The arrival of the Bank of China in Angola is generating expectations in the business and financial sectors in the Angolan capital, as it will potentially facilitate payments abroad, currently constrained by a lack of foreign currency.
On 13 May the government of Angola authorised the Bank of China – the affiliate in Angola conducting banking activities, which in December 2012 was authorised to open a representative office in Luanda, justifying the decision based on increased economic and trade relations between China and Angola, “which has led to increased demand for financial services.”
Portuguese weekly newspaper Expresso last weekend reported that the opening of a branch of the Chinese bank is seen as a solution to the problem of lack of foreign currency in Angola and is therefore eagerly awaited.
The shortage of foreign currency in Angola related to the decline in oil revenues comes at a time when the Chinese authorities have said they are committed to spreading the use of the renminbi as a means of payment in Africa.
In this process, Macau plans, with support from the Chinese central government, to become a bank platform for renminbi clearance between China and Portuguese-speaking countries, according to statements in January from Yao Jian, the Deputy Director of the Central Government Liaison Office in Macau.
The lack of foreign currency is currently one of the main constraints on economic growth in Angola, limiting the liquidity of local banks, hampering company payments and affecting foreign trade.
The governor of the National Bank of Angola (BNA), Válter Filipe acknowledged in May that the country’s banks are being placed “on the margins” of the global financial system, an apparent allusion to the lack of access of Angolan banks to the international exchange circuit, a situation that “is serious for the prosperity of our families.”
In August 2015 China and Angola signed an official agreement allowing reciprocity in the use of the currencies of both countries, which was interpreted by the Economist Intelligence Unit (EIU) as a result of Angola’s “hope” that greater use of the renminbi will decrease the need for dollars.
According to Portuguese bank BPI, this agreement makes it possible to “make up for the lack of dollars,” needed to pay for imports, but the effect in currency terms will likely be none.
South Africa, Africa’s largest economy and China’s main trading partner in Africa, was the latest country to embrace the renminbi, during a visit by the Chinese Foreign Affairs Minister, when the two countries launched an initial exchange platform between the two currencies.
Previously, Ghana, Nigeria, Mauritius and Zimbabwe accepted renminbi payments and reserves and the Nigerian central bank already has 10 percent of its foreign reserves in Chinese currency.
In recent statements to the ChinaAfrica (http://chinafrica.info/) website, Chinese economist Qu Hongbin said that “the increase of Chinese investment abroad – especially in Africa – is a key factor in the internationalisation of the yuan.”
A recent HSBC study predicts that by 2020, the renminbi will be used in half of trade carried out by China abroad, compared to just 20 percent currently.
The IMF, which had decided to include the renminbi in its basket of reserves, recently announced that the member countries of the institution may, from October, register official reserves denominated in the Chinese currency as foreign assets available to meet the financial needs of their balance of payments.
In an article recently published on the website of the Council on Foreign Relations (http://www.cfr.org/), the financial consultant specialising in sub-Saharan Africa, John Casey argued that “dollar dominance is no longer a certainty” in the region and that 2016 will be the year of “solidification of the renminbi’s role in Africa.” (macauhub/AO/CN)