ANGOLA: Oil city
Recent reforms in oil-rich Angola have done little to enhance its credibility
For expats arriving in Luanda to work, Angolas capital is the most expensive city on earth. Despite a boom in construction, property prices remain almost untenably high and imports add to the cost of living in a country that is vying to be sub-Saharan Africas largest oil producer.
The impact of the financial crisis lingers on. Angola has not yet come close to matching the pre-crisis growth rates of over 20% that catapulted it to the attention of international investors; lower demand for oil and output disruptions mean that growth has stabilized at around 8% per year.
The ongoing uncertainty in the Middle East and North Africa, alongside falling output in Nigeria, pushed Angola up the ranks of global energy producers, while its close ties with China have given it a bargaining chip with western interests, although the US is still the countrys largest market. In 2009, then US secretary-of-state Hillary Clinton visited the country on a rare tour of Africa, an unusual step that was widely interpreted as a sign that Washington was worried about the enduring strength of the relationship.
The country is heavily dependent on oil for money 90% of export earnings and 75% of government revenues come from oil but the wider benefits to society of the industry remain questionable. Only around 1% of the countrys workforce is employed in the sector. Angolas gross domestic product per capita, at around $5,500, means that it is technically an upper-middle-income country, but the majority of the population, according to the UN Development Programme, live on less than $2 per day. The countrys Gini coefficient is 0.58, making its society inequitable even by regional standards.
In June, the World Bank issued an economic update on the country, which said that, while the financial sector had driven a rapid expansion in the banking sector, access to credit outside of the oil industry remained tight. Investment is also surprisingly slow. Public-sector investment accounts for around 10% of Angolas GDP, and private investment just 3%.
Although the skyscrapers in Luanda hint at the flow of money from the oil industry into the real economy, there is persistent criticism over the transparency in the use of state resources. Angola ranks 157th in the world on Transparency Internationals Corruption Perception Index, and has been criticized widely by NGOs for its opacity. The World Banks report was diplomatic, saying: The authorities have made significant strides in improving the transparency and accountability of public financial management, but challenges remain.
Almost immediately after the report was released, the launch of a $5 billion sovereign wealth fund to reinvest the proceeds of the countrys oil money the Fundo Soberano de Angola was marred by allegations of nepotism, after the presidents son, Jose Filomeno Dos Santos, was appointed to head it. Isobel Dos Santos, the presidents daughter, is one of Africas wealthiest women, with stakes in the countrys biggest bank and telecoms operator.
The launch of the fund was handled with great fanfare. The fund would be split into capital preservation through investments into sovereign debt in the G7; infrastructure development locally; with the remainder up to 50% invested in return-generating projects at the discretion of the board. It was pitched as a way to maintain the countrys financial status and invest in its long-term development. This Norwegian model of reuse and redistribution of hydrocarbon resources still stands out as an example of how oil and gas can be a positive force for economic development. But this, local analysts say, is not the Norwegian model.
Its very clear hes positioning his own son to succeed him, says Elias Isaac, Angola country director for the Open Society Initiative (OSISA). Its very clear that by giving the son the responsibility of the management of the sovereign wealth fund, he wants the son to be economically strong and powerful.
The fund is being managed by Quantum Global, a Swiss-based company whose advisory board is chaired by Jean-Claude Bastos de Morais, a Swiss-Angolan businessman and long-standing associate of the younger Dos Santos. Quantum did not return requests for comment.
Echoing the sentiments of several transparency campaigners in Angola, OSISAs Isaac warned that the structures used to set up the fund had automatically reduced its credibility.
Given the fact that this fund is being managed outside Angola and will be used for investments in Africa, not directly in Angola, that creates a lot of suspicion, he says. Angola needs real development. Not just infrastructure, but manufacturing, agriculture and so on. If the fund is building hotels and restaurants in Dar Es Salaam, in Cape Town, then Angola will never have the direct benefit of the fund. Thats what we feel... the issue of transparency and accountability is going to be a major issue of this fund.