Floating exchange rate is a big mistake in Angola

/in /by

João Shang– Research Associate at CEDESA / Kwenda Institute principal investigator

What is a floating exchange rate? A floating exchange rate means that the price level of the national currency is determined by the mechanism of supply and demand without interference from the central bank, either locally or in the external environment.

International currencies, such as the US dollar in the United States and the euro in the European Union, are traded through international currency exchanges in a floating system. However, their governments often try to determine currency prices through indirect monetary policy mechanisms in order to obtain economic benefits. For example, the US can only reduce the profits of third countries that use US dollars by raising interest rates.

The National Bank of Angola introduced the new monetary system in 2018. On January 1, 2018, one US dollar was exchanged for 165.92 kwanzas, after the introduction of the floating exchange rate, on December 30, one US dollar was already worth 308 kwanzas. In the last year, the US dollar reached a maximum of 954.50 Angolan Kwanzas per US dollar on October 2, 2024. The minimum rate for the USD/AOA exchange was 827.48 Angolan Kwanzas per US Dollar on October 27, 2023. The general USD/AOA exchange rate has risen by 10% in the last year.

This means that the US Dollar has gained value against the Angolan Kwanza. The Kwanza currency has not been able to stand up to foreign currencies, so it is continuing to depreciate.

As another example, in 2021, the Sudanese Minister of Finance, Gabriel Ibrahim, announced that the Sudanese pound would have a floating exchange rate, one US dollar could be exchanged for 375 Sudanese pounds, whereas before the decision to implement a floating exchange rate, one US dollar could be exchanged for 55 Sudanese pounds. The price increased by 580% for the exchange of Sudanese pounds.

The implementation of floating exchange rates in developing economies can bring risks with unpredictable consequences. Below I will explain the risks of floating exchange rates.

What types of currency fluctuations do they include?

There are two types of exchange rate fluctuation. The first, which we referred to in the definition of exchange rate fluctuation, is absolute fluctuation, and the second is managed fluctuation, i.e. the central bank intervenes to guide the rise in the exchange rate or to target the national economy.

The controlled float is generally implemented by economically stronger countries, which account for a considerable share of international trade, so they tend to adopt this method to increase or decrease the import or export of goods.

In order to maximize exports and reduce imports, the global economy has been experiencing so-called currency wars since the international financial crisis of 2008.

Countries with weak economies can also adopt floating exchange rate systems, but this will cost them enormously. This is exactly the case in Egypt, which depends on foreign investment to support its debt in order to stabilize the exchange rate of the Egyptian pound.

How to set exchange rates?

Since 1971, the world has abandoned the gold standard to set exchange rates and established a basket of currencies to determine exchange rates. Determinants include foreign exchange reserves, gold reserves and the performance of the gross domestic product, the existence of local products with higher added value, thus greatly increasing the value of its currency. This is because external demand for the country’s products increases the country’s foreign exchange reserves, its balance with the outside world.

There are several types of exchange rate. The first is the administrative exchange rate, which does not depend on the mechanism of supply and demand, but depends on the monetary authority’s decision to set the exchange rate. The second type is the free exchange rate.

The third is the managed exchange rate, i.e. the monetary authority intervenes through the open market mechanism to set the exchange rate. This means that the monetary authority intervenes in the buying and selling of currency to achieve a price it believes to be balanced.

What do its negative effects include?

The decision to float a currency during a period of economic turmoil usually has a series of negative consequences for the economy and society, the most common of which is high inflation. External markets will also be affected because the external debt that the country needs to pay increases, especially when they are short of foreign currency resources.

Floating exchange rates help stop money laundering crimes？ Who benefits?

The biggest beneficiaries of a floating exchange rate are those who had savings in foreign currency.

The second is for debtors, especially those who owe banks and official financial institutions, as they will be able to pay off their debts for less than the real value of the debts they have received and will be able to pay off large debts by selling some of their assets.

The third are the big traders, the so-called wholesalers, agents or big importers.

The fourth is producers of raw materials for export, whose production depends on local supply, but only if they have high production flexibility to meet the demand for local products after the exchange rate fluctuates. After implementing a float, they can take advantage of the currency devaluation to obtain larger quantities of local products that they need in the production of goods for export.

The fifth biggest beneficiary is the government, which reduces the burden on the country’s general budget by significantly devaluing its domestic debt.

Who will suffer?

In countries that adopt floating exchange rate policies, some people will also suffer losses, led by those who hold savings in local currency – their savings will devalue due to the reduction in the currency’s purchasing power. After the implementation of the floating exchange rate, this group of people will lose a large part of their wealth.

The second is creditors denominated in local currency, because the value of the debt they service is lower than the original value after the implementation of the flotation, so the gains they receive cannot compensate for this loss. In these cases, the long-term debt is considered a significant loss for the creditors.

The third are holders of goods that cannot increase their price according to the extent of currency depreciation, such as those who have real estate as an asset. It is difficult for these commodities to increase their prices by 100% in a few days, the market would face a severe recession.

The fourth is importers, who will be faced with high bills for the goods they import, while producers who depend on imported production supplies will also suffer because they are forced to increase the price of their products.

The price of foreign currency is increasing at such a rate that their products are not competitive on the local market or on the international market, so with the implementation of currency fluctuation, industrial activity will decrease, while commercial and service activities will increase.

The fifth largest group to suffer losses are employees on fixed incomes, because their salaries cannot be increased to the same extent as the depreciation of the currency, their salaries by 50% or 100%. So what should we do if a situation like Sudan’s occurs, where a floating exchange rate causes the currency to depreciate by more than 580%?

What are the advantages of floating exchange rates?

The implementation of floating exchange rates in developing economies can bring risks of unpredictable consequences, especially in countries with weak political institutions, a lack of transparency and fragile rule of law.

However, from an economic perspective, a number of positive effects can be achieved through the implementation of the floating exchange rate process, the most important of which is the elimination of the black market, since traders will receive a single rate for foreign currency within banks and all other institutions.

In theory, floating exchange rates can help suppress money laundering crimes, because money laundering crimes are an important way of committing crimes on the parallel or black market exchange rates. In the case of floating exchange rates, foreign exchange transactions can only be carried out through official channels, channels that money laundering gangs cannot use.

But in reality, the floating exchange rate failed to prevent money laundering, which is why on October 25, 2024, the Financial Action Task Force announced that it had placed Angola on the institution’s gray list for money laundering, terrorist financing and arms proliferation.

At the same time, the floating exchange rate in Angola has also caused serious foreign exchange illiquidity, with domestic and foreign entrepreneurs unable to send foreign currency abroad to buy goods, and having to use the informal market to keep their businesses afloat.

When they don’t send the money abroad to buy new goods, domestic consumer prices rise sharply. This situation has been going on for a long time in Angola. The main reason is that the Kwanza is a weak currency against Western currencies, which is why since the introduction of the floating exchange rate in 2018 the Kwanza has been devaluing and never stops. Canceling this floating exchange rate system is a priority.

China’s new strategy for Angola

/in /by

João Shang – Research Associate at CEDESA (China-Africa area)

In November 2010, China and Angola established a strategic partnership.

On March 15, 2024, the two heads of state (Xi Jinping and João Lourenço) announced that they would improve China-Angola relations by promoting a comprehensive strategic partnership.

Despite some problems, relations between Angola and China have always evolved positively. Since 2002, political cooperation and trade between the two countries have reached their peak. But in the case of cooperation and exchange in the area of culture and education, there is still a need to work together.

In the 41 years since diplomatic relations were established, the relationship between the two countries has become an example of friendly South-South cooperation. The deep China-Angola friendship has its origins in the arduous struggle of the two peoples to achieve national liberation. The two sides are naturally good partners and good brothers.

China always adheres to mutual respect and equal treatment. It never attaches political conditions to cooperation and never interferes in Angola’s internal affairs. The two countries have always helped each other, supporting each other on issues concerning fundamental interests and major concerns, jointly safeguarding the international system and multilateralism with the UN as the center.

We have set an example of mutual benefit and win-win cooperation between China and Africa. China-Angola pragmatic cooperation has been continuously developed and consolidated.

I am pleased to tell you that China is a champion of cooperation with Angola in various sectors, such as the largest economic and trade partner, the largest importer of Angolan products, and the main source of investment for Angola. We have set an example of friendship between the people of China and Angola. China has actively supported Angola’s development and provided assistance through various donation projects, such as CINFOTEC Huambo, the Luanda General Hospital, the Agricultural Technology Demonstration Center in Mazozo, and the Venâncio de Moura Diplomatic Academy. The Confucius Institute of the University of Agostinho Neto and other Chinese language educational institutions have given wings to Sino-Angolan cooperation, more and more Chinese films and cultural products and art groups have entered Angola, and the literary works of Angolan writers have been translated in China, helping the people of both countries to better understand each other’s history and culture.

In 2023, high-level exchanges between China and Angola were frequent and close, while interaction at all levels flourished. Visiting Angola were China’s Minister of Foreign Affairs, China’s Minister of Commerce, Cda. Yin Li, member of the Political Bureau of the Central Committee of the Communist Party and Secretary of the Beijing Municipal Committee of the Party, Cda. Su Hui, Vice-Chairman of the Chinese People’s Political Consultative Conference and Chairman of the Central Committee of the Taiwan Democratic Autonomy League. A delegation from the National People’s Assembly came to Angola to take part in the 147th IPU Assembly. Several high-level party and central and local government delegations traveled to China, including the delegation of the Angolan Minister of Industry and Trade to the third edition of the China-Africa Economic and Trade Exhibition and the delegation of the Minister of Energy and Water to the third edition of the Belt and Road Forum for International Cooperation. Angola’s Foreign Minister successfully visited China. China’s Shandong province and Angola’s Bengo province signed a letter of intent for cooperation.

Strategic communication between China and Angola is growing closer, friendship is deepening and cooperation and exchanges in various fields have gained momentum. So far there are 12 more Angolan literary works translated by me, for example, Estórias do Musseque, UANGA, Nga Mutúri, Luuanda, A Montanha da água lilás, Que Me Dera Ser Ondas, A Morte do Velho Kipacaça, Bola com Feitiço, A Dívida da Pexeira, O Principe Merdroso, Undengue, Uma vida sem trégua.

Through works translated into Mandarin, the Chinese people are getting to know Angola. At the same time, the promotion of Angolan tourism can attract more Chinese tourists.

In 2023, there was a lot of good news for China-Angola pragmatic cooperation. The annual volume of bilateral trade reached 23.05 billion US dollars. Angola once again became China’s second largest trading partner in Africa. The second meeting of the China-Angola Economic and Trade Cooperation Steering Committee was successfully held and the Agreement between China and Angola on Reciprocal Investment Promotion and Protection was signed. Progress was made on the major China-Angola infrastructure cooperation projects. The Caculo Cabaça Hydroelectric Plant completed the first phase of the provisional detour of the Kwanza River. The New Luanda International Airport and the Luachimo Hydroelectric Plant were inaugurated. CINFOTEC Huambo, offered by China, was officially handed over to the Angolan government. The New Port of Caio, Angola’s National Broadband Project and the Lobito Refinery are progressing steadily. China-Angola cooperation continues to expand in the energy and mining, manufacturing, agriculture and fisheries sectors, and investment projects have been launched successively, helping Angola to achieve its goal of economic diversification.

In 2023, cultural exchanges between China and Angola were vibrant. The “China-Angola Friendship Day” was celebrated with great success. Journalists, academics and young talents from Angola visited China for friendly exchanges. The Chinese Language Proficiency Contest “Chinese Bridge” and the Reading Contest of Chinese Classical Works were held in Angola. The Confucius Institute at Agostinho Neto University and the Venâncio de Moura Diplomatic Academy jointly opened Chinese language courses. Dozens of Angolan friends won prizes in the #ChinAnGood series of photo and short video competitions. Thousands of people took part in the 2nd Chinese Film Cycle. The Chinese Embassy in Angola, in partnership with the Catholic University of Angola, organized a Conference focused on development, where academics from both countries exchanged ideas, contributing their wisdom to the development and cooperation of our countries. We are very pleased to see that enthusiasm for the Chinese language and culture continues to grow in Angolan society, especially among young people.

It should be noted that the development of the motherland and the deepening of China-Angola relations cannot be separated from the hard work of Chinese companies and institutions and Chinese residents in Angola. We have noted that in the face of separatist activity in pursuit of “Taiwanese independence”, Chinese compatriots in Angola issued early statements of condemnation, strengthening the international voice in support of China’s unification. We have noticed that under the scorching heat of the sun, Chinese builders insist on fighting on construction sites to promote the inauguration and operation of China-Angola cooperation projects with benefits for the local community. We have noticed that during the heavy rains in Angola, Chinese companies and Chinese organizations have voluntarily provided accommodation centers and donations to help the affected community. We have noticed that despite the difference in skin color and language, our compatriots and Angolans are able to relate to each other and create fraternal and brotherly bonds.

China has steadfastly followed the path of peaceful development, actively opening up to the world and participating in global governance. Challenged by the historic question of “what kind of world will we build and how will we build it”, China has put forward the important concept of building a community with a shared future for humanity and has set up the Global Development Initiative, the Global Security Initiative and the Global Civilization Initiative. China joins hands with more than three quarters of the world’s countries to jointly build the “Belt and Road”. It calls for equitable and orderly global multipolarity and economic globalization that benefits all, injecting Chinese wisdom and strength into promoting the world towards a promising future of peace, security, prosperity and progress.

Secondly, the 2024 Summit of the Forum on China-Africa Cooperation (FOCAC) was successfully held in Beijing last month. Heads of State and Government and representatives from 53 African countries met in Beijing to discuss plans for friendly China-Africa cooperation in the new era. The China-Africa relationship has been elevated to a community with a shared China-Africa future of all times in the new era.

The Chinese president announced that over the next three years, China will work with Africa to take the ten partnership actions for modernization, including the ten areas of mutual learning between civilizations, trade prosperity, supply chain cooperation, connectivity, development cooperation, health, agriculture and people’s welfare, people-to-people exchanges, green development and common security. To implement the ten partnership actions, the Chinese government will provide financial support of 360 billion yuan over the next three years. This includes a 210 billion yuan credit line, 80 billion yuan of assistance in different forms, and at least 70 billion yuan of investment in Africa by Chinese companies, providing strong support for pragmatic China-Africa cooperation in various fields.

Therefore, in the coming years, Angola may also have more opportunities for cooperation with China. To make things easier, Angolan entrepreneurs have already been exporting goods to China tax-free since December 2024. Around 98% of Angolan goods imported into China have tax benefits. In this way, Angolan entrepreneurs can earn more foreign currency. 

The problem of recovering Isabel dos Santos’ assets in Portugal

/in /by

In his recent speech to the United Nations General Assembly, the President of the Republic of Angola, João Lourenço, was incisive about the recovery of Angolan assets abroad.

“With regard to the recovery of assets, we have had two successful cases, in which the UK authorities took a very responsible attitude and respected our sovereignty (…) Unfortunately, not all the countries that agreed to receive these assets of corruption without questioning their origins at the time, today respect the judgments of our courts, which are mandatory. Some of these countries even arrogate to themselves the right to question the credibility of our courts, almost wanting to review the judgments issued by them, as if they were extra-territorial appellate bodies.[1] “

It is obvious that this question arises, and it arises in the case of Isabel dos Santos’ assets in Portugal, not because of the existence of decisions by Portuguese courts that call into question the Angolan courts – which has not happened so far – but because of the functioning or non-functioning of various criminal procedural rules. It is worth analyzing in as much detail as possible what has happened with Isabel dos Santos’ main assets in Portugal, in order to try to reach some conclusions.

THE SALE OF EUROBIC

Recently, a fact caught the public’s attention.  The sale of Isabel dos Santos’ stake in the Portuguese bank EuroBic to ABANCA, a Spanish bank.

In the sale of Isabel dos Santos’ stake to the Spanish bank, some entities were identified as having Isabel dos Santos as the ultimate beneficiary, namely Santoro Financial Holding, SGPS, S.A. with 25% of the bank’s share capital and Finisantoro Holding Limited with 17.5% of the bank’s share capital, totaling 42.5%[2] . These holdings were subject to a preventive seizure decreed in several Portuguese criminal proceedings, namely nº 210/20.4TELSB, nº 26310/21.5T8LSB and nº 10314/22.3T8LSB.

Apparently, according to the public information available, the amount received by Isabel dos Santos for the sale to ABANCA, around 127.5 million euros, was held in escrow under the previous terms of participation,[3] although the exact terms are not entirely clear.

Two questions arise in relation to this asset and its possible recovery. The first is the nature of the preventive seizure made in connection with criminal proceedings.

Preventive distraint is a measure of criminal procedure, provided for in article 228 of the Portuguese Code of Criminal Procedure, which seeks to guarantee payments that the defendant will incur in the future, whether they are related to any pecuniary penalty, costs of the proceedings or any other debt to the state related to the crime, or related to the loss of the instruments, products and advantages of a typical illegal act or the payment of the corresponding amount.

It is therefore a provisional measure that can be revoked by a judge or declared extinct. Without going into too many legal considerations, what is certain is that this seizure does not factually guarantee that, in the end, the Angolan state will receive any of these sums, either because the criminal proceedings in Portugal are not concluded, they lapse or even because Isabel dos Santos is acquitted.

As things stand at the moment, the amount will only be definitively withdrawn from Isabel dos Santos’ sphere in the event of a final and unappealable conviction in the aforementioned cases, which will probably take ten years or more.

Other situations, such as a statute of limitations, acquittal or closure, imply that the sums will be handed over to Isabel dos Santos.

What’s more, even in the event of a conviction, the truth is that these proceedings take place in Portugal, and the costs associated with them will first be reimbursed by the Portuguese state.

In fact, there is a legal weakness in the measures taken by the authorities of both countries in relation to Isabel dos Santos, which could mean that over time there will be no benefits from all this judicial action, at least for Angola.

Another aspect, still linked to this sale, is that it wasn’t just Isabel dos Santos, but 100% of the bank’s capital.[4] This means that the other shareholders also sold their positions and received their sums. Their list is public, just as it is public that they are not the target of any criminal proceedings in the Luanda Leaks or related cases.[5] There is no suspicion against these other shareholders.

The relevant point is that they are former associates of Isabel dos Santos, who with her founded BIC in 2005 in Angola, and who then moved with her to the then Banco Português de Negócios (BPN), which they bought and renamed EuroBic. For example, Luanda Leaks wrote: “The bank’s [Eurobic] then-chairman, Fernando Teles, was a dos Santos business partner.[6] “

The question that remains open, given the information published, is the financial relationship between these shareholders and Isabel dos Santos, given that they are considered “business partners” and, above all, whether the judicial authorities have looked into the matter. In the absence of a public response, it is assumed that there is no relationship, but it would have been good if this aspect had been clarified.

The essential conclusion is that the recovery of Isabel dos Santos’ assets in relation to Eurobic may happen in the long term, but it is very fragile.

EFACEC

Another well-known asset was EFACEC. The story is well known and is currently being contested by Portuguese state audit bodies.[7] We do not follow the position of the Portuguese Court of Auditors in this regard. In fact, at the time, nationalizing the company was the best way to safeguard the company’s permanence and jobs. We must not forget the media impact of Luanda Leaks and the whole investigation into Isabel dos Santos, which acted like a vortex that made everything disappear. The questions raised by the Court of Auditors may have made sense downstream, in terms of public management problems and subsequent inattention, but at the moment, it was the best possible decision.

The fact is that EFACEC was nationalized by Decree-Law no. 33-A/2020, of July 2. According to this law, there will only be a right to compensation according to the value of the respective rights, assessed in the light of the assets and financial situation of the legal person on the date of entry into force of the nationalization act, and in calculating the compensation to be awarded to the holders of nationalized shareholdings, the value of the respective rights is calculated taking into account the actual net assets (articles 4 and 5 of Law no. 62-A/2008, of November 11). Now, given what the Court of Auditors says in its report now presented, according to which “public financing of 484 million euros was necessary, with the risk of rising to 564 million euros[8] “, it is easy to conclude that the value at the time of nationalization was negative, and there is nothing to compensate the owners of the company (Isabel dos Santos) or anyone who owes it by virtue of any criminal proceedings (the Angolan state).

EFACEC’s situation is straightforward. Nothing will be returned to the Angolan state, because the company was in a negative net position when it was nationalized.

NOS

Finally, Isabel dos Santos’s stake in NOS is a major issue in the Portuguese legal system. The company’s official information states that in March 2024, Isabel dos Santos’ position corresponded to 26.7% through ZOPT, SGPS, S.A. therefore, the companies Kento Holding Limited and Unitel International Holdings, BV, as well as Isabel dos Santos, being (i) Kento Holding Limited and Unitel International Holdings, BV, companies directly and indirectly controlled by Isabel dos Santos, and (ii) ZOPT, a company controlled by its shareholders Kento Holding Limited and Unitel International Holdings, BV .[9]

The situation of Isabel dos Santos’ position in this company deserves some attention, because it has undergone a remarkable evolution, which has probably gone unnoticed by many.

In a first phase, on “April 4, 2020, SONAECOM, SGPS, S.A. (“Sonaecom”), which holds 50% of the share capital of ZOPT, SGPS, S.A. (hereinafter “ZOPT”), was informed by its subsidiary of the communication received from the Central Criminal Investigation Court of Lisbon (hereinafter the Court) to proceed with the preventive seizure of 26.075% of the share capital of NOS, SGPS, SA, corresponding to half of the shareholding in NOS held by ZOPT and, indirectly, by the companies Unitel International Holdings, BV and Kento Holding Limited”, controlled by Isabel dos Santos.[10] “

Then.

“In September 2022, Sonaecom informed that at the General Meeting of ZOPT it was decided to proceed with the amortization of Sonaecom’s participation in that company and the restitution of the accessory payments made by Sonaecom, for a consideration that includes the delivery of shares representing 26.075% of the share capital of NOS. As a result of this amortization, which was subject to the applicable legal procedures, Sonaecom is no longer a shareholder of ZOPT, which is now fully owned by Unitel International Holdings, BV and Kento Holding Limited, companies controlled by Isabel do Santos.

In December 2022, Sonaecom, at the end of the legal procedures, informed that it directly held 134,322,268 ordinary shares in NOS, corresponding to 26.07% of the share capital.”

The result of this evolution is that Isabel dos Santos’ stake is no longer part of a block that controlled the capital and management of NOS and SONAE now has effective control of the company on its own (37.37%), since 31.56% of the capital is distributed among others who do not reach 5% individually. There has been a qualitative change in Isabel dos Santos’ position, possibly for the worse.

Therefore, Isabel dos Santos’ position ceased to be strategic and controlling and became a (possibly) “dormant” financial position, while SONAE’s position was strengthened.

There is no doubt that the Portuguese group SONAE has acted intelligently in a complicated situation, while Isabel’s position has degraded in terms of real valuation.

It should be noted that in the same report cited above (1H2024), the Board of Directors notes that “it is not aware of any possible developments in the preventive seizure process referred to above.” Therefore, it seems that the seizure remains in place, but under the same terms as the Eurobic seizure, meaning that the same considerations apply.

CONCLUSION

The conclusion we can reach is that for the Angolan state, the likelihood of obtaining the recovery of Isabel dos Santos’ assets in Portugal is distant in terms of time, and depends on various legal vicissitudes that may or may not occur, so there is justifiable fear that the words of the President of the Republic João Lourenço at the UN will come true.

In fact, only the triggering of the so-called “confiscation without judicial conviction” provided for in articles 109 and 110 of the Portuguese Penal Code could reverse the situation and lead to the immediate confiscation of these assets.

[1] http://www.embaixadadeangola.pt/discurso-presidente-joa%CC%83o-lourenc%CC%A7o-na-79a-sessa%CC%83o-da-assembleia-geral-da-onu/

[2] https://www.eurobicabanca.pt/eurobicabanca/informacao-financeira

[3] https://expresso.pt/economia/sistema-financeiro/2024-07-29-verbas-pagas-pelo-abanca-a-isabel-dos-santos-para-comprar-o-eurobic-estao-congeladas-7b33fe1d

[4] https://www.eurobicabanca.pt/eurobicabanca/noticias/ABANCA-conclui-compra-do-EuroBic

[5] https://www.icij.org/investigations/luanda-leaks/

[6] https://www.icij.org/investigations/luanda-leaks/how-africas-richest-woman-exploited-family-ties-shell-companies-and-inside-deals-to-build-an-empire/

[7] https://www.tcontas.pt/pt-pt/MenuSecundario/Noticias/Pages/n20240930-2.aspx

[8] https://www.tcontas.pt/pt-pt/MenuSecundario/Noticias/Pages/n20240930-2.aspx

[9] https://www.nos.pt/pt/institucional/investidores/nos-em-bolsa/estrutura-acionista

[10] See p.96 of the NOS Report and Accounts for the 1st Half of 2024.

Angola: the American challenge and the Chinese reaction

/in /by

Angola’s new foreign policy under João Lourenço (2017)

After the end of the Civil War (2002), José Eduardo dos Santos (JES) opted for a “low profile” foreign policy for Angola. Apart from the intensification of relations with China, which essentially had economic objectives, and muscular interventions in African border countries, generally when Angola’s internal security could be at stake, the former President of the Republic did not develop an active policy in the world, preferring it to forget about Angola’s existence.

JES’s non-foreign policy had two fundamental consequences. It took Angola out of the concerns of the major powers, preventing the country from being looked at greedily on the world stage, and in doing so, it allowed the “capture of the state” by private interests to take on unthinkable contours[1] . Angola has become a kind of private property for a few, in the face of the generalised indifference of the world and the glee of sophisticated profiteers.

João Lourenço effectively changed the compass of Angolan foreign policy, promoting what we will call a sovereigntist policy of variable geometry from 2017 onwards.  In other words, Lourenço wanted to put Angola on the world’s radar and the country assumed itself as a regional power, with a role to play in the peaceful stabilisation of Central and Southern Africa; also open to investment and committed to global affairs[2] .

This Laurentian perspective has meant a strong rapprochement with the United States, the Arab countries of the Gulf, but also maintaining relations with China and Russia, and economic realities now impose a stronger bond with India.

While Angola’s new active presidential diplomacy is clear and perceptible, the big question mark is the reaction of the other countries, particularly the major powers, such as the United States, which has an ambiguous history in relation to Angola, as well as China, which is used to playing a decisive role in Angola.

The United States and the Lobito Corridor

It seems that, initially, the United States didn’t understand João Lourenço’s moves. It was at the end of the Trump administration, which had no interest in Africa, there was still, albeit in degradation, an idea of cooperation between America and China, and Russia had not invaded Ukraine. Africa and Angola, in particular, were of no interest to the Americans, except for the traditional oil companies.

However, everything changed at the beginning of the 1920s. The world’s geostrategic situation once again placed Africa as a field of conflicting interests, both in terms of obtaining raw materials (an area in which China was far ahead and in which the US became interested in order to guarantee its strategic autonomy) and in counting support for the Ukrainian War and its aftermath. In this sense, with a new US ambassador in Angola, Tulinabo S. Mushingi, and Luanda’s persistent rapprochement with Washington, the Americans realised that they had a possible new and powerful ally in Angola.

As a result, Angola appeared to become one of the United States’ strongest allies in Africa. Symbols of this were João Lourenço’s trip to Washington for a meeting at the White House with President Joe Biden (December 2023)[3] , and the constant visits by US officials to Luanda (Antony Blinken, five US senators, Samantha Power, Lloyd Austin, among others).

Many projects were announced, most notably the famous Lobito Corridor, which has become the flagship of this intense Angola-US co-operation.

Without going into an in-depth description of this project, the main thing to remember is that it is a railway linking the African interior, including the Democratic Republic of Congo, Zambia and Angola itself, to the port of Lobito. Just recently, the Partnership for Global Infrastructure and Investment (PGII) was announced, mobilising 4.9 billion dollars to date, presented as a significant step by the United States of America, the European Union and private partners to strengthen the commitment to sustainable development and regional integration, benefiting Angola, Zambia and the Democratic Republic of Congo[4] . And at the recent G7 summit in Puglia, Italy, the leaders of the West’s most advanced economies reaffirmed their support for multi-billion dollar infrastructure projects across Africa in order to realise the continent’s economic potential and transformation, specifying the Lobito Corridor as a top priority[5] .

Many observers have claimed that this is a response to Chinese mining domination of Africa[6] . This is unlikely to be the case, since a large part of the minerals to be transported through the Corridor are in mines under Chinese control. Although, according to the Wilson Center, China currently controls only around 8 per cent of Africa’s mining sector, less than half of its Western competitors, this is still an increase from 6.7 per cent in 2018. And as far as the potential beneficiaries of the Lobito Corridor are concerned, what worries the US is China’s monopoly on mining in Africa’s copper belt (Democratic Republic of Congo and Zambia) and its recent substantial investments in lithium production in Zimbabwe, which holds Africa’s largest lithium reserves. These investments allow China to dictate the global supply chain for renewable batteries and electric vehicles (EVs). In the DRC, the country with the world’s largest reserves of high-quality cobalt and copper, China currently owns 72 per cent of the cobalt and copper mines, including the Tenge Fungurume mine, which alone produces around 12 per cent of the world’s cobalt output. China’s mining operations in these three countries give Beijing a significant lead in the production of semiconductors and batteries, and therefore in the field of climate security technologies. This leaves the rest of the world increasingly dependent on Chinese innovation and industry to drive global energy transitions and tackle climate change. Furthermore, in the DRC, China owns at least 7 cobalt processing entities, but mainly sends raw minerals back to China for processing and manufacturing in order to meet global demand for critical minerals and finished products[7] .

Naturally, this data on China’s mining influence in the DRC and Zambia makes it clear that the Lobito Corridor will never be an American alternative to Chinese domination of Central African minerals. In fact, to be commercially successful, American transport will need the support of Chinese miners.

Well-placed sources tell us that the objective is less the transport of minerals and more the creation of an agro-industrial development area parallel to the corridor, whose products will be transported through it. It is in this objective that the American option for the Cart Group comes into play. At the aforementioned recent G7 summit, significant funding was announced for the Carrinho Group, which is considered to be a leading Angolan company in the agro-industrial sector, to develop the Lobito Corridor. Apparently, the Carrinho Group, a sort of “darling” company of the Americans, has the task of transforming Angola into a regional food hub, with investments aimed at building and acquiring infrastructure for storing food products[8] . The Carrinho Group has thus become a key part of the American strategy for Africa.

Even so, however, it should be noted that even in the current structure of the Corridor, there is a relevant Chinese company, Mota-Engil, which, although it has a Portuguese name, has the Chinese state as its reference shareholder. The truth is that China Communications Construction Co., Ltd. holds 32.41 per cent of the share capital, and the CEO of Mota-Engil himself, Carlos Mota Santos, has already admitted that CCCC is owned by the State of the People’s Republic of China[9] .

So, at the end of the day, the Lobito Corridor will never be a US project to counter China, but it will certainly have to be a Sino-American co-operative project if it is to succeed. Whether or not this is possible, we’ll see in the future.

The Chinese attitude

For years, while ensuring its exponential economic growth, China adopted a soft and discreet international diplomacy, not confronting but modelling, following the precepts of Deng Xiao Ping, who favoured an international approach known as “taoguang yanghui”, which emphasized the need to avoid polemics and the use of cooperative rhetoric. It is clear that with Xi Jiping, China has entered a new, more assertive phase on the international stage, known as the “warrior wolf”, which does not avoid confrontation, allowing China to occupy the place it recognizes as its own on the world stage.

In this context of assertiveness, contrary to what might have been expected in the past, China has reacted to the American rapprochement with Angola swiftly, above all by expeditiously reoccupying spaces that the Americans or their Western allies have not been able to occupy or where they have been sloppy.

From a political point of view, the Chinese reaction was visible during João Lourenço’s most recent trip to Beijing (March 2024). Although the official statements were of great friendship and success, the Chinese authorities made their disenchantment with João Lourenço known in certain reasonably public circles, contradicting the official narrative of the trip. It was a discreet game, unnoticeable to many, but it existed, demonstrating the Chinese will not “throw in the towel” in Angola.

And the reality is that China’s political will has subsequently asserted itself in China’s field of choice: the economy.

Three recent announcements affirm the renewed Chinese vigour in Angola.

Firstly, a Chinese group is going to build Angola’s first motorway, some 1,400 kilometers long, linking the south to the north of the country. The Chinese state-owned company China Road and Bridge Corporation (CRBC) will build a 1,400 kilometer motorway linking the southern part of Angola with neighbouring Namibia to the northern part of Angola with the Democratic Republic of Congo. Construction is expected to begin at the end of 2025 or in 2026[10] .

This project shows China returning to large-scale infrastructure projects in Angola, something that was thought to be over. However, this is not the case.

Secondly, there is the Angolan government’s intention to terminate the contract with the company that won the tender to build the Soyo refinery, which has had difficulties obtaining funding. This is a consortium led by Quanten, which won an international public tender in 2021 for the construction of the Soyo refinery, made up of four companies, three of which are American (the consortium leader Quanten LLC, TGT INC and Aurum & Sharp LLC) and one Angolan (ATIS Nebest)[11] .

In this case, we have an American failure to secure financing, which leads to the cancellation of a contract, opening the door to China’s entry, because, remember, China had already been involved in the construction of the Soyo refinery during the time of José Eduardo dos Santos, and a Chinese company had come second in the international tender that awarded the contract to Quanten[12] . Now the door is open for the second-placed Chinese, the CMEC consortium made up of China Machinery Engineering Corp,[13] or other Chinese-led interested parties to move into Soyo.

It’s clear that here we are confronted with a typical American problem of our time, the excessive belief in the power of marketing and in financial engineering that is impractical in Africa. To quote the CEO of Mota-Engil, Carlos Mota Santos, the American problem is that “all North American or European investment, with one or two exceptions, is more opportunistic. They are property funds and vulture funds, I don’t see them investing in any industry.”[14]

Finally, we have a third sign of Western withdrawal, now from Siemens, and the opening of more doors to China in an area in which it also has expertise, that of surface metros (let’s remember that the recent fleet of the Porto metro in Portugal has already been equipped with Chinese trains).

Now it’s the case of the surface metro in Luanda. The Germans from Siemens Mobility have pulled out of the project based on a public-private partnership and the Angolan government intends to take on the construction costs itself with funding from China[15] .

It’s a big turnaround, and once again demonstrates the inability or unwillingness of Western companies to invest in Angola. First Quanten failed in Soyo, now Siemens in the Luanda metro. Angola is once again fully open and in need of China to ensure its development.

Slow United States and energetic China

What appears to be the case at the moment is that American and Western goodwill is not enough. The reality is simple. Angola needs money, as it did in 2002 for reconstruction, and once again China seems committed to taking the lead.

The United States seems to want to be with Angola, but when it comes to decisive moments it has no practical or operational solutions, getting lost in plans, projects, trips, financial engineering and announcements of intent. On the other hand, China seems to have realized that a new opportunity is opening up in Angola, and is apparently in a position to take advantage of this new opportunity.

The future will tell.

[1] Rui Verde, 2021, Angola at the Crossroads: Between Kleptocracy and Development, London

[2] See our previous report at https://www.cedesa.pt/2021/05/18/os-realinhamentos-da-politica-externa-de-angola/

[3] https://observador.pt/2023/12/06/embaixador-dos-eua-destaca-ano-verdadeiramente-historico-apos-encontro-entre-biden-e-joao-lourenco/

[4] João de Almeida, https://www.facebook.com/dealmeida31

[5] https://www.afdb.org/pt/noticias-e-eventos/comunicados-de-imprensa/lideres-do-g-7-reafirmam-empenho-em-infraestruturas-de-milhares-de-milhoes-de-dolares-para-africa-prometem-mais-apoio-iniciativas-do-banco-africano-de-desenvolvimento-71926

[6] https://www.club-k.net/index.php?option=com_content&view=article&id=52349:o-corredor-do-lobito-a-resposta-de-washington-a-iniciativa-belt-and-road-em-africa&catid=5&lang=pt&Itemid=1070#google_vignette

[7] https://www.wilsoncenter.org/blog-post/addressing-chinas-monopoly-over-africas-renewable-energy-minerals

[8] https://www.club-k.net/index.php?option=com_content&view=article&id=54293:grupo-angolano-carrinho-recebe-financiamento-do-g7-para-impulsionar-infraestrutura-no-corredor-do-lobito&catid=41026:nacional&lang=pt&Itemid=1083

[9] https://eco.sapo.pt/2023/04/20/mota-engil-insiste-numa-decisao-e-diz-que-e-incontornavel-no-projeto-do-novo-aeroporto/

[10] https://www.angonoticias.com/Artigos/item/77289/grupo-chines-vai-construir-primeira-autoestrada-de-angola

[11] https://www.rtp.pt/noticias/economia/angola-admite-rescindir-contrato-com-empresa-que-vai-construir-refinaria-do-soyo_n1578622

[12] https://expansao.co.ao/expansao-mercados/interior/consorcio-euaangola-tem-tres-anos-para-construir-refinaria-101446.html

[13] https://www.noticiasaominuto.com/economia/1710487/consorcio-quantem-vence-concurso-para-a-construcao-da-refinaria-do-soyo

[14] https://eco.sapo.pt/2023/04/20/mota-engil-insiste-numa-decisao-e-diz-que-e-incontornavel-no-projeto-do-novo-aeroporto/

[15] https://www.angonoticias.com/Artigos/item/77319/angola-avanca-com-metro-de-luanda-e-desiste-de-ppp-negociada-com-os-alemaes-da-siemens-mobility

Dubai: the new sanctuary for Politically Exposed Persons?

/in , /by

Warning note

This report addresses the apparent breach of international legal obligations by the United Arab Emirates, specifically Dubai. The references made to individuals, such as Isabel dos Santos and other entities cited in the report, respect the principle of the presumption of innocence and do not contain any value judgment about them, only in relation to Dubai’s legal duties.

The federal constitutional system of Dubai

Dubai is not a sovereign state, but a federated state in the United Arab Emirates. The United Arab Emirates is a constitutional federation created in December 1971. It is made up of seven emirates, of which Dubai is one. The political system is based on a constitution that determines the main rules of the country’s political and constitutional organization. According to the custom adopted, the ruler of Abu Dhabi (Mohamed bin Zayed Al Nahyan) is the president of the United Arab Emirates (despite holding the title of president, the country is not governed as a republic, but as a monarchy) and the ruler of Dubai is the prime minister of the United Arab Emirates, the head of government. Within the United Arab Emirates, each emirate has considerable administrative autonomy within itself.

Despite the wide latitude each emirate has, each is subject to federal authority in the following matters: foreign relations, security and defense, nationality and immigration issues, education, public health, currency, postal, telephone and other communication services, air traffic control, aircraft licensing, labor relations, banking, delimitation of territorial waters and extradition of criminals. [1][2]

The federal judiciary is a constitutionally fully independent body (under Article 94 of the Constitution) and includes the Federal Supreme Court and the Courts of First Instance. The Supreme Council of Rulers appoints the five judges headed by a president to the Supreme Court. The judges are responsible for deciding whether federal laws are constitutional, mediating disputes between Emiratis.

Consequently, Dubai is part of a federal legal system in which international relations, and therefore its international obligations, as well as extradition procedures, are subject to the federal rules of the Emirates. In theory, there is a set of rules governing the actions of each Emirate within a constitutional framework.

Isabel dos Santos’ situation and the Interpol warrant

It is public knowledge that the Angolan Attorney General’s Office issued an arrest warrant for the extradition of Isabel dos Santos at the end of 2022, announcing that it had disclosed this through an Interpol Red Notice.

A Red Notice is a request to law enforcement authorities around the world to locate and provisionally arrest a person pending extradition, surrender or similar legal action. It is not an international arrest warrant. Individuals are sought by a requesting member country and the other member countries apply their own laws when deciding whether to arrest a person and extradite them or not.[3]

In the specific case of Isabel dos Santos, it is public and notorious that she is in Dubai. According to Bellingcat, a Dutch-based investigative journalism website specializing in fact-checking and open-source intelligence, founded by British journalist Eliot Higgins in July 2014, a TikTok post by Isabel dos Santos dated December 4, 2022, is located in the swimming pool of the Bulgari Yacht Club in Dubai. In another case, Isabel dos Santos was tagged by a friend in an Instagram post on December 27, 2022, where she can be seen enjoying a meal at Nusr-Et Steakhouse Dubai. She also appeared briefly in another friend’s post from the restaurant that day and the restaurant’s reviews point to the presence of Nusret Gökçe – also known as Salt Bae – at its outlet in Dubai in the last week of December 2022. In a photo posted on Instagram by another friend on January 8, 2023, Isabel dos Santos can be seen in the red and purple corridor of the Trove restaurant in Dubai, within the Dubai Mall complex[4] .

Given that Isabel dos Santos is (or was in 2022 and 2023) in Dubai, and that Angola has issued an arrest warrant published through an Interpol Red Notice, it is important to understand the situation and reaction of Dubai or the United Arab Emirates. Apparently, none.

The legal obligations of Dubai (United Arab Emirates)

The UAE has been a member of Interpol since October 2, 1973. Each of the member countries hosts an INTERPOL National Central Bureau (NCB), which liaises between the various countries and the General Secretariat via a secure global police communications network called I-24/7. The NCBs are the heart of INTERPOL. They seek the necessary information from other NCBs to help investigate crimes or criminals in their own country and share criminal data and information to help another country.[5]

As a result, when Interpol’s local NCB in Abu-Dhabi received a Red Notice concerning someone in Dubai, the Emirati police forces had to take action.

Although there is no extradition agreement between the UAE and Angola, there is a federal law that regulates the issue.  In the UAE, the extradition of wanted persons is governed by Federal Law No. 39 of 2006 on International Judicial Cooperation in Criminal Matters (“Extradition Law”). The Extradition Law is generally applied if the UAE and the requesting country do not have an extradition treaty in force.

According to Article 11 of the Extradition Law, a request for surrender must be submitted by the requesting country through diplomatic channels to the competent department and supported by the necessary information and documents, such as the name and description of the wanted person, legal texts applicable to the crime, and the applicable penalty, conviction sentence, if the wanted person has already been convicted, with proof that the sentence is enforceable. All documents and information must be legalized and translated into Arabic.

However, it should be noted that the UAE will not allow the extradition of a person if, under Article 9 of the Extradition Law:

-is a citizen of the United Arab Emirates;

-the object of the crime is political in nature. Terrorist crimes, war crimes and genocide are not considered political crimes;

[It should be noted in this regard that Isabel dos Santos’ public defense of the accusations made against her by the Angolan state is based on this premise: the allegation of political persecution. To that extent, it is an anticipation of a defense that she could make in an Emirati court].

-the object of the crime is limited to infractions of military obligations;

-the request for surrender aims to penalize or prosecute a person for their religion, nationality or ethnic affiliation;

-the wanted person has previously been tried and convicted or acquitted of the same crime;

-the UAE courts have already handed down an irrevocable judgment on the crime for which his extradition has been requested;

-there has been a lapse of time or the criminal proceedings have been closed; or you may be subjected to inhuman or insulting treatment or torture in the requesting country if you are extradited.

In addition to the above, the surrender request is subject to the following key conditions: the crime must be penalized by the laws of the United Arab Emirates and the requesting country for at least 1 year or more in prison.

The competent court has the right to determine whether the requested person should be returned to the requesting country. This determination must be in accordance with the law and the reasons for reaching a decision must be justified (Article 20).

The Extradition Law also allows the UAE authorities to provisionally arrest the wanted person in cases of urgency. Additional documents and information may also be requested by the UAE authorities if it is considered that the information submitted is insufficient.

Reasons for Dubai’s inaction

The matter falls under federal jurisdiction, i.e. the United Arab Emirates and not Dubai.

The Red Notice should have led to action by the local police. That action would not have meant arresting Isabel dos Santos and putting her on a plane to Angola, but the start of the internal judicial process of extradition under Emirati Federal Law.

If this doesn’t happen, there are two opposite explanations.

Hypothesis A: The Dubai pattern: political sanctuary in return for huge investments

Firstly, it could be a deliberate act by the Emirati authorities out of political interest or local corruption. Let’s remember that Dubai has become a safe haven for Russian oligarchs previously based in London.

In fact, it may be the internal policy of the UAE government (or federally-covered Dubai) to be the global point of refuge and reception for various politically exposed people, receiving large sums of money for this protection role.

In fact, since the invasion of Ukraine in 2022, Russian citizens have bought 6.3 billion dollars worth of existing and developing property in Dubai. It is estimated that the amount of Russian money flowing into Dubai real estate has increased more than tenfold since the invasion of Ukraine. This illustrates how the city has become a prime destination for the Russian elite avoiding sanctions or escaping the war itself. Of the 6.3 billion dollars in residential properties acquired – a “conservative estimate”, according to the report – 2.4 billion dollars were existing properties and 3.9 billion dollars were still under development[6] .

There is a pattern of behavior here, applicable to Isabel dos Santos, the Russian oligarchs and anyone else who seeks friendly cover in Dubai. They invest in the country and are welcomed and protected.

This may be the most obvious explanation for Dubai’s dissonant behavior in relation to its international law enforcement obligations.

Hypothesis B: The lack of a comprehensive legal initiative

Although many facts indicate that Dubai purposely assumes itself as a sanctuary for political protection in exchange for large investments, it may be that it considers that domestic federal law is not being fully complied with, leading to action by the authorities.

Strictly speaking, it could be argued that a Red Notice (or any initiative to extradite or freeze the assets of entities located in Dubai) must comply with the protocols set out in Article 11 of the Extradition Law. In other words, in order to be effective in triggering federal judicial proceedings, a Red Alert must be followed by a formal extradition request, which must be submitted by the requesting country through diplomatic channels (Angolan Embassy in Abu Dhabi) to the relevant Emirati department, supported by the necessary information and documents, such as the name and description of the wanted person, legal texts applicable to the crime, and the applicable penalty.  All documents and information must be legalized and translated into Arabic.

In this sense, any Angolan warrant would only be effective when accompanied by the full procedure laid down in Emirati federal law.

Conclusion

The question remains as to whether Dubai is becoming a privileged sanctuary for the refuge and protection of politically exposed people in exchange for large investments, failing to comply with its international legal obligations, or whether there is a lack of knowledge of the internal rules of the Emirates and Dubai that means that the judicial authorities of the various countries are unable to have the necessary success in extending their law enforcement to Dubai.

[1] UAE Constitution, available at https://elaws.moj.gov.ae/MainArabicTranslation.aspx?val=UAE-MOJ_LC-En%2F00_CONSTITUTION%2FUAE-LC-En_1971-07-18_00000_Dos.html&np=&lmp=undefined

[2] UAE The political system, available at https://u.ae/en/about-the-uae/the-uae-government/political-system-and-government

[3] Interpol.Red Notice. Available https://www.interpol.int/How-we-work/Notices/Red-Notices/View-Red-Notices

[4] Miguel Ramalho, Wanted by Interpol, Relaxing in Dubai: Geolocating Isabel dos Santos’ Life of Luxury, available at https://www.bellingcat.com/news/2023/02/03/wanted-by-interpol-relaxing-in-dubai-geolocating-isabel-dos-santos-life-of-luxury/

[5] Interpol. United Arab Emirates, available at https://www.interpol.int/Who-we-are/Member-countries/Asia-South-Pacific/UNITED-ARAB-EMIRATES

[6] Carmen Molina Acosta and Eiliv Frich Flydal, Russians bought up $6.3 billion in Dubai property after 2022 Ukraine invasion, report finds, Available at https://www.icij.org/news/2024/05/russians-bought-up-6-3-billion-in-dubai-property-after-2022-ukraine-invasion-report-finds/

India: a new strategic bet for Angola?

/in /by

The centrality of trade relations between India and Angola

Angola has become the epicenter of many international relations. There is talk of the rapprochement with the United States, the recalibration with China, the history with Russia, the role in the Great Lakes. However, one of the relationships that is discreetly becoming more important, but seems to have been forgotten, or needs to be discovered, is the relationship with India.

India is currently Angola’s third largest trading partner, sharing around 10% of Angola’s foreign trade, mainly due to the purchase of crude oil in bulk. The trade balance is in Angola’s favor, with India being Angola’s 2nd largest oil importer, accounting for 90% of bilateral trade. The trade relationship is clearly driven by the oil partnership.

Clearly, since 2021-22, India-Angola bilateral trade has been on the rise, reaching 3.2 billion dollars in 2021-22, with a large increase in Indian exports to Angola of 452 million dollars (45 % increase year-on-year). Bilateral trade in 2022-23 reached 3.9 billion dollars (by February 2023), with Indian exports to Angola registering a new high of 575 million dollars[1] .

Figure 1: Angola – India: Imports/Exports

(in millions of dollars)

Source: Embassy of India in Luanda (April 2023)[2]

As a comparison, the value of trade in tradable goods (excluding services) between Portugal and Angola totals €1,149.3 million (M€) in exports and €488.1 M€ in imports, on average for the 2019-2023 period.[3]

It’s easy to see that the value of trade relations between India and Angola is three times greater than that between Angola and Portugal. India is already a giant in its relationship with Angola.

Figures in millions of USD. For Portugal average 2019-2023, for India values 2023.

The Indian community in Angola is made up of around 4,000 people, mainly based in offshore oil fields or working in establishments owned by Indian owners, mostly involved in restaurants, supermarkets, commerce and other services; in industries dealing with plastics, metal, steel, clothing. In the non-oil sector, several projects are being carried out by Indian companies in the retail, hotel, agricultural plastics, scrap metal, steel, trade and other services sectors[4] .

India’s potential in relation to Angola

Having established the strong economic ties between India and Angola, it is worth highlighting India’s potential and the possibilities it opens up for Angola.

India is one of the world’s fastest growing large countries, expanding at an annual rate of 6-7%. New data shows that private sector confidence is at its highest level since 2010. Already the fifth largest economy, it could take third place by 2027, after America and China. India’s influence is manifesting itself in new ways. American companies have 1.5 million employees in India, more than in any other foreign country. Its stock market is the fourth most valuable in the world, while the aviation market ranks third. India’s purchases of Russian oil drive global prices. Increased wealth means more geopolitical clout. India has sent ten warships to the Middle East to contain the Houthis in Yemen.[5]

India’s strong presence in the Gulf should also be noted. Since Modi (the Indian prime minister) took office in 2014, India has transformed its relationship with the Gulf states, moving from one centered on energy, trade and Indian expatriates, to a new framework that encompasses political relations, investment and cooperation in defense and security. In addition, India has a keen interest in the stability of the Gulf, given that approximately 8.8 million Indian citizens live in the region[6] .

These are the essential facts, which pose a strategic challenge for Angolan presidential diplomacy.

As we all know and have mentioned in previous reports, João Lourenço’s new foreign policy, launched after 2017, is based on several vectors: a rapprochement with the United States and Europe in general, a new relationship with the Gulf States, a friendly recalibration with China and a repositioning with Russia. All this has been done. Now it will be India’s time.

India as a strategic priority for Angola

Given India’s economic growth and potential, its relationship with the Gulf States, as well as its global position as a country that is friendly to the United States but maintains its own external sovereignty, which leads it to buy oil from Russia, among other things, it is important to include India in Angola’s strategic priorities.

The point is not only that India is a market with clear potential for Angolan oil, as well as for other future exports, such as those linked to the agri-food sector, but also that it is a source of technological innovation for Angola. However, India’s economic aptitude is also important and relevant in discovering new robust markets for Angola.

Equally important is that India can be a support for Angola in its relations with the Gulf, where many Indians occupy prominent positions in the financial sector, and at the same time serve as a support for the difficult negotiations with China over the debt and, finally, serve as an example to the United States of a friendly country, but one that follows its own foreign policy.

These elements, both economic and in terms of international relations, are strong enough to attract the attention of Angolan presidential diplomacy to create a common framework for intense political and commercial cooperation. It is easy to understand that India can be an excellent expansion market for Angola, as well as a technological partner, and can also be complementary to Angola in many political aspects, both in establishing bridges with the Gulf countries and in knowing how to draw the boundaries of balance in relations with the major powers. This experience should be assimilated by Angola.

It should be remembered that the history of relations between heads of government (presidents of the republic and prime ministers) is not very intense. The first visit by an Indian prime minister to Angola took place in May 1986, by Prime Minister Rajiv Gandhi, which was reciprocated by Angolan President José Eduardo dos Santos in April 1987. PM Dr. Manmohan Singh met President José Santos on the sidelines of the G-8 meeting in L’Aquila, Italy, on July 10, 2009. In October 2015, Angola’s Vice-President Manuel Vicente visited India to take part in the Third India-Africa Summit. Finally, during his visit to Johannesburg to attend the BRICS Summit, Angolan President João Lourenço met Prime Minister Narendra Modi on July 26, 2018 and discussed ways to improve trade and investment between the two countries and also to deepen cooperation in sectors such as Energy, agriculture, food processing and pharmaceuticals[7] .

There really is no proximity between diplomacies at the highest level. Now, it is this pattern that would indicate that we need to move to a new level. This is possibly the time to create a strong bridge between India and Angola, based on political and economic aspects.

[1] Embassy of India Luanda (2023) Bilateral Brief on India-Angola Relations: https://www.mea.gov.in/Portal/ForeignRelation/Public_Bilateral_Brief_as_on_April_2023.pdf

[2] idem

[3] GPP (2024) ANGOLA Trade with Portugal (PT) 2019-2023: www.gpp.pt/images/gam/2/de/Angola.pdf

[4] Ditto note 1

[5] The Economist (2024), How strong is India’s economy? https://www.economist.com/leaders/2024/04/25/how-strong-is-indias-economy

[6] Viraj Solanki (2024) The Gulf region’s growing importance for India: https://www.iiss.org/online-analysis/online-analysis/2024/02/the-gulf-regions-growing-importance-for-india/

[7] See note 1.

CEDESA launches portal on Public Works and Investments in Angola

/in /by

On Thursday 18th April, CEDESA – the Centre for Studies for the Economic and Social Development of Africa – presented its website on Public Works and Investments in Angola – https://obraspublicasinvestimentosangola.org/, with the dual aim of providing independent information to academics, journalists and interested parties in general on what is happening in Angola in this area, and to serve as a public information document for Angolan civil society on the evolution of major works in the country, through the creation of a participatory opening mechanism.

The presentation of the project was attended by members of the Angolan and Chinese Embassies in Portugal and the Angolan Consulate General in Lisbon, as well as various businesspeople, academics and journalists.

CEDESA is a non-profit organisation under private law dedicated to the study and research of political and economic issues in southern Africa, particularly Angola. It was born out of an initiative by several academics and experts from the Angola Research Network (ARN https://www.angolaresearchnetwork.org/) , with the main aim of providing rigorous analyses of the economic outlook for Angola and neighbouring countries to political decision-makers, the business community, academics, students and other interested parties.

Source: CEDESA (www.cedesa.pt)

The need for a joint African Union mechanism for Africa’s debt to China

/in /by

The framework and problems of debt to China in Africa

Africa is a continent that is mentioned many times because of its vast natural wealth. Unfortunately, this is not reflected in the wealth of the African populations, who consequently suffer a variety of deprivations.

In this context, the issue of the debt owed by African countries to China is taking on somewhat worrying contours. The loans taken out by sub-Saharan African countries from China have seen a major boost, especially since the Road and Belt Initiative (RBI) was established in 2013. This ambitious Chinese initiative, whose main driving force was President Xi Jinping, aimed to increase the country’s economic and geopolitical influence. And while loans grew dramatically in 2013 with 17.5 billion dollars, and even peaked in 2016 with 28.4 billion dollars, in the following years the drop in loan amounts was incessant, reaching 1.2 billion in 2021, and the following year totalling just 994 million dollars (a total of 9 loans), making it the lowest level of Chinese loans since 2004.[1]

Fig.1 – Annual evolution of Chinese loans to Africa (billions of dollars)

Source: Chinese Loans to Africa Database, Boston University

The channelling of this Chinese money into development in Africa, specifically in the financing of various infrastructure projects and other ventures, has stimulated some African economic growth. However, there have been several “grey clouds”, many of which are clearly visible in the Angolan economy, but which also stand out in other countries. This translates into an often undisguised unease in Sino-African relations. Some countries have even become hostages to the so-called “debt trap diplomacy”. China, by unleashing the RBI, provoked the idea of facilitating loans to other developing economy states, and indeed, this ended up making the Asian country the largest international creditor. However, these loans have often lacked transparency: cases of corruption have multiplied, often because the financing did not go through public tender processes. The problem of the so-called ‘hidden debt’ arose when “China stopped lending to central governments and state-owned or state-supported companies. These debts do not appear on government balance sheets, although governments are often responsible for them if the official debtor is unable to pay.”[2]

You might think that this situation could eventually benefit the Chinese, since they have several countries “stuck” with monstrous debts. However, this is not the case, because at the same time, China is facing very serious domestic economic problems, which, until they are solved, will make it difficult to promote a reduction in foreign debt at the same time. [3]

Indeed, the slow recovery from the pandemic, the problem of youth unemployment, and the collapse of the property sector have shaken what seemed to be China’s unshakeable growth. This is how Christoph Nedopil, founder and director of the Chinese think tank Green Finance and Development Centre (GFDC), argues: “it will be a domestic challenge for China to simultaneously promote debt reduction abroad as long as domestic economic problems are not fully resolved.”[4]

In December 2022, Chatham House published a report analysing the development of the model of Chinese loans to African states (2000-2020), which were initially based on providing resources, and then evolved into more strategic or business-oriented choices.

Fig 2: Top 10 recipients of Chinese loans in Africa, 2000-20

Source: Chatham House: https://www.chathamhouse.org/2022/12/response-debt-distress-africa-and-role-china/02-case-studies-chinese-lending-africa

It should be noted, however, that from 2021 onwards the Asian country’s orientation changed, for reasons already mentioned, and also because several states were not meeting their payments. The Chinese leadership changed course and stopped investing in large projects, such as railways and motorways, to focus on smaller loans with a more beneficial social and environmental impact. The climate agenda was another factor to enter the equation.[5]

In addition, the money began to change direction; previously most of the loans went to countries in East and Southern Africa. From 2021-22 there was a shift towards West Africa, with countries like Senegal, Benin and Côte d’Ivoire receiving most of the money.[6]

Many African states and others have defaulted on their debts, so it was imperative that ways were found to resolve China’s so-called ‘odious debt’.

According to the International Monetary Fund (IMF), the world’s most indebted poor countries have all borrowed heavily from China. This situation, as we have already mentioned, may constitute “debt trap diplomacy”, in which China deliberately grants loans to countries it knows it cannot repay, in the hope of gaining political influence.[7]

What we saw last year was a growth in Chinese exports to Africa, which reached 173 billion dollars, an increase of 7.5 per cent compared to 2022, while its imports from the continent fell by 6.7 per cent to 109 billion dollars (data provided by the Chinese General Administration of Customs).

Although the annual increase of 100 million dollars made bilateral trade in 2023 a record, Africa’s trade deficit with China continued to rise, from 46.9 billion dollars in 2022 to 64 billion dollars last year.[8]

In 2022, 60 per cent of China’s debtor nations were in financial difficulties, compared to 5 per cent in 2010.[9]

How have some of these African nations dealt with this debt problem, and how has China changed its behaviour over time?

Let’s analyse a few cases:

Zambia:

The Middle Kingdom has been tough in the debt restructuring negotiations, and the situation, despite all the constraints, is not worse because other actors are gaining prominence, not just states, such as economic institutions like the IMF or the World Bank, or organisations that promote international negotiation and dialogue, such as the G20.

In the case of Zambia, which is the continent’s largest copper producer, it was the first sovereign nation in Africa during the pandemic to default when it failed to make a bond payment of 42.5 million dollars. The debt ended up preventing the country from developing economically and taking on new projects. So, in June 2023, Zambia and its creditors, including China, finally reached an agreement within the G20 Common Framework to restructure 6.3 billion dollars in loans.[10] This relief was limited to deadline extensions and a grace period on interest payments, but in order to reach a consensus there were no debt cuts,

However, in November there were already disagreements, as the Zambian government announced that a revised agreement to rework 3 billion dollars in eurobonds could not be implemented due to objections from official creditors, including China.

These problems in restructuring Zambia’s debt, which had been negotiated within the G20 Common Framework, ended up greatly undermining the negotiations and further delaying debt restructuring, putting the lives of ordinary Zambians in ever greater agony.[11]

Ghana:

At the beginning of last year, Ghana owed China 1.7 billion dollars, according to the International Institute of Finance, a financial services trade association focused on emerging markets.[12] Like Zambia, Ghana went into sovereign default on 60 billion dollars in domestic and external debt at the end of 2022 and sought a resolution to this problem soon afterwards under the Common Framework for official external debt of 5.4 billion dollars.[13]

An agreement was reached with the official creditors to restructure the debt, along the same lines as Zambia. However, although this agreement has unlocked an IMF loan, progress has been slow.

Currently, according to some sources, “Ghana intends to carry out a simple debt restructuring, exchanging old bonds for new notes, at a time when the country is seeking to relieve a debt of around 13 billion dollars owed to international private creditors”.[14] However, the information provided has been contradictory, which is why the Ghanaian government has been cautious about a debt overhaul that would include a gradual reduction, in which bondholders would receive less if macroeconomic results were not as good as expected.[15]

Nevertheless, the government has told investors that it would like to reach a solution following the agreement on public debt reached with creditors such as the Paris Club and China.

Ethiopia:

Ethiopia is the second most populous country in Africa and the tenth largest in terms of area, but it is also one of the African states experiencing the greatest geopolitical, military and economic turbulence. The proximity to the Chinese state goes back a long way. Ethiopia recently signed several bilateral agreements with several of its official creditors, including China itself. With low foreign currency reserves, which have been a constant problem in the country, and high inflation, it has reached bilateral agreements to suspend debt servicing. With China, it obtained a two-year debt suspension, which is quickly being cancelled. Ethiopia has 28.2 billion dollars in foreign debt, half of which is Chinese. According to the African Development Bank, Ethiopia’s GDP is expected to grow by 5.8 per cent in 2023 and 6.2 per cent in 2024, mainly on the basis of industry, consumption and investment. On the other hand, inflation reached 34 per cent in 2022. Due to high defence spending and declining revenue collection, the budget deficit was 4.2% of GDP in 2022.[16] Against this backdrop, Ethiopia needs development support, debt relief and Foreign Direct Investment.[17]

The Angolan situation

Angola’s debt to China is older than the Belt and Road initiative of 2013. It began to develop after the end of the Civil War in 2002, with China becoming the main financier of the reconstruction that followed. At the moment, according to official data from the National Bank of Angola (BNA), Angola’s public debt stock in relation to China is 18.4 billion dollars (billions in Anglo-American terms), corresponding to 37 per cent of the total debt. What’s more, the figures show that between 2019 and 2023 this amount fell from 22.4 billion to 18.4 billion. This means that, in four years, Angola has paid – in capital alone, not counting interest – 4 billion dollars to China[18] . Everyone has noticed the weight that public debt payments have on the state budget, and there were serious problems with Angola’s public finances in 2023, and it is expected that the same will happen in 2024, especially from March onwards, given the need for payments to China.

Although we don’t believe that the payment of the debt to China jeopardises the solvency of the Angolan state, we do believe that it has a very significant crowding out effect, since it removes resources from the General State Budget that could be earmarked for development and the social sector to pay off debt, debt that is controversial to some extent, since the loans were used in a very questionable way: Part of that debt was earmarked for disposable infrastructure, such as stadiums and roads that today are in a precarious condition. In addition, a significant portion of these loans ended up being privately appropriated by Angolan leaders, damaging the country’s economy.

There is a clear Angolan problem with Chinese debt, which, as we have just briefly described, also exists in relation to other African countries.

Fig. 3 – Chinese loans to Africa and Angola (in USD$ billion)

Source: China Africa Research Initiative – Johns Hopkins University (https://www.sais-cari.org/) 

The creation of a common mechanism within the African Union (AU) to negotiate Chinese debt

Since the Chinese debt is an African issue, it should no longer be dealt with bilaterally, as it is clear that each state on its own may be too weak to negotiate with China, one of the world powers of today, or to appear alone in the organisations promoted by the creditors. The creditors unite, while the African countries face them individually without support.

It would be important for the Conference of the African Union, the AU’s supreme body made up of heads of state and government (Article 6 of the AU’s Constitutive Act), to set up a Joint Chinese Debt Negotiation Committee (Article 6(d)), mandated to negotiate with the Chinese authorities a global framework for readjusting Africa’s debt to China, which would then be applied to all those seeking debt relief.

It is clear that negotiating Africa’s debt with China is a complex process that involves interaction between different parties with different interests and objectives. In order to achieve success, it is essential to consider African unity in demanding Chinese co-operation. This unity means, from the outset, gathering information and obtaining as many elements as possible for the negotiation, which a joint body can facilitate. In complex negotiations, time and the ability to understand the other person are fundamental aspects, and in this sense, a unified African solution will allow for a much greater exchange of experiences and, at the same time, a more technical, less emotional and more ‘negotiatingly’ weighty follow-up to the negotiation.

It is essential that Africa draws up a joint policy to deal with Chinese debt on an equal footing and not from a position of weakness.

A clear solution is to pass all the negotiations through a united African body within the African Union, becoming an enlarged African Union-China negotiation. This would also make it possible to strengthen the unity of the cradle continent.

[1] https://www.reuters.com/world/africa/chinese-loans-africa-plummet-near-two-decade-low-study-2023-09-19/

[2] Africa Defence Forum Magazine: https://adf-magazine.com/pt-pt/2022/02/dividas-com-a-china-colocam-20-paises-africanos-em-dificuldades-financeiras/

[3] https://www.bbc.com/portuguese/articles/cmj544lg205o

[4] idem

[5] https://www.voanews.com/a/china-s-lending-to-africa-hits-a-low-study-shows/7280214.html

[6] idem

[7]  Visual Capitalist: https://www.visualcapitalist.com/countries-loans-from-china/

[8] South China Morning Post: https://www.scmp.com/news/china/diplomacy/article/3250552/china-africa-trade-hit-282-billion-2023-africas-trade-deficit-widens-commodity-prices-key-factor

[9] Visual Capitalist: https://www.visualcapitalist.com/countries-loans-from-china/

[10] Associated Press: https://apnews.com/article/zambia-debt-restructuring-deal-china-a0d14e7af986e2f873555685cedb86b3

[11] Afronomics Law: https://www.afronomicslaw.org/category/african-sovereign-debt-justice-network-afsdjn/one-hundred-and-fourth-sovereign-debt-news

[12] https://www.reuters.com/world/africa/china-says-its-official-bilateral-loans-are-less-than-5-ghana-debt-2023-03-02/

[13] Economist Intelligence: https://www.eiu.com/n/china-and-africas-long-road-to-debt-recovery/

[14] https://www.reuters.com/markets/rates-bonds/ghana-pushes-simple-debt-rework-proposal-bondholders-sources-2024-01-30/

[15] idem

[16] Observer Research Foundation: https://www.orfonline.org/research/the-changing-face-of-ethiopia

[17] idem

[18] Rui Verde, https://www.makaangola.org/2024/01/angola-eua-trump-e-divida-a-china/

The electoral system of Local Authorities in Angola and the inclusion of Traditional Power

/in /by

Rui Verde

Previous note:

Having been invited and accepted to participate in the 1st Angolan Congress on Electoral Law, to be held on December 7 and 8, 2023, for technical reasons I was unable to present my paper online. Here is the text of the presentation.

Specificity of local elections

A local electoral system does not necessarily have to replicate the national system. Although in both cases we are dealing with the choice of representatives in democratic processes, the nature of the elections and bodies is somewhat different.

In many countries, the abstention rate in local elections is higher than in national elections[1] , and local governance is dedicated to issues that are often different from national issues. To a certain extent, although this is disputable, especially in politically polarized countries like Angola, it is understood that local politics will be essentially non-ideological. In the United States, for many years, academics argued that there was little difference between the policies of locally elected officials from the Democratic or Republican parties because most local political issues were technical and non-political. As Adrian wrote, “there is no Republican way to pave a street and no Democratic way to install a sewer.”[2] It should also be noted that the issue of representation of various minorities and interests is particularly acute at the local level.[3]

It is this structural differentiation that serves as the starting point for a short commentary on the current electoral system for local authorities in Angola, addressing two specific issues. Firstly, there will be a brief description of the current constitutional-legal model for local elections, and secondly, a brief reflection on the role of traditional power, given the undeniable demographic pressure in Angola.

Local power in the Constitution

The first place to look at local power in the Angolan legal system is the Constitution (CRA), which deals with the subject in Articles 213 et seq.

It states that the “organizational forms of Local Power include Local Authorities, the institutions of Traditional Power” (art. 213, no. 2) and that Local Authorities “have, among others and under the terms of the law, the following powersº 2) and that Local Authorities “have, among others and under the terms of the law, powers in the areas of education, health, energy, water, rural and urban equipment, heritage, culture and science, transport and communications, leisure and sports, housing, social action, civil protection, environment and basic sanitation, consumer protection, promotion of economic and social development, land use planning, municipal police, decentralized cooperation and twinning.” (art. 219), with various bodies such as an “Assembly with deliberative powers, a Collegiate Executive Body and a Mayor” (art. 220, no. 1).

In terms of the electoral system, the Constitution establishes that the “Assembly is made up of local representatives, elected by universal, equal, free, direct, secret and periodic suffrage of the electors in the area of the respective municipality, according to the proportional representation system.” (art. 220, no. 2), the “Collegiate Executive Body is made up of its President and Secretaries appointed by it, all accountable to the Municipal Assembly.” (article 220, no. 3) and the President of the Executive Body of the Municipality is the head of the list with the most votes for the Assembly (article 220, no. 4). Finally, Article 220(5) states that “candidacies for elections to local authority bodies may be presented by political parties, alone or in coalition, or by groups of voting citizens, under the terms of the law.”

Regarding the institutions of traditional power, the Constitution recognizes them in its articles 223 and following, referring to customary law for their designation, and to the law for their articulation with Local Authorities (article 225).

Consequently, according to the Constitution, there are two forms of local power, local authorities and traditional power, the relationship between which is not established in the fundamental law. In the case of local authorities, their method of election is defined from the outset, which is not the case, of course, with traditional power.

The electoral system of local authorities

In order to describe the electoral system envisaged for Local Authorities, in addition to the Constitution, the Organic Law on the Organization and Functioning of Local Authorities (Law no. 27/19 of 25 September) must be added, as well as the Organic Law on Local Elections (Law no. 3/20 of 27 January), which we will stick to in this description.

As mentioned, there are three bodies in municipalities: the assembly, the executive and the mayor. Looking at the municipality, the local authority par excellence (article 218 of the CRA), we see that only two of these bodies, the assembly and the mayor, are elected. The executive is appointed by the mayor. In fact, Article 29(2) of the Law on the Organization and Functioning of Local Authorities states that the Municipal Council (the executive) is made up of Secretaries appointed by the Mayor, although they are accountable to the Municipal Assembly. The removal of Secretaries is the responsibility of the Mayor (Article 31(1)(b)).

In municipalities, there are two elective bodies, and we’ll focus on them. These are the Municipal Assembly and the Mayor.

The members of the elective bodies are elected by universal, equal, direct, secret and periodic suffrage by the citizens residing in the local district (article 15 of the Municipal Elections Law – LEA). The most relevant article of the LEA is Article 40, which defines the single-list electoral model for the Assembly and the Mayor’s Office, replicating the national constitutional model that has raised so much controversy. In fact, under the terms of this regulation there will only be one list. Article 40 of the LEA states that candidacies for Mayor are presented in the context of the presentation of lists of candidates for members of the Local Authority Assembly (Article 40(1)), and that the candidate for Mayor is the one who appears first on the list of candidates for member of the Assembly (Article 41(2)). Accordingly, each ballot paper will bear the name of the competing party, coalition or group of citizens, the name of the candidate for mayor and the respective passport photo, the acronym and symbols of the candidacy (Article 17 of the LEA). The person on the list with the highest number of votes, even if not an absolute majority, will be elected Mayor, and will have the right to appoint the entire executive (article 21 of the LEA). The members of the Municipal Assembly are elected according to the proportional representation system, following the d’Hondt method for converting votes into mandates in accordance with the rules of article 29 of the LEA.

It should be noted that this electoral system, as well as the rules regarding the ballot paper, have already been upheld constitutionally by Ruling 111/2010 of the Constitutional Court when it considered the text that became known as the 2010 Constitution.

So we have a mixture of the one-round majority system that elects the mayor and the proportional system that determines the composition of the municipal assembly.

It will be argued in its defense that it simultaneously guarantees the efficiency of the government (one-round majority system) with broad democracy (proportional system for the constitution of the Assembly).

But it could also be said that it retains the “defect” of a not entirely direct election of the President, which many in the CRA criticize with reference to the election of the President of the Republic.

Also for those who like Portuguese comparatistics, it should be noted that it does not follow the Portuguese model in which the election of the Mayor is separate from the election of the Municipal Assembly, and a party can win the Presidency and lose the Assembly as is currently the case in Lisbon, in addition to the fact that the executive (Council) is formed according to the electoral results, depending on the presidential will only the distribution or not of portfolios[4] .

In this respect, the Portuguese model could be educational, as it would teach the various parties, which are usually polarized, to enter into local government agreements, which would be a basis for a good democratic spirit of dialogue and tolerance.

As an innovative reference, it should be mentioned that groups of voting citizens can, without any authorization, stand in municipal elections (art. 44 of the LEA) provided that they are at least 150 voting citizens in the respective constituency (art. 48, no. 1 of the LEA).

Traditional power and demographic expansion

It is a fact that Angola’s demography has undergone an explosion. “Between 1960 and 2020, Angola’s population grew 6.2 times, reaching more than 30 million inhabitants, a more significant increase than that seen in sub-Saharan African countries (5.1x) and than in other regions such as East Asia (2.3x) and Latin America (2.9x).”[5]

It is clear that this number of inhabitants is not in line with the current number of Angolan municipalities, 164. Just remember that Portugal, with 10 million inhabitants, has 308 municipalities.

While it is true that the current number of municipalities in Angola does not correspond to the real needs of the population, it is also true that the idea of increasing the number from 164 to 581 is absurdly impossible, both for financial reasons and for administrative and bureaucratic reasons.[6]

We therefore need to look for innovative, possible and constitutional responses. It is in this sense that the constitutional system is relevant, placing the institutions of traditional power under the heading of local power, which also includes local authorities. The same is true of the Organic Law on Local Power, Law 15/17 of August 8, which deals with Local Authorities and Institutions of Traditional Power.

The constitutional and legal system outlines a start on answering the question we posed above. To the systematics we have to add some considerations about the current paradigm of law. We can no longer think of law in terms of the positive rational frameworks of the 18th and 19th centuries, which apply a single menu to all the regulation of social life. Without delving into the subject here, we have to consider law as an open system[7] that allows for various material intersections and contributions and not just a closed, single and reductive positivism. It is in this context that it is important to allow the institutions of traditional power to take on the role of local authority where these do not exist and are necessary.

The reality is that there are two types of Local Authorities in force, those regulated by positive law and those derived from customary law and regulated by custom, accepting a plurality of regimes, legal and customary[8] , with a view to the effective implementation of decentralized local power close to the population, accepting the “presence of more than one normative order in a social field.” [9]

In essence, it is a question of realizing a systematic desire of the Constitution, which, by placing both formal Local Authorities and Local Power Institutions under the aegis of Local Power, is not making a mistake, as some claim, but is opening up avenues for the consideration of a true legal pluralism in Angola, which will act as a solution to problems linked to the efficiency of the state machine.

[1] Anzia SF. 2013. Timing and Turnout: How Off-Cycle Elections Favor Organized Groups. Chicago: Univ. Chicago Press or Hajnal ZL. 2009. America’s Uneven Democracy: Race, Turnout, and Representation in City Politics. Cambridge, UK: Cambridge Univ. Press.

[2] Adrian CR. 1952. Some general characteristics of nonpartisan elections. Am. Political Sci. Rev. 46: 766-786, p. 766.

[3] Abott, Carolyn, and Asya Magazinnik. “At-Large Elections and Minority Representation in Local Government.” American Journal of Political Science 64, no. 3 (2020): 717-33.

[4]  Law no. 75/2013, of September 12th

[5] Economic Studies Group (2023), Demographic transition in Angola: burden or bonus? MakaAngola, https://www.makaangola.org/2023/07/transicao-demografica-em-angola-onus-ou-bonus/

[6] Verde, Rui, (2022), The “(ir)rational” of the 581 municipalities, MakaAngola, https://www.makaangola.org/?s=munic%C3%ADpios

[7] Viehweg, T. Topik und Jurisprudenz, 1954; Perelman, Ch. Das Reich der Rhetorik; Rhetorik und Argumentation, 1980

[8] Cfr. Feijó, Carlos, A coexistência normativa entre o Estado e as Autoridades Tradicionais na Ordem

Angolan Plural Law, Coimbra, Almedina, 2012.

[9] Fernandes, T. 2009. Local power in Mozambique. Decentralization, legal pluralism and legitimacy. Porto, Edições Afrontamento, p. 40

The current economic situation in China and Angola

/in /by

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