Even With Cease-fire, Angolans Face Tough Prospects for Economy

Rich resources including oil, diamonds, and agriculture have been neglected

AN end to Angola's 15-year-old civil war could mean immediate savings of more than $1 billion a year for the country's shattered economy. According to the United Nations, at its peak in 1988-89, Angola's war effort consumed more than 60 percent of the country's annual foreign exchange earnings of more than $2 billion.

Potentially one of Africa's richest countries, Angola's vital indicators (such as infant mortality, literacy, and access to health services, and safe water) resemble those of one of the world's poorest nations.

The war between the government and rebels backed by the United States (and until recently South Africa), has warped the once-prosperous economy beyond recognition. But Angola's economic potential is reflected in the fact that it has remained the second-largest trading partner of the US in Africa (after Nigeria), despite severe setbacks.

US companies like Chevron and Gulf produce oil in Cabinda, an Angolan enclave bordered by Congo and Zaire.

Oil, which accounted for about 30 percent of export earnings when the Portuguese colonial government left, now accounts for a staggering 95 percent of foreign exchange earnings. The once-flourishing coffee and agricultural sector, which employed 75 percent of the population, and a once-lucrative diamond industry have all but ceased.

The war has drained foreign reserves, claimed an estimated 100,000 lives, and caused some $20 billion in damage - mainly in the fields of transport, communications, health, and education.

Substantial foreign earnings ($2.15 billion in 1987) produce a relatively high gross domestic product of $500 per capita - 25 percent higher than the average in the region.

With the doubling of the oil price during the Gulf crisis, Angola received an unexpected windfall that is helping service its $6 billion foreign debt. But the Angolan currency, the kwanza, has been rendered almost worthless, and a barter economy has replaced one based on currency. The unofficial exchange rate is currently about 66 times the official rate of 30 kwanzas per US dollar.

A cease-fire would end massive Soviet military aid, estimated at more than $5 billion over the last decade, and hasten the withdrawal of 12,000 Cuban mercenaries who remain to protect the government against rebel attacks.

A cease-fire ``will assist in creating a market economy in Angola,'' said a Western diplomat here. ``But it's going to be a formidable task.''

The ruling Popular Liberation Movement of Angola which declared itself a Marxist-Leninist party at its first Congress in 1977, has recently committed itself to a multiparty system based on a market economy. The government has consistently blamed the failure of the country's economy on the war.

``It's a good excuse but it's only part of the story,'' said a Western diplomat here. ``The disastrous state of the economy has as much to do with mismanagement and corruption as anything else.''

Aguinaldo Jaime, Angola's British-educated finance minister, has predicted that Angola will achieve a market-based economy within two years. But his optimism is not shared by Western diplomats and economists, who foresee continuing economic chaos.

The UN has predicted that the transition from Marxism-Leninism to a market-driven economy could cause 1 in 5 Angolans to lose their jobs, as inefficient state companies are shut down.

Rent, electricity, and transport prices could increase by 400 percent. And a proposed 100 percent currency devaluation could be increased to 500 percent. In October, the authorities slapped a 500 percent tax on petroleum refined in Luanda.

The first economic reforms in 1987 included the closure of unprofitable state farms and factories, ending some subsidies, and a currency devaluation. Then in September 1989, the government joined the International Monetary Fund. This led to a chaotic bid last October to reduce the money supply and to commit to a 100 percent devaluation of the kwanza against the dollar.

In an attempt to stabilize the currency, the government recalled all existing money, estimated to be between 170 and 350 billion kwanzas, and issued new notes for 5 percent of what was surrendered.

For the remaining 95 percent, government promissory notes were issued. This caused widespread panic among ordinary Angolans. A Western diplomat estimated that only about 30,000 Angolans cooperated with the exchange, and about 90 billion kwanzas were recovered.

Since 1987, prices of agricultural produce and public transport have been deregulated and the government has abandoned efforts to close the growing unofficial markets. These markets include a breathtaking array of goods.

Luanda's largest unofficial market - named Roque Santeiro after a Brazilian soap opera - is situated on a seaside landfill just outside town.

It offers everything from traditional foods to designer clothes, modern medicines, music centers, and videocassette recorders. Prices are extremely high, if calculated according to official exchange rates. Most of the trading is carried on at unofficial rates. With the average worker's salary of 10,000 kwanzas a month, most Luandans just manage to survive.

Progress toward a new economic order has been painfully slow. Yet Angolan officials insist that the process cannot be halted.

``Whatever the future course of events,'' said Politburo member Dino Mattross, ``the transition to a multiparty system and a market economy is irreversible.''

About these ads
Sponsored Content by LockerDome

We want to hear, did we miss an angle we should have covered? Should we come back to this topic? Or just give us a rating for this story. We want to hear from you.

Loading...

Loading...

Loading...

Save for later

Save
Cancel

Saved ( of items)

This item has been saved to read later from any device.
Access saved items through your user name at the top of the page.

View Saved Items

OK

Failed to save

You reached the limit of 20 saved items.
Please visit following link to manage you saved items.

View Saved Items

OK

Failed to save

You have already saved this item.

View Saved Items

OK