On February 22, 2002, Jonas Savimbi, the leader of the Angolan rebel faction, the National Union for the Total Independence of Angola (UNITA), was ambushed by government forces and shot dead. His death signalled the end of what had been almost 30 years of continuous civil war in Angola since the country gained independence from Portugal in 1974.
It was a war that had cost the lives of almost a million people and displaced many millions more. Such was the disbelief among Angolans at Mr Savimbi’s death that many at the time refused to believe it. A charismatic and stubborn opponent of the ruling Popular Movement for the Liberation of Angola (MPLA) party, he had eluded capture many times before. It took the publication of graphic pictures of his bullet-riddled body as well as independent confirmation from the US State Department to convince ordinary Angolans of his demise.
It is just six years since Mr Savimbi’s death and the transformation that has taken place in Angola during that time has been little short of staggering. From being the hopeless case of Africa, Angola has become the hope for the continent’s future. Gross domestic product (GDP) growth in Angola has been one of the highest in the world for the past three years, at between 15% and 20% annually. That growth has been driven in large part by the booming oil revenues that make up almost 60% of GDP. But Angola’s transformation is about so much more than just oil.
Not the same oil story
Angola is a country starting from scratch. Almost 30 years of war devastated its infrastructure and stymied any attempts at political and social reform. Although it has far to go in terms of reforming its government, institution building and infrastructure investment, there is a tangible sense of optimism in Angola and a willingness among its rulers to ‘get on with the job’.
“There is a strong desire from the population for peace and reconstruction [as well as] a strong desire and action from the government to improve how the population benefits from the peace and oil and diamond prices,” says Ignacio Ramiro, head of structured trade and export finance at Deutsche Bank.
Mr Ramiro has been working with the Angolan government for many years and Deutsche Bank was one of the first investors in the country after the cessation of hostilities. It offered credit lines to the government when Angola was still regarded by the World Bank and other Western financial institutions as a pariah.
“It is a unique case. I have been 20 years in emerging markets and export finance and I have never witnessed such an exercise,” he says.
In terms of macroeconomic stability, Angola has achieved much since 2002. The government has taken on board many of the recommendations concerning fiscal and monetary responsibility passed on by the World Bank when it turned Angola down for a loan six years ago. Inflation, which had been at 3000% at one stage in the 1990s, is now stable at 11.75%, with a target for 10% next year. The budget has, to some extent, been decentralised, and substantial foreign currency reserves of about $12bn to $15bn have been built up on the back of conservative forecasts for the oil price. The ministry of finance has also taken great strides towards tackling the perception of corruption in Angola by opening up the books and publishing the nation’s accounts. The country languishes in 147th place out of 179 in Transparency International’s corruption perception index for 2007.
Such has been the turnaround that the government is in talks with Standard & Poor’s about achieving its first sovereign credit rating, which many believe could be a reality by the end of this year.
Chinese influence
Despite a promising start, huge challenges remain for the Angolan government. Almost 30 years of war left the country practically devoid of infrastructure. Roads, rail, post and telecommunications were literally wiped out and the government will need to spend billions on rehabilitating it before Angola’s non-oil economy can truly take off. Fortunately, due to that booming oil sector, billions is exactly what the government has: that and huge support from the Chinese.
When the World Bank turned Angola down for loans in 2002, it was China that stepped into the breach. In return for access to oil and lucrative construction contracts, the Chinese have set to work transforming the nation’s infrastructure. Some estimate that China has invested up to $11bn into the country already.
“China came as a very timely partner,” says Amadeu de Jesus Castelhano Mauricio, the Governor of Banco Nacional de Angola, the nation’s central bank. “We could not get through talking to the Western world [at first] and China came in support of our economy. They were looking for sources for what they needed at the time and we were in a position to supply them. They have been very supportive in most of our infrastructure – and supplied the available manpower.”
The Chinese influence in Angola is not popular with everybody. José Severino, president of the Angolan Industrial Association, takes a more cynical attitude towards Chinese investment and says that more work should be done with European countries that are culturally closer to Angola.
“The government is investing in rebuilding roads and railways, but it is moving slowly and I don’t believe in China,” he says. “My worry is to see China expanding its influence here. I don’t like its political system and believe there are deep cultural differences.”
Angola’s pool of foreign lenders and investors is opening up. The state visit by French president Nikolas Sarkozy in May signalled the dawn of a new relationship with France and the closing off of a €300m loan from French bank Société Générale. The country has also received financing from Germany, Portugal and Spain in recent years.
Road and rail
The money is being put to work across the nation’s infrastructure, particularly on transport. The country’s 50,000-plus kilo metres (km) of road are in a desperate state of disrepair and very few bridges survived the civil war. A recent World Bank report estimated that one truck’s 423km journey from the port of Luanda inland to the town of Magande costs up to $2500.
No economy can develop on the back of costs such as these. But it is also clear that action is being taken. The government has put in place a plan to rebuild 1500 bridges and rehabilitate 12,000km of road by 2012.
It is not only the roads that are being rebuilt. The former rail backbone of Angola, the Benguela railway, is near to the end of its reconstruction. When completed, it will open up Angola’s vast mineral and agricultural heartland as well as providing a vital trade link to the rest of Africa.
Angola’s minister of transport, Dr Augusto da Silva Tomas, believes that the key to rebuilding the nation’s infrastructure lies in reforming the way in which the government spends its money.
“We have a new model of managing public enterprises in the transport sector,” he says. “We want to move to a dualist model where there is an executive and non-executive board.”
Dr Tomas also wants to transform the way in which tenders are awarded, to make it a more open and transparent process. “We had a very serious problem in the management of public enterprises in the past. Our aim is to make public enterprises more efficient and more profitable. They must add value to the nation and give quality service to the people. Everything now is bad but we have the opportunity to change this and integrate road, rail, maritime and air services.”
Agrarian revolution
For a country that once boasted agricultural self-sufficiency and was the fourth biggest exporter of coffee in the world, it is hard to believe how far the agricultural sector has declined in Angola. Just 3% of the nation’s 1.2 million square kilometres of potentially productive land are exploited and much of the country remains in profound poverty and starvation.
For Angola’s minister of planning, Ana Dias Lourenco, the key to long-term growth lies in developing the non-oil sector, in particular agriculture.
“We are developing concrete programmes to support medium- and large-scale entrepreneurs in the area of agriculture,” she says. “It is the government’s priority to ensure food security in Angola and to enhance exports in the medium and long term.”
One way that the government is attempting to promote a new productive class in the country is through the establishment of the Angola Development Bank. It was launched in 2006 and aims to revitalise agricultural production and make Angola once again self-sufficient in food.
A thriving agricultural sector would also provide plenty of employment. According to the secretary for economic policy and social policy for the ruling MPLA party, Manuel Nunes Júnior, it is the huge unemployment rate that is holding the country back.
“What has been done in the past two to three years is immense. The problem we still have though is employment,” he says. “The Angolan economy is still heavily dependent on oil, which is not intensive in terms of manpower. It employs no more than 10,000 Angolans and we have an unemployment rate of at least 22.5%. We need, very quickly, to diversify the economy and make it less dependent on the oil sector.”
Bright future
Looking ahead, it is clear that much needs to be done before Angola can emerge properly from its traumatic past and take its place on the world stage. The vast majority of Angolans remain in dire poverty and many questions remain about the government’s transparency and governance. The country has yet to fully shake off its communist past and vast parts of the government remain highly secretive – especially when it comes to awarding government contracts.
Sonangol concern
The role of Angola’s biggest oil firm, Sonangol, is also under heavy scrutiny by the West. Its dual role as both market player and regulator has come under heavy criticism and there are no concrete plans to tackle this conflict of interest.
Mr Severino says, however, that the country is working hard to shake off its communist past. Since 1984, he and others in the government have been working to shift the central government philosophy away from socialism and towards a free market.
“We are still pushing for more change and there are some hard battles ahead but sometimes we can’t move as fast as we would like,” he says. He accepts too that Angola still suffers from corruption but that big steps have been taken to tackle it and it is coming under control. “It has not been easy, it is a process that must be taken step by step because it can also bring political problems and affect the stability of the country,” he says.
Another area ripe for reform, according to Mr Severino, is Angola’s tax system. He has called for tax on profits to be cut to 20% from its current 35%.
“The private sector is moving but it needs more support from the government,” he says. “The private sector in Angola is new. Why should we pay so much on our small profits?”
Elections loom
The litmus test for Angola will come in September, when it holds its first democratic parliamentary elections since 1992. Back then, the defeat of UNITA by MPLA led the country straight back into civil war but it is highly unlikely that this will be the case next month.
The country has been politically stable since 2002 and the opposition party, UNITA, has generally worked with the ruling MPLA to maintain economic growth and stability. The elections will be viewed with a critical eye by developed countries, especially after the debacles in Kenya in January and more recently in Zimbabwe. Most, however, remain optimistic of a peaceful ballot.
The presidential elections in 2009 are a different matter. President José Eduardo dos Santos remains an aloof figure and has been in power since 1979. He rules without any effective opposition and it is unclear who his successor might be.
Western interpretations on emerging African nations such as Angola, however, need to be tempered by reality. “What people need is a system that produces better conditions and development in a non-traumatic way,” says José Pedro de Morais, the Angolan minister of finance. “It takes a lot to generate one leader who can mobilise the whole people towards the objectives of the nation. In Western countries this problem doesn’t exist. In Angola you do not have institutions – you have to look to one person and it takes time to produce those kinds of people.”
Angola has a bright future. If it can mobilise its vast oil-backed resources to rebuild its infrastructure and revive its non-oil sector, then it can be not just a leader in Africa, but the world. As one foreign investor puts it: “Angola is a country coming out of hibernation.”
ECONOMIC INDICATORS
Exchange rate: $1 = Kz74.78
Inflation: 11.75% (2008)
Real GDP growth Rate: 21.1% (2007)
Exports: $44.32bn (2007)
Imports: $12.29bn (2007)
GDP per capita: $5600 (2007)
GDP at current prices: $61.36bn
Principal exports: Crude oil, refined petroleum products, liquefied petroleum gas, diamonds, coffee
Principal imports: Machinery and electrical equipment, vehicles and spare parts, medicines, food, textiles
Main export destinations: US, China, France, South Korea, Chile
Main import origins: South Korea, Portugal, US, South Africa, Brazil, France, China
Literacy: 40%
Natural resources: Diamonds, oil products, gas, fish, wildlife, agricultural products,
sea and marine resources
Source: SADC Secretariat
