China-Angola Investment Model

Abstract

Abstract:In the aftermath of Angola's civil war, strong economic relations developed between the country and the People's Republic of China. Our study addresses China's investment risks in Angola, considering an infrastructure-for-petroleum partnership between these two countries. The main working hypothesis is that the recovery of Chinese investments made in Angola is has translated into thousands of barrels of petroleum being imported daily from Angola. We analyzed the main economic, social, and political indicators that describe the situation in Angola that could impact the recovery of Chinese loans in the form of oil exports. Data processing implied involved regression-based imputation, MinMax data normalization, the use of the Analytical Hierarchy Process (AHP), and econometric analysis, next to the construction of a composite risk indicator. The results of the econometric analysis highlighted that an increase in the composite risk indicator of 1% leads to a decrease in the quantity of petroleum exported by almost 6377 barrels per day. Because, at least in the short run, the economic diversification in Angola is weak, and the most important asset is its oil, the partnership with China will continue to exist. This cooperation model represents a source of economic growth and infrastructure development for Angola and a source of energy that fuels China-one of the most powerful economies in the world.

Same Same, but Different: Ghana’s Sinohydro Deal as Evolved ‘Angola Model’?

“…Therefore, using natural resources as collateral to access sources of finance for investment came as a welcome solution. China loans were provided without political conditionality and at a much lower interest rate than any international financial institution might offer (Begu et al 2018). This was also a more favourable deal for the African political elites (Konijn 2014).…”

“…While a trade transaction characteristically consists of a one-off exchange of goods and money, an investment deal initiates a long-term relationship (Dolzer and Schreuer 2008). The World Bank, in its report entitled Building Bridges (Foster et al 2009), first framed the term Angola Model, the fundamental assumption of which is that African Countries want China to invest in their infrastructure, and China needs to import Africa’s mineral and oil resources (Begu et al 2018). Foster et al (2009) point out that the China Exim Bank increasingly uses the Angola model for countries that cannot provide adequate financial guarantees to back their loan.…”

“…Brautigam and Gallagher (2014) name Angola, Congo-Brazzaville, the Democratic Republic of Congo, Equatorial Guinea, Ethiopia, Gabon, Ghana, Nigeria, Sudan and Zimbabwe as recipients of commodity-backed finance in Africa. This large-scale Chinese financing scheme has been widely known as the Angola Model (Foster et al 2009), Angola Mode (Alves 2013) or China–Angola Investment Model (Begu et al 2018). The Angola Model involves an exchange of natural resources for national infrastructure through direct investments by China in both mining (in the case of Angolan oil) and infrastructure, and it dates back to 2004 when Angola signed several financing packages with China for public investment projects.…”

An Evaluation of Project Risk Dynamics in Sino-Africa Public Infrastructure Delivery; A Causal Loop and Interpretive Structural Modelling Approach (ISM-CLD)

“…According to [32], public-private partnerships have gained popularity in Africa and most of these partnerships involve foreign investors, i.e., Transnational PPPs (TPPPs). China has steadily combined the provision of financial and technical aid for the construction of infrastructure in most African countries with business pursuits and interests [7,33]. Unique to this type of partnership is the use of state-owned corporations who come in as private sector investors [34,35], which makes a distinctive representation of Transnational PPPs [36].…”

The Africa–China engagement: Contemporary developments and directions for future research

“…This is best exemplified by the so-called Angola model of "infrastructure-forresources" agreement. This took the form of concessional loans in 2004 provided by Exim Bank (China) to secure oil (Begu, Vasilescu, Stanila, & Clodnitchi, 2018). Not surprisingly, the trade relationship between Angola and China showcases Chinese imports from Angola dominated by petroleum products.…”