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Angola and the exploitation of its resources

Angola and the exploitation of its resources

Alexandre Addor

 

Since the end of the Civil War, Angola has been receiving weighty investments, mainly in the petroleum area, ranging from those by multinational corporations to those by States; a classic example is the People’s Republic of China.

 

The magnitude is such that ¼ of Angola’s oil production is exported to China (1).

 

In 2004, the Angolan exportation to the oriental country summed up to the value of US$ 3,422.63 Millions (2), representing 27.4% (3) of China’s trade with Africa.

 

Nevertheless, the Chinese involvement is not only commercial, in view of the fact that it is not restricted to the national resources exploitation of Angola; the Asian power also assists the country in the financial area.

 

Beijing established credit lines for African countries, of which Luanda was one of the main users.

 

In 2004, China started them with the value of US$2 billions for railways maintenance, roads construction and governmental offices, besides an important amount of money for the implementation of fiber optic lines for communication and petroleum exploitation (4).

 

In 2006, these same credit lines were enlarged to an extra US$1 billion.

 

Above and beyond the importance of the modernization of the means to extract Angola’s oil production, payment was made easy such as a period of 17 years, with 1, 5% interest rate per year, with a grace period of five years for the payment of interests and with the elimination of interest payments in the first five years (5).

 

This assistance was highly important for the Angolan economy, even more so after the failure the negotiations between Luanda and the International Monetary Fund (IMF) failed, because the latter enlisted pre-requisites, such as government accountability transparency, which the former Angolan government was not willing to accept.

 

A policy without strings or bonds is exactly how China acts in the African Continent, in a very realistic approach, especially with the Angolan government, since the concessions given to petroleum exploitation are surrounded with lack of transparency.

 

To exemplify, it is only necessary to say that China acquired 40% of the stocks of offshore oil Bloc 18, maybe the most profitable of all blocs.

 

In the Chinese proposal of US$1.4 billions for Bloc 18, $ 1.1 billion (6) was in reality a “bribery” to obtain the concession to the Chinese.

 

Corruption is one of the problems in Angola’s society and it is apparent in its most dynamic economic sector, the oil one.

 

China is also a partner of major importance by the means it enters in the Angolan market, through joint ventures, which allows companies such as SONANGOL (Angola’s Fuels National Society, in English), a stated owned company in the oil sector, to work with the Chinese government and corporations controlled by it and to have access to technology hardly available otherwise, either because of the price or secrecy issues, for developing countries.

 

Nevertheless besides that, Beijing is also investing in research in Angola to discover areas to be exploited, which makes possible for Angola to invest only when oil is found, avoiding costs, according to government sources, they can’t afford.

 

China, this way, is able to acquire an important amount of oil, vital for its growth, and also able to shape the image of Angola’s savior in the post civil war scenario.

 

The profitability achieved by the Chinese government and companies in Angola and other African countries, where it acts in the same manner, made has produced a change in the vision of several countries regarding how to proceed in the petroleum market, mainly in Angola, since they realized as the predominance of Beijing in comparison to them became apparent.

 

The United States has always been present in Angola; however, when they it realized China’s dominant presence, a decision was made to invest heavily in Angola, not only in petroleum, but also in the gas sector.

 

Nowadays, Chevron is developing jointly with the Angolan government projects in the liquefied gas area. Several other countries recognized the potentialities in this African country, such as Japan and Brazil.

 

Exports are a major source of wealth, because they represent 74% of Angola’s GDP (7).

 

These numbers demonstrate the loathing character, since the largest part of what is found and produced in the country is exported.

 

Regarding values, US$ 16,119 millions are exported in crude oil, US$ 94.9 millions in diamonds, US$ 234 millions in products derived from refined oil and US$ 21 millions in liquefied gas (8).

 

Nevertheless, Angola is extremely dependent on the petroleum sector, which composes 62.9% of its GDP. Because of that, Luanda exploits in a possibly unsustainable manner in the long run, to uphold its economy and to enrich its national elite.

 

However, income distribution in Angola is extremely unequal, leaving the majority of the population out of the prosperity created by the “black gold”; besides lack of investment in basic sectors, such as education and health; which would be essential factors for Angola to become a major actor in the international arena.

 

Notes

 

1 – SAUTMAN, Barry V. P. 10

2 – TAYLOR, Ian. P. 3

3 – Idem, Ibidem

4 – SAUTMAN, Barry V. P. 26

5 – Idem, Ibidem

6 – TAYLOR, Ian. P. 13

7 – ONU, Relatório de Desenvolvimento Humano HUMAN DEVELOPMENT REPORT

8 – http://www.economist.com/countries/Angola/profile. cfm?folder=Profile%2DEconomic%20Structure

 

Alexandre Addor is graduated in international relations by Bennett, studies History in PUC-Rio and is a member of WG III – Prevention and Resolution of armed Conflicts, Group of Analysis of International Conflict Prevention, under the coordination of prof. Clovis Brigagão

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