The fall in oil revenues has led the Angolan authorities to restrict the availability of US dollars, and, according to Portuguese bank BPI, part of the solution may be an exchange agreement with China.
In its latest report on the Angolan economy, BPI said that for China, an agreement like this would secure oil purchases from Angola and cement its role as a supplier of Angolan imports.
“In Angola, this agreement could partly make up for a lack of dollars that are needed to pay for imports, but in terms of foreign exchange flows would have potentially zero effect,” said the BPI analysts.
Despite the difficulties related to the decline in oil revenues, international reserve levels are considered by BPI to be “relatively strong” in view of official data published by the National Bank of Angola.
However, it added, a big divergence between the official exchange rate and the black market rate is a sign that liquidity problems in the forex market “have not been resolved,” with the value of the kwanza falling back almost a third against the dollar in the last 12 months.
Figures for 2014 from the World Trade Organization (WTO) showed that China rose to first place on the list of largest suppliers to Angola, and is already the largest Angolan trading partner, with total trade of about US$30.5 billion in 2014.
In the last decade, China has become the main destination market for Angolan oil exports, overtaking the United States, and Angola reached second place among suppliers of oil to China, according to Energy Intelligence Agency.
“Angola is one of the countries that benefited most from strengthening trade relations with China,” said BPI.
According to the Angolan investment agency (ANIP) report, in the first quarter of 2015, China accounted for about 46 percent of the total invested by foreigners in Angola, 10 percentage points more than in the same period of 2014.
A recent study by the Brookings Institution, based on figures from the Chinese Ministry of Commerce, puts Angola in third place among sub-Saharan African countries attracting most Chinese investment.
According to BPI, the slowdown in Chinese investment “could punish Angola, but the official cooperative effort between the two countries suggests that the authorities are committed to dealing with the situation.”
“The Angolan authorities seem to be working in diplomatic terms to continue to deepen relations with China and secure continued Chinese funding for infrastructure construction projects, or at least that’s the suggestion from the recent official visit by the President of Angola to China,” BPI said.
At the same time, Angola has agreed to loans with preferential terms, through a credit line set up for Angola that is paid back in oil exports.
According to BPI, China’s investment strategy in Angola and other African countries “has had a long-term view and, as such, investments have been directed to structural projects, mainly in the form of foreign direct investment.” MDT/Macauhub
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