Since becoming a net oil importer in 1993, China has gone to substantial lengths to ensure greater energy security to maintain the growth rate of its massive economy. This endeavour has taken the Asian giant all over the world in search of energy sources, which has also led to growing ties between China and energy rich countries. This policy has necessitated stronger involvement in energy rich countries throughout Africa such as Angola and the Republic of Congo. This CAI paper explores the impacts that China’s energy driven investments have had in both Angola and the Republic of Congo with an aim to further analyse the socio-economic effects that have been experienced in both countries as a result of China’s involvement. The discussion reveals that China’s investments in both countries have had considerable impact on infrastructure development and have also boosted the recipient states’ gross domestic product (GDP) growth substantially. However, there have been reports of numerous issues relating to use of primarily Chinese labour on projects, poor quality of products and services, and the funding given by the Chinese being used to further strengthen the existing regimes due to the “no strings attached” policy through which China invests.

Impacts of China’s relations with Angola

Since the end of the 27-year long civil war in 2002, China has been instrumental in the development of Angola’s infrastructure through economic and commercial co-operation agreements resulting in huge investments in major projects in energy, transport, infrastructure, telecommunications and agro-business, as well as oil-backed loans.⁽²⁾ As a result of the credit line provided by China ⁽³⁾ as well as the boost in infrastructure development ⁽⁴⁾ and oil exports, Angola’s economy grew by an average of 10% from 2006-2010.⁽⁵⁾ This growth has been in no small part the result of China’s increasing purchases of Angolan oil. The oil dynamics between the two states have grown to a point where in 2012 46% of Angola’s oil exports went to China.⁽⁶⁾ Conversely, Angola now accounts for 16% of China’s total oil imports, thus making it China’s largest African supplier of crude oil.⁽⁷⁾ Translated into figures, in the short space of five years since the framework agreement on economic cooperation was signed, oil exports from Angola to China rose 10-fold from US$ 2.2 billion in 2003 to US$ 22.3 billion in 2008.⁽⁸⁾ Notably, China has consistently increased its oil imports from Angola and although China has less influence in terms of acquiring oil exploration and extraction contracts due to the presence of a number of Western oil majors such as ExxonMobil, BP, Total SA, and Eni, China has managed to get its foot through the energy door. This was evident in 2004 when China was able to sign a partnership agreement with Angola’s state owned oil major, Sonangol, after acquiring a 50% stake in BP’s offshore block 18.⁽⁹⁾

Few work opportunities, too much foreign labour and not enough democracy

While the benefits accrued by Angola as a result of China’s involvement in the country have had a substantial impact on Angola’s development, there have been certain negative issues which have come to the fore, including allegations of Chinese companies providing sub-standard construction services.⁽¹⁰⁾ At the same time there are labour issues to consider. Contracts given to Chinese companies stipulate that 50% of procurement materials as well as 70% of projects must come from and be awarded to China and Chinese firms.⁽¹¹⁾ Reports note that in some cases Chinese companies even prefer to use their own labour entirely, instead of employing Angolans.⁽¹²⁾ By employing their own labour, Chinese companies are not only necessarily decreasing the likelihood of skills transference to the Angolan labour force, but many view the influx of Chinese workers - numbering 250,000 in 2014 ⁽¹³⁾ - as a result of this policy as depriving locals of jobs, fostering a certain level of resentment towards the Chinese and their business activities.

The “no strings attached” policy has in part also ensured the longevity of the incumbent Angolan president José Eduardo dos Santos, in power since 1979. The dos Santos regime remains in power through a strict system of suppressing mass protests against the ruling government, and attempting to control mass media. Amendments to the constitution in 2012 allow the president to name the vice-president, cabinet, and provincial governors.⁽¹⁴⁾ As a result the People’s Movement for the Liberation of Angola (MPLA) remains the single most dominant party in power and stands accused by opposition parties of being responsible for the misallocation of large portions of oil-revenue and for Sonangol linked funds disappearing.⁽¹⁵⁾ This is all possible due to the corruption that permeates the ranks of the Angolan leadership. Through the misappropriation of oil-revenue, President dos Santos has become one of the richest men in Angola, which allows him to maintain a firm grip on Angolan politics.⁽¹⁶⁾ To compound this, despite opportunities available in other sectors such as agriculture, the ruling regime has failed to diversify exports and stimulate non-oil sector economic growth and development.⁽¹⁷⁾ This has been done in order to allow the ruling regime to continue being subsidised by Chinese investment-for-oil in return for Chinese built infrastructure projects. It also provides little benefit to the majority of Angolans, as oil-for-infrastructure contracts are normally not closely scrutinised, which allows China to continue these projects with a predominantly Chinese workforce.

Impacts of China’s relations with the Republic of Congo

China’s foreign policy differs little from the Republic of Congo to Angola. With Congo China also bases the majority of the relationship on energy cooperation. The share of Congo’s crude going to China accounted for 43% of total crude exports in 2012 (roughly 115,000 b/d).⁽¹⁸⁾ Conversely, China now imports roughly 2% of its total crude oil demand from Congo.⁽¹⁹⁾ China backs up the need to secure this supply of energy with favourable infrastructure development contracts as well as interest-free loans and lines of credit.

Like in Angola, China is behind in acquiring oil assets in the Congo due to the involvement of a number of Western oil-majors such as Eni and Total. This has, however, only pushed China towards closer relations with the central African state. In March 2012, newly elected Chinese president Xi Jinping ended off his inaugural tour of Africa with a short visit to the Congo.⁽²⁰⁾ In October 2013 the Congolese government also sought Chinese expertise to construct special economic zones aimed at reducing the country’s oil dependence, and increasing its ability to process raw materials.⁽²¹⁾ In 2014, the presidents from both countries also held a meeting in Beijing aimed at boosting further co-operation in petroleum, finance and infrastructure construction.⁽²²⁾

Deforestation, poor pay and weak governance

Increased co-operation with China has certainly brought some benefit to the Congo. Since the end of civil conflict in 1997 and the signing of a new constitution in 2002, Congo experienced GDP growth of just less than 6% between 2008 and 2012 ⁽²³⁾ due to China’s purchase of raw materials such as crude oil and wood. But again, the relationship has come with costs. Wood is the next most dominant sector after oil and accounts for 13.5% of exports.⁽²⁴⁾ This has led to a substantial increase in deforestation in the Congo, in large part attributed to the work of Chinese logging, road construction and mining companies.⁽²⁵⁾ The construction of the Imboulou Dam did include 2,000 Congolese in contrast to many other projects around Africa that have used far more Chinese than locals.⁽²⁶⁾ But, the rock used to make cement for the duration of the project came from a quarry near Brazzaville run by China Machinery and Equipment Corporation, and Congolese workers at the site had few positives to say about their Chinese employers. The primary use of sophisticated machinery for the extraction of rock did not bring much benefit to the local population, and the few that were employed had complaints of pay as low as 35c for an entire day’s worth of dangerous work.⁽²⁷⁾

Despite the substantial oil and forestry revenues ⁽²⁸⁾ corruption runs rampant within the extractive industries of the Congo. Due to the weakness of the institutions within the country, contracts are not enforced to standard and funds are often misappropriated or lost. Data of oil revenue is also normally withheld by the government and the main state oil company is in the direct control of President Denis Sassou Nguesso’s family.⁽²⁹⁾ The deep root that corruption has taken throughout the country’s oil sector ensures that the ruling leadership remains in power.⁽³⁰⁾ The incumbent president, in power since 1979, has survived a number of civil conflicts and continues to maintain control through elections marred by corruption, fraud and popular dissent.⁽³¹⁾

Concluding remarks

There are a number of conflicting issues between China and its African partners. While Chinese investment in infrastructure development has been beneficial, Angola and Congo’s development-for-oil relationship with China is unsustainable. Although China offers African citizens scholarships to study in China, the fact that the majority of labour employed is Chinese leaves little room for skills transference, thus limiting the long-term impact of development brought by Chinese companies. Furthermore, the level of autocratic control exercised by the ruling regimes will ensure that any protest regarding the substandard quality of the work and lack of employment opportunities from Chinese companies is suppressed in order for the government to continue benefiting from oil revenues. Resentment toward the Chinese as well as limitations to the populace’s ability to express their frustrations and have their grievances addressed, considering their interests come second to those with the deep pockets, could lead to discontent escalating to violence against the Chinese, as has been seen countless times in Zambia for example. This unrest could in turn have a substantial impact on investor confidence, negatively affecting prospects for other investment, further brining into question the sustainability of China’s role in Angola and Congo’s development.

The short-sighted approach by both governments to keep economic diversification to a minimum will also leave the development achieved through the relationships with China unsustainable over a long period. While the case of the Congo is slightly different as Chinese expertise has been sought in the diversification of the economy, the overwhelming levels of corruption within the ruling government will inevitably nullify this. While both nations’ GDP may continue to grow for the time being, actual development will likely be curbed due to high unemployment, lack of resource-export diversification, and the perpetual corruption sustained by Chinese investments. The level of dependence by both countries on Chinese demand for oil could also lead to instability should this demand decrease. In this light, if both Angola and the Congo wish to look for a path of greater sustainable development, they would have to seriously reconsider their existing relationship with China.

Written by Ogi Williams ⁽¹⁾

NOTES:

(1)Ogi Williams is a Researcher at CAI with an interest in foreign policy, energy security, trade and governance. Contact Ogi through Consultancy Africa Intelligence's Asia Dimension unit ( asia.dimension@consultancyafrica.com). Edited by Nicky Berg. Research Manager: Claire Furphy.
(2) For details on China’s loans to Angola, see Thompson, R., ‘Assessing the Chinese influence in Ghana, Angola, and Zimbabwe: The impact of politics, partners, and petro’, Centre for International Security and Cooperation, 21 May 2012, http://iis-db.stanford.edu; Kabemba, C., ‘Chinese involvement in Angola’, Open Society Initiative for Southern Africa, 4 October 2012, http://www.osisa.org.
(3) See Kabemba, C., ‘Chinese involvement in Angola’, Open Society Initiative for Southern Africa, 4 October 2012, http://www.osisa.org; Thompson, R., ‘Assessing the Chinese influence in Ghana, Angola, and Zimbabwe: The impact of politics, partners, and petro’, Centre for International Security and Cooperation, 21 May 2012, http://iis-db.stanford.edu.
(4) See De Morais, R.M., ‘The New Imperialism: China in Angola’, World Affairs Journal, March/April 2011, p. 1-5; Kabemba, C., ‘Chinese involvement in Angola’, Open Society Initiative for Southern Africa, 4 October 2012, http://www.osisa.org; McClelland, C. and Soque, M., ‘Chinese premier to sign trade agreements in oil supplier Angola’, Bloomberg, 8 May 2014, http://www.bloomberg.com; Kiala, C., 2010. The impact of China-Africa aid relations: The Case of Angola. AERC Policy Brief, 1, http://www.africaportal.org.
(5) Zhao, S., ‘The China-Angola partnership: A case study of China’s oil relations in Africa’, China Briefing, 25 May 2011, http://www.china-briefing.com.
(6) Ibid.
(7) ‘Country Profile – China’, US Energy Information Administration, http://www.eia.gov.
(8) Sandrey, R. and Edinger, H., 2010. The impact of China-Africa trade relations: The case of Angola. AERC Policy Brief, 3, http://www.aercafrica.org.
(9) Kabemba, C., ‘Chinese involvement in Angola’, Open Society Initiative for Southern Africa, 4 October 2012, http://www.osisa.org.
(10) For example, in the construction of Luanda’s General Hospital which once had to be evacuated and with Chinese built roads which lasted no longer than a year after construction. See De Morais, R.M., ‘The New Imperialism: China in Angola’, World Affairs, 2011, http://www.worldaffairsjournal.org.
(11) Thompson, R., ‘Assessing the Chinese influence in Ghana, Angola, and Zimbabwe: The impact of politics, partners, and petro’, Centre for International Security and Cooperation, 21 May 2012, http://iis-db.stanford.edu.
(12) Corkin, L., ‘Chinese construction companies in Angola: A local linkages perspective’, UCT School of Oriental and African Studies Discussion Paper, March 2011, http://www.cssr.uct.ac.za.
(13) ‘Chinese workers line up to take Angola’s jobs’, Angola News Network, 22 January 2014, http://www.angolanewsnetwork.com.
(14) ‘Freedom of the world 2013 – Angola’, Freedom House, http://www.freedomhouse.org.
(15) Ibid.
(16) Ibid.
(17) ‘Still much too oily’, The Economist, 12 April 2014, http://www.economist.com.
(18) ‘Country Profile – Congo (Brazzaville)’, US Energy Information Administration, http://www.eia.gov.
(19)‘Country Profile – China’, US Energy Information Administration, http://www.eia.gov.
(20) For more details on the development pledges made during the president’s visit, see ‘China's Xi wraps up Africa tour in Republic of Congo’, Reuters, 29 March 2013, http://www.reuters.com.
(21) ‘Interview: Congo to use Chinese expertise in special zone building: minister’, Xinhua, 25 October 2013, http://www.china.org.cn.
(22) ‘Congo-Brazzaville: China, Republic of Congo Pledge Closer Cooperation’, All Africa, 13 June 2014, http://allafrica.com.
(23) ‘Republic of Congo – Overview’, World Bank, http://www.worldbank.org.
(24) Bazika, J-C B., ‘The Impact of China’s trade relations with Africa – the case of the Congo’, Economic Policy Analysis and Research Centre, July 2009, http://www.africaportal.org.
(25) ‘Jane Goodall accuses China of plundering Africa’, Mail and Guardian, 11 March 2009, http://mg.co.za; Kaye, M., ‘Deforestation from mining in the Congo more than ‘a hole in the canopy’’, Centre for International Forestry Research, 16 July 2012, http://blog.cifor.org.
(26) ‘Congo Republic hails successful dam turbine test,’ Reuters, 29 January 2010, http://af.reuters.com.
(27) ‘Congo and China Forge Economic Partnership,’ NPR, 26 June 2007, http://www.npr.org
(28) Government oil revenues rose from just under US$ 1 billion in 2001, to over US$ 2 billion in 2005 with ever larger quantities of oil being exported to China. The same was evident in terms of wood with China accounting for less than 2% of Congo’s exports in 2000, the share skyrocketing to over 55% by 2006. See Global Timber, ‘Congo (Brazzaville)’, 2012, http://www.globaltimber.org.uk.
(29) Ibid.
(30) ‘Congo (Brazzaville) – 2014 Index’, Heritage Foundation, 2014, http://www.heritage.org.
(31) Freedom House, ‘Congo, Republic of (Brazzaville)’, Freedom in the World 2013, http://www.freedomhouse.org.