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ECONOMY-ANGOLA: Slowdown Will Hurt Trade Partners

Mario de Queiroz

LISBON, Jun 19 2008 (IPS) - Slower economic growth in Angola will have a negative effect on exports from the southwest African nation’s main trading partners, especially Portugal and Brazil.

Forecasts released in May by the Organisation for Economic Cooperation and Development (OECD), which groups the world’s industrialised countries, predict that Angola’s annual growth rate will fall by 15 percentage points by 2009.

This is grim news for Portugal, the former colonial power in the oil-rich but cash-poor African nation with a territory of 1.25 million square kilometres and nearly 18 million people, which in 2007 posted outstanding gross domestic product (GDP) growth of 20 percent.

Portugal is experiencing serious economic difficulties, with a growth rate lower than forecast, one-quarter of its population experiencing loss of buying power for the fifth consecutive year, and a widening gap between rich and poor.

Economics professor Jorge Braga de Macedo, who served as Portugal’s finance minister from 1991 to 1993, says the slowdown in the Angolan economy “will have an undisputedly negative effect on Portugal.”

In May, the OECD and the African Development Bank (ADB) presented a report titled “African Economic Outlook 2008”, in which they estimate that Angolan economic growth will fall to 11.5 percent in 2008 and 5.1 percent in 2009 – a modest figure compared with the results of previous years.

The joint OECD/ADB report is slightly gloomier than forecasts by the International Monetary Fund and the government in Luanda, Braga de Macedo pointed out in statements to the Portuguese news agency Lusa this week.

The former minister in the conservative government of Prime Minister Aníbal Cavaco Silva (1985-1995) underscored that in the last two years, Angola has recorded “double digit economic growth, which when all is said and done, is exceptional on the global level.”

Lack of investment in the oil sector partly explains the OECD/ADB estimates because, according to Braga de Macedo, “when the price of a commodity is expected to rise, less is invested.”

He said that Angola, the second largest oil producer in sub-Saharan Africa after Nigeria, has very few other economic activities, and “even if these expand, it will not be sufficient” to boost overall growth.

U.S. oil giant Chevron announced it will invest three billion dollars to develop the Tombua-Landana project in off-shore Block 14, off the coast of Cabinda, an Angolan enclave sandwiched between the Republic of the Congo (capital city Brazzaville) and the Democratic Republic of the Congo (formerly Zaire).

The province of Cabinda, with 10,000 square kilometres and 300,000 people, is where most of the country’s crude oil is extracted, and is also rich in gold.

The area has been a source of constant conflict since 1975, when Portugal did not recognise its independence as a separate state, but as part of Angola.

In August 2006, a peace deal was signed with the rebels led by Antonio Bento Bembe, who is now a government minister without portfolio, but the agreement was not recognised by the Cabinda Liberation Front-Cabindan Armed Forces (FLEC-FAC), headed by Henrique N’Zita Tiago, which is still at war with what it refers to as the “colonial government in Luanda.”

In statements early this week aimed at calming the fears of Chevron investors, General Jack Raul, commander of the second military region of Angola, which includes Cabinda, said that the situation is “stable and secure,” in spite of “attempted actions by enemies of the peace” in the region.

The investment is part of a total of 20 billion dollars that Chevron will spend in the next five years to stimulate production of oil and gas in Africa, especially Angola and Nigeria, the company’s vice chairman Peter Robertson said early this month during a visit to Tanzania.

On that occasion, Robertson said that the Tombua-Landana field should produce close to 125,000 barrels per day in the initial phase. Chevron will invest five billion dollars in Nigeria, in a diesel refinery located in the Niger river delta.

According to information released Wednesday by the Organisation of Petroleum Exporting Countries (OPEC), Angola produced more crude in April than any other country in Africa, overtaking Nigeria, which was affected by attacks on oil installations.

Oil contributes 60 percent of Angola’s GDP, and 95 percent of its exports. In this respect, the country’s economy “is over-specialised, more than is advisable for its population,” Braga de Macedo said.

The estimated GDP growth of 5.1 percent next year could have considerable social impact if the gain is used “to benefit the poor, create jobs and provide incentives for domestic economic sectors,” he said.

Braga de Macedo warned that the worst course of action would be to let Angola’s growth pattern continue along its customary lines. At the very least, “policies should be changed to make growth more equitable,” he argued.

Economic studies on Angola carried out by development experts recommend that the government of President José Eduardo dos Santos reverse the present trend of growth that is “biased against the poor,” he said.

Since peace was achieved in Angola following the February 2002 death in combat of rebel leader Jonas Savimbi, “a small new class with incalculable wealth has consolidated its position, while the vast majority of the population are living in utter poverty and hunger in what is potentially one of the richest countries in the world,” Portuguese-Angolan entrepreneur Silvio de Paula told IPS.

Not only do the leaders of the formerly Marxist Popular Movement for the Liberation of Angola (MPLA) receive a generous share of the country’s wealth, but so do the former rebels of the National Union for the Total Independence of Angola (UNITA).

Journalists who report on the situation “are prosecuted” if they are Angolan, or “threatened with expulsion from the country” if they are Portuguese, de Paula added.

The worst thing, according to de Paula, “is that editorials in the state newspaper in Angola have expressed blanket threats against Portuguese interests as a whole when another newspaper publishes a report on corruption, even if it appears in an opinion column.”