Angola is US priority as rising oil output boosts influence

Donald Steinberg arrived in Angola in 1995 as US ambassador to find American oilmen doing more than drilling for coastal crude.
"They were, in fact, the American ambassadors to Angola in that period," Steinberg recalls. "The only real relationship was through the oil companies."

Angola, currently Africa's top oil producer, is now a priority in Washington. Hillary Clinton's overnight visit in August -- the first for a US secretary of state -- sent the message that America is eager to help transform the former Cold War battleground into a stable energy giant with strong democratic institutions and transparent business practices.
Angola is poised to become a hub of liquefied natural gas and diamond exports. It is also a potential growth market for Atlanta-based Coca-Cola, Bechtel Group in San Francisco and other American companies seeking to take advantage of the government's push to diversify the economy and improve conditions for the country's 17 mm people, most of whom live on $ 2 a day.

"We are definitely interested" in Angola, says David Welch, a former US diplomat who is president of Middle East, Africa, Europe and South Asian operations at Bechtel, the largest US engineering company. "They have every single infrastructure need."
Angola topped Nigeria's crude output in July and August partly because unrest cut production in Nigeria's Niger Delta. It joined the Organization of Petroleum Exporting Countries in 2007 and, as this year's president, will host a Dec. 22 meeting in its capital, Luanda. Within three years, it will expand energy exports when it begins shipping natural gas with help from San Ramon, California-based Chevron.

Price swings
Angola gets about 84 % of fiscal revenue from petrodollars, making it vulnerable to price swings like last year's 77 % drop to $ 33.87 a barrel Dec. 19 from $ 145.29 July 3. The price recovered to $ 69.29 Sept. 11. So Angola is turning to foreign investors for help developing non-energy industries including agriculture.
Only 5% of arable land is under cultivation after farmers fled to cities during Angola's 27-year civil war between rival factions, which began after its 1975 independence from Portugal. If farmed to its potential, Angola could meet not only its own needs, but also those of sub-Saharan Africa, Clinton said. The war pitted the ruling Soviet-backed Popular Movement for the Liberation of Angola against the US-supported National Union for the Total Independence of Angola led by Jonas Savimbi. Half a million people died, including Savimbi, who was killed by government troops.

Abandoned buildings
Devastation from the conflict is evident across the country. Many buildings in Luanda are abandoned; roads need repair. Embassy employees were relieved when the lights stayed on during Clinton's stay there; outages are routine because there isn't any effective power grid.
Peace brought investment from China and the US, which are the top recipients of Angola's oil shipments. China, the No. 1 importer, has grantedAngola loans of more than $ 5 bn and is building stadiums, roads and an airport expansion. The US makes more modest loans through the Export-Import Bank, which extended a $ 120 mm credit line. Ties with China are closer than those with the US. In exchange for financing, Angola guarantees China a percentage of oil output, and a top Angolan military official visited Beijing Sept. 1 to announce enhanced cooperation.

Lag times
Long lag times for starting a business have deterred American investment. In 2007, it took 119 days to register an enterprise, according to the World Bank.
Government corruption is also "widespread," according to a Feb. 25 US State Department report. It said Sonangol, Angola's national oil company, didn't consistently report revenue to the Ministry of Finance and "the business climate continued to favour those connected to the government," with "no laws or regulations regarding conflict of interest."

While Angola held a legislative vote last year, its presidential election, scheduled for this year, has been postponed, and Jose Eduardo dos Santos has ruled since 1979. At an Aug. 9 press conference alongside Clinton, Foreign Minister Assuncao Afonso dos Anjos said Angola needs more time for balloting.
When asked about alleviating poverty, he said there's no "magic wand." Angola needs "well-structured, well-designed programs, meaning programs that will gradually create wealth."

Financial transparency
Angola has taken steps toward financial transparency by publishing oil-industry revenue, according to the US. The Treasury Department is sending an adviser to help Angola manage debt and take advantage of international currency markets to raise funds.
The Corporate Council on Africa, which promotes commercial relationships, is hosting a US-Africa summit in Washington Sept. 29-Oct. 1 that will dedicate half a day to doing business in Angola, especially in the non-oil infrastructure, housing and communications sectors.

London-based SABMiller, the world's second-largest brewer, is expanding operations, opening a new Coca-Cola bottling plant last year and now completing another north of Luanda. Atlanta-based Delta Air Lines, the world's largest carrier, applied with the US government to begin direct commercial flights from America.
"It's not easy to invest in Angola," says Rosa Whitaker, former first assistant US trade representative to Africa and now a consultant. "But for the investors willing to take the risk, Angola is a country that can produce high rewards."