária reforma do Tribunal Supremo em Angola, https://www.cedesa.pt/2022/11/24/a-necessaria-reforma-do-tribunal-supremo-em-angola/

[3] Jennifer Gandhi e James Vreeland (2008). “Political Institutions and Civil War: Unpacking Anocracy”. Journal of Conflict Solutions. 52 (3): 401–425; Patrick Regan and Sam Bell, Sam (2010). “Changing Lanes or Stuck in the Middle: Why Are Anocracies More Prone to Civil Wars?”. Political Science Quarterly. 63 (4): 747–759.

[4] Patrick Regan and Sam Bell, Sam (2010). “Changing Lanes or Stuck in the Middle: Why Are Anocracies More Prone to Civil Wars?”. Political Science Quarterly. 63 (4): 747–759.

[5] Karl Loewenstein (1937) Militant Democracy and Fundamental Rights, in: American Political Science Review 31.

[6] M. Shamsul Haque (2009), Public Administration and Public Governance in Singapore in Pan Suk Kim, ed., Public Administration and Public Governance in ASEAN Member Countries and Korea. Seoul: Daeyoung Moonhwasa Publishing Company, 2009. pp.246-271.