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Vol 6 (AAC) No 9

Published 1st July 2013

Equatorial Guinea

Obiang loves China

Billions in non-transparent contracts have gone to Chinese companies and the opposition claims that Beijing is supporting the regime’s oppressive tactics

China stands accused of cooperating with the government of President Teodoro Obiang Nguema Mbasogo to limit civil rights in Equatorial  Guinea and to suppress the political opposition. After protests in mid-May, it is no longer possible to access social media websites such as Twitter and Facebook. Opposition sources told Africa-Asia Confidential that Chinese technicians are behind the blocking of those and other sites critical of government. Graver still, an opposition member told AAC that the regime had used Chinese police officers to stop demonstrations by the opposition ahead of the 26 May legislative and local elections.

The oil sector in Equatorial Guinea has long been the preserve of companies from the United States, but Chinese state-owned companies have been snapping up billions of dollars of contracts in the construction sector. Cooperation with Beijing is managed by the Presidency. The leading opposition party, the Convergencia para la Democracia Social (CPDS) and the opposition in exile in Spain, the Partido del Progreso y Gobierno en el Exilio de Guinea Ecuatorial led by Severo Moto, see China as an unabashed supporter of the regime. They say the Malabo government fears what its people might do if freedoms of expression and association were permitted. A change in government would leave China with a legacy that would be difficult to defend.

The opposition regards China’s staunch support for President Obiang and his Partido Democrático de Guinea Ecuatorial as unfair and short-sighted. Beijing’s ambassadors regularly meet government officials and PDGE members but not the opposition. The Chinese Communist Party provided office equipment and other supplies for the PDGE in May 2012 but gave nothing to opposition parties. New Chinese Ambassador Zhao Hongsheng expressed his willingness to work only with the PDGE when he met the party’s Secretary General, Lucas Nguema Esono Mbang, about two weeks before the elections, which the CPDS denounced as fraudulent and that the US State Department called a ‘missed opportunity for further democratisation’. US and European Union embassy staff get together regularly with CPDS Secretary General Placido Micó Abogo.

On his return from a state visit to China in 2005, President Obiang set the tone for the next several years of bilateral cooperation. He declared that ‘from now on, China has become the principal partner with which we are going to develop Equatorial Guinea.’ In terms of trade, China has been the country’s most important source of imports since 2008, due in large part to the supplies that Chinese companies import from home for their myriad construction projects (see Box). Bilateral trade rose to US$1.9 billion in 2011, up more than 84% on the previous year.

Chinese solutions
Equatorial Guinean officials see Chinese investors as the providers of answers to local problems. When Bata’s Mayor Constantino Ekong Nsue met Ambassador Zhao in mid-June, he asked his guest if he could suggest a solution to the problem of urban transport in Bata and proposed that Beijing set up a Chinese cultural centre there. The President has also asked Beijing to set up a training centre at the country’s future capital of Oyala/Djibloho and a pilot agricultural development zone.

Most Western governments do not provide assistance to Equatorial Guinea. They contend that a corrupt elite is not sharing the benefits of economic growth with the population. Yet the rise in Chinese activity in Equatorial Guinea can be seen in many domains, from the numerous Chinese workers on building sites to the proliferation of Chinese-run pharmacies, corner shops, internet cafes and photography labs.

Most of the streets of Malabo’s old town have a few Chinese-run shops. Chinese teachers give classes in embroidery at the Centro de Formación Nana Mangue in Malabo. The self-proclaimed government in exile led by the failed coup leader, Severo Moto (AC Special Report, Mercenary Fandango, March 2004), calls this influx the ‘Chinese danger’. Unlike other African governments, Malabo imposes no quotas on Chinese labour.

By the end of 2012, 336 Guinean students were studying in China. Beijing also has plans to set up a Confucius Institute at the Universidad Nacional de Guinea Ecuatorial. In January 2012, the government announced a 51%-49% deal with China to form a telecoms company, the Guinea Ecuatorial de Comunicaciones Sociedad Anónima (GECOMSA), which will compete with Guinea Ecuatorial de Telecomunicaciones and Hits Telecom. The Chinese stake is believed to be held by China Telecom and this would be its first holding in an African operating company.

The framework financial agreement between China and Equatorial Guinea was forged on the sidelines of the Forum on China-Africa Cooperation in Beijing in 2006 (AAC, Africa plans for FOCAC IV, Vol 2 No 11). The $2 bn. loan from China Export-Import Bank makes China Malabo’s only external source of credit since the government has refused to work with the World Bank and International Monetary Fund. Malabo is using the funds for priority infrastructure projects. As of 2012, $1 bn. had been spent on electricity projects and on the expansion of the port at Bata on the mainland.

Warnings from the IMF
The loan has strict terms and requires a repayment guarantee of liquid deposits equivalent to at least 30% of the outstanding debt. The two governments also reached an agreement for repayments in crude oil. The loans are not concessional and come to maturity in five years, with a two-year grace period. The interest rate is 5.5%. The IMF continues to monitor economic developments and has warned against the government’s financial practices, including the fact that it does not include its Exim Bank loans in its budget. The IMF warns that external debt service as a percentage of government revenue will rise to 14.7% in 2013, hitting 15% in 2015, up from 0.8% in 2009.

Other Exim Bank loans have a concessional element: a $380 mn. loan in 2010 for social housing units was based on a maturity period of 17 years, with a two-year grace period and an 2% interest rate. In June 2012, the two parties signed an additional loan of $174 mn. for an electrification project in Malabo.

While not yet Mines Minister, Obiang’s son Gabriel Mbega Obiang Lima went to China in 2005 and opened negotiations with Chinese companies over the exploration and production sector. Equatorial Guinea exported 35,000 barrels per day of its production of 297,000 bpd to China in 2011. China National Offshore Oil Corporation, which signed a production-sharing contract for Block S with state-oil company GEPetrol in February 2006, is due to drill two new wells this year. In May 2006, Santa Isabel Petroleum Company, owned by China National Oil and Gas Exploration and Development Corporation, a subsidiary of China National Petroleum Corporation, partnered with Nigeria’s Fruitex in Block M. The deal has since fallen apart and Fruitex is pursuing a legal claim.  

In the last bidding round concluded in December 2012, the government brought in a raft of unknown Chinese companies, despite legal regulations on recognised experience and capacity. Xuan Energy is the new operator on Block Y, which was previously four separate blocks; Hong Kong-based Elegance Power is the operator of EG-03 and EG-04; and another unknown Chinese outfit, Pioneer Brass, has a stake in EG-05.

In 2012, Mbega Obiang approached Sinopec about a deal for the construction of a 20,000 bpd oil refinery at Mbini on the mainland and for chemicals plants at Riaba on Bioko Island. No firm agreement has yet been reached but Mbega Obiang said the government would like to work with Sinochem Group on another deal to provide Beijing with oil in exchange for a loan for more infrastructure projects.

Chinese companies also have a substantial foothold in the timber sector, controlled by another presidential son and putative successor, Teodoro Nguema Obiang Mangue, who was Agriculture Minister until last year. Malaysian company Shimmer International, owned by Rimbunan Hijau, is the largest company in the sector. Chinese companies Sijifo and Sinosa both hold permits covering 50,000 hectares, while Vicwood has 80,000 ha. China Jilin Forest Industry (Group) is also involved in timber processing. National statistics show that China imports around 70% of Equatorial Guinea’s timber.

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