Angola and the Oil

Halfway down Luanda’s Marginal Boulevard, which runs along the rim of its Atlantic bay, is one of the city’s few billboards, advertising Mont Blanc jewellery. Resting in its shade is a group of street children. None is older than 12, some have distended bellies and all are trying to hustle a bread roll for breakfast from passers-by. One of the children, Fernando, is usually on parking duty next to the Hotel Tropico. The small tips he gets from businessmen for keeping an eye on their cars are enough for one decent meal a day. Occasionally he manages to get a little extra by saying he needs money for school fees. He distributes some of the cash among his friends, who provide protection in numbers from older hucksters keen to chase the boys off their patch.

Fernando tells me he’s from Boavista, one of the largest slums in the city. When the Portuguese left Angola, Luanda was a city of half a million people. Since then, with the influx of a steady stream of refugees from the war-torn interior, it has grown into a sprawling conurbation with an estimated population of five million. Town planning wasn’t on the government’s list of priorities during the war, and the city’s slums look more like refugee camps, lacking any sort of infrastructure.

A cholera epidemic that began in Boavista has spread across the country, killing more than two thousand people. It’s the first serious outbreak in Luanda in more than ten years; the interior has not seen the disease for even longer. In the centre of Boavista a man is collecting water from a pothole. It hasn’t rained for ten days, but if you make less than a dollar a day, you can’t afford the water ferried in by private tankers. At the nearby emergency clinic a doctor tells me that the disease has already moved hundreds of miles south, to the port of Benguela. During the war, which lasted until Jonas Savimbi, the leader of Unita, was killed in 2002, people tended not to move out of the capital, so cholera didn’t spread. Since the government has been rebuilding the country’s infrastructure, however, the disease has travelled along the new roads.

Most of the reconstruction, financed in the main by Angola’s oil boom, is concentrated along the Lusophone coast, traditionally a bastion of government support – to the detriment of the vast Umbundu-speaking interior. The linguistic divide is also political, dating back hundreds of years to when mulatto families on the coast acted as intermediaries in the slave trade between the Portuguese and the interior tribes. Savimbi, backed by Western cash and guns, skilfully portrayed his fight as the struggle of an authentic African people, or povo – authentic because they were indigenous – against a mixed-race Communist coastal elite, whose definition of the povo was exclusive and ‘racist’.

In the city of Huambo, a centre of the old Ovimbundu kingdom high in the Planalto region, a guide drove me to the place where Savimbi lived in the early 1990s. The dilapidated ‘White House’ is decked with lines of colourful clothes hung out to dry by squatters in its gutted interior. The city’s colonial buildings are dilapidated, their pastel façades scarred by shrapnel, and crumbling factories are all that remain of a once thriving manufacturing base: ‘Before the war Huambo was the industrial centre of the country, making everything from plastics to TVs,’ an official from the Environment Ministry said. Now a motorcycle factory is all that remains. The buildings in the old industrial park on the outskirts of the city are surrounded by overgrown grass, their insides long since gutted by bombs. One, a former municipal office block, bears the faded slogan ‘Viva o Marxismo Leninismo.’ That was before the oil boom. President José Eduardo dos Santos and the MPLA (Popular Movement for the Liberation of Angola) government abandoned their commitment to socialism some time ago.

The Planalto, an area the size of Texas, was the site of the heaviest fighting between government forces, with their Cuban allies, and Unita, backed by elite battalions from the South African Defence Force. It was also the most heavily mined: the Planalto is infested with up to four million landmines. At one minefield in Canhama – there are 327 in Huambo province – officials display a map of the region covered in sinister red dots. The government estimates that there are between 70,000 and 80,000 survivors of landmine explosions in Angola, representing 78 per cent of those with disabilities. Getting rid of these mines has been one of postwar Angola’s few unambiguous success stories. In the mid-1990s there was a new mine victim every day in Huambo city alone; now there are three or four a month in the whole of Huambo province.

But the mines continue to strangle economic development. Huambo province was Angola’s breadbasket. Now small villages sit uneasily next to minefields. Farms, water supplies and the local school in Canhama all lie beside ‘suspect areas’ – those containing at least two hundred mines. ‘In Huambo most mines came from the USSR, Germany, Cuba, China, Czechoslovakia and a few from France and Italy – these countries had no shame,’ Fernandes Waldemar, the head of the anti-mine NGO Halo, told me. But now China’s Road and Bridges Corporation is rebuilding the region’s only railway, which it once helped to destroy, in return for Angolan oil.

Can Angola survive on oil alone? Probably not. Like other big oil states, sub-Saharan Africa’s second largest producer has failed to move much beyond crude exports. But it is certainly making the best of the boom while it lasts. Oil is touching $70 a barrel and the state-owned oil company, Sonangol, recently announced that the two million barrels a day mark is about to be reached – helped by $23 billion of foreign investment over the next five years. Nigeria currently produces 2.3 million barrels per day – but it has more than ten times Angola’s population. Between them, Angola and Nigeria will supply 20 per cent of US demand by 2010. And as the West is keen to become less reliant on oil from the Middle East, it won’t want to antagonise those in control of Africa’s large reserves.

Oil has brought little tangible benefit to the povo and there is wide suspicion of the oil sector. It accounts for more than three-quarters of government revenue, but employs less than 1 per cent of the population in a country with more than 50 per cent unemployment. People have yet to be persuaded that big oil projects, most of which are offshore and thus out of sight, are anything other than a big waste of time.

‘This country is resource rich or resource cursed – depending how you look at it,’ one business consultant said to me. Savimbi’s movement was funded by diamonds, ivory, hardwoods and aid from Washington. A new Leonardo DiCaprio movie, Blood Diamond, explores the role of unscrupulous Western agents picking up diamonds on the cheap from war-ravaged Sierra Leone, and De Beers has splurged on a massive counter-publicity campaign to persuade the public that its diamonds are clean. Unita had networks of garimperos digging for diamonds which were then auctioned to raise money for weapons. With the war over, De Beers have moved in, along with the Russian giant Alrosa, and traders cut deals directly with the political class. Production doubled in 2006 and was expected to reach more than 10 million carats by the end of the year. Although the industry has now made a commitment not to deal in ‘conflict diamonds’, porous borders allow a convenient margin of error and Angola has become a vast laundromat for diamonds from the Congo.

Setting aside the IMF’s dodgy record in Africa, you might expect Angola, after thirty years of fighting, to ask for a modicum of development assistance. Not at all. ‘We don’t need your money,’ Angola’s finance minister, José Pedro de Morais, told the fund last year after it demanded greater transparency in the matter of oil revenues, ‘ambitious’ targets for lowering inflation, spending cuts and measures to encourage private sector growth. He dismissed the fund’s loan package as equivalent to his department’s budget ‘for a week’. According to the IMF, between 1997 and 2002, some $4.6 billion of oil money was not accounted for in government figures. In truth, nobody knows how much money has gone missing because the government has never allowed a public audit of its books.

There have been reforms since 2002, pushed by technocrats irritated at the government’s habit of using Sonangol to contract off-record loans that bypass the Finance Ministry entirely. This year, for the first time, the government published its 2006-7 budget on the Finance Ministry website. And then in May, the government – again a first – announced how much had been received or pledged by oil companies bidding for offshore contracts.

ExxonMobil is the leading producer in Angola, pumping 560,000 barrels per day. Chevron is second with 420,000 barrels and France’s Total third with around 250,000. BP, Shell, Italy’s ENI, Brazil’s Petrobras, Malaysia’s Petronas and China’s Sinopec all have important holdings; during the latest bidding round last May Sinopec made an unprecedented $1.2 billion bid for a 50 per cent stake in the lucrative offshore block 18.

The oil companies, which for years have used ‘confidentiality clauses’ to justify not making such information public, were effusive in their praise of the government’s new commitment to transparency. But obfuscation – especially when it comes to access to official statistics – remains the order of the day. ‘Angola’s finances are still much more opaque than those of other countries, even African ones,’ an IMF employee told me. But Angola knows that Western governments tend not to ask too many questions when it comes to regulating the supply of oil.

It’s clear the IMF has no leverage here. I had lunch with the IMF head of mission when he visited the country in March. He talked about Angola’s explosive economic growth, expected to be 28 per cent in 2006, the highest in the world. IMF concessional lending would be cheaper than oil-backed loans from Western banks. But such bank loans have no strings attached. Last year France’s Calyon bank – like South Africa’s Standard Chartered in 2005 – stepped in with a loan of $3 billion.

Then there’s China. Angola overtook Saudi Arabia as China’s main supplier at the beginning of 2006. The Chinese premier, Wen Jiabao, made a brief stop in Luanda in June to sign a new $2 billion loan earmarked for ‘national reconstruction’. This comes on top of $3 billion of low-interest loans, tied to the purchase of goods and services, which have already been disbursed. All of this is mortgaged against future oil production, so China gets to enjoy the economic benefits of colonialism without the messy business of military conquest.

There are lots of Chinese in Angola now. Workers congregate on the capital’s building sites, to the bemusement of unemployed locals. ‘There’s a lot of resentment,’ said João Banga, a regional head at the Ministry of the Environment, who told me that any project backed by Chinese money is obliged to give only 30 per cent of the work to domestic companies. The Chinese import almost everything: trucks, cranes, building material, labour. Importing, the Chinese argue, allows them to keep costs low. It also lets them inflate prices on vertically integrated projects which they control and then skim off the top – after paying tribute to the bigwigs at the Office of National Reconstruction, which is controlled by General Hélder ‘Kopelipa’, an ally of the president. Naturally, local government apparatchiks have to be taken care of too, and on their rock-bottom salaries they usually aren’t averse to a little double-dipping. That way everybody does well – except the povo.

There is another casualty of the Chinese presence: the elephant population. Angola is fast becoming the hub of Africa’s illegal ivory trade, buoyed by rising demand from the East. ‘The civilian market for ivory has grown since the end of the war,’ Vladimir Russo, the head of a local environmental NGO, told me. ‘There are more Chinese workers in Africa. They have money, so they buy the ivory curios. But there is potential for more foreigners to come – and a really big market.’ It may not last long, however: there are thought to be only 246 elephants left in the country.

The Mercado do Artesanato in the seaside town of Benfica is forty minutes’ drive from Luanda. The shacks and the crowds give an impression of chaos, but the market is carefully organised. Stall-holders are allocated plots according to their trade: food on one side, booze on the other, clothes and textiles at the back, curios at the entrance to entice inquisitive passers-by. About 90 per cent of the illegal ivory in Luanda, according to a 2006 WWF report, can be found at the Mercado do Artesanato. By the time I arrive at midday, there are already plenty of foreigners bartering for artefacts – mostly Europeans and Asians.

The ivory isn’t hard to spot. The first thing you see when you walk in is two giant tusks set in stone. ‘Some of it comes from Angola and some from the Congo, but the artist lives nearby,’ explains Bemvinda, the owner of the tusks and the many ivory carvings that surround them. He speaks bad Portuguese with a French accent and, like most of the other vendors, is from the Congo. Raw ivory is relatively easy to acquire, with prices ranging from $35 to $100 per kilo, but the retail price is several times that. Bemvinda shows me some ivory chopsticks: ‘They’re for the Chinese. I sell a lot of them.’

The variety of expats in Angola mirrors the diversity of the foreign companies doing business there. Expats are often pleasantly surprised by Luanda’s bars, beaches and beautiful (if decrepit) colonial-era architecture – as long as they stick to the city centre. In the slums, the expat invasion has brought little reward and, in some cases, a great deal of loss. The government has recycled some of its windfall gains into large-scale suburban-style housing to accommodate the growing number of foreign workers. This hasn’t left much room for the residents of Cambamba, a poor area outside Luanda, who live on land which the government says is occupied illegally. In March, police and workers from a private security company moved into the area and destroyed the houses of six hundred families to make way for the expansion of a government-sponsored housing project called Nova Vida.

What’s left of the houses, splintered wood and stray pieces of sheet metal, now lies scattered below the gaze of the Nova Vida condominiums, which are arranged in pink and white rows. ‘The Europeans get to live in condos while we live like this. There is no law for us,’ said Manuel Antonio, a former resident. According to the UN, this was the fourth forcible eviction in the area in recent months, leaving thousands of people without shelter.

With elections promised – the first since 1992 – it’s possible that things will improve for the povo. There were long queues at the start of voter registration in mid-November. The state media have been encouraging people to sign up with frequent radio spots and posters have been put up in urban areas. The process is one of the most sophisticated ever to be used in Africa: hundreds of millions of dollars have been spent on digital cameras, computers, generators, printers and scanners, and on training officials. Some 7.5 million of Angola’s 13 million people are thought to be eligible to vote, according to the National Electoral Commission. But nobody really knows; the last official census was carried out by the departing Portuguese.

Registration finishes in June but there is still no poll date. Some claim there will be parliamentary elections at the end of 2007; most believe that presidential elections won’t take place before 2008, so that the government has time for some of its Chinese-backed mega-projects to reach completion. Unita privately says that it expects both polls to take place some time in 2008. But it all depends on Dos Santos. He’s in no hurry, and there’s unlikely to be any pressure from aid donors or foreign companies.

Little has been done to combat the corruption that fuels the popular disenchantment with politicians. In early November, 63 members of the small opposition Partido Democrático para Progreso were arrested for attempting to stage a protest against corruption outside the French embassy. The party released pamphlets accusing government officials of hiding ‘away billions of dollars . . . on the Côte d’Azur’. Given the widespread discontent with the ruling party after four years of peace Unita might be expected to do well. But the playing field is far from level. The government is supported by the state press, which dominates the media. Most important, Unita has nothing like the oil-backed resources of the MPLA. And at the moment it is weak and divided; some are calling for a change in leadership.

Confusion over electoral dates only serves to underline the bigger question: who will lead the country when Dos Santos quits after 27 years? He has pledged not to stand again, but he might change his mind – if he is well enough. In March last year he was rushed to hospital in Brazil after suffering an allergic reaction while undergoing medical treatment for a lesion on his leg. But rumours of more serious diagnoses abound. He went to Brazil several times last year – which the country’s independent press persistently puts down to health problems. Odd to recall that his predecessor, Agostinho Neto, was rushed out of Luanda for surgery in the Soviet Union. Neto died in Moscow, and there were plentiful rumours in those days that all had gone according to Russian plans.

The prize of state control and the revenues that accrue from it are too big to be left uncontested for much longer. While a return to war seems unlikely there is concern in the foreign business community that an ugly succession struggle could imperil the billions already invested. Business hopes that an election will be over quickly. Ordinary Angolans know better than to get their hopes up.