Angola - Economy

Economy

Angola has a rich subsoil heritage, from diamonds, oil, gold, copper, as well as a rich wildlife (dramatically impoverished during the civil war), forest, and fossils. Since independence, oil and diamonds have been the most important economic resource. Smallholder and plantation agriculture have dramatically dropped because of the Angolan Civil War, but have begun to recover after 2002. The transformation industry that had come into existence in the late colonial period collapsed at independence, because of the exodus of most of the ethnic Portuguese population, but has begun to reemerge (with updated technologies), partly because of the influx of new Portuguese entrepreneurs. Similar developments can be verified in the service sector.

Overall, Angola's economy has undergone a period of transformation in recent years, moving from the disarray caused by a quarter century of civil war to being the fastest growing economy in Africa and one of the fastest in the world, with an average GDP growth of 20 percent between 2005 and 2007. In the period 2001–2010, Angola had the world's highest annual average GDP growth, at 11.1 percent. In 2004, China's Eximbank approved a $2 billion line of credit to Angola. The loan is being used to rebuild Angola's infrastructure, and has also limited the influence of the International Monetary Fund in the country.

The Economist reported in 2008 that diamonds and oil make up 60 percent of Angola's economy, almost all of the country's revenue and are its dominant exports. Growth is almost entirely driven by rising oil production which surpassed 1.4 million barrels per day (220,000 m3/d) in late 2005 and was expected to grow to 2 million barrels per day (320,000 m3/d) by 2007. Control of the oil industry is consolidated in Sonangol Group, a conglomerate which is owned by the Angolan government. In December 2006, Angola was admitted as a member of OPEC. The economy grew 18% in 2005, 26% in 2006 and 17.6% in 2007. However, due to the global recession the economy contracted an estimated −0.3% in 2009. The security brought about by the 2002 peace settlement has led to the resettlement of 4 million displaced persons, thus resulting in large-scale increases in agriculture production.

Although the country's economy has developed very significantly since achieving political stability in 2002, mainly thanks to the fast-rising earnings of the oil sector, Angola faces huge social and economic problems. These are in part a result of the almost continual state of conflict from 1961 onwards, although the highest level of destruction and socio-economic damage took place after the 1975 independence, during the long years of civil war. However, high poverty rates and blatant social inequality are chiefly the outcome of a combination of a persistent political authoritarianism, of "neo-patrimonial" practices at all levels of the political, administrative, military, and economic apparatuses, and of a pervasive corruption. The main beneficiary of this situation is a social segment constituted since 1975, but mainly during the last decades, around the political, administrative, economic, and military power holders, which has accumulated (and continues accumulating) enormous wealth. "Secondary beneficiaries" are the middle strata which are about to become social classes. However, overall almost half the population has to be considered as poor, but in this respect there are dramatic differences between the countryside and the cities (where by now slightly more than 50% of the people live).

An inquiry carried out in 2008 by the Angolan Instituto Nacional de Estatística has it that in the rural areas roughly 58% must be classified as "poor", according to UN norms, but in the urban areas only 19%, while the overall rate is 37%. In the cities, a majority of families, well beyond those officially classified as poor, have to adopt a variety of survival strategies. At the same time, in urban areas social inequality is most evident, and assumes extreme forms in the capital, Luanda. In the Human Development Index Angola constantly ranks in the bottom group.

According to The Heritage Foundation, a conservative American think tank, oil production from Angola has increased so significantly that Angola now is China's biggest supplier of oil. Growing oil revenues have also created opportunities for corruption: according to a recent Human Rights Watch report, 32 billion US dollars disappeared from government accounts from 2007 to 2010.

Before independence in 1975, Angola was a breadbasket of southern Africa and a major exporter of bananas, coffee and sisal, but three decades of civil war (1975–2002) destroyed the fertile countryside, leaving it littered with landmines and driving millions into the cities. The country now depends on expensive food imports, mainly from South Africa and Portugal, while more than 90 percent of farming is done at family and subsistence level. Thousands of Angolan small-scale farmers are trapped in poverty.

The enormous differences between the regions pose a serious structural problem in the Angolan economy. This is best illustrated by the fact that about one third of the economic activities is concentrated in Luanda and the neighbouring Bengo province, while several areas of the interior are characterized by stagnation and even regression.

One of the economic consequences of the social and regional disparities is a sharp increase in Angolan private investments abroad. The small fringe of Angolan society where most of the accumulation takes place seeks to spread its assets, for reasons of security and profit. For the time being, the biggest share of these investments is concentrated in Portugal where the Angolan presence (including that of the family of the state president) in banks as well as in the domais of energy, telecommunications, and mass media has become notable, as has the acquisition of vinyards and orchards as well as of touristic enterprises.