Country Profile: ANGOLA

This country profile was published in November 2010 in our annual 'Africa in 2011' issue. The next edition, 'Africa in 2012' will be on sale in November 2011.

In 2010, Angola hosted the Africa Cup of Nations football tournament, acquired its first sovereign credit rating and enjoyed a return to positive economic growth after stagnating in 2009. The government says it expects GDP to increase by 6.7% in 2010 and by 8.4% in 2011. Angola has continued to receive strong non-oil foreign direct investment, which rose to $1.8bn in 2009, from $1.2bn in 2008.

Angola

The newly acquired credit rating of B+ gives Angola the green light to sell treasury bonds on international markets. The long-awaited stock exchange is set to open in 2011 with more than 30 companies expected to sign up.?Oil production hovered about 1.8bn barrels per day (bpd) during 2010 but is likely to rise to some 2m bpd in 2011, with several major new projects due to come on stream. Pre-salt blocks are already under negotiation and there is some confusion as to whether the bidding round put off in 2007 will take place in 2011 or not. In the downstream sector, construction is set to begin on the country’s second refinery.

Work continues on a liquefied natural gas plant which is due to open in late 2012.?The government has made significant efforts to improve fiscal and economic systems, driven in part by conditions set by the IMF under the $1.4bn standby agreement signed in late 2009, but also following reports of money-laundering in a US Senate investigation. In a bid to counter this bad publicity and Angola’s poor ranking in Transparency International surveys, there is a new high-profile campaign against corruption, backed by legislation on probity and money-laundering, plans for an overhaul of the antiquated and poorly functioning tax system and new laws on public tendering. ?Critics dismiss the anti-corruption agenda as simply a front to punish lowly offenders and allow high-ranking officials to operate with impunity.

Civil society activists are disappointed that ministerial declarations required under the new probity law are to be kept private.?The effects of several events in 2010 will continue to echo into 2011. The government created a new constitution, replacing the interim law which had been in place since 1992. The new charter gives more power to the president, as well as abolishing direct presidential elections: the head of state will now be chosen from the top of the list of the political party that wins the most votes. ?The next legislative elections are set for 2012, by which time President José Eduardo dos Santos will have been in power for 33 years. The 68-year-old is expected to run again and, under the new constitution, could remain until 2022. There is still no obvious replacement or likely successor.

Many believe that the president will attempt to stay in power for as long as possible since he has not established a plan for a transition or spoken of a desire to retire. ?The main opposition party, the União Nacional para a Independência Total de Angola (UNITA) reacted angrily to the new constitution, describing it as the “death of democracy in Angola”. However, UNITA MPs were easily out-voted by Dos Santos’ Movimento Popular de Libertação de Angola (MPLA) because the party holds an 82% majority in parliament. ?Critics say that, despite the achievements of the peaceful 2008 elections, the first held for 16 years, Angola is regressing towards a one-party state because the MPLA has such a tight grip on the media and so much political and financial sway.

Diplomats and businessmen

Angola is slowly transforming its economic potential into regional political influence. Having assumed the presidency of the Comunidade dos Países de Língua Portuguesa in 2010, Angola appears to be taking a leading role in bringing reform to Guinea-Bissau, having sent a team of experts from the police and armed forces to lead the restructuring of the West African country’s security forces.

?In its role as vice-president of the Southern African Development Community, Angola is also likely to try to flex its growing muscles in the region, already having proved itself as a key adviser to President Joseph Kabila of the Democratic Republic of Congo and to those working for a resolution to problems in Zimbabwe.?

South African companies, which had hoped for so much in terms of investment following the high profile visit of Jacob Zuma to Luanda in 2009, are still struggling to get a foot in the market. Business is still dominated by China, Portugal and Brazil, although new players like Japan and Vietnam could break through in 2011.? Some cracks are appearing in Sino-Angolan relations, after the government had to close down a four-year-old Chinese-built hospital in Luanda because the walls were crumbling.? But this did not stop Angola signing up for another estimated $4.5 bn in loans from China to be used for infrastructure projects.

A new private television station which opened to much fanfare last year is now known to be owned by close presidential allies. Several once-outspoken private newspapers have also been bought up by businessmen with links to the government. ?Strongly-worded media exchanges between the MPLA and Isaias Samakuva’s UNITA have signalled the unofficial start of the 2012 election campaign, and the coming year should bring some interesting exchanges between the parties. But while the party politics play out in the media, there is plenty of work to be done.

In spite of Angola’s oil and macroeconomic advances, nearly 10 years after the end of the 27-year civil war, the country is still trailing behind its neighbours in terms of healthcare and education. One in five children die before the age of five, maternal mortality is 600 in every 100,000, only 42% of the population has direct access to drinking water, even fewer to electricity, and 91% of urban dwellers live in ‘inappropriate’ conditions.?The government made a 2008 election pledge to build 1m new homes by 2012, and it has delegated a large part of the construction to the private sector, with only a small percentage in the affordable and social housing category.

The capital, Luanda, remains seriously overcrowded, with an estimated population of 8 million people, many of whom live in slum-like conditions without water and electricity. Rural poverty is even worse. According to the Maplecroft Food Security Risk Index 2010, Angola is the seventh most food-insecure country out of the 50 countries assessed?The government is committed to spending $18bn on energy projects in the next six years and says that the country will be self-sufficient in electricity by 2016. Investing in energy is crucial if the country wants to develop its manufacturing base, an idea which is prohibitively expensive due to a reliance on generators.

Many construction projects are, however, seriously delayed since the government fell behind in payments to the mostly Brazilian and Portuguese companies carrying out the work.?In a rare exchange with journalists during Portuguese President Anibal Cavaco Silva’s visit in July, Dos Santos admitted that his government was close to $7bn in debt to foreign firms, although the finance ministry later said in a statement that this could be as high as $9bn. The government has set up a special debt task force and claimed that it had already paid back as much as 60% of what is owed by August.

Angola Graph

?The high levels of debt are clearly linked to Angola’s liquidity crisis from 2009, when the oil price halved in a matter of months and a rush on US dollars caused the kwanza to tumble by 25% in a matter of weeks. However, critics blame the crisis on weak management and corrupt officials.

?Diversification of the economy remains a major issue because the country still relies on oil for 90% of export revenue. Foreign firms are investing in agriculture and manufacturing, but a weak private sector and bloated bureaucracy are slowing down the process. ?Other economic challenges for 2011 include the handling of bad debt in the commercial banks. Plans for a rescue package were included in the budget submitted to the National Assembly. When questioned, the Banco Nacional de Angola has refused to expand on the extent of the problem.