Angola boosts its influence in Sao Tome and Principe with credit line

27 January 2014

Sao Tome and Principe is increasingly the destination for Angolan investment in strategic sectors such as airports and infrastructure, and this trend is expected to be bolstered by a credit line due to be opened by Angola this year.

According to the local press the credit line is worth US$180 million, although the Angolan authorities have not confirmed the figure. This amount is the equivalent of 50 percent of Sao Tome and Principe’s gross domestic product (GDP) and a US$60 million tranche is due to begin to be paid out this year to fund “development projects.”

According to the Economist Intelligence Unit (EIU), the funding shows the “increasingly close ties between Angola and Sao Tome and Principe,” with “potential to drive economic growth,” in the archipelago.

“The credit line underlines Angola’s growing influence,” as “it has significant business interests in the country and a further increase in the presence of Angolan companies is expected in the short term,” said the latest EIU report on Angola.

Angolan companies in the last few years have taken strategic positions in Sao Tome’s economy, particularly state oil company Sonangol, which is now one of the most influential companies on the archipelago.

In 2012 Sonangol reached an agreement to buy at least 51 percent of Sao Tome’s flagship airline, STP, via Sonair, which provides support to the oil industry in Angola.

As well as this the oil company is in the Sao Tome fuel, port and airport sector, as well as having a staff training programme and the possibility to expand to other sectors.

Last year Angola’s most famous businesswoman, Isabel dos Santos, visited the archipelago for a few hours. She is setting up her telecommunications company Unitel in the archipelago, which has also been expanding into other Portuguese-speaking countries.

The credit line, according to some Sao Tome media outlets, will be repaid through stakes in future local oil projects, although Sao Tome and Principe has yet to identify oil reserves in sufficient quantity to be commercially viable.

According to the Economist, payments from the credit line will put pressure on Sao Tome’s public accounts as foreign debt already stands at 93 percent of GDP, including over US$24 million in late payments to Angola.

In order to generate substantial growth and not undermine the sustainability of Sao Tome’s debt, the loans will need to be highly subsidised as Sao Tome’s range of exports is very reduced.

Some of Sao Tome’s traditional partners, which contribute to the state budget, have moved away, and the country has sought new partners in the region to add to its long-standing partnership with Taiwan.

Last year rumours about re-establishment of a relationship with Beijing reached a peak, similar to the talk about Guinea Bissau when “Nino” Vieira was president, given the greater proximity of Sao Tome’s president, Manuel Pinto da Costa, in his relationship with China.

Although the archipelago has had no diplomatic relations with China for 15 years it sent a mission to the Forum Macau ministerial conference at the beginning of November 2013, headed up by the Minister for Planning and Finance, Hélio Almeida, with observer status.

In October the Foreign Affairs Minister Natália Umbelina, made an official visit to China.

Another member of the government, Osvaldo Abreu, the Minister for Public Works, Infrastructure and Natural resources, later said that China would open a commercial link in Sao tome, in the country’s former embassy. (macauhub)