Gusher of oil cash transforms Angola

Feb 01, 2010 01:00 AM

by Schalk Van Zuydam

Construction cranes dot the skyline of Angola's capital, Luanda, as the south-central African nation uses money from oil production to modernize a country emerging from decades of civil war.
Two years ago, oil-rich Angola was reckoned to have one of the world's fastest-growing economies. In both 2006 and 2007, real GDP had surged by around 20 % and double-digit growth rates were widely predicted for at least the next five years. Then oil prices crashed with the global recession. Last year the economy is estimated to have grown, at best, by 1.5 %. But it is bouncing back. Some say Angola will be among the world's top five performers again this year, with growth exceeding 8 %.

After four decades of strife, Angola was a basket case. A 14-year war of independence against its former Portuguese masters until 1975 had been followed by nearly three decades of fighting between the communist Popular Movement for the Liberation of Angola (MPLA) and Jonas Savimbi's pro-western National Union for the Total Independence of Angola (UNITA) that ended in 2002. Out of a population of 7 mm in 1980, some 1.5 mm were killed and more than 4 mm forced to flee their homes.
A whole generation had missed their education. Infrastructure, political institutions and social services had to be rebuilt, often from scratch.

The pace of development since peace returned eight years ago has been staggering. Angola feels like one gigantic building site, as roads, ports, railways, hotels, shopping centres, hospitals, universities -- even whole new towns -- rise up out of the bush. The capital, Luanda, has changed out of all recognition, as the dilapidated red-tiled colonial buildings and encroaching slums make way for a forest of elegant high-rise hotels, offices and apartment blocks.
None of this would be possible without Angola's vast oil reserves, estimated at 13 bn barrels. Production stands at 1.9 mm bpd, making Angola sub-Saharan Africa's biggest producer after Nigeria.

Despite a reboundin oil prices, the ruling MPLA, now wedded to a market economy, is trying to slash public spending this year to 37 % of GDP, down from last year's 50 %.
Despite this dip in fortunes, the country has barely paused for breath, relying on international lines of credit for infrastructure projects, with China to the fore. Since 2002, China's ExImBank has lent Angola $ 4.5 bn. The China International Fund, which is privately owned, has provided another $ 3 bn. Angola is repaying all of this in oil, overtaking Saudi Arabia and Iran to become China's biggest supplier. Foreign direct investment, at $ 15.5 bn in 2008, up from $ 6.8 bn in 2005, now accounts for over half the total for southern Africa.

Yet Luanda is one of the world's trickiest places to do business in. It is sticky, dirty, chaotic and hugely expensive for visitors. Logistics are a nightmare. The country has no manufacturing base to speak of, so most items have to be imported, which pushes prices up.
The ports are clogged. The rubbish-strewn streets, potholed and still usually made of mud, are jammed with traffic. Red tape snags almost every activity. Electricity is patchy. There are few skilled locals. Corruption and nepotism are pervasive.

Moreover, the petrodollar influx has yet to improve ordinary Angolan lives very much. Last year's UN human development index put Angola near the bottom in almost every category: life expectancy is 46 years; infant mortality is 180 per 1,000 live births; one-third of adults are illiterate. Two-thirds of the 17 mm Angolans survive on less than $ 2 a day.
Yet things are improving. Teachers and doctors are being trained, children sent back to school, clinics opened, water-purification plants installed, and electricity brought to villages and urban slums. José Eduardo dos Santos, Angola's leader for the past 30 years, has even pledged -- for the first time -- to reduce corruption.

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