Understanding Post-War Foreign Direct Investment in Angola: South–South Led or the West Still Rules?

Abstract

Members of the political elite of Angola often explain the post-war economic recovery through south–south co-operation, with particular reference to the emerging economies – that is, Brazil, Russia, India, China and South Africa (BRICS). Mainstream argument suggests that although foreign direct investment (FDI) from new sources, such as the BRICS, is necessary for natural resource-rich developing countries, the effects of this investment are likely to replicate western practices, making it difficult for these countries to move away from natural-resource dependency. Countries in sub-Saharan Africa are particular likely to experience these challenges. However, by looking at the historical relations between Angola and the BRICS, then examining the patterns of the FDI registered with the Angolan National Private Investment Agency (ANIP) (from 2003 until 2013), this study indicates that BRICS FDI has been concentrated in the non-mineral sector, particularly in construction and manufacturing. Evidence further highlights the point that despite inadequate transparency and poor accountability, western-based FDI still rules in Angola.

Keywords:

• Angola
• BRICS
• FDI
• non-mineral sector
• ANIP

Acknowledgements

I would like to thank those who have read earlier versions of this article for their comments. My special gratitude goes to Professor David Simon and the sponsors of the first Emerging Southern Africa Scholars’ Writing Workshop held in Livingstone, Zambia, 5–11 August 2015; to Carlos Oya for his comments; and to two anonymous reviewers. Any remaining errors or omissions are my own.

Notes

¹ A. Basu and K. Srinivasan, ‘Foreign Direct Investment in Africa – Some Case Studies’, IMF Working Paper, 02/61 (Washington DC, International Monetary Fund, March 2002).

² J.E. Stiglitz, More Instruments and Broader Goals: Moving Toward the Post-Washington Consensus, WIDER Annual Lecture 002 (Helsinki, UNU–WIDER, 1998).

³ World Bank, World Development Report: The State in a Changing World (Oxford, Oxford University Press, 1997), pp. 19–38.

⁴ Under the Washington Consensus macro-economic reforms, the state was expected to improve its control over inflation (through strict controls over the money supply), reduce its public investment plans in order to improve the balance of payments, and instead focus on attracting FDI. In order to make it safer for foreign investors to invest in a country, the state was expected to protect and secure individual property rights, let the market influence the levels of interest rate in the economy, remove fixed exchange rates, liberalise trade to promote competition, and remove most subsidies and regulatory barriers. The state was also expected to improve its tax revenue, which in turn would lead to significant improvement in the national accounts; J. Williamson, ‘What Washington Means By Policy Reform’ (Washington DC, Peterson Institute for International Economics, 2002), available at https://www.wcl.american.edu/hracademy/documents/Williamson1990WhatWashingtonMeansbyPolicyReform.pdf, retrieved 7 February 2017.

⁵ This study will use the term ‘Africa’ with particular reference to its sub-Saharan region; when otherwise, it will be highlighted.

⁶ M. Mlachila and M. Takebe, ‘FDI from BRICs to LICs: Emerging Growth Driver?’IMF Working Paper, 11/178 (Washington DC, International Monetary Fund, July 2011).

⁷ A. Malaquias, ‘China is Angola’s New Best Friend – For Now’, in M. Power and A. Alves (eds),China and Angola: A Marriage of Convenience? (Oxford, Pambazuka, 2012), pp. 26–44.

⁸ Ibid.

⁹ F. Wanda, ‘Financing Post-War (Re)Construction: The Changing Role of Natural Resources Wealth in Angola’, unpublished paper presented at the IV International Conference of the Institute of Social and Economic Studies (IESE), ‘State, Natural Resources and Conflict: Actors and Dynamics’, Maputo, 27–28 August 2014.

¹⁰ A. Vines, N. Shaxson and L. Rimli, with C. Heymans, ‘Angola: Drivers of Change: An Overview’, London, Chatham House (April 2005), available at http://www.gsdrc.org/docs/open/DOC87.pdf, retrieved 31 July 2013.

¹¹ R. Soares de Oliveira, ‘Business Success, Angola-Style: Postcolonial Politics and the Rise and Rise of Sonangol’, Journal of Modern African Studies, 45, 4 (2007), pp. 595–619.

¹² J.D. Sachs and A.M. Warner, ‘Natural Resource Abundance and Economic Growth’, National Bureau of Economic Research Working Paper, 5398 (Cambridge, Mass., NBER, 1995), available at http://www.nber.org/papers/w5398, retrieved 5 August 2013.

¹³ J. Di John, ‘Is There Really a Resource Curse? A Critical Survey of Theory and Evidence’, Global Governance, 17, 2 (2011), pp. 167–84.

¹⁴ R. Soares de Oliveira, ‘Making Sense of Chinese Oil Investment in Africa’, in C. Alden, D. Large and R. Soares de Oliveira (eds), China Returns to Africa: A Rising Power and a Continent Embrace (New York, Columbia University Press, 2008), pp. 83–109; P. Chabal, ‘E Pluribus Unum: Transitions in Angola’, in P. Chabal and N. Vidal (eds), Angola: The Weight of History (London, Hurst, 2007), pp. 1–19; T. Hodges, ‘The Economic Foundations of the Patrimonial State’, in Chabal and Vidal (eds), Angola, pp. 175–99.

¹⁵ O. Morrissey, ‘FDI in Sub-Saharan Africa: Few Linkages, Fewer Spillovers’, European Journal of Development Research, 24, 1 (2011), p. 28.

¹⁶ Mlachila and Takebe, ‘FDI from BRICs to LICs’.

¹⁷ UNCTADstat, available at http://unctadstat.unctad.org/CountryProfile/GeneralProfile/en-GB/024/index.html, retrieved 22 May 2017.

¹⁸ Wanda, ‘Financing Post-War (Re)Construction’.

¹⁹ This article uses the terms ‘western-based FDI’ and ‘OECD FDI’ interchangeably.

²⁰ ANIP is the institution responsible for executing governmental private investment policy, its promotion, co-ordination and supervision. It was established through the Presidential Decree 44/03 on 4 July 2003.

²¹ According to Decree 32/00, INE is the official central body responsible for producing and publishing official statistical data in Angola.

²² The sources are: OECD (Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Estonia, France, Finland, Germany, Hungary, Ireland, Israel, Italy, Japan, Luxembourg, Netherlands, New Zealand, Norway, Portugal, Slovak Republic, Slovenia, South Korea, Spain, Sweden, Switzerland, Turkey, UK, USA); Europe (Croatia, Cyprus, Georgia, Gibraltar, Liechtenstein, Malta, Romania, Yugoslavia); North Africa and Middle East (Algeria, Djibouti, Egypt, Jordan, Kuwait, Lebanon, Morocco, Oman, Syria, Tunisia, United Arab Emirates); sub-Saharan Africa (Botswana, Cameroon, Cape Verde, Congo, Democratic Republic of Congo, Eritrea, Ethiopia, Gabon, Gambia, Ghana, Guinea, Ivory Coast, Kenya, Liberia, Mauritius, Madagascar, Malawi, Mali, Mauritania, Mozambique, Namibia, Nigeria, Rwanda, São Tomé and Príncipe, Senegal, Seychelles, Sierra Leone, Somalia, Tanzania, Togo, Zambia, Zimbabwe); South America (Paraguay, Uruguay, Venezuela); Central America and Caribbean (Bahamas, Belize, Bermuda, British Virgin Island, Cayman Islands, Cuba, Dominica, Panama, St Vincent, Turks & Caicos); Asia (Bangladesh, Malaysia, Pakistan, Singapore, Sri Lanka, Thailand, Vietnam).

²³ Brazil gained its independence from Portugal in 1822, whereas Angola achieved it only in 1975.

²⁴ R. Warner, ‘Historical Setting’, in T. Collelo (ed.), Angola: Country Study, 3rd ed. (Washington DC, Federal Research Division, 1991), p. 14.

²⁵ This was changed to República de Angola after the transition from a one-party system, created on the Soviet model, to a multi-party system, which led to the first democratic free elections in 1992.

²⁶ I. Taylor, China and Africa: Engagement and Compromise (London, Routledge, 2006), p. 76.

²⁷ Taylor, China and Africa.

²⁸ Ibid.

²⁹ D. Srivastava, ‘Expanding and Boosting Bilateral Co-operation on the Basis of Mutual Benefit’,The Times of India, 11 November 2014.

³⁰ L. Corkin, ‘Uneasy Allies: China’s Evolving Relations With Angola’, Journal of Contemporary African Studies, 29, 2 (2011), pp. 169–80.

³¹ This section takes parts of the arguments from Wanda, ‘Financing Post-War (Re)Construction’.

³² Government of Angola, Ministry of Planning, ‘Estratégia de Combate À Pobreza: Reinserção Social, Reabilitação e Reconstrução e EstabilizaçãoEconómica’ (unpublished paper, 2005), available at www.enhancedif.org/en/file/294/download?token=6f_zOa8U , retrieved 27 February 2017.

³³ Malaquias, ‘China is Angola’s New Best Friend’, p. 39.

³⁴ M. Anstee, ‘International Indifference Blighted Angola’, Financial Times, London, 9 February 2010, para. 6.

³⁵ ‘Natural-resource wealth’ and ‘mineral sector’ are used throughout this article with particular reference to oil and minerals, unless otherwise stated.

³⁶ L. Corkin, ‘Uneasy Allies’.

³⁷ Soares de Oliveira, ‘Business Success’; Soares de Oliveira, ‘Making Sense’; A. Alves, ‘The Oil Factor in Sino-Angolan Relations at the Start of the 21st Century’, SAIIA Occasional Paper, 55 (Johannesburg, SAIIA, 2010), available at http://www.saiia.org.za/occasional-papers/the-oil-factor-in-sino-angolan-relations-at-the-start-of-the-21st-century.html, retrieved 8 April 2013; R. Morais, ‘Kero, O Supermercado de Manuel Vicente’, 25 January 2012, available at https://www.makaangola.org/2012/01/kero-o-supermercado-de-manuel-vicente/, retrieved 2 August 2013.

³⁸ Wanda, ‘Financing Post-War (Re)Construction’.

³⁹ Ibid.

⁴⁰ Government of Angola, Ministry of Planning, Angola 2025: Angola, um País de Futuro (Luanda, 2008).

⁴¹ Government of Angola, Ministry of Finance, ‘Esclarecimento Sobre a Linhade Crédito da China’, press release, 17 October 2007. To consult this document, it is now necessary first to request to do so; see http://www.ugd.minfin.gv.ao/.

⁴² A. Hirschman, The Strategy of Economic Development (Boulder and London, Westview Press, 1988).

⁴³ Ibid., p. 83.

⁴⁴ N. Pushak and V. Foster, ‘Angola’s Infrastructure: A Continental Perspective’, Policy Research Working Paper, 5813, September 2011, available at https://doi.org/10.1596/1813-9450-5813, retrieved 14 July 2013.

⁴⁵ Malaquias, ‘China is Angola’s New Best Friend’.

⁴⁶ E. Dabla-Norris, J. Honda, A. Lahreche and G. Verdier, ‘FDI Flows to Low-Income Countries: Global Drivers and Growth Implications’, IMF Working Paper, 10/132 (Washington DC, International Monetary Fund, 2010), p. 3.

⁴⁷ Mlachila and Takebe, ‘FDI from BRICs to LICs’, p. 3.

⁴⁸ Basic information from World Bank, Doing Business, is available via http://www.doingbusiness.org/Custom-Query/angola, retrieved 16 May 2017.

⁴⁹ S. Kyle, ‘Development of Angola’s Agricultural Sector’, Agroalimentaria, 4, June 1997, available at http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.550.922&rep=rep1&type=pdf, retrieved 16 May 2017.

⁵⁰ Angola Press Agency, ‘País Regista Desminagem de Mais de Mil Milhões Metros Quadrados’, 5 July 2013, available at

http://www.portalangop.co.ao/motix/pt_pt/noticias/politica/2013/6/27/Pais-regista-desminagem-mais-mil-milhoes-metros-quadrados,c2afa953-62c4-4a4a-89e6-15daa19e6a80.html, retrieved 2 August 2013.

⁵¹ N. Kaldor, Strategic Factors in Economic Development (Ithaca, Cornell University Press, 1967).

⁵² Soares de Oliveira, ‘Business Success’; Soares de Oliveira, ‘Making Sense’; Alves, ‘The Oil Factor’; Morais, ‘Kero’.

⁵³ For a similar argument, see Hodges, ‘The Economic Foundations’.

⁵⁴ Hirschman, The Strategy of Economic Development.

⁵⁵ As opposed to Morrissey’s ‘wrong type’, mentioned above in my introduction (and footnote 15).

⁵⁶ One would also expect Brazilian investors to focus on agriculture. Although land mines are still a major concern in Angola, Odebrecht nevertheless submitted, in partnership with the public company Gesterra S.A., a major agricultural project, Fazenda Pungo Andongo, in 2009 to produce cereals (it accounts for 99 per cent of all Brazilian FDI investment in this sector). Odebrecht is also involved in the Companhia de Bioenergia de Angola (Biocom) investment project, a joint venture that includes the Angolan state-owned oil company, Sonangol, and Cochan, a local company linked to people with ties to the political elite. It is focused on sugar-cane plantation for the production of sugar, for consumption and industry, ethanol and biodiesel for electricity production. Further information on the project can be found at the company’s website, http://www.biocom-angola.com/en/home, retrieved 16 May 2017.

⁵⁷ Jornal de Angola (23 May 2015), reported that the Angolan parliament passed a law authorising the GoA to reduce the fiscal charges on the import of agricultural and industrial equipment and machinery in order to boost the current economic diversification effort.

⁵⁸ In 2015 and 2016, the GoA had to review its budget and put on hold some construction projects.

⁵⁹ GoA, Ministry of Finance, ‘Orçamento Geral do Estado: Relatório de Fundamentação’, p. 19, available via http://www.minfin.gv.ao/PortalMinfin/faces/materiasderealce/estatisticas, retrieved 21 May 2017.

⁶⁰ F. Wanda, ‘Financing Post-War (Re)Construction’.

⁶¹ Currently there is an on-going research project by the School of Oriental and African Studies, University of London, in partnership with the Faculdade de Economia, Universidade Agostinho Neto, to assess the dynamics of FDI in job creation in Angola.