About Angola
Angola gained independence in 1975, following 500 years of Portuguese subjugation and 14 years of armed struggle between the Portuguese colonizers and a splintered Angolan nationalist movement. Upon independence, the nationalist groups - unable to reconcile their respective aspirations for national power but able to draw first on the largesse of respective Cold War sponsors and later on Angola's abundant mineral wealth - plunged into a brutal, 27-year civil war. The two largest groups to emerge during the long period of struggle were the Movimento Popular de Libertação de Angola (MPLA) and the União Nacional para a Independência Total de Angola (UNITA). The battle between the MPLA and UNITA, interrupted by only a few short periods of peace or "quasi-peace," lasted until the death of UNITA's leader, Jonas Savimbi, in 2002. All told, as many as 1 million Angolans were killed, 4.5 million became internally displaced, and another 450,000 fled the country as refugees.
The prolonged war left the country's infrastructure in ruins, its interior areas heavily mined, and much of its social fabric in tatters. Political and economic institutions, which during colonial times were centralized and geared to serve the interests of a select elite, were also impaired, as the war (and the Marxist-Leninist philosophy the Government adopted during the war) further entrenched the practice of centralized planning and left in its wake large disparities of income and a new elite. The combined effect of the legacies of colonialism and civil war is that Angola compares quite poorly with other countries on measures of good governance. In 2004, Angola scored below the 25th percentile on the six elements of governance measured in the World Bank's "Governance Matters" data sets; and, scored below the 10th percentile on the measures of regulatory quality, rule of law, and control of corruption. On Transparency International's "Corruption Perceptions Index," Angola ranks 133 out of 145 countries.
Not surprisingly, Angola also falls near the bottom on most global measures of socio-economic development. The UNDP's most recent Human Development Index places it 166 out of 177 countries. While the World Bank estimates average per capita income at $740, relatively high for sub-Saharan Africa, Angola's poverty reduction strategy (Estratégia de Combate à Pobreza [ECP] in Portuguese), notes that 68 percent of the population lives below the poverty line of $1.70 per day, with 28 percent living in extreme poverty on less than $0.70 per day. Angola's health indicators are some of the worst in sub-Saharan Africa: the total fertility rate is estimated to be 7.2 births per woman, average life expectancy is only 40 years, the infant mortality rate is 154 per 1,000 live births, and the under-5 mortality rate is a staggering 260 per 1,000 live births.
The tragedy is that this poor nation is an enormously wealthy country. Angola is the second-largest oil producer in sub-Saharan Africa and the seventh-largest supplier to the United States. Production currently stands at 1.6 million barrels per day and is rising. Oil accounts for almost half of GDP and about 75 percent of Government revenue. It, along with the potential that a stable, prosperous Angola has for deepening stability and spurring economic growth in the region, gives the United States a strong stake in Angola's stability and prosperity. Angola is also the world's fourth-largest producer of rough diamonds. Diamonds represent 95 percent of non-oil exports. Production is expected to reach $1 billion in 2006, with Angola's diamond deposits still largely untapped.
Less well known is Angola's agricultural, timber, hydroelectric, fishing, and mineral ore potential. Prior to 1975, Angola was a leading exporter of agricultural commodities. It exported over 400,000 metric tons of smallholder-produced maize annually and was the world's fourth-largest supplier of coffee. Angola's fertile land also nourishes one of the largest areas of planted forest in Africa which, to date, has been minimally exploited for productive purposes. Angola's many rivers provide it with significant hydroelectric resources, though these too have not been fully exploited. Its southern coast boasts some of the best fisheries in Africa. This is a resource that has been exploited - there is some concern that over-fishing has reduced stocks - but not always to Angola's benefit since policing coastal waters for unlicensed fishing fleets was a low priority during the war. Angolan mining companies are already exporting granite and marble to foreign markets, and mining may be one of the few non-petroleum sectors that could benefit in the short-term from the Africa Growth and Opportunity Act (AGOA).
Angola is on the path to harnessing its vast potential to the greater benefit of its citizens. Despite occasional, minor flare-ups in regions outside Luanda and in the oil-rich enclave of Cabinda, the peace has held and is likely to continue. Unlike earlier attempts to bring peace to Angola, the peace agreement of 2002 was signed following UNITA's clear military defeat by the MPLA. Furthermore, after 14 years of armed struggle for independence and 27 years of civil war, the Angolan people are exhausted by war and determined to move forward. In six short years, the emergency response to the immediate post-conflict situation has given way to a more comprehensive focus on the actions necessary to support sustained, longer-term development.
The Government has succeeded in stabilizing the macro-economy. During the 1980s and 1990s, Angola suffered a series of hyperinflationary episodes. Annual inflation reached 3,000 percent in 1995 and spiked to 12,034 percent in July 1996. By February 2006, it was 28.5 percent and falling. Similarly, the Government stabilized the exchange rate. For virtually all of the 1990s, the exchange rate was substantially overvalued, with the parallel market premium reaching levels well above 1,000 percent at times. Since 2000, the parallel market premium has generally remained below one percent, and the Kwanza now holds its value against the dollar.
Importantly, the Government has also taken several steps to increase transparency in the collection and use of revenues generated from oil reserves. A significant share of Angola's famous "unexplained discrepancies" in its published budgets has been eliminated. In 2004, an oil-revenue diagnostic study was completed by the international consulting firm KPMG. The study was made public on the Ministry of Finance website. In addition, independent audits of Sonangol (the oil parastatal) and the Central Bank are occurring, and all government oil activity, including revenues and expenditures, is being unified into one budget at the Ministry of Finance.
Another positive development is that the first legislative elections since 1992 took place on September 5, 2008, and the presidential election is likely to take place in 2009. Voter registration was initiated in 2006, and the government estimates that more than 2 million voters were registered in the first four months of the process. To date, more than 8 million voters have registered. In passing bills related to the elections, the Government took into account the perspectives of both civil society and opposition parties. There also appears to be a commitment on the part of both the MPLA and UNITA to, after national elections, institute elections at the municipal level as part of a general effort to decentralize certain government functions. The relatively inclusive process that led to new laws on land and the rights of people living with AIDS suggest further openings in political space.
Despite progress on numerous fronts, considerable work remains to be done. The political will to create a fair and open economy and a transparent, accountable, and participatory political system exists but is weakened by lack of institutional capacity; a genuine, and perhaps reasonable, fear of rapid change (a fear which the Government and the people share); and a political class that has no direct experience with democratic processes and a less-than-positive experience with foreign intervention. Unfortunately, the high price of oil and easy access to oil-backed credits relieve pressure to reform. Nevertheless, incentives in favor of reform exist. Angolans now have the ability to focus on something other than the war, and there is a sense among many Angolan leaders that attention must be directed toward addressing the needs of the people. Other incentives for reform include: the Government's desire for international and regional legitimacy, its interest in access to international capital and bond markets based on sovereign credit (which would be cheaper than oil-backed credits), its understanding of the oil industry's volatility, and the remembered hardships caused by the economic instability of the 1990s.
