Angolan President Jose Eduardo dos Santos is expected to make a state visit to South Africa before the end of 2010. Originally expected in October, this would be his second state visit to South Africa since Jacob Zuma became president of the latter country in April 2009. Dos Santos is not particularly fond of travel, a fact that made his failure to show in October unsurprising (and a fact that would make his absence from the forthcoming meeting likewise unsurprising). However, over the past few weeks both Angolan state media and South African government ministers have confirmed that the visit is expected before the end of the year. STRATFOR sources report that the visit is likely to take place Dec. 14-15. While the issue of Angola's Lobito refinery project will probably be the focus of the agenda, there are also a variety of other items the two sides will want to discuss, namely trade and visa issues. The larger significance of the trip, though, lies in how it fits into the budding relationship between two rising powers in southern Africa that may be simultaneously cooperative and competitive. South Africa and Angola differ in many ways, from their colonial history to their political structure, language, economic base and level of development. Where they find common ground is in the fact that both are effectively dominated by a single ruling party currently transitioning from a "post-struggle" era focused strictly on internal consolidation to an era of foreign endeavor. For South Africa's African National Congress (ANC), this means moving beyond the Nelson Mandela-Thabo Mbeki period that followed the end of apartheid in 1994. Angola's Popular Movement for the Liberation of Angola (MPLA) may not be as far along in its own process of post-civil war development, but is trying to improve its oil industry so as to expedite the reconstruction process, badly needed just eight years removed from a 27-year civil war. While the two countries may be at different levels in the process, both are starting to set their sights outward, looking around the southern African region to assess where they can best exert influence.

Angolan and South African Cooperation

Regardless of when the two leaders meet, representatives from their countries' respective state-owned oil companies — South Africa's PetroSA and Angola's Sonangol — are currently in discussions over an ambitious project being planned in Angola: the construction of a massive new crude oil refinery in the coastal town of Lobito. MPLA and Sonangol elites selected this as the location for the future Sonaref refinery, which — if it is actually constructed — would cost $9 billion and would produce 200,000 barrels per day (bpd) of refined fuel. Lobito is far from the MPLA's core of Luanda. It may have been chosen for a variety of factors. Lobito sits on a port capable of handling large numbers of ships, while Luanda, Angola's main port, is notoriously crowded. But the proposed engineering designs envision a single-point mooring system, akin to a floating buoy, connected to the refinery by pipeline — which would render crude tankers' use of the Lobito's berths unnecessary. Still, it is quite normal for governments in developing nations to select locations off the beaten path for projects like this to spur development in undeveloped regions. Alternatively, personal interests involved within the government and/or Sonangol might have motivated the choice, a plausible scenario in a place like Angola. Whatever the motive, the Sonaref project has been in the front-end engineering design (FEED) stage since late 2008, meaning ground has not been broken. Financing has been a significant problem, as no one has proved willing to help Sonangol pay. The state-owned China Petroleum & Chemical Corp. (Sinopec) originally agreed to participate, but the deal fell apart in March 2007 after Sinopec insisted that 80 percent of the refined product be reserved for export to foreign markets. At the time, Sonangol chairman Manuel Vicente said "we cannot construct a refinery just to make products for China." The South Africans could now partner with Angola to help finance the project, though to what extent remains unknown. During a visit to Angola in mid-October, South African Energy Minister Dipuo Peters announced that PetroSA and Sonangol had entered discussions over a joint venture that would engage in deepwater exploration and production in Angolan waters and build and manage refineries. As there are no other refineries in the planning phases in Angola, this could only mean Lobito. The Angolan Oil Ministry issued a follow-up statement confirming the negotiations, showing that the two countries seem to be serious about the talks. (click here to enlarge image) Angola has only one mainland refinery currently in operation, a small facility in the greater Luanda area that produces around 40,000 bpd. This refinery is thought to provide about 40 percent of Angola's consumption needs. The Lobito refinery would provide much more than Angola could consume. With its strategic location along the Atlantic Ocean, Lobito could allow Angola to export refined fuel, something unique in Africa. This is likely the root of South Africa's publicly expressed interest in the joint venture with Sonangol, though a chance to try its hand at deepwater oil exploration and production activities might also be tempting it. Still, whether PetroSA would be willing and able to contribute a sizable amount to Sonaref's construction bills depends on numerous factors in South Africa. South Africa is already planning its fifth crude oil refinery, a massive facility near Port Elizabeth in the Eastern Cape region. The proposed Mthombo refinery, which will be built in the Coega Industrial Development Zone, would have the largest refining capacity of any refinery in sub-Saharan Africa at 400,000 bpd. This would make it twice as productive as Lobito but still around the same estimated cost of $9 billion-$11 billion. (The reason for the price similarity is unknown, though corruption issues in Luanda are probably a factor.) Mthombo is also still in the FEED stage, but its eventual completion is much more likely than that of Sonaref. Just how much South Africa would be willing to pay to make the Sonangol joint venture a reality (thereby giving Pretoria access to a stake in Sonaref, and likely a certain portion of the finished product) will say a lot about South Africa's desire to establish a foothold in Angola. Helping Luanda out with such a hefty bill would certainly be seen as a sign of good will from Zuma's government, and could help open doors for other investment opportunities for South African businesses in other lucrative sectors of the Angolan economy. The economics of the Mthombo refinery project appear much more logical, but sometimes strategic factors trump financial ones. One South African STRATFOR source describes the Lobito refinery as Luanda's "pet project," indicating Pretoria sees it as important to the MPLA government. This is not to say that a failure to strike a deal would mean South Africa does not factor Angola into its foreign policy, only that Lobito provides an interesting barometer with which to assess relations between the two countries.

Angolan and South African Competition

Dos Santos and Zuma will want to discuss other issues, however. South Africans often complain about the endless bureaucratic structures that make it difficult to operate in Angola. They badly want to get more involved in Angola's reconstruction efforts, among other sectors. (South African companies also have long desired to increase their participation in Angola's rich diamond mining and telecommunications industries.) The leaders therefore probably will discuss the Investment Promotion and Protection Agreement, signed in 2005, that aims to alleviate such problems. Moving ahead to enforce the already-negotiated Avoidance of Double Taxation Agreement would also help in this regard. Visa-free travel is also likely to be discussed, the lack of which hinders the ability of businessmen to travel back and forth between the two countries. A STRATFOR source in Angola has said these visa difficulties make it easier to organize a South African-Angolan meeting in Namibia than in either Angola or South Africa. Though the time will come when Angola and South Africa come into conflict as their regional interests start to collide, for now they are likely to be more cooperative than combative.