China and the World

Oiling the wheels

China is building a new city – in Angola

Oiling the wheels

Luanda: most costly city for expats

As a lifelong supporter of Liverpool Football Club, Mike Woolrich should be happy. He has just received an email confirming his 13 year wait for a coveted season ticket is over. But his chances of getting to any home games look slim. That’s because seven months ago he joined the growing number of foreign workers heading to Luanda, the capital of Angola.

Until 2002, this country of 19 million people had suffered more than a generation of civil war. But since then, oil-rich Angola has been one of the world’s fastest-growing economies with GDP up an average of 11.1% a year, according to The Economist.

The country’s war-ravaged infrastructure is straining to support such rapid growth – the upshot being that Luanda has become one of the world’s most expensive cities for expats (the consultancy Mercer ranked it costliest for expat employees in 2010 and 2011, while Woolrich, a geologist, told WiC that taxi rides of less then 10 miles cost $90).

Still, Angola is desperate to lure foreign workers. And as with a number of other African countries, China has been one of the main providers. According to a June 2011 report by the Centre for Strategic and International Studies, there are now 50 Chinese state-owned firms and 400 private companies operating in Angola, with an associated workforce of up to 70,000 Chinese nationals. To put that in perspective, that’s twice the number recently evacuated from similarly oil-rich Libya.

Bilateral ties are lubricated in oil. By March 2010, Angola had become the largest global supplier of crude to China, shipping more than one million barrels per day, 42% higher than second-placed Saudi Arabia. Accounting for 2% of global production, Angola’s low-sulphur product is particularly in demand by Chinese refiners for higher-quality gasoline and diesel. In 2010, Beijing bought about 45% of Angola’s output.

Production also looks set to increase following announcements late last year that BP, Total and Norway’s Statoil have secured licences to explore offshore deposits, which have the potential to double Angola’s reserves.

As WiC has reported before (see issues 91, 129 and 131) China’s growing presence in Africa is not without its critics, especially those who detect a neo-colonial effort to grab the continent’s resources. Others have drawn comparisons with the arrival of thousands of Cuban advisers and engineers in Angola in the 1980s. But the Chinese lack the Marxist motivations of their Cuban predecessors. Plus they’ve been building roads, railways and airports in places where other foreign firms have feared to tread. Financial assistance has been more forthcoming too, with $14.2 billion extended in official credit lines to Angola, at more competitive terms than those offered by Paris Club creditors.

Of course, the Angolans are paying off these loans with oil exports and by awarding contracts to Chinese companies. At least $4.4 billion in construction contracts were signed last year alone. One ongoing project is the huge greenfield site 30 kilometres south of Luanda, where a $3.5 billion city is emerging. The new city of Kilamba Kiaxi is the showpiece in a government push to build a million new homes. The first phase, due for completion in December this year, will provide housing for 120,000 people, with associated schools, shops and parks. The Chinese are prominent once again: state-owned CITIC Construction is overseeing the work and employs 10,000 Chinese workers on the site.

Of course, all those involved in the Kilamba Kiaxi project will be hoping that the new city doesn’t suffer the same fate as the Luanda General Hospital, built by COVEC, another Chinese construction firm, and opened to great fanfare by Wen Jiabao in 2006. Within four years of opening, hospital walls were showing signs of cracking and serious erosion, and the facility had to be shut down. The Chinese blamed a faulty geological survey provided by the Angolans, while the locals say the hospital design was flawed.

Both sides will be hoping that wider bilateral relations turn out to have a more solid foundation.

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