Economy of Angola

History

The Portuguese explorer Diogo Cão reached the Angolan coast in 1484, after which Portugal began to found trading posts and forts along the shore. Paulo Dias de Novais founded Sāo Paulo de Loanda (Luanda) in 1575. São Felipe de Benguella (Benguela) followed in 1587.

The principal early trade was in slaves. Portuguese merchants purchased the slaves from the local Imbangala and Mbundu peoples, notable slave hunters, and sold them to the sugarcane plantations in Brazil. Brazilian ships were frequent visitors to Luanda and Benguela and Angola functioned as a kind of colony of Brazil, with Brazilian Jesuits active in its religious and educational centers.

The Portuguese Empire was neglected during the period of the Iberian Union, which lasted from 1580 to 1640. The Dutch, bitter enemies of their former masters in Spain, invaded many Portuguese overseas possessions. During Portugal's separatist war against Spain, the Dutch occupied Luanda from 1640 to 1648, calling it "Fort Aardenburgh". The Dutch used the territory to supply their own slaves to the 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. Portugal recovered the territory between 1648 and 1650.

In the high plains, the Planalto, the most important native states were Bié and Bailundo, the latter being noted for its production of foodstuffs and rubber. Portugal expanded into their territory, but did not control much of the interior prior to the late 19th century.

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. Following the independence of Brazil in 1822, the slave trade was formally abolished in 1836. However it did continue locally into the 20th century. 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 of Mainland Portugal, full of trading companies, exporting peanut oil, copal, timber, and cocoa. The principal exports of the post-slave economy in the 19th century were rubber, beeswax, and ivory. Maize, tobacco, dried meat and cassava flour also began to be locally produced. Prior to the First World War, exportation of coffee, palm kernels and oil, cattle, leather and hides, and salt fish joined the principal exports, with small quantities of gold and cotton also being produced. Grains, sugar, and rum were also produced for local consumption. The principal imports were foodstuffs, cotton goods, hardware, and British coal. Legislation against foreign traders was implemented in the 1890s. The territory's prosperity, however, continued to depend on plantations worked by labor "indentured" from the interior.

From the 1920s to the 1960s, strong economic growth, abundant natural resources and development of infrastructure, led to the arrival of even more Portuguese settlers. Petroleum was known to exist as early as the mid-19th century, but modern exploitation didn't begin until 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.

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 Cape Verde, 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 façade 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 (~300×10⁹ 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 and 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, 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. Angola ranked 160 of 174 nations in the United Nations Human Development Index in 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 (600 kilograms) of diamonds in 2003, and production was expected to grow to 10 million carats (2,000 kilograms) 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.

The construction industry is taking advantage of the growing economy, with various housing projects stimulated by the government initiatives for example the Angola Investe program and the Casa Feliz or Meña projects. Not all public construction projects are functional. A case in point: Kilamba Kiaxi, where a whole new satellite town of Luanda, consisting of housing facilities for several hundreds of thousands of people, was completely uninhabited for over four years because of skyrocketing prices, but completely sold out after the government decreased the original price and created mortgage plans at around the election time thus made it affordable for middle-class people. ChevronTexaco started pumping 50 kbbl/d (7.9×10^³ m³/d) from Block 14 in January 2000, but production decreased to 57 kbbl/d (9.1×10^³ m³/d) in 2007 due to poor-quality 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 1.4 million barrels per day (220×10^³ m³/d) in late-2005 and which is expected to grow to 2 million barrels per day (320×10^³ m³/d) by 2007. Control of the oil industry is consolidated in Sonangol Group, a conglomerate owned by the Angolan government. With revenues booming from oil exports, the government has started to implement ambitious development programs to build 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. Severe wartime conditions, including extensive planting of landmines throughout the countryside, have brought agricultural activities 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. Expanding oil production is now almost half of GDP and 90% of exports, at 800 thousand barrels per day (130×10^³ m³/d). 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 at market prices using International Monetary Fund data; figures are in millions of units.

Foreign trade

Exports in 2004 reached US$10,530,764,911. The vast majority of Angola's exports, 92% in 2004, are petroleum products. US$785 million worth of diamonds, 7.5% of exports, were sold abroad that year. Nearly all of Angola's oil goes to the United States, 526 kbbl/d (83.6×10^³ m³/d) in 2006, making it the eighth largest supplier of oil to the United States, and to China, 477 kbbl/d (75.8×10^³ m³/d) 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. From the 2000s many Chinese have settled and started up businesses.