Moving Forward in Angola

Stephen DeAngelis

October 8, 2008

For those who grew up during the height of the Cold War, Angola conjures up images of proxy wars and Cuban troops. Fortunately, times have changed. Earlier this month Angola held its first elections in 16 years. According to Human Rights Watch, the elections “were marred by numerous irregularities.” This shouldn’t be too surprising since the ruling party isn’t too keen on giving up power. There were many reported incidents of violence on election day. Most of them were attacks on opposition party supporters. In the days before the elections, The Economist provided its assessment of the situation in Angola [“Marching towards riches and democracy?” 30 August 2008 print edition].

“Since independence from Portugal in 1975, Angola has had only one multi-party election, in 1992, and it led to a resumption of the horrific civil war that had ravaged the place since independence. The government has repeatedly promised and postponed fresh elections since the end of the conflict in 2002. Only now, it judges, is Angola finally ready. Decades of war, first pitting Angolans against their Portuguese colonial masters and then against each other, destroyed and traumatised a country that is rich in oil, diamonds and fertile soil. The two sides in the civil war are still the main political parties that will contest these elections: the ruling Popular Movement for the Liberation of Angola (MPLA) and the opposition National Union for the Total Independence of Angola (UNITA). The latter, for many years a rebel movement, gave up arms after the death of its leader, Jonas Savimbi, in 2002. Now led by the articulate and urbane Isaias Samavuka, it has turned into a proper party. Though 14 groups are registered to contest the election, UNITA is still by far the largest opposition one. Incidents still occur in the oil-rich province of Cabinda, but a peace deal signed in 2006 has eased separatist tensions there.”

The MPLA remained in power following the elections, yet, in spite of the reported violence, Luisa Morgantini, head of the European Union’s observer mission, expressed satisfaction over Angola’s elections, calling them a major step forward. Morgantini is convinced that the elections were an advance for democracy. The world would like to see a stable Angola because it has become Africa’s leading oil supplier — overtaking Nigeria, whose production has fallen because of instability there.

“At stake is the future of what may be sub-Saharan Africa’s fastest-growing economy. Angola has come a long way since the end of the civil war. Its economy, starting from a tiny base in 2002, grew by 21% in 2007 and may expand by 16% this year. In the past six years, GDP per person, by some measures, has increased several times over. Oil has been vital. With production at close to 2m barrels a day, Angola is poised to become sub-Saharan Africa’s biggest producer, ahead of Nigeria. It has overtaken Saudi Arabia as China’s largest supplier. The government is investing a big chunk of its petrodollars rebuilding roads, railways and houses with the help of Chinese, Brazilian and Portuguese contractors. The days of hyperinflation are over, with prices increasing by about 12% in 2007.”

Angola, of course, is not out of the woods. The problems that plague Nigeria could still visit Angola. The risk of corruption also remains high in what remains a near-single-party state. Nevertheless, The Economist reports that signs of progress in Luanda, the nation’s capital, are everywhere.

“The benefits are plain. Cranes and high-rise buildings crowd Luanda’s skyline. Swish housing complexes are mushrooming south of the city. New roads try to ease the city’s clogged traffic. The port is congested too, with ships waiting often for weeks in nearby waters to dock. Flights are fully booked far ahead. Businessmen have to reserve months in advance to get a decent hotel room. A stock exchange is expected to start up in the next few months.”

Outside of Luanda, however, things aren’t quite so perky.

“Many Angolans … have yet to savour the benefits. Oil and diamonds make up 60% of the economy, most of the government’s revenue and almost all the country’s exports, but these industries do not employ many people. Most Angolans, despite the rise in average income, remain dirt poor. Though the government is busy building schools and clinics, there are often no teachers and doctors to staff them. In overcrowded slums like Boa Vista, near Luanda’s port, filthy water mixes with mountains of uncollected rubbish in the unpaved alleys that run between shacks; unemployment and crime are rife.”

Angola’s leaders need to start simultaneous investments in infrastructure and social programs. Clearly jobs could be created if people were ready to fill them. Social investments need to begin with health and sanitation. Only a healthy populace can take advantage of emerging opportunities. From investments in health, the government needs to move quickly into investments in education. While the next generation of Angolan is being trained and educated to fill white collar jobs, the government needs to support programs that are labor intensive (building roads, improving agriculture, etc.). None of this will happen if corruption siphons off desperately needed funds.

“Much of the opposition’s electoral campaign harps on inequality and corruption, whereas the government prefers to point to new roads and sewerage. Two years ago, it took 16 hours to drive the 420km (261 miles) from Luanda to Waco Kungo in the Kwanza Sul province; lorries often got stuck and could take three weeks. Now, along a new road, it takes five hours.”

Fortunately, Angolan leaders understand that the country will never achieve a stable and growing economy if it continues to rely mainly on the export of oil and diamonds.

“The government wants to diversify the economy into farms and industry, not only to create jobs but to prepare for when Angola’s oil starts to run out. The government itself is investing in agriculture, as in Waco Kungo. A few private commercial farms, often owned by politically well-connected Angolans, have also started up, and foreigners are taking an interest: Chiquita, a banana conglomerate, may invest in Benguela province. Once an exporter of food, Angola now gets most of it from abroad.”

Angola is beginning to attract foreign direct investments, but conditions are not yet ripe enough for investors to rush in.

“Foreign interest is growing apace, but doing business is not for faint hearts. Portuguese colonial administration and years of Marxist management have created a forest of mind-numbing red tape and stifled entrepreneurial spirit. The World Bank says it takes 46 procedures and over 1,000 days to enforce a contract. Angola is near the bottom of the bank’s governance rankings. War has left many people with little education, let alone business acumen. The government, directly or through parastatals such as Sonangol, the state oil company, is entangled in much of the economy. Years of central planning dull the minds of the country’s host of bureaucrats.”

In my discussions of Development-in-a-Box™, I have stressed the fact that FDI is essential to help pull countries out of poverty. I have also stressed that FDI is cowardly and avoids situations where a reasonable return on investment is not likely. At the top of the list of things that repel FDI are political corruption and its close companion bad governance — meaning a lack of transparency and lots of red tape. The Economist concludes, however, that things are getting better in Angola.

“There are signs of progress. Getting approval for an investment is becoming quicker. The government is making its budget and the allocation of oil concessions a bit more transparent. All the same, juicy business opportunities are often restricted to a small elite with links to the ruling party. ‘In most countries, people get rich in the private sector before going into government,’ remarks a local economist. ‘In Angola, it’s the other way round.'”

The article concludes that Angola’s road to prosperity remains “long and bumpy.” It would be tragic if Angolans let this historic moment be lost to corruption and incompetence. Angolan President José Eduardo dos Santos can create a lasting legacy for his long rule if he seizes the opportunity to make Angola a stable and prosperous nation. It will be difficult, since he will have to fire many of his cronies, proactively eliminate corrupt practices, and wisely invest oil revenues.