Out of Africa

Finbarr Bermingham examines the economics behind Angola's investment in its former colonial master, Portugal

Benjamin Disraeli once said that "colonies do not cease to be colonies because they are independent", and post-colonial relationships are, indeed, complex and fractious. But with social, cultural and linguistic links already established, they often provide the bedrock for internationalisation for the newly independent state, though some can subsequently have difficulty untangling themselves from the apron strings of their former rulers. Recently, however, some emerging market economies have reached a pivotal stage in their development and engaged in a "reverse colonisation" of sorts.

In 2007, the Indian conglomerate Tata purchased Corus, formerly British Steel, for £4.3 billion, in the largest Indian takeover of a foreign company ever. Last autumn, debt-stricken parts of the eurozone turned to China in the hope that Beijing would purchase enough government bonds to steady the ship (even after former Italian finance minister Giulio Tremonti warned against China's reverse colonisation of Europe). The most surprising volte-face to date, though, has been that of an African state, Angola, which is now pumping capital into its former master, Portugal.

Turning the tables

For 500 years, Angola was Portugal's biggest and richest African colony, with huge reserves of oil, gas and diamonds. When they withdrew in 1975, the Portuguese were accused of negligence - Angola descended into 27 years of ferocious civil war (said by many to have been a surrogate battleground for the Cold War), and opportunism - the Portuguese retained huge stakes in the Angolan banking and construction sectors. Since the war ended in 2002, though, Angola's economic recovery has been spectacular.

Most European countries will probably experience recessions in 2012 and Portugal's is expected to be deepest (a 2.8 per cent contraction has been mooted). Angola's economy, on the other hand, is predicted to grow by 12 per cent this year. Portugal's unemployment rate has rocketed to 13.4 per cent (with 27 per cent of its youth without work), and throngs of Portuguese are flocking towards the Southern African nation. Around 100,000 were estimated to live in Angola in 2010, up from 45,000 in 2009 - with many of the recent immigrants having no previous relationship with the country. Angolans, too, are returning home from Iberia to take advantage of the post-conflict reconstruction boom. The southern African republic is the biggest supplier of oil to China, the most influential foreigner in the region, which has invested heavily in post-war rebuilding. And last year, as Portugal's credit rating was downgraded to junk status by agencies, Angolan capital Luanda was named the most expensive city in the world (a no-frills hotel room will set you back over £300 per night).

In November, the Portuguese prime minister, Pedro Passos Coelho, visited Luanda, cap in hand, to encourage the former colony to invest in a Portuguese privatisation programme. Angolan investment in Portugal isn't a new thing - 4 per cent of the firms listed on the Lisbon Stock Exchange are owned by Angolan companies - but with Portugal under pressure from the IMF and EU to sell state-owned assets, it's expected to accelerate.

"It's the first time I've heard of this (reverse colonisation) happening with an African country," says Dr Ana Alves, an Angolan-Portuguese professor at the South African Institute of International Affairs (SAIIA) in Johannesburg. "They've (the Angolan government and state-backed firms) been buying out Portuguese assets for the past five years." According to Dr Alves, the Angolan interest in Portuguese privatisation will be spearheaded by Sonangol, the national petroleum and natural gas producer fronted by President José Eduardo dos Santos' daughter, Isabel. "Sonangol is the biggest investor in Portugal," she explains, "and has a major interest in the banking and the energy sector. I think they would be interested in GALP, the Portuguese energy company, of which 7 per cent is still owned by the state. They'll be interested in the banking sector, of course, and will probably increase their interest in the electricity company, EDP, maybe the airline, TAP, and the airport navigation company, NAV Portugal."

A state of imbalance

While outsiders have been marvelling at Angola's international ambition and astronomical growth, those within the country are left to wonder when they will see a slice of the pie. The Angolan economy is dominated by a few tycoons, and all of them are linked to President Dos Santos, whose government is roundly criticised as a nepotistic kleptocracy. The gap between the nation's rich and poor is growing. Luanda's elite live in a sub-Saharan version of Monte Carlo, lined with white beaches, fast cars and casinos, but 70 per cent of Angola's population is living on less than £1.30 per day. It has by far the highest infant mortality rate in the world and the vast majority of the population has no access to basic healthcare. With a bigger budget than that of six EU member states (and three times the size of Estonia's), Dos Santos' government is still reliant on aid workers to distribute medicine and water.

The feeling among most Angolans is that their government needs to get its own affairs in order before taking an interest in those of Portugal and to a lesser extent, Brazil (Angolan investment in its Lusophonic peer has also increased, but with Brazil's economy booming, opportunities aren't as readily available as they are in Portugal). However, Angola's weak civil society makes a major uprising unlikely, though Dos Santos is said to have voiced concerns over the fate suffered by some of his Northern African counterparts. Most dissident voices come from outside the country's borders and, according to Dr Alves, "aren't allowed inside Angola anyway". And while Angola continues to play a role in alleviating the eurozone crisis, be a major trade partner of China (it's also the eighth largest provider of oil to the US), and provide crude oil at the right price, we're unlikely to hear any criticism from the international community of the poor distribution of its wealth. The tables may have turned, but some things are, sadly, still the same.