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Economy of Angola

The Economy of Angola is the fastest-growing economy in Africa, but is still recovering from the Angolan Civil War that plagued Angola from independence in 1975 until 2002. Despite extensive oil and gas resources, diamonds, hydroelectric potential, and rich agricultural land, Angola remains poor, and a third of the population relies on subsistence agriculture. Since 2002, when the 27-year civil war ended, the country has worked to repair and improve ravaged infrastructure and weakened political and social institutions. High international oil prices and rising oil production have led to a very strong economic growth in recent years, but corruption and public-sector mismanagement remain, particularly in the oil sector, which accounts for over 50 percent of GDP, over 90 percent of export revenue, and over 80 percent of government revenue.

History

Kingdom of Portugal's explorers and settlers, founded trading posts and forts along the coast of Africa since the 15th century, and reached the Angolan coast in the 16th century. Portuguese explorer Paulo Dias de Novais founded Luanda in 1575 as "São Paulo de Loanda", and the region developed as a slave trade market with the help of local Imbangala and Mbundu peoples who were notable slave hunters. Trade was mostly with the Portuguese colony of Brazil; Brazilian ships were the most numerous in the ports of Luanda and Benguela. By this time, Angola, a Portuguese colony, was in fact like a colony of Brazil, paradoxically another Portuguese colony. A strong Brazilian influence was also exercised by the Jesuits in religion and education. War gradually gave way to the philosophy of trade. The great trade routes and the agreements that made them possible were the driving force for activities between the different areas; warlike states become states ready to produce and to sell. In the Planalto (the high plains), the most important states were those of Bié and Bailundo, the latter being noted for its production of foodstuffs and rubber. The colonial power, Portugal, becoming ever richer and more powerful, would not tolerate the growth of these neighbouring states and subjugated them one by one, so that by the beginning of this century the Portuguese had complete control over the entire area. During the period of the Iberian Union (1580-1640), Portugal lost influence and power and made new enemies. The Dutch, a major enemy of Castile, invaded many Portuguese overseas possessions, including Luanda. The Dutch ruled Luanda from 1640 to 1648 as Fort Aardenburgh. They were seeking black slaves for use in sugarcane plantations of Northeastern Brazil (Pernambuco, Olinda, Recife) which they had also seized from Portugal. John Maurice, Prince of Nassau-Siegen, conquered the Portuguese possessions of Saint George del Mina, Saint Thomas, and Luanda, Angola, on the west coast of Africa. After the dissolution of the Iberian Union in 1640, Portugal would reestablish its authority over the lost territories of the Portuguese Empire.

The Portuguese started to develop townships, trading posts, logging camps and small processing factories. From 1764 onwards, there was a gradual change from a slave-based society to one based on production for domestic consumption and export. Meanwhile, with the independence of Brazil in 1822, the slave trade was abolished in 1836, and in 1844 Angola's ports were opened to foreign shipping. By 1850, Luanda was one of the greatest and most developed Portuguese cities in the vast Portuguese Empire outside Mainland Portugal, full of trading companies, exporting (together with Benguela) palm and peanut oil, wax, copal, timber, ivory, cotton, coffee, and cocoa, among many other products. Maize, tobacco, dried meat and cassava flour also began to be produced locally. The Angolan bourgeoisie was born. From the 1920s to the 1960s, strong economic growth, abundant natural resources and development of infrastruture, led to the arrival of even more Portuguese settlers from the metropole.

The Portuguese discovered petroleum in Angola in 1955. Production began in the Cuanza basin in the 1950s, in the Congo basin in the 1960s, and in the exclave of Cabinda in 1968. The Portuguese government granted operating rights for Block Zero to the Cabinda Gulf Oil Company, a subsidiary of ChevronTexaco, in 1955. Oil production surpassed the exportation of coffee as Angola's largest export in 1973.

Angolan oil production rates
Year thousand barrels per day thousand cubic metres per day
1974
1991
1995
2001
2006

A leftist military-led coup d'état, started on April 25, 1974, in Lisbon, overthrew the Marcelo Caetano government in Portugal, and promised to hand over power to an independent Angolan government. Mobutu Sese Seko, the President of Zaire, met with António de Spínola, the transitional President of Portugal, on September 15, 1974 on Sal island in the Cape Verdes, crafting a plan to empower Holden Roberto of the National Liberation Front of Angola, Jonas Savimbi of UNITA, and Daniel Chipenda of the MPLA's eastern faction at the expense of MPLA leader Agostinho Neto while retaining the facade of national unity. Mobutu and Spínola wanted to present Chipenda as the MPLA head, Mobutu particularly preferring Chipenda over Neto because Chipenda supported autonomy for Cabinda. The Angolan exclave has immense petroleum reserves estimated at around 300 million tons (~300 kg) which Zaire, and thus the Mobutu government, depended on for economic survival. After independence thousands of white Portuguese left, most of them to Portugal and many travelling overland to South Africa. There was an immediate crisis because the indigenous African population lacked the skills and knowledge needed to run the country and maintain its well-developed infrastructure.

The Angolan government created Sonangol, a state-run oil company, in 1976. Two years later Sonangol received the rights to oil exploration and production in all of Angola. After independence from Portugal in 1975, Angola was ravaged by a horrific civil war between 1975 and 2002.

1990s

United Nations Angola Verification Mission III and MONUA spent USD1.5 billion overseeing implementation of the Lusaka Protocol, a 1994 peace accord that ultimately failed to end the civil war. The protocol prohibited UNITA from buying foreign arms, a provision the United Nations largely did not enforce, so both sides continued to build up their stockpile. UNITA purchased weapons in 1996 and 1997 from private sources in Albania and Bulgaria, and from Zaire, South Africa, Republic of the Congo, Zambia, Togo, and Burkina Faso. In October 1997 the UN imposed travel sanctions on UNITA leaders, but the UN waited until July 1998 to limit UNITA's exportation of diamonds and freeze UNITA bank accounts. While the U.S. government gave USD250 million to UNITA between 1986 to 1991, UNITA made USD1.72 billion between 1994 and 1999 exporting diamonds, primarily through Zaire to Europe. At the same time the Angolan government received large amounts of weapons from the governments of Belarus, Brazil, Bulgaria, the People's Republic of China, and South Africa. While no arms shipment to the government violated the protocol, no country informed the U.N. Register on Conventional Weapons as required.

Despite the increase in civil warfare in late 1998, the economy grew by an estimated 4% in 1999. The government introduced new currency denominations in 1999, including a 1 and 5 kwanza note.

2000s

An economic reform effort was launched in 1998. The Angolan economy ranked 160 out of 174 nations in the United Nations Human Development Index of 2000. In April 2000 Angola started an International Monetary Fund (IMF) Staff-Monitored Program (SMP). The program formally lapsed in June 2001, but the IMF remains engaged. In this context the Government of Angola has succeeded in unifying exchange rates and has raised fuel, electricity, and water rates. The Commercial Code, telecommunications law, and Foreign Investment Code are being modernized. A privatization effort, prepared with World Bank assistance, has begun with the BCI bank. Nevertheless, a legacy of fiscal mismanagement and corruption persists. The civil war internally displaced 3.8 million people, 32% of the population, by 2001. The security brought about by the 2002 peace settlement has led to the resettlement of 4 million displaced persons, thus resulting in large-scale increases in agriculture production.

Angola produced over 3 million carats of diamonds per year in 2003, with its production expected to grow to 10 million carats per year by 2007. In 2004 China's Eximbank approved a $2 billion line of credit to Angola to rebuild infrastructure. The economy grew 18% in 2005 and growth was expected to reach 26% in 2006 and stay above 10% for the rest of the decade.

ChevronTexaco started pumping from Block 14 in January 2000, but production has decreased to in 2007 due to the poor quality of the oil. Angola joined the Organization of the Petroleum Exporting Countries on January 1, 2007.

Cabinda Gulf Oil Company found Malange-1, an oil reservoir in Block 14, on August 9, 2007.

Overview

Despite its abundant natural resources, output per capita is among the world's lowest. Subsistence agriculture provides the main livelihood for 85% of the population. Oil production and the supporting activities are vital to the economy, contributing about 45% to GDP and 90% of exports. Growth is almost entirely driven by rising oil production which surpassed in late-2005 and which is expected to grow to by 2007. Control of the oil industry is consolidated in Sonangol Group, a conglomerate which is owned by the Angolan government. With revenues booming from oil exports, the government has started to implement ambitious development programs in building roads and other basic infrastructure for the nation.

In the last decade of the colonial period, Angola was a major African food exporter but now imports almost all its food. Because of severe wartime conditions, including extensive planting of landmines throughout the countryside, agricultural activities have been brought to a near standstill. Some efforts to recover have gone forward, however, notably in fisheries. Coffee production, though a fraction of its pre-1975 level, is sufficient for domestic needs and some exports. In sharp contrast to a bleak picture of devastation and bare subsistence is expanding oil production, now almost half of GDP and 90% of exports, at . Diamonds provided much of the revenue for Jonas Savimbi's UNITA rebellion through illicit trade. Other rich resources await development: gold, forest products, fisheries, iron ore, coffee, and fruits.

This is a chart of trend of nominal gross domestic product of Angola (since unification) at market prices using International Monetary Fund data; figures are in millions of units.

Year USD Angolan kwanza
1995 5,066 14
2000 9,135 91,666
2005 28,860 2,515,452

Foreign trade

Exports in 2004 reached . The vast majority of Angola's exports, 92% in 2004, are petroleum products. worth of diamonds, 7.5% of exports, were sold abroad that year. Nearly all of Angola's oil goes to the United States, in 2006, making it the eighth largest supplier of oil to the United States, and to the People's Republic of China, in 2006. In the first quarter of 2008, Angola became the main exporter of oil to China. The rest of its petroleum exports go to Europe and Latin America. U.S. companies account for more than half the investment in Angola, with Chevron-Texaco leading the way. The U.S. exports industrial goods and services, primarily oilfield equipment, mining equipment, chemicals, aircraft, and food, to Angola, while principally importing petroleum. Trade between Angola and South Africa exceeded USD 300 million in 2007.

Resources

Petroleum

Angolan petroleum production has in recently surpassed Nigeria in African oil production, and in January 2007 Angola became a member of OPEC. By 2010 production is expected to double the 2006 output level with development of deep-water offshore oil fields. Oil sales generated USD 1.71 billion in tax revenue in 2004 and now makes up 80% of the government's budget, a 5% increase from 2003, and 45% of GDP.

Chevron Corporation produces and receives , 27% of Angolan oil. Elf Oil, Texaco, ExxonMobil, Agip, Petrobras, and British Petroleum also operate in the country.

Block Zero provides the majority of Angola's crude oil production with produced annually. The largest fields in Block Zero are Takula (Area A), Numbi (Area A), and Kokongo (Area B). ChevronTexaco operates in Block Zero with a 39.2% share. SONANGOL, the state oil company, Total, and ENI-Agip own the rest of the block. ChevronTexaco also operates Angola's first producing deepwater section, Block 14, with .

The United Nations has criticized the Angolan government for using torture, rape, summary executions, arbitrary detention, and disappearances, actions which Angolan government has justified on the need to maintain oil output.

Angola is the third-largest trading partner of the United States in Sub-Saharan Africa, largely because of its petroleum exports. The U.S. imports 7% of its oil from Angola, about three times as much as it imported from Kuwait just prior to the Gulf War in 1991. The U.S. Government has invested USD $4 billion in Angola's petroleum sector.

Diamonds

Angola is the third largest producer of diamonds in Africa and has only explored 40% of the diamond-rich territory within the country, but has had difficulty in attracting foreign investment because of corruption, human rights violations, and diamond smuggling. Production rose by 30% in 2006 and Endiama, the national diamond company of Angola, expects production to increase by 8% in 2007 to 10 million carats annually. The government is trying to attract foreign companies to the provinces of Bié, Malanje and Uíge.

The Angolan government loses $375 million annually from diamond smuggling. In 2003 the government began Operation Brilliant, an anti-smuggling investigation that arrested and deported 250,000 smugglers between 2003 and 2006. Rafael Marques, a journalist and human rights activist, described the diamond industry in his 2006 Angola's Deadly Diamonds report as plagued by "murders, beatings, arbitrary detentions and other human rights violations." Marques called on foreign countries to boycott Angola's "conflict diamonds."

Iron

Angola began mining iron in 1957, producing 1.2 million tons in 1967 and 6.2 million tons by 1971. In the 1970s 70% of Angola's iron exports went to Western Europe or Japan.

Further reading

  • McCormick, Shawn H. The Angolan Economy: Prospects for Growth in a Postwar Environment, 1994.
  • OECD, International Energy Agency. Angola: Towards an Energy Strategy, 2006.

References

External links

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