Social life in Angola is very alive and, at this moment, political and judicial matters dominate the country’s agenda. However, it is in the domain of the economy that there is an extremely significant evolution on which it is important to reflect and proceed to a careful analysis.
The recent (February 2023)[1] International Monetary Fund (IMF) report on the country underlines the favorable advances of the Angolan economy and also the necessary reforms. It is based on this report that we will enunciate Angola’s main trends in the economic field and the neuralgic points to avoid relapses such as the last long recession that began in the presidency of José Eduardo dos Santos.
Positive Trends
Angola’s economy is in full recovery after the five-year recession (2016-2020). By 2022, supported by higher oil prices and resilient non-oil activity, it has already reached growth of more than 3%, estimating the IMF that by 2023 the country continues to see the GDP increase in the order of 3.5%.
Therefore, we see growths of over 3% per year, which by our calculations, maintaining the price of oil and accelerating the liberalization of Angolan markets and foreign investment, could accelerate to numbers of 4% or 5%, adopted that are the right policies.
The optimism we share here results from the fact that non-oil growth has been widespread, despite a difficult external environment, as it means that the non-oil sector is reviving, as well as the attention that several developed countries with market economies are providing Angola, as is the case of US, Spain, France and Germany. Mentions should be made to recent visits to Angola of the King of Spain and the President of the French Republic, Emmanuel Macron (February and March 2023).
It should be noted that the debt that the public debt/GDP ratio has dropped about 17.5 percentage points of GDP, for an estimated 66.1% of GDP, aided by a stronger exchange rate. It is estimated that the checking account remained with a large surplus in 2022, while coverage of foreign currency reserves remained adequate (IMF data).
The fact is that the Angolan government has, according to the IMF, to adopt and maintain solid macroeconomic policies and maintained a commitment to structural reforms that are vital to Angola’s economy.
Necessary reforms
We understand that it is in the verification of fundamental structural reforms that resides the future of the Angolan economy. We highlight some reforms that are necessary to take and/or continue.
1-First renovation, with impact on the medium and long term, is to foster training for the economy of young people. Training not only means, and perhaps not in most, university education, but solid training in basic education and in professional aspects. We argue, therefore, that there must be an effective bet on vocational and technical education in Angola, before any other. A real bet on professional and technical schools and institutes, which are seen as valuable alternatives to academism and not mere university imitations (tragic error of Portuguese polytechnics).
2-Second renovation entails the creation of more conditions for investment, no longer at the legal level, where there is a modern framing and updated twice during the presidency of João Lourenço, but at the judicial, administrative and good practices level. The investor must feel safe to arrive in Angola and apply his money. One should not be afraid of being without the money due to any interference from an oligarch, or see any process dragging on in court. The speed and impartiality of justice is linked to good investment.
3-Third reform is dedicated to the financial sector, there is a special emphasis on increase credit to private persons and and the resolution of banking weaknesses. Quickly we must merge and capitalize banks, creating a banking sector not dependent on the state, clientelism or mere public debt management.
Finally, among other reforms, we highlight the true imperative of making more progress in strengthening governance and transparency, to improve the business environment and promote private investment.
Of course, continuing and accelerating anti-corruption strategy is also important.
National Employment Plan
All these news should be framed with the well-being of the population and the serious problems still pending. The one we highlight is unemployment, which although noting a slight descent, is still very high, about 30% [2]. This is an area in which we advocate direct state intervention. It is evident that the increase in GDP corresponds to an unemployment decrease, however, we believe that in the face of such high unemployment, in the short term the immediate action of the government is fundamental.
In this sense, the recent announcement of the World Bank of US $ 300 million for a project to accelerate economic diversification and job creation[3] is to greet. Not knowing in detail the design of this acceleration program, its existence should be underlined, as well as the previous announcement of the Angolan Labor Minister of the creation of a National Employment Program, with the aim of creating more opportunities for insertion of young people in job market[4]. Also, in this case, the data are scarce about the design of the plan, and it is certain that the President of the Republic had declared in the discourse of the State of the Nation of 2022, the creation of the referred plan.
So far, these initiatives related to unemployment, although positive, seem uncoordinated and poorly implemented. Therefore, the truth is that Angola would win to see a comprehensive national employment plan, specific and directly coordinated by the President of the Republic, without the risk of not properly implemented a plan, which in the short term is fundamental to the economy and Angolan population.
https://www.cedesa.pt/wp-content/uploads/2023/03/econ2.jpg6581006CEDESA-Editorhttps://www.cedesa.pt/wp-content/uploads/2020/01/logo-CEDESA-completo-W-curvas.svgCEDESA-Editor2023-03-17 13:53:002023-03-13 18:59:13Angolan Economy trends, necessary reforms and national employment plan
The proposal of the State General Budget (SGB) from Angola to 2023 has already been delivered to the National Assembly, including its essential elements of an affordable and pedagogical digital page of the Ministry of Finance[1].
The Ministry of Finance in its official note highlighted the following main aspects about SGB[2].
Objectives
The two main objectives of budget policy are the “continuation of national economic growth and the continuation of prudent budgetary management.”
Budget balance and public debt
The budget balance will be surplus in the value of 0.9% of GDP, consolidating the evolution of 2021 and 2022. The public debt ratio in relation to Gross Domestic Product (GDP) is decreasing, and projections for 2022 point a ratio of 56.1% of GDP, manifestly less than 128.7% already registered. The government expects the conjugated tendency to decrease public debt and inflation (which estimates 11% at the end of 2023), finally, to decrease interest rates, promoting economic growth.
Some tax aligners will be maintained such as reducing the VAT rate of basic basket products, which fell from 14 to 5%, and in hotel and tourism (14 to 7%).
Oil price
SGB’s proposal has as reference the oil barrel to USD 75.00.
Sectors expense
In terms of expenditure affectation, 23.9 % for the social sector are budgeted, 10 % for the economic sector, 8.6 % for defense, security and public order while general public services have 12.5 %.
According to the government, social expense represents the largest share of expense in SGB absorbing 43.5% of primary tax expense and 23.9% of total budget expense, with an increase of 33.4% compared to SGB 2022.
Growth
In terms of predictions that substantiate the proposal, the SGB assumes that by 2022, the real GDP should have a positive real growth rate of 2.7%, above the 2.4% initially provided for in SGB 2022, and for the year of 2023, a real growth of 3.3% is expected[3].
Inflation
The government expects to 2022 an inflation of 14.4%, well below the 18%goal. For 2023, it anticipates an inflation rate of 11.1%, as mentioned above.
2-The Question of Oil
It is evident that the price of oil still occupies a wide space in the Angolan economy. According to the Ministry of Finance data, in the SGB of 2022, the oil sector represented approximately 25% of the nominal SGB, and it is expected to be 22%[4].
Set the determining role of oil in the economy and in Angolan public accounts, it is repeated that the indicative price calculated for SGB 2023 was 75.00 USD/BBL as an average for the year, with an average production of 1 180.0 MIL BBL/DAY.
At this moment (December 13 2022) the price of the barrel is in USD 79, 03[5] and the trend in markets in recent times has been falling. Last month came from a level higher than USD 90.00 to a limit less than USD 80.00. Obviously, the volatility of oil price is large and no one can make predictions about the predictable evolution of the price. The current fall is attributed to the slowdown of the Chinese economy and the effect of rising US interest rates on commodoties. It may be like this or not, the price may climb or go down. If there is perhaps an expectation of climbing, as it is anticipated that China begins to recover and US interest rates no longer increase, besides OPEC production cuts, the truth is that the budget margin is not too big in Terms of oil price. Quickly, price oscillations can call into question SGB calculations.
In addition, the accuracy of daily production is 1180 thousand barrels, when the average of 2022 was 1 147 in 2022 and 1 124 in what refers to 2021. Given a recognized obsolescence in some sectors of oil production in Angola It may happen that this barrel value is not achieved.
This means that, in our opinion, there will be some optimism in the oil projections in SGB 2023 both at the price level and at the production level. It cannot be said that projections will not be verified, only that some emergency reserve is required for projections not to be consummated.
There is still a very thin line between success and budgetary failure, so a renewed reform of the economy is critical.
3-The Social Expenditure
The government announces as a great success of its proposal the increase in social expense by 33.4% compared to 2022, occupying the largest slice by sector. Realizing, the reasoning report states that social expenditure will correspond to 43.5% of primary tax expense (without debt service), which is 23.9% of total expenditure and an increase of 33.4% compared to SGB 2022, as already mentioned. “In this sector, we highlight education, health, housing and community services and social protection, with weights of 14.1%, 12.1%, 10.1% and 6.2% in primary tax expense, respectively[6].” The truth is that comparing education, health, and housing with 2022, in all these rubrics there is an increase in expense higher than inflation.
Notably is the exponential climb of health and housing over the next year, with increases of 45.1% and 57.6% respectively.
If we notice the 2022 SGB, the social sector represented 38.8% of primary tax expense, corresponding to 19.02% of total expense and an increase of 27.1% compared to SGB 2021[7]. This means that it is manifest that the government is paying special attention and promotion to the social sector that increases year after year. The numbers prove this social attention of budget policy.
However, as is well known it is in the social sector that the complaints of the population often appear. There is a problem that is not budgetary, but related to management and rationality. It has to effectively execute the SGB and make the money reach people. The issue is increasingly good management and good governance, competence and deliverance, not the lack of resources.
4- The financial expense related to debt
The debt financial expense is 45.1% of SGB expense, decreasing by 2.6% compared to 2022[8]. In practice, we have a little less than half of the SGB designed to pay debts. We will not wave with the “ghost” of debt failure, which we have referred to over the long analyzes we have made, it does not exist. What worries us is the content of the debt and the fact that the state is supporting and paying a debt that is not his.
As an Angolan press agency specialized in economics and confirms official data, “China remains the country that Angola should most, holding about 40% of the total. Most of the debt to China has as its main creditor the China Development Bank (CDB), as a result of a USD 15 billion financing, as part of an agreement signed in December 2015.”[9]
This 2015/2016 Chinese loan is one of the most issues one must pay attention to and has a specific approach.
Our argument is that part of Angolan public debt is what is doctrinally called “odious debt.” The legal doctrine of “hateful debt” argues that sovereign debt contracted without the consent of the people and that it does not benefit it is “hateful” and should not be transferable to a successor government, especially if creditors are aware of these facts in advance[10]. We do not fight for non-full payment of this debt or others to China or another country (also offers us many doubts the debt enrolled in favor of the UK, but we will leave this theme for another occasion) or entity, but a bi-volunteer renegotiation with the respective Haircut of capital and interest that manifestly relieves the weight of the debt.
Consequently, there should be a profound forensic audit to this 2015/2016 Chinese loan whose destination has never been very clear, except in vacancies that would be applied at Sonangol, at a time coincident with the assumption of the company’s management mandate by Isabel dos Santos. After this forensic audit and according to the results obtained there should be a very serious renegotiation of debt with China. In 2015, China already had more than enough elements to know that part of its borrowed money was being poorly applied. In fact, this is the year when its supposed representative, Sam Pa, was apparently detained. The country, as a great power it is, cannot be hidden behind legal formalism and has to face together with Angola the problem of its debt that was diverted by corruption.
5-Conclusions
It is evident that there is an economic policy effort to exist financial rigor and budgetary control according to the injunctions of the International Monetary Fund, externally credible the country in economic terms. Alongside this financial rigor that cost João Lourenço quite electorally in August 2022, there is attention to the social sector, trying to mitigate the financier.
This budgetary policy is correctly formulated, the question to be aware is within the scope of the realization and execution. It is essential that social expense comes to those who need it and in the frontline structures: doctors, nurses, hospitals, schools, teachers, etc., and do not stay in intermediate consumption and corruption shortcuts that act as funds siphon. In other words, it is imperative that budget public money is not diverted. And then it becomes imperative to control the affectation and application of the funds. The task of good management and governance is the most important in the SGB of 2023.
At the level of resources it is relevant to emphasize that the oil activity (price and quantity produced) optimistic is relevant to us, to this extent, it is important to have a contingency reserve for low price and production.
And in relation to public debt in the face of China (and other entities) we argue that certain forensic audits are required and if something similar to a “hateful debt” is glimpsed, mechanisms of profound renegotiation are activated. Ultimately, it would have to bring the matter (“debt hatred”) to the United Nations pursuant to articles 1 (3) and 14, among others from the United Nations Charter to create a consensus on international law on the subject.
https://www.cedesa.pt/wp-content/uploads/2022/12/Capturar.jpg532870CEDESA-Editorhttps://www.cedesa.pt/wp-content/uploads/2020/01/logo-CEDESA-completo-W-curvas.svgCEDESA-Editor2022-12-20 11:36:152022-12-13 18:39:18Analysis of the General Budget Proposal of the State of Angola for 2023
The latest figures available from the National Institute of Statistics on the Angolan economy point to a decrease in GDP in the 1st quarter of 2021 in the order of -3.4%, an unemployment rate in the same quarter of 30.5%, and a annual inflation rate for the month of July 2021 of 25.72%[1]. None of these figures that reflect macroeconomic magnitudes are encouraging in the short term.
However, there are other economic and financial realities to consider in order to have a global view of the movement underway in the Angolan economy, and which allow for a more optimistic perspective.
To begin with, in terms of the budget balance and public debt, essential elements of the support program of the International Monetary Fund (IMF), the expectation is that the 2021 budget balance will be positive, possibly above 2% of GDP (further on we will present our prediction). In relation to public debt, as we had predicted in previous reports, its sustainability is consolidated, as recognized by the IMF representative in Angola very recently (see our forecast below)[2].
In terms of exchange rate with reference to the month of July 2021, the Kwanza has already appreciated 1.8% against the dollar and 6.1% against the euro, since January 2021, breaking a strong period of strong devaluation started in 2018. Furthermore, 3.5 years after exchange rate flexibility, the gap between formal and informal market rates is below the 20% target announced by the central bank at the time of liberalization, between 7% and 8% for the dollar and euro respectively. Note that at the time prior to liberalization, the same gap was 159% and 167%.
Figure 1 – Kwanza Exchange Rate Variation against the Dollar and Euro (July 2021)
Currently, some sectors are already announcing an increase in the profitability of exports due to the favorable exchange rate policy. This is the case of cement, where Pedro Pinto CEO of Nova Cimangola assures that “To boost exports, the devaluation of the currency helped, because all the costs that the company has in national currency, in dollars, were lower and, in this way, the competitiveness of the company to place products on the international market. In other words, all those products that we continue to buy in Kzs and that have not suffered large price variations in dollars were lower and, therefore, allowed the company to have greater profitability with exports.[3] ”
Also a reference to PRODESI (Program to Support Production, Diversification of Exports and Substitution of Imports), which has generated more than USD 29 million since the beginning of the year. As the main exported products, emphasis is placed on cement, beer, glass packaging, bananas, juices and soft drinks and sugar[4].
These movements are reflected in the trade balance. Angola’s trade balance recorded, in the 1st half of 2021, a surplus of USD 8,381.9 million[5], an increase of 40.2 % compared to the results recorded in the 2nd half of 2020 (USD 5,978.8 million)[6]. Within this framework, there was an increase in exports of 25%, naturally still influenced by the increase in exports from the oil sector of 28.4%.
Figure 2 – Angola’s Trade Balance and Trade Relations with China
But there is also a significant increase in trade with one of Angola’s main trading partners, China. “Trade between Angola and China increased 23.9% in the first half of 2021, to US$10,550 million (€8,985 million), compared to the same period last year”[7]. According to Gong Tao, Chinese ambassador to Angola, despite the adverse effects caused by the covid-19 pandemic, Chinese companies remain interested in investing in Angola, highlighting the recent construction of factories, one dedicated to the production of tiles and another qualified for the production of energy and water meters.
2021 Summer Forecasts
In modeling the perspectives we present here, several factors are taken into account, among which we highlight the main ones. The first element is the calculation of the oil price (always a determining factor in the Angolan economy). We assume that the price of Brent will maintain a slight upward trend, standing at a level between USD 65 to USD 75 per barrel. A relative stabilization or possible appreciation of the Kwanza against the dollar and the euro is also part of our model, which makes it possible to reverse some of the falls in the past that were merely nominal due to the more flexible exchange rate. We anticipate that the post-Covid-19 world recovery will boost the Angolan economy’s exports, as is already happening with China. Finally, we anticipate that the environment for foreign investment will gradually improve as a result of legislative reforms and the commitment of political power. We have as a recent example the several advertisements coming from Turkey. At the end of July 2021, Angola and Turkey signed 10 cooperation agreements, in the fields of economy, trade, mineral resources and transport, having already announced an increase in the trade balance with Angola to a value of around USD 500 million[8].
From the point of view of obstacles, it is worth mentioning the immense lack of capital. This is the main element for any sustained recovery, and also the inexistence of economic diversification[9] and the persistence of administrative bureaucracy.
All things considered, our model predicts that by the year 2021 the Angolan economy will come out of recession, and GDP growth will reach between 1.4% and 1.75%.
Our model points to a budget surplus between 2.3% and 2.75%, depending on the evolution of the oil price until the end of the year. And considering the evolution of the Kwanza exchange rate, our forecast is that in 2022, the public debt/Gross Domestic Product (GDP) ratio will be below 100%, achieving greater consolidation.
Figure 3 – CEDESA Model – Forecasts for the Angolan Economy
Consequently, the initial period of strong adjustment and contraction of the Angolan economy is expected to come to an end this year, with no more shocks and global control of the Covid-19 pandemic.
The special case of Unemployment
We understand that unemployment is a special case that should be treated differently, both statistically and in terms of public policies. In terms of statistics, it should be better ascertained who is occupied with informal productive paid activities and who cannot effectively obtain any paid work they want. We should avoid statistical biases that disturb the proper understanding of reality.
On the other hand, it is clear that it will not be the market or the private economy that will solve the problem of lack of employment in the short term, especially for young people. To that extent, the authorities are urged to develop a Keynesian-type employment promotion program, if necessary using available capital from the fight against corruption, as we have advocated in other reports. The state has to spend money on job creation.
https://www.cedesa.pt/wp-content/uploads/2021/08/economia-angola-1.jpg14152560CEDESA-Editorhttps://www.cedesa.pt/wp-content/uploads/2020/01/logo-CEDESA-completo-W-curvas.svgCEDESA-Editor2021-08-30 10:20:372021-08-30 10:21:13Indications and Summer Forecasts for the Angolan Economy
0-Introduction. A different focus for Angolan economic analysis
The consulting companies that are dedicated to the study of the Angolan economy follow a conjunctural methodology in which the predominant narrative is based on the negative numbers about the macroeconomic aggregates and their possible perspectives.
However, a more detailed analysis of the evolution of the Angolan economy suggests that behind the numbers of inflation, unemployment, GDP growth and public debt, which are not very encouraging[1], a series of public political reforms are taking place together with the reinforcement of certain economic trends that will indicate the construction of a new, more positive economic reality for Angola.
This study deals with the positive elements that point to the correction of the direction of the Angolan economy in a sense more consistent with the necessary prosperity.
A-Positive trends in the Angolan economy
1-The International Monetary Fund (IMF) and public policy reform
A first element that allows to shed a different light on the perspectives of the Angolan economy lies in the recent assessment carried out by the IMF. In fact, on January 11, the IMF Executive Board concluded the fourth review of the Extended Fund Mechanism Agreement for Angola and approved the disbursement of an additional USD 487.5 million[2].
The important thing in this decision is the IMF’s positive assessment of the reform of Angolan public policies. The IMF states that: “The [Angolan] authorities achieved a prudent budgetary adjustment in 2020, which included gains in non-oil revenues and containment of non-essential expenses, while preserving essential spending on health and social security networks. The approval of the 2021 budget in December consolidates these gains. The authorities have also allowed the exchange rate to act as a shock absorber and have begun to implement a gradual shift towards monetary restraint to face increasing price pressures [3]”.
According to what the IMF explains, the economic policy followed by the Angolan government is developed in the following vectors:
-The stabilization of public finances, which is the cornerstone of the authorities’ strategy. In this regard, the government achieved a strong fiscal adjustment in 2020. In addition, its budget for 2021 consolidates non-oil revenue gains and the containment of budget expenditures for 2020, while protecting priority social and health expenditures.
These advances help to reduce the budget’s dependence on oil revenues.
– Reformulation and management of public debt. The government has implemented debt profile reform agreements, in addition to benefiting from the extension of the Debt Service Suspension Initiative until the end of June 2021, which will provide significant debt service relief and help reduce risks related to debt sustainability. We will elaborate below on the reformulation and management of public debt.
-Restrictive monetary policy and exchange rate easing. After easing the monetary constraint to mitigate the shock of COVID-19, the National Bank of Angola (BNA) began, once again, to face the increase in inflationary pressures through the tightening of monetary policy. A more gradual tightening of monetary policy is needed to reduce inflation. Exchange rate flexibility served as a valuable buffer during the crisis. Efforts are underway to develop a liberalized foreign exchange market.
-Reform of the financial sector. Continued progress in financial sector reforms was critical, especially the completion of the restructuring of the two struggling public banks. The timely adoption of the revision of the BNA Law and the revision of the Financial Institutions Law is the key to continuing this progress.
Finally, the IMF highlights the fundamental aspect that underlies all political reform, which is the maintenance of the fight against corruption.
What can be seen clearly from this IMF assessment is that the government is pursuing a reformist policy based on the assumptions made by this international organization, and is implementing difficult reforms.
It is known that many of these IMF policies have an initial recessive effect, especially fiscal consolidation when it involves raising taxes and cutting wages and subsidies, as well as restrictive monetary policy to fight inflation. It is therefore no wonder that the first result of adopting IMF policies is recession and not growth.
What is expected is that this “housekeeping” creates the conditions for a sustained and virtuous growth of the Angolan economy.
Fig. Nº. 1 – Economic policies of the Angolan government celebrated by the IMF
2-Management and careful reformulation of public debt
The executive followed an appropriate strategy when initially negotiating with China the issue of public debt. As we described in previous reports, the Chinese debt is key to Angola, as it represents about 50% of external commitments[4]. Consequently, it was important, first of all to ensure the appropriate terms with China, although they are not public knowledge, apparently imply a three-year suspension of payments agreement. The adherence already mentioned to the IMF’s debt suspension program allowed the government room for maneuver. It should be noted that the Eurobonds on which a lot has been written and pointed out various dangers, has a smaller weight in the total Angolan debt, around USD 8 billion, thus not having, on the contrary, what one could think of exaggerated pressure on Angolan finances in this area.
So, for now, the issue of public debt pressure seems to be eased and within the government’s management capacities.
3-Meridian oil price recovery
As we had also anticipated, after an abrupt drop in the price of oil at the beginning of the pandemic (March 2020) there would be a rise[5], which is gradually happening.
The reality is that following a trend that was already very clear at the end of the year, the barrel of brent finally reached a price above $ 55, a value that had not been reached since the end of February 2020, the month before the start of the pandemic. Still being the most relevant indicator for the Angolan economy, and considering that the budget for 2021 was calculated based on USD 33 per barrel, we have a financial margin of more than USD 20. This is an additional “cushion” in the management of Angolan public finances.
It is clear that it is not known for how long this rise in the price of oil will continue. The commitment of the new Biden administration to the Paris Agreement, the evolution of the Chinese economy, the decision to cut or increase production by Saudi Arabia and the maintenance of the restrictions resulting from the Covid-19 pandemic are factors that may imply a further decline in the oil price.
Therefore, movements in the oil price are always unknown and these moments of increase must be used by the government to reinforce its reserves for future reproductive and social investments.
Fig. No. 2- Evolution of the Brent price since February 2020
4-Decrease in imports of food basket and agricultural production with continental relevance
The diversification policy combined with the promotion of the national industry through the substitution of exports has been another “motto” of this government. This policy allows in one fel swoop to reduce external dependency and create a thriving national industry.
While it is still untimely to draw any definitive conclusions about the results of this policy, some figures emerge that can be encouraging, at least in relation to the dependence on imports and foreign exchange spending on foreign trade.
According to data provided by the Ministry of Industry and Trade, Angola managed to record a reduction of almost US $ 100 million in the import of products from the basic basket and other essential goods in the last month of 2020, compared to the same period in December 2019. In December 2019, the Government disbursed US $ 250 million for imports, while in the same period of 2020, it only spent US $ 152 million[6].
In particular, it is worth noting the reduction in sugar imports, which went from 2.1 million tons in 2019, at the cost of 17.6 million dollars, to 1,472 tons, at the cost of 831,121 dollars. Regarding the importation of current rice, in 2019 Angola imported 136,985 tons in the amount of US $ 37.2 million and in 2020, only 59,505 tons, in the amount of US $ 10.5 million. In what concerns chicken (the most consumed meat in Angola), it is also worth mentioning a considerable reduction, compared to 2019. In that year, 46,385 tons were imported, for US $ 51.5 million, whereas last year, only 32,447 tonnes were acquired, for a value of just over US $ 25 million.
Fig. Nº. 3- Comparison of annual imports of basic basket products (Dec.2019 / 2020 in USD million)
These are just some of the products highlighted in the considerable reduction in imports, however this trend has proved to be general in the remaining products that make up the basic basket.
For these numbers to be considered a success, it is necessary to compare them with the internal consumption of the same goods, and understand if the decrease in imports was due to a substitution by domestic products or only reflects a decline in demand as a result of the economic crisis.
In the latter case, although they represent savings in foreign exchange, they do not mean a success in politics, but a decrease in the quality of life of the population. However, even in this situation, national investors should be alert to proceed with investments in these areas in order to correspond to future demand growth.
Statistics published by the Angolan Ministry of Industry and Trade and released by the Portuguese news agency Lusa show the enhanced sustainability of some Angolan agricultural production.
Angola asserts itself as a continental-level agricultural producer. Angola is the largest African banana producer and the seventh in the world with an offer of 4.4 million tons, according to the latest table of the United Nations Food and Agriculture Fund (FAO). It should be noted that the banana continues to be the most produced and consumed fruit in the world. Angola, in particular, has declared itself self-sufficient in banana production for more than six years, with emphasis on the provinces of Bengo and Benguela. In these provinces, private companies already export the fruit to countries such as Portugal, Zambia, Democratic Congo and plan to bring the fruit to the United States, the world’s largest consumer[7].
In relation to cassava, Angola has an annual production estimated at more than 11 million tons of cassava, being today the third largest producer in Africa, after Nigeria and Ghana, and wants to bet on its transformation into starch[8].
5-New investments and exports. Two examples: Rio Tinto and Gold
The finance minister recently told Reuters: “We are building a future (through our reform program) that prioritizes direct investment (not just with China, but with other partners). We want to add value for our economy to create jobs. We want the money to stay. Borrowing is an option, but we are trying to change the way we relate to our partners [9]”.
Thus, it appears that the government is betting on direct investment to revive the economy and also to increase exports.
There are two recent examples that are important to underline in this context. The first is the entry of the powerful multinational Rio Tinto into the Angolan market. Apparently, such a perspective will materialize this year[10].
Also important is the first export of gold mined in Huíla in 2020, in the amount of sixteen hundred and ninety-six ounces sent to Portugal and the United Arab Emirates, which corresponds, at the current price, to more than three million dollars. Obviously, what is relevant is not the amount of gold exported, but the beginning of a trend. As with the entry of Rio Tinto, it is important to mark a trend that brings other big investors like Anglo-American or DeBeers.
None of these investments is very firm yet. Their reference is important because they can represent future axes for the development of the Angolan economy, now in the beginning.
Fig. nº 4 – Signs of optimism in the Angolan economy
B-Necessary policy adjustments
The foregoing demonstrates that the Angolan government pursues an economic reform policy based essentially on the IMF’s revenues: i) budgetary balance and debt control, considering financial solvency as a sine qua non for economic growth; ii) restrictive monetary policy to control inflation; iii) flexible exchange rate policy, allowing for a devaluation of the currency that encourages exports and hinders imports; iv) investing in investment and the private sector as engines of the economy.
Basically, the policy followed corresponds to what was once called the Washington consensus[11]. This is the standard reform package adopted by the IMF, World Bank and the US Treasury Department since the late 1980s and which corresponds to a liberal model of the economy, based on fiscal prudence and the free market.
Naturally, this model has potential for Angola, but it is not enough. There are not strong enough institutions in Angola yet to guarantee the functioning of a free market in which some do not end up dominating others and creating oligopolistic and inefficient situations, as there is not a private sector strong enough to become the engine of the economy.
Making Angola’s economic reform dependent on reforms inspired by the Washington Consensus is not enough, a broader view is needed.
This broader view should imply structural institutional reform. This means that property rights must be clarified by abandoning the confusion that the collectivization of property has generated and still generates, courts must be put in place, bureaucracy is no longer an obstacle, and obviously great corruption must be eradicated. In addition to structural institutional reform, it should be realized that the State has a role to play in this new phase. There is no robust private sector in Angola, nor can everything be delivered to foreign investors with short-term perspectives. A mix should be found between the state and the private sector. In fact, this is how the most advanced Western countries work, despite rhetoric. It is important to adopt the concept advanced by Mariana Mazzucato of Entrepreneurial State[12].
The point to consider in economic reform in Angola is that the role of the government, in the most successful economies, went far beyond creating the right infrastructure and setting the rules. The State is a fundamental agent to achieve the type of innovation that allows companies and economies to grow, not only by creating the “conditions” that allow innovation. Instead, the state can proactively create a strategy around new areas of high growth before the potential is understood by the business community by financing the most uncertain phase of research in which the private sector is risk-averse, seeking new developments, and often even supervising the marketing process.
In addition, the IMF’s recessionary policies, while necessary, must be offset by other types of policies that alleviate the socially depredating burden of those. In short, there must be a mix of reformist policies that is more comprehensive and adequate to Angola, so that in the end the first flashes of success have sustained results.
C-Conclusions
It is necessary to look beyond the negative conjuncture numbers of the Angolan economy and understand that there is a reformist economy policy that is beginning to bear fruit and to mark some new trends. This policy has been applauded (and possibly advised) by the IMF, and here lies its strength and weakness. Strength because it contains some indispensable measures to clean up the Angolan economy and launch it on the path of growth. It also strengthens because its adoption and implementation brings the praise and support of the IMF and sister organizations. However, this policy also has weaknesses, including the lack of attention to institutional reform, the weakness of the private sector in Angola, the recessive effects of contractionary policies, among others.
Consequently, with signs of optimism in the medium-term perspectives of the Angolan economy, it is necessary to improve the economic policy that is being followed, including the intensification of institutional reforms that ensure that the judiciary works, bureaucracy does not hinder, corruption does not divert resources. In addition, the role of the State as an entrepreneurial partner in the private sector should be reviewed.
[1] See the most recent figures: Unemployment 34% (III quarter 2020), Annual inflation 25.19% (December 2020 / December 2019), GDP growth -5.8% (III quarter 2020) at https: // www. ine.gov.ao/
https://www.cedesa.pt/wp-content/uploads/2021/01/otimismo-economia-2.jpg10801920CEDESA-Editorhttps://www.cedesa.pt/wp-content/uploads/2020/01/logo-CEDESA-completo-W-curvas.svgCEDESA-Editor2021-05-12 18:51:492021-05-12 18:51:51Flashes of optimism in the Angolan economy at the beginning of 2021
Although Angola is suffering
several economic shocks due to Covid-19 and the drop in oil prices, in addition
to the nominal increase in public external debt, the truth is that the
situation does not present the seriousness indicated in some studies.
Oil: The country is well prepared to benefit from the recovery that is already taking place in the oil price, and which is likely to accelerate with the global unlockdown.
Debt: The debt problem results essentially from the depreciation of the currency and its solution lies in a political negotiation with China, which holds about half of the external public debt.
Diversification: The present difficulties are a real incentive, and not merely rhetorical, for the beginning of the diversification of the economy, made possible by the liberalization measures of the economy.
In recent times, a lot has been
written about the Angolan oil crisis, presenting catastrophic forecasts for the
country’s economy and the evolution of oil exploration. To the pressure of oil,
it has been added strain
on public debt, all in
the Covid-19 packaging.
The situation being serious, it
is not desperate, and several
data must be considered
analytically with sufficient distance.
The public debt
The issue of public debt, which
we have already addressed in a previous report with regard to China
(https://www.cedesa.pt/2020/05/05/porque-a-china-deve-reduza-a-divida-de
-angola /), does not have the danger that is attributed considering only a
formal analysis of the numbers.
If we look at the most recent
data from the BNA[1],
Angola’s big creditors are China, Great Britain and International
Organizations.
The sum of these creditors equals
approximately US $ 39.4 million and is equivalent to almost 80% of the external
public debt.
Figure No. 1-Stock of Angola’s public
external debt by countries. Source: BNA (bna.ao)
Obviously, the debt to China is
eminently political and cannot be seen as an ordinary debt. It should be noted
that the Angolan Foreign Minister is already in talks with his Chinese
counterpart on the subject[2].
Therefore, there is an effective development in this area.
In some ways, the same is true
for International Organizations. It is public that International Organizations,
led by the International Monetary Fund, are proposing several relief measures regarding the
debt burden of the most fragile economies and emerging markets[3].
However, there is still Britain’s debt. Part of this debt comes from companies based in London, but with privileged relations
with Angola and which have a long-term perspective, as is the case with Gemcorp[4],
so here too we will have to handle
with some caution the overly general statements about the severity of
the weight of the Angolan debt.
Furthermore, the International
Monetary Fund itself recognized in December 2019 that about four-fifths of the
nominal increase in Angolan debt was due to the depreciation of the kwanza and
not to new liabilities[5].
Hence, any analysis of
the Angolan public external debt that does not disaggregate its elements is
wrong.
Clearly the external public debt is
concentrated in a few creditors that have several considerations to take apart
from those strictly financial, and depends a lot on the attitude of China.
In short, unless an additional
extraordinary event occurs, the issue of Angolan foreign public debt is not as
serious as it might appear to be a mere nominal observation, and should not
become an obstacle to development. The key is in talks with China on the topic.
And obviously, China will not want to appear as a negative agent in Angola.
Oil
The same analytical exaggeration
has occurred with regard to oil and Angola. Obviously, Angola has an excessive
dependence on oil, and that, at this moment, the price of crude is subject to
two negative pressures: the fall in demand due to Covid-19 and an apparent
secular tendency to decrease oil consumption, replacing it by alternative
sources.
Two of the most renowned analysts
of these issues in relation to Angola, Agostinho Pereira de Miranda and Jaime
Nogueira Pinto[6],
have, however, devalued the excess of anguish in relation to this issue in what
concerns Angola. We tend to subscribe to this position.
The shock of oil in the Angolan
economy has persisted since 2014 (see fig. No. 2) and is a problem for which
the government since 2018, has taken several measures that focus on two
strategies: i) modernization and opening of the oil sector and ii) promoting
the diversification of the economy.
Regarding the first element, it is worth
mentioning, among others, the creation of a regulatory agency different from
Sonangol, allowing this company to focus on its core business, the
privatization of Sonangol’s secondary subsidiaries and the signing of
agreements with several foreign companies to increase investment. In fact, the
big companies, including Total, Exxon, Chevron, BP, ENI, planned to operate
more drilling vessels in Angola than anywhere in the continent to explore new
discoveries. In relation to diversification, there has been more rhetoric than
practice, but the need, as we will see below, will force it to be put into
practice, provided that the government effectively liberalizes the economy.
Meanwhile, Covid-19 made oil
prices dip and foreign companies stopped their activity in Angola[7].
However, despite the immediate bad news, the situation will tend to stabilize
at a higher level. Moody´s at the end of May announced that it foresaw a future
generic level between USD 45-65. It is not a question of relying on the
accuracy of these figures, but only of noting that there will be an upward trend.
Consider the price of Brent. At the
moment, it stands at USD 36.6 (May 22nd, 2020[8]).
Therefore, it has already risen from the minimum number reached on April 21,
2020, USD 19.33. The value of USD 36, 6 is already above several levels reached
after the abrupt fall in 2014. For instance, in the beginning of 2016, the value ranged between USD
29 to 32. This means that the price of oil seems to enter, at the present moment, again in some
normality, besides that since 2014, the country is already used to dealing with
a great oscillation in the markets.
Figure No. 2- Brent USD Peak / Barrel
Price Peaks and Lows (Nasdaq and Oilprice.com source)
Figure no. 3 – Price evolution of
Brent 2020 (Sources in fig. No. 2)
It also should be pointed out
that a good part of Angolan contracting is reversed in long-term contracts, so
price fluctuations do not necessarily affect public treasury immediately.
In addition,
very soon, there will be a time when economies close when the demand for oil
has decreased substantially, to a relaunch of economies. Whether this recovery
in V, U, W or another letter, the truth is that it will imply an increase in
the demand for oil, which will probably increase the price of oil as long as
the “wars” between Russia or Saudi Arabia do not restart. or other similar
events.
In addition,
the low value of oil will be an incentive for its use in an economic recovery
phase in which concerns about clean but more expensive energies will, in the
short term, be replaced by the need to put companies to work and people with a
job.
Even if
concerns about the climate emergency persists in Europe, it is difficult to see that the major engines of the
world economy, such as the United States, China and India, do not prefer a
cheap source of energy that quickly gets plants up and running.
Angola has
already started to anticipate and still in the week of 25-29 May, the National
Agency of Petroleum, Gas and Biofuels (NAPGB) made available, a data package for oil exploration of the
terrestrial basins of the lower Congo and Kwanza, for nationals and
internationals companies.
These are the blocks CON1, CON5, CON6, KON5, KON6, KON8, KON9, KON17 and KON20,
whose official announcement, for the start of new bids, will be made in the
coming days.
In a nutshell, the
organizational reforms, of rationalization and increase of the oil market
underway in Angola, combined with the gradual recovery of oil prices, in the
context of the relaunch of the world economy in the post-Covid-19 period, allow
us to believe that the oil sector in Angola has good conditions for recovery,
and remove the most pessimistic scenarios.
Opportunity
for diversification
A final note on
the diversification policy that has been proclaimed constantly by Angolan leaders,
but without success.
There are now
two clear incentives to make it a reality. On the one hand, oil is no longer
the reliable source of revenue that the state can rely on, on the other, there
are measures to liberalize the economy and break the previous oligopolies.
Still shy, but there are.
These two facts
should make entrepreneurs feel more free and obliged to look for new areas of
investment. These areas should not be civil construction, but others linked to
natural resources, such as natural gas; agribusiness (Angola’s soils are some
of the most fertile in Africa and its climate is manifestly conducive to
agriculture. In the past, Angola was almost self-sufficient in agricultural
terms, with wheat being the only exception); the forest economy (forests cover
almost 18.4% of the country’s total area and form one of the country’s most
critical natural resources), high-quality minerals (iron ore, manganese and
tin) and solar energy, among others.
In this crisis,
Angola’s great challenge is to seize the opportunity to transform itself,
benefiting from its diversified
wealth.
[1] BNA, External Debt by countries (stock): 2012-2019. Available online at: https://www.bna.ao/Conteudos/Artigos/lista_artigos_medias.aspx?idc=15419&idsc=16458&idl=1
[8]
NASDAQ-Brent Crude (BZ: NMX).
Available online at https://www.nasdaq.com/market-activity/commodities/bz%3anmx.
See also https://oilprice.com/oil-price-charts/46. Note that these elements are
merely informative of trends and do not necessarily reflect the exact price of
Angolan oil transactions. However, they give an approximation to possible developments
and perspectives.
https://www.cedesa.pt/wp-content/uploads/2020/05/oil-angola-3.jpg5851500CEDESA-Editorhttps://www.cedesa.pt/wp-content/uploads/2020/01/logo-CEDESA-completo-W-curvas.svgCEDESA-Editor2020-06-09 09:17:062020-06-09 09:18:42Angola: Oil and Debt. Renewed opportunities
In its December 2019
report on Angola, the International Monetary Fund (IMF) stated that: “Angola’s
public debt is sustainable, but the risks have increased and the
vulnerabilities remain. [1]”While
forecasting a peak of 111% public debt/ GDP by the end of 2019, the IMF’s view
was optimistic for several reasons, namely the mobilization of new non-oil
revenues in the 2020-2021 budgets, the rapid implementation of structural
reforms and the continuation of the privatization program.[2]
The percentage increase in
public debt/ GDP forecasting was due to three factors: the depreciation of the
kwanza in the fourth quarter of 2019 (about four fifths of the increase), the
fall in prices and oil production, and the slow economic recovery. Therefore,
the first point to be emphasized is the fact that 80% of the increase in the
percentage of public debt/GDP derives from the depreciation of the kwanza.
Consequently, a policy favoured
by the IMF (currency depreciation) would negatively influence another aspect
considered important by the same organization (public debt / GDP ratio). This
means that it was not too important to look at this relationship to calculate
the possible fragility of the Angolan public debt, as it essentially reflected
nominal and not real fluctuations. In December 2019, Angolan public debt was
sustainable.
However, after four
months, the state of affairs has become more difficult. Now, the real aspects
of the economy may hinder debt service. However, Angola is not in that
situation yet, and proper action can avoid any problem. The Covid-19 economic shock
has consequences for Angola, adding pressure on the two material elements that are
important for the sustainability of debt payments: the price of oil and the
economic recovery. As we already know, oil has seen its price drop sharply, and
the prospects for the recovery of the Angolan economy are weak.
Consequently, in April
2020, the same IMF predicted a 1.4% recession for the Angolan economy and a
debt value equal to 132% /GDP. The IMF’s forecast is just that, and it does not
yet correspond, in terms of public debt, to any new reality. In fact, 2019 closed
with a public debt of 109.8%/ GDP and not 111%, slightly better than expected.[3]
It should also be noted
that the share corresponding to the external public debt will be 85.4% of GDP,
which is what we are interested in analyzing.
The several elements
considered so far, leads us to two conclusions: the first: the Angolan public
debt was evolving in a sustainable manner, and the nominal degradation of the
country’s public debt as a percentage of GDP reflected, above all, the nominal
depreciation of the currency and not some absurd lack of control that would
have occurred in recent times ath the public finances. Between 2017 and 2019, in an
epoch of recession, the stock of
external debt increased only 14%, whereas it was previously, between 2012 and
2016, that it increased 100%. This means, politically, that the government of
José Eduardo dos Santos doubled the external public debt in four years, while
João Lourenço has tried to stop this exponential increase. [4]A detailed
analysis of the figure below shows the great boost in the Angolan external debt
ocurred between 2012 and 2016. There was an attempt to stabilize in 2017 and
only a modest increase in 2018 and 2019.
Figure 1 – Angolan
external public debt stock (2012-2019) [amounts in millions of dollars; BNA
source]
However, and this is the
second conclusion, if in the past there was confidence in Angola’s capacity to
pay the debt, and its control by the current government, the truth is that the
Covid-19 global crisis has launched a cloud of uncertainty over the public
debts in global terms, obviously affecting perception in relation to Angola.
Naturally, this post-Covid-19 perception requires governments to anticipate and
take steps to avoid future problems.
It is in this
context that the possible adjustment of the Angolan external debt to the
current reality brought by Covid-19 deserves attention, as well as the need to
lighten its weight to guarantee the sustainability of the economic recovery.
The importance of debt to
China
The current global
situation brought about by Covid-19 implied the need that Angola has to ensure
that its public debt is sustainable and do not to disturb the economic kick-start
that is urgently necessary to mobilize.
Regarding the essential features
of the Angolan public debt, the Cartesian method must be followed. This means
that one should not look at the debt as a whole, but divide it into sections,
addressing each one independently. It is wrong from a methodological point of
view to perceive the Angolan external public debt as a whole due to the huge
weight that China has in it.
Total Angolan public
external debt (stock) was worth US $ 49,461 million at the end of 2019,
according to data from the National Bank of Angola. [5]It turns out
that $ 22.424 million is owed to China. [6]This means that
China accounted for almost half of Angola’s external responsibilities, more
precisely, 45.3%.
Figure 2-Weight of the
Angolan external debt to China (in percentage; source: BNA)
It seems clear that the
Angolan debt to China represents an enormous magnitude and obviously has the
most important weight in Luanda’s public finances.
Given the historical features
of Angola’s relationship with China, as well as its global positioning,
especially with regard to the relationship with Africa, this is the time to
propose a thorough negotiation of the Angolan debt to China, promoting its
reduction and time-based rescheduling.
In simple terms, the
negotiation of the Angolan public debt to China should lower the debt amount and
increase the payment times.
It is easy to see that debt
to China may become the main obstacle to Angola’s development.
Nevertheless, China in
Angola must be a factor of development
and not of economic recession. At the outset, it should be noted that since
2017, the year when João Lourenço took office, the date on which the debt
peaked, Angola has been lowering the stock value (see Fig. No. 3 below) thus
demonstrating its capacity and good faith towards China.
There are three very
strong reasons for carrying out China to renegotiate its debt with a view to
reducing and prolonging it over time.
1-China’s global
positioning, especially in Africa.
China is currently one of
the great world powers, intending to engage with the United States in terms of
projected influence in the world.
In that sense, with a new
power comes new responsibilities, as happened in relation to the United States at the end of
the Second World War (1939-1945), in which it took on is shoulders the European economic reconstruction through
the Marshall Plan and actively promoted the creation of which became the EEC
(European Economic Community), today the European Union. It was the American
commitment that made this reality possible and brought prosperity and peace to
Europe.
China has been taking a
similar position in relation to Africa, using a rhetoric of friendship and
solidarity. President Xi Jinping’s words at the opening ceremony of the
China-Africa Cooperation Forum (FOCAC) in 2018: “China seeks common interests
and puts friendship first in the search for cooperation. China believes
that the right way to boost China-Africa cooperation is for both sides to
leverage their respective strength; it is up to China to complement Africa’s
development through its own growth, and it is up to China and Africa to seek
cooperation for mutual benefit and common development. In doing so, China
follows the principle of giving more and receiving less, giving before
receiving and giving without asking for a return ”[7](emphasis
added).
What is certain is that
the current situation caused by the Covid-19 disease presents itself as the
ideal one for President Xi Jinping to turn his speech into reality and move on
to concrete acts of friendship, giving more and receiving less, as well as
giving without ask for return.
In this way, it will build
positive China’s image in Africa as a great world power that bets on the
effective development of a continent and will show, from the geostrategic point
of view , that it is a real competitor of the United States in the creation of a more
prosperous and secure world.
It is at this moment that
China’s place in the post-Covid-19 world will be seen.
2-Pragmatism
Deng Xiaoping is
attributed with the slogan “It doesn’t matter if the cat is black or white, as
long as it hunts mice”. It is precisely this pragmatism that has brought so
much success to China that it will justify the remission of the Angolan debt.
Angola has always been
presented as the model for investment in Africa. The scientific literature even
refers to the “Angolan model” that served as a basis for China’s contemporary
performance in Africa.
Thus, it will be worrying
for China to see that its model fails and becomes a burden on the economy.
If we look at the numbers,
during 2019 Angola spent almost 43% of public revenues to pay debt, where, as
already mentioned, China occupies the largest share. Consequently, the
continuation of this situation may prove to be justified by the allegations that
the US Secretary of State, Mike Pompeo, made during his recent tour of Africa,
that the Chinese debt is becaming an
unbearable burden for the development of the continent. In fact, to conclude that
this is ocurring in Angola, will turn the whole of China’s African policy into
a disaster, since its initial model failed badly.
In addition to this
political pragmatism, there is an obvious economic factor. The most recent
evaluations show that Chinese companies in Angola recorded a loss of 350 to 500
million dollars due to the COVID-19 pandemic[8]. And these
losses can be widened if Angola’s economic situation does not improve.
Therefore, it is of Chinese interest to create the conditions for a relaunch
for the Angolan economy, as such a relaunch will benefit in a massive scale Chinese companies.
It is called the win-win situation.
Consequently, it is
therefore of Chinese practical interest to reduce Angolan debt to show the
world that its model of intervention in Africa works and is not predatory, and also
help the countless Chinese companies established in Angola.
3-Combat corruption and odious
debt
There is a fundamental and
ultimate reason to reduce the Angolan debt to China. There is no doubt that
part of this debt is what is doctrinally called “odious debt”, ie,
debt whose purposes were not the public interest and the common good, but the
private appropriation of sovereignty by members of the highest organs of the
State . [9]More bluntly, it
is a debt that was used in acts of corruption or served to finance the private interests
of Angolan leaders and possibly of Chinese officials.
One can never forget the
role that Chinese citizen Sam Pa, today, apparently imprisoned in China, played
in several businesses in Angola. Names like the CIF-China International Fund, the
Queensway Group, or China Sonangol, are paradigms of activities considered
illegal that are or have been under close investigation. It is a fact that
Chinese money was involved in diverse acts of corruption.
In addition to this, there
is another one with undefined contours and that deserves a more careful
investigation by researching journalists. The analysis of the disaggregated
statistical series provided by the National Bank of Angola on the evolution of
Chinese debt shows that in the second quadrimester of 2016 (May to August) this
debt went from US $ 10,531 million to US $ 21,228 million. Debt to China
doubled in 2016.[10]
Figure 3- Evolution of
Angola’s external public debt (stock) to China-2012/2019 (Millions of dollars.
Source: BNA)
This movement was
relatively recent and it is, still, badly
explained. In terms of timing, this event coincides with an announced trip by
José Eduardo dos Santos to China to negotiate a loan in July 2015, which was
subsequently followed by several events such as the fall from grace of the Vice
President of the Republic, Manuel Vicente, and the Sam Pa’s arrest in October
2015. After this, Isabel dos Santos assumed the presidency of Sonangol in June
2016, coinciding with the launch of the Chinese debt in the BNA’s accounts.
Apparently, it was from this new Chinese debt that the Government attributed to
Sonangol 10 billion USD. At the time the company was starting to be chaired by Isabel dos Santos. Apparently from those 10
billion USD, Sonangol paid loans in the total amount of five billion dollars.
This allowed the Sonangol`s debt to be reduced from 9.8 billion to 4.8 billion
USD. The remaining five billion USD will have been channeled to investments in
and from Sonangol.
In view of the judicial
controversy that currently involves Isabel dos Santos’s appointment as
President of Sonangol and the apparent simultaneity of her appointment with the
doubling of the Angolan debt to China that may have served to finance Sonangol,
perhaps there should be a suspension of payment of this debt until it becomes
clear whether there was any illegality or not, namely in what refers to the 5
billion that were apparently allocated to investments in and from Sonangol.
It should be noted that
this is what Chinese law, enforced by Xi Jinping, imposes. The Chinese
President and his administration are taking a long and hard fight against
corruption in their country. Current Chinese law on corruption is found in the
Penal Code of the People’s Republic of China approved in 1981, revised in 1997
and enhanced in 2015. According to this
rule, all activities involving corruption related to foreign rulers are a crime
for which Chinese courts have jurisdiction. In effect, since May 1, 2011, it is
a crime to pay illegally to foreign officials. The truth is that, currently,
the Chinese Penal Code acts beyond its borders, so corrupt payments, the
“odious debt”, already has to be considered by the Chinese authorities when
making their assessments of situations.
This means that for political
reasons as well as for reasons of domestic law, China is obliged and must
analyze the debt that may have been incurred for corrupt purposes or for
illegitimate benefit. Angola’s debt must be thoroughly reviewed in this
perspective.
Figure 4- Reasons for China to reduce Angolan debt
Conclusions
The reasons explained
strongly advise China to proceed with a substantial unilateral reduction of the
Angolan debt. It is an imperative of its current position in the world, its
pragmatism and sinic law.
https://www.cedesa.pt/wp-content/uploads/2020/05/china-angola-2.jpg400912CEDESA-Editorhttps://www.cedesa.pt/wp-content/uploads/2020/01/logo-CEDESA-completo-W-curvas.svgCEDESA-Editor2020-05-07 08:38:312020-05-07 08:38:33Why China should reduce Angola's debt
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