Beijing. Angolan President Jose Eduardo dos Santos met Chinese counterpart Xi Jinping on Tuesday on a state visit to seek financing for projects, including a $4.5 billion hydropower scheme, intended to revive an economy hit by low crude prices.

Construction firm China Gezhouba said it had won the contract to build the dam in the southern African nation, a project that would take six years to complete and be financed by Chinese bank loans.

“China and Angola are good brothers and long term strategic partners,” Xi told dos Santos, adding that Beijing would encourage more Chinese companies to invest in Africa’s number two oil producer, according to Chinese state television.

China has built strong ties with Angola since the end of a long civil war in 2002. Luanda now sells around half of its 1.7 million barrels per day oil output to China.

Angolan foreign minister Georges Chikoti said Dos Santos was seeking financial backing for “priority projects”.

“These are projects in the financial industry, high education, energy, training and agriculture,” he was quoted as saying in state media. There were no more details.

China’s state-owned Industrial and Commercial Bank (ICBC) said in a statement that it will lend $840 million to the power project.

With oil hitting a six-year low of $45 a barrel in January and the global output glut unlikely to abate with OPEC maintaining supply levels, Angola’s oil-dependent economy is in trouble.

The central bank devalued the kwanza by 6 percent last week and the government is predicting a budget deficit of 7 percent of GDP for this year even after massive cuts to state spending.

Oil accounts for around half of Angola’s GDP, 80 percent of tax revenues and 90 percent of export earnings.

“I don’t think dos Santos is going there to beg but there will be some negotiations around increased funding from China,” said Cobus de Hart, Angola analyst with NKC African Economics in Cape Town.

Beijing has issued oil-backed loans to Angola since 2003, a year after it emerged from a 27-year civil war. Including the latest hydropower loan, those debts now amount to more than $20 billion.

“Dos Santos is one of the few leaders in Africa who can actually single-handedly raise billions,” said Anthony Lopes Pinto, managing director of Imara Securities Angola.

“Angola is the largest recipient of Chinese FDI in Africa and increased FDI is one of the ways to avoid recession.”

Reuters

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Source: The Jakarta Globe