ANGOLA

COUNTRY OVERVIEW

LOCATION AND SIZE.

Angola is located in southern Africa, and borders the South Atlantic Ocean, Namibia, Zambia, and both Congos—the Democratic Republic of Congo and the Republic of the Congo. Angola has a total area of 1,246,700 square kilometers (481,351 square miles). It has a coastline of 1,610 kilometers (1,000 miles) on the South Atlantic Ocean. Comparatively, the area is slightly less than twice the size of Texas. The capital of Angola, Luanda, is located on the north-central coastline. The highest point in Angola is Morro de Moco at 2,620 meters (8,596 feet). Angola also includes the exclave of Cabinda (an exclave is an area of land that is part of another country but separated physically from that country). A province of Angola, Cabinda's size is roughly 7,300 square kilometers (2,800 square miles), and it lies south of the Republic of Congo on the Atlantic coast.

POPULATION.

The population of Angola was estimated by the CIA to be a little over 10 million in July 2000, although the World Bank put the figure at 12.4 million for 1999. These organizations also believe that the annual population growth rate decreased from 3.2 percent in 1995 to 2.9 percent in 1999. The growth rate for the year 2000 was estimated at 2.15 percent. In 2000 the birth rate stood at 46.89 births per 1,000, while the death rate was 25.01 per 1,000.

The population of Angola is very young. Only 3 percent of the population is over 65 years of age. About 54 percent of the population is between 15-64 years old, and 43 percent is below the age of 15. The life expectancy at birth for women is about 39 years and about 37 years for men.

The population density in 1995 was 8.8 people per square kilometer (18.1 people per square mile). The urban population has increased slowly but steadily from 31 percent in 1995 to 33.6 percent in 1999. The illiteracy rate in Angola is very high; only 42 percent of people over the age of 15 can read and write. There is a significantly higher number of men who are literate than women (56 percent versus 28 percent).

OVERVIEW OF ECONOMY

Angola's economy is in disarray due to the near-continuous warfare that has been ongoing in the country since independence in 1975. The National Union for the Total Independence of Angola (UNITA) and the Popular Movement for the Liberation of Angola (MPLA) have struggled for control of Angola and its abundance of natural resources since Portugal relinquished its control of the nation in 1975. Although the MPLA has managed to stay in power for most of Angola's history, the effort it expends in fighting UNITA and other hostile forces prevents it from developing Angola's economy. The government is likewise hindered by the fact that UNITA controls much of Angola, including its valuable diamond mines, the profits of which go towards UNITA's military efforts rather than the development of a stable economy. The result is that Angola is among those nations with the lowest output per capita in the world. GDP per capita in 1999 was estimated by the CIA World Factbook at US$1030, figured according to purchasing power parity.

The dominant force shaping Angola's economy today is oil and oil-related activities. These are essential to the economy of the country and contribute about 45 percent to GDP and 90 percent of exports. Thanks to oil production, the economy grew by 4 percent from 1998 to 1999. U.S. oil companies have invested heavily in Angola's oil production. In 1997, the United States bought 70-80 percent of all Angola's oil. In 2000, 7 percent of all U.S. petroleum came from Angola. This is expected to rise to 10 percent within 8 years. Unfortunately, the continual warfare has stifled investment in all other sectors. Diamonds are an important export product, but UNITA's control of this valuable resource limits its positive impact on the nation's economy.

Subsistence agriculture provides the main livelihood for 85 percent of the population, but larger-scale farming is difficult in Angola's landmine-ridden countryside. These mines remain throughout the country and hamper any development of the agricultural sector, even though the country itself is fertile. As a result, much of Angola's food must be imported. Coffee is one product that could be a large export opportunity, but the presence of so many minefields makes this development problematic.

Angola is severely indebted. The burden of debt on each Angolan is 3 times higher than the average for Africa. In 1999 the total outstanding debt was US$10.5 billion, more than two-thirds of which was owed to private creditors. In 1995 international donors (the World Bank, the European Union, and the United Nations' specialized agencies are the leading multilateral donors) pledged over US__BODY__.0 billion in assistance to Angola. However, these funds have been held back because of the stalemated peace process between the MPLA and UNITA.

POLITICS, GOVERNMENT, AND TAXATION

MPLA and UNITA began by fighting a common enemy—Portugal—for Angola's independence in 1961. They formed a coalition government along with the National Front for the Liberation of Angola (FLNA) following Portugal's decision to grant Angola independence on 11 November 1975, but the differences between the groups resulted in the coalition's disintegration before independence was achieved. The failure of the coalition government set the stage for a civil war that continued to plague the nation into the 21st century. UNITA, backed by the United States and South Africa, fought MPLA, backed by the Soviet Union and Cuba in a Cold-War showdown. However, the MPLA forces gained the victory when they overpowered major UNITA strongholds, and earned recognition from the Organization of African Unity (OAU) as the official government of Angola in 1976.

However, MPLA's hold on the government was far from secure. UNITA continued operating from southern Angola and from Namibia to topple MPLA; both South Africa and Cuba remained involved in Angola's war-battered landscape as military presences. With so many countries and factions involved in the war, a peace agreement seemed impossible until the thawing of the Cold War in 1988 resulted in the withdrawal of South African and Cuban troops from Angola. The first free elections in 1992 gave a narrow victory to the MPLA (which then became the Government of the Republic of Angola, GRA), but UNITA alleged voter fraud and did not accept the results. Fighting broke out once more and UNITA gained control of 75 percent of the country. However, the international community condemned UNITA's failure to honor the election results and recognized the MPLA government as the legitimate power. The 1994 Lusaka Protocol attempted to broker a peace agreement between UNITA and MPLA, but not even the 6,000 peacekeeping troops installed in Angola by the United Nations in 1995 could stop continued fighting. By 1999 the United Nations withdrew its peacekeeping force and acknowledged the failure of the Lusaka Protocol.

The governmental structure of Angola is considered to be in transition pending the settlement of the civil war. In the country's first elections following independence, Jose Eduardo Dos Santos, the head of the MPLA, was elected under a one-party system. The 1992 elections were designed to elect the president by popular vote and the 220-seat National Assembly by proportional vote, with both president and legislators to serve 4-year terms. UNITA, led by presidential candidate Jonas Savimbi, contested the 1992 elections after winning 40.1 percent of the vote. Since that time the official government has been led by the MPLA with no new elections.

INFRASTRUCTURE, POWER, AND COMMUNICATIONS

Due to the extensive warfare, most of Angola's infrastructure has been destroyed. Millions of land mines were laid, and efforts to remove them have so far made little progress. Not only do these vast numbers of mines hamper the building of an infrastructure of extensive road networks, but they continue to maim and kill civilians. There are 19,156 kilometers (11,903.5 miles) of paved roads and a total of 2,952 kilometers (1,834.4 miles) of rail tracks. There are 32 airports with paved runways and 217 with unpaved runways. However, the condition of these airfields varies, and mines are a problem here as well.

Transportation in general is a problem in Angola. Perhaps no sector has suffered more than transportation from the war. Roads, railways, and bridges have been severely damaged. Ports are run-down and antiquated. More than 60 percent of the paved road network needs repair. The estimation of the Angolan government is that it will take 10-15 years to restore the road network to the status prior to the war. However, this presumes an end to the fighting, without which the road infrastructure will take considerably longer to recreate. The road, railway, and bridge networks are essential for the other economic sectors to grow. They will link the main cities in the country and get the products from one end of the country to the next.

The continued political violence and fighting is the reason for the lack of external investment in Angola. However, when stability returns, the lack of an infrastructure

will be a major factor hindering economic development. Building an infrastructure is essential for the country's further development of other economic areas such as agricultural products, of which Angola used to be a net exporter.

There are about 60,000 telephone main lines in use (1995). The telephone system is limited mostly to government and business use. Radio telephones are used extensively by the military. There are 2 Internet service providers in the country (1999), but the level of personal computer ownership is very low (0.8 per 1,000 in 1998). There are also very few televisions in Angola, with only 14 sets per 1,000 people in 1998.

ECONOMIC SECTORS

Angola's total labor force for 1997 was estimated at 5 million, with 85 percent of the workforce engaged in agriculture, and industry and services with 15 percent. Despite the large segment of the population in agriculture, it contributed only 13 percent to GDP in 1998. Industry contributed 53 percent, and services provided 34 percent of GDP in the same year, according to the CIA World Factbook.

The most important industries are petroleum, diamonds, fish, and fish processing. Other significant industries are iron ore, phosphates, feldspar, bauxite, uranium, gold, cement, basic metal products, food processing, brewing, tobacco products, and sugar textiles.

Agricultural products include bananas, sugarcane, coffee, sisal, corn, cotton, manioc, tobacco, vegetables, plaintains, livestock, forest products, and fish. The most important of these agricultural products for export are coffee, sisal, timber, and cotton. However, agricultural production in Angola has been severely reduced by the civil war. The majority of agriculture is now subsistence farming. The industrial sector has likewise been reduced, with oil as the sector's only growing industry. This is important for the economic development of Angola, but is not enough to create sustainable development, and leaves Angola's economy vulnerable to fluctuating oil prices.

AGRICULTURE

Agricultural production is the sector that contributes the least to Angola's economy, a mere 13 percent of the GDP. Prior to the civil war in 1975 Angola was self-sufficient in food production and was a major exporter of agricultural products. The two most important products for export prior to the war were coffee and sisal. Angola was the second-largest producer of coffee in Africa and the fourth-largest in the world in 1974. Today only 3 percent of all arable land is being cultivated. There are two crucial reasons for this. First, large numbers of refugees have fled the country due to constant fighting, leaving the land uncultivated. Secondly, the vast amounts of anti-personnel mines that have been buried throughout the countryside make it difficult to cultivate the land again. This is unfortunate because Angola has the potential to grow a huge range of both semi-tropical and tropical crops. With continued fighting, Angola cannot fulfill its promise as a major agricultural producer.

COFFEE.

There have been attempts at coffee production during the conflict, but continued fighting has made the sector's recovery impossible. There are several advantages to focusing on coffee production in Angola. First, it is an area where Angola can compete in the global market, hence supplementing oil as a major income generator. Second, Angolans have a lot of experience in the production of coffee. Third, the fertile land is well disposed to the cultivation of coffee. Today, the coffee industry is moribund. The U.S. Department of Agriculture estimates Angola's total coffee production for 2001 will be 65,000 bags of coffee (each weighing 60 kilograms). This is up slightly from 55,000 bags for the previous year. In contrast, Mexico was expected to produce 5.8 million bags, and Kenya's production was estimated at 1.1 million for 2001. Angola is not even on the list of the top 35 suppliers of coffee to the United States.

FISH AND FISH PRODUCTS.

The fishing industry in Angola prior to the war was very important, and annual catches were about 600,000 tons. This shrank to only 35,000 tons during the war, but began to rise from 1993, when the catch was 122,000 tons, and this trend has continued. Angola has been building up its fishing fleet with the support of Spain, Italy, Portugal, and the Arab Bank for African Economic Development (BADEA). The World Bank helped the Angolan government set up the Angolan Support Fund for Fisheries Development. Angola has a long coastline which is especially rich with sardines, tuna, and mackerel. There is great potential for continued expansion in this sector.

INDUSTRY

Industry is the most important sector in Angola's economy, accounting for 53 percent of the GDP. The 3 important industrial sectors are mineral resources, energy, and manufacturing, the former two being by far the most significant. All of these were severely affected by the war, but since 1994 have increased significantly.

MINERAL RESOURCES.

Angola has vast deposits of a large variety of mineral resources including diamonds, gold, iron ore, phosphates, copper, lead, and zinc. However, the most important mineral with respect to export is diamonds. Prior to 1975 Angola was the fourth-largest diamond producer in the world, but this dropped during the war because of large-scale theft, smuggling, and transportation problems. UNITA controls the majority of the diamond-producing land, which has added to the government's problems in controlling the diamond trade. In 1992 Angola exported diamonds worth $250 million. While diamond exports are increasing, they have not reached pre-war levels. With a stable peace agreement there should be no obstacles keeping Angola from reaching and exceeding former export levels.

Apart from diamonds, Angola's resources are vast, but largely untapped. The Angolan government's efforts to promote private investment led it to abolish the previously state-held monopoly of mineral rights. (This began on a small scale in 1986 in relation to diamonds). Mining ventures can consequently be privately held. However, the continued conflict makes it difficult to attract private investment, and these resources remain untapped.

ENERGY.

Angola is a regional player in energy production. Angola co-ordinates the energy policy for the Southern African Development Co-ordination Conference (SADCC), and its energy secretariat is based in Luanda. Energy production is essential for Angola, with 90 percent of the country's total exports coming from oil. In 2000 oil contributed 45 percent to the GDP of the country. Energy is the only sector that expanded throughout the 1980s, during the war. The oil industry is run by the Angolan state oil firm Sonangol, in conjunction with foreign oil companies. Angola is the second-largest producer of oil in sub-Saharan Africa and provides 7 percent of all U.S. oil imports. The United States is the main purchaser of Angolan oil, buying some 70-80 percent of all oil exports.

New oil reserves are being discovered regularly, and faster than the country's reserves can be depleted. Foreign companies have not been deterred from investing in Angola's oil industry irrespective of the warfare. The oil industry is viewed as an attractive investment opportunity that offers the oil companies favorable geological conditions, low operating costs, and co-operation from the Angolan government. The total foreign investment in oil production in the 1980-86 period was US$2.7 billion. The investment level in the next 3 years was US$2 billion, with US$4 billion invested between 1993 and 1997.

Hydroelectric power has been a priority of the Angolan government. In 2000 75.03 percent of the electricity produced was hydro-generated. Several large rivers flow through the country and give an enormous potential for hydroelectricity. The current generating capacity exceeds demand locally and output is increasing. This makes Angola a potential regional exporter of hydroelectric energy. However the power supply has been irregular, partially due to sabotage by the warring factions, and a deteriorating infrastructure due to poor maintenance and lack of investment. However, the potential for regional export is vast when stability returns, even though Angola exported no electricity as of 1998.

MANUFACTURING.

Angola had about 4,000 manufacturing enterprises before the civil war, which employed 200,000 people. However, this was significantly reduced by the onset of the war. The only products that are manufactured and exported from Angola today are cement and refined petroleum products. There is potential for establishing the pre-war levels of production, but this will require stability and outside investment. It would also necessitate the creation of an infrastructure. Hence, investment in oil and diamonds will for a long time be more interesting to outside investors than Angola's manufacturing sector.

SERVICES

Services in Angola are not very developed, again a direct consequence of the war. The government has begun to encourage investment in tourism. However, with the continued strife and breached peace agreements it is doubtful whether such projects will take place. Foreign investors will shy away from investing in tourism in such a volatile society. Not only will it take substantial time before there will be investors in tourism, but the entire infrastructure to support such an expansion is at present lacking. The willingness of tourists to go to such an area is also in doubt. Financial and human services are in a similar state of disarray.

INTERNATIONAL TRADE

In 1999 Angola exported a total of US$5 billion worth of goods and services and imported US$3 billion worth. Due to Angola's colonial past, its primary trading partner has historically been Portugal. Today, Portugal is still a primary trading partner from which 20 percent of Angola's commodities are imported. The United States and South Africa are other major sources of imports for Angola, providing 17 percent and 10 percent, respectively. However, the United States is the major source of Angolan exports with 63 percent of all exports; 9 percent of exports going to the Benelux countries (Belgium, the Netherlands, and Luxembourg), and China, Chile, and France are also important sources of exports.

MONEY

In 1990 the Angolan government changed the currency from the kwanza to the nova kwanza. This was done to reduce the money supply and force prices down in the informal sector, which operated parallel to the more regulated conventional market. This measure was taken to satisfy requirements of the World Bank, the IMF, and other financial institutions as part of the reforms that these institutions see as essential to higher growth and poverty reduction in Angola. A devaluation followed in which the official value of the kwanza was cut in half. In order to control the foreign exchange in circulation, 4 different exchange rates were applied in the banking system. Privatization was also introduced gradually because of pressure from international financial institutions. This liberalization process was stopped in 1992 due to resumption of the war.

Angola's financial woes heightened in 1994 and the government renewed its reform efforts. Since 1993 there has been a 25 percent decline in real GDP. In 1994 the government's budget deficit was US$872 million. The central bank attempted to address these deficits by increasing the money supply, but this raised inflation to 1,838 percent in Luanda in 1993, in 1995 inflation had reached 3,700 percent. In 1994 another adjustment program was attempted. However, this was made more difficult by the development of a robust informal sector with

its own credits and expenditures which were outside the control of the Ministry of Finance. In 1994 as much as 60 percent of the income of the state was outside treasury accounts.

There has yet to be any economic stabilization in Angola. There are 2 reasons why it might continue to be difficult to obtain even with a peace process. First, military expenditures will remain high because of the previous history of broken peace processes, in addition to the involvement of other countries in the conflict. Second, strong adjustment policies may antagonize the population, because they may want to see change come about quicker than is practically feasible.

The nova kwanza has dropped in value against the U.S. dollar for several years. In 1995, the official rate was Kzr2,750 to the dollar, and by January 2000, the rate had risen to Kzr577,304 to the US__BODY__.

POVERTY AND WEALTH

The vast majority of Angolans live in poverty, while the political elites are very wealthy. Access to goods for the poor and the rich is very different. For years there has been a shortage of consumer goods, and the government sought to obtain fair distribution via lojas do povo (people's stores). However, only about 15 basic commodities were available, and in practice the shelves were often empty. The elites on the other hand had access to lojas de responsaveis (stores for high-ranking people) and lojas francas (free shops) where they could buy goods with foreign currency only. Economic policies were faltering and this made it more difficult for people to make ends meet both in rural and urban areas. Therefore, a parallel economy grew rapidly after independence.

An estimated three-quarters of economically active people have been involved in the informal economy. There are 2 main elements of the informal economy: rural, subsistence agricultural production (which occupies 85 percent of the population) and the urban parallel market, a system of exchange outside regulated channels. However, due to the lack of infrastructure and war conditions, there has been little integration of these two aspects

of the informal sector. Therefore, the urban markets tend to rely on imports.

WORKING CONDITIONS

The working conditions in Angola are tightly connected with the war and the development of dual economies. Wages were nominal after the war began and therefore could not serve to ensure access to consumer goods. There is also vast unemployment, which affects more than half of the population. In addition, 25 percent of the population depended upon humanitarian aid for survival in 1996.

Most Angolans are active in the informal sector. This mainly consists of subsistence farming and urban markets. Since this economy is informal there are no laws to protect the workers or unions. The effect of the war has resulted in 1.5 million internal refugees. Workers in the mines in UNITA-held territories extract diamonds to sell in support of their cause.

COUNTRY HISTORY AND ECONOMIC DEVELOPMENT

1575. Portuguese settlement established at Luanda.

17TH CENTURY. Portugal controls the slave trade from its base in Angola, though the Dutch, French, and British began to establish a presence on the African continent.

1836. The export of slaves is banned.

1850s. Angola's exports are dominated by ivory, wax, and rubber.

1912. Alluvial diamond mining becomes an important industry in northeast Angola.

1930. With the Colonial Act of 1930, Portugal modernizes Angola's economy and binds it to that of Portugal by a system of protective tariffs.

1956. The Popular Liberation Movement of Angola (MPLA) is founded. It is supported by the Soviet Union.

1957. The National Front for the Liberation of Angola (FNLA) is founded. It is supported by the United States.

1961. A major revolt against Portuguese rule erupts in northern Angola, followed by a long guerrilla war.

1966. Political leader Jonas Savimbi breaks from the FNLA and sets up the National Union for the Total Independence of Angola (UNITA). UNITA, FNLA, and MPLA all fight a guerrilla war against Portuguese forces.

1975. Portugal releases its claim to Angola, and independence is declared. A government is established, consisting of the 3 nationalist groups and a Portuguese representative. However, this government collapses and civil war ensues. Over the next 25 years the MPLA acts as official government, and the coalition of UNITA/FNLA has been in rebellion. The MPLA is backed by the U.S.S.R. and Cuba, while UNITA and the FNLA are backed by the United States, the United Kingdom, and South Africa. The civil war claims a total of 500,000 lives by 2000.

1981. An undeclared war with South Africa begins. Its origins lie in the refusal of South Africa to grant independence to Namibia and South Africa's struggle against the nationalist groups in Namibia fighting against South African rule.

1989. The United Nations monitors the withdrawal of Cuban troops.

1991. The government and UNITA conclude a peace agreement.

1992. The Forcas Armadas Populares de Libertacao de Angola (FAPLA) and UNITA forces are disbanded and a new national army established. Elections are held, and the MPLA wins a narrow majority. Refusing to accept the results of the elections, UNITA forces resume fighting.

1993. The UN sponsors peace talks amidst continued fighting.

1999. It is estimated that there are 1.5 million refugees inside Angola displaced by the civil war.

FUTURE TRENDS

The future of Angola's economy depends entirely upon a cessation of hostilities and the creation of a stable and secure environment. If this does not happen, Angola will continue to have a low GDP regardless of the vast resources it possesses. However, due to the destruction of the infrastructure and the immense problem with land mines, there will be huge problems to overcome even if the war is ended. Infrastructure is necessary for expansion of the mining industry and agricultural production. The removal of mine fields will take huge resources. Both of these objectives will take a long time to achieve and have a high cost. Therefore, even with the creation of a stable and secure society it will take a long time before Angola can begin to tap its vast resources. An additional problem is that Angola is one of the most indebted countries in the world. Unless there is a substantial debt reduction the possibilities of rebuilding Angola's economy are slim, irrespective of cessation of hostilities.

DEPENDENCIES

Angola has no territories or colonies.

BIBLIOGRAPHY

"Angola History." Newafrica.com. <http://www.newafrica.com/history/country.asp?CountryID=5>. Accessed January 2001.

"Angola." Jubilee 2000: Profile: Angola. <http://www.jubileeplus.org/databank/profiles/angola.htm>. Accessed January 2001.

"Countries: Angola." The World Bank Group. <http://www.worldbank.org/afr/ao2.htm>. Accessed January 2001.

Economist Intelligence Unit. Country Profile: Angola. London: Economist Intelligence Unit, 2001.

Embassy of the Republic of Angola. "Business & Economics." Angola. <http://www.angola.org/business/index.htm>. Accessed January 2001.

Hodges, Tony. "Looking to Angola's Future: Rebuilding the Economy." Africa Insight. Vol. 23, No. 3, 1993.

James, W. Martin. A Political History of the Civil War in Angola, 1974-1990. New Brunswick, NJ: Transaction Publishers, 1992.

Moura Roque, Fatima. "Economic Transformation in Angola." South African Journal of Economics. Vol. 62, No. 2, June 1994.

Tvedten, Inge. Angola's Struggle for Peace and Reconciliation .Oxford, England: Westview Press, 1997.

U.S. Central Intelligence Agency. World Factbook 2000. <http://www.odci.gov/cia/publications/factbook/index.html>. Accessed July 2001.

—Eirin Mobekk

CAPITAL:

Luanda.

MONETARY UNIT:

The currency of Angola is the nova kwanza (Kzr). One Kzr equals 100 centimos. Notes are in denominations of Kzr5, 10, 50, and 100. Coins are in denominations of Kzr1, 2, 5, and 100, as well as 10, 20, and 50 centimos.

CHIEF EXPORTS:

Crude oil, diamonds, refined petroleum products, gas, coffee, sisal, fish and fish products, timber, cotton.

CHIEF IMPORTS:

Machinery and electrical equipment, vehicles and spare parts, medicines, food, textiles, military goods.

GROSS DOMESTIC PRODUCT:

US$11.6 billion (purchasing power parity, 1999 est.).

BALANCE OF TRADE:

Exports: US$5 billion (f.o.b., 1999 est.). Imports: US$3 billion (f.o.b., 1999 est.).