Angola: oil-dependent and debt-ridden, but on the brink of real change?
By breaking up Angola’s oil giant Sonangol, luring foreign investment and purging key members of the ruling class, is Angola’s new president actually pushing for real change?
Scott C. McKnight
The past four years have been tough for Angola. The southwest African country’s oil production is dipping; investment has dried up; oil is still the country’s only real export despite a decade of bonanza-spending; its foreign debt—about half of which is owed to China—is growing and getting harder to pay back; and the political grip of the ruling MPLA is loosening. But João Lourenço, who became Angola’s president after his predecessor’s 38-year tenure, is making a virtue of necessity. Since coming to power in September 2017, he has pushed through some painful reforms, sacking several heavy-hitters of Angola’s infamously corrupt ruling class and most recently attempting to curb the power of state-owned oil giant Sonangol. But in a country that may best typify the ‘resource curse’—corrupt, mismanaged, indebted, authoritarian and appallingly unequal—we have to ask: is Angola really on the brink of change? This analysis argues that the basic structures of Angola’s problems—extreme dependence on oil production, growing indebtedness to China, endemic corruption centered around the one-party state and the Sonangol leviathan—all remain in place, even if the country's president has finally changed.
A Tale of Two Angolas
There may be no more depressing cautionary tale about the negative side-effects of oil than Angola. And that’s saying something: Africa’s oil-rich states are paragons of inequality, corruption, authoritarianism, debt and mismanagement, and wasted opportunity. Some of this can be explained by the tragically cartoonish quality of Angola’s political economy: oil and diamonds are practically the country’s only exports. The rule of José Eduardo dos Santos lasted nearly four decades, was shamelessly kleptocratic from start to finish, and ended seemingly the only other way that dictators leave power: handpicking a successor (his minister of defense, João Lourenço), granting himself immunity from prosecution, and installing his progeny in key (and stunningly lucrative) positions of power (the daughter’s net worth is estimated at US$2.2 billion, making her Africa’s richest woman).
This extreme wealth coexists with the appalling socioeconomic reality of a banana republic: about one Angolan child in five die before the age of five, a rate higher than war-torn Afghanistan; although the per capita income (GDP divided by population) is US$3,110—twice the average for sub-Saharan Africa—two of three Angolans live on less than $US2 a day. Despite being Africa’s second-largest oil producer and having a modestly sized population of under 30 million, the Angolan masses have long learned to find a way to survive while the ultra-rich live off oil revenue.
Another part of Angola’s tragedy can be explained by the country’s uniquely gruesome modern history. Angolans emerged from nearly half a century of war—first against their Portuguese colonial overlords (roughly 1961-75) and later against one another in a particularly macabre civil war (1975-2002). Its infrastructure ravaged, landmines littering the countryside and its population traumatized, after 2002 Angola had the benefit of rising oil production timed with rising oil prices. The country also had the benefit of being young; since two-thirds of Angola's population is under twenty-five years-old, they have little memory of war. In the early 2000s then, Angola seemed poised to cash the peace dividend.
Toward Petro-Diamond Capitalism
One party has ruled Angola since independence. The People’s Movement for the Liberation of Angola (MPLA) was, as its name suggests, born to fight the Portuguese for independence and later to build a communist state among cassava shrubs. But, reading the writing on the wall at the end of the Cold War, the MPLA abandoned its Marxist ideology for what a veteran Angolan expert called ‘petro-diamond capitalism’. The MPLA successfully transitioned to become a well-organized party—by fragile democracy standards anyway—and has won parliamentary elections in 2008, 2012 and recently in 2018 (in Angola, the largest party in parliament chooses the president). The MPLA’s credentials as bringers-of-peace were bolstered by the oil boom: Angola’s gross domestic product (GDP) grew at over a 7% per year between 2003-15; it’s estimated that the country made $640 billion from oil and gas exports since 2002.
The MPLA put a good chunk of this wealth into infrastructure—paved roads, railways to span vast countryside, and shiny buildings, especially in the capital Luanda. This infrastructure push was helped by China, itself searching abroad for ways to feed its oil-hungry economy. Given what each side had to offer then, it wasn’t long before China became Angola’s biggest trading partner, creditor, and diplomatic partner, swapping its expertise in infrastructure-development and abundance of credit for Angola’s growing oil exports. Reuters reported in 2015 that there were fifty Chinese state companies and 400 private businesses operating in Angola. Angola became a frequently-cited case in the cottage industry of China’s supposed resource-based ‘neo-colonialism’ of the developing world. Several visits to Luanda by Chinese presidents, premiers and foreign ministers only seemed to confirm this trend. These oil-backed loans (OBLs) grew to become a template of China’s engagement with oil-rich but infrastructure-starved countries, especially after the financial crisis (2008-09) snapped shut other, mostly Western sources of credit.
Chinese president Xi Jinping with now former president José Eduardo dos Santos on a state visit to Beijing in 2015