Angola, once one of the fastest-growing economies in the world, is now facing economic stagnation, following the global commodity price plunge.
At the height of the oil boom in 2007, Angola notched up a 20percent gross domestic product growth. The country is sub-Saharan Africa’s second largest oil producer after Nigeria.
Last month, the International Monetary Fund (IMF) found that Angola’s economy stagnated last year, with the oil sector growing by only 0.8percent and the non-oil sector contracting by 0.4percent. Global oil prices have declined by about 50 percent since 2014.
The IMF says the oil price shock reduced Angola’s tax revenues and exports, dragging down the non-oil sector too, with industry, construction and services plummeting.
Last month, Angolan banks approached the government for a rescue package to safeguard the deposits of account holders as banks struggled to make ends meet.
Amílcar Silva, the chairman of the Association of Angolan Banks, said the banks faced a liquidity crisis due to a shortage of foreign currency. International banks withdrew from providing Angola with foreign currency because the country failed to adhere to international anti-money laundering rules.
The currency, the kwanza, has been in freefall, also increasing the costs of servicing dollar-denominated debt. Inflation has been hovering around 40percent.
In June 2015, Angola secured a $650million loan from the World Bank to cushion it against falling oil prices. That same year, Angola issued its debut $1.5billion 10-year bond with a yield of 9.5percent.
In 2009, in the aftermath of the global financial crisis, Angola secured a $1.4bn emergency loan from the IMF, which it is still paying off. Over the years, the country has borrowed from China, using its oil production as collateral, but when the Chinese economy slowed, it added to Angola’s woes.
Last April, Angola sought more loans from the IMF – the organisation said it could secure a maximum of $4.5bn. However, the government stopped the request in June due to the IMF's stringent lending criteria, including having to introduce value added tax, cut the public sector wage bill and cut fuel subsidies.
Over the past decade, the country has seen more than $400bn in oil income. However, little of this has been ploughed into broad-based development. The bulk has gone into the hands of Dos Santos, his family and the MPLA elite, while most of Angola’s 22million people live in grinding poverty.
Angola’s economic crisis has drained the country’s finances; the government has cut fuel subsidies, and restricted the taking of foreign currency out of the country and the use of credit. The hardships have sparked protests which the People’s Movement for the Liberation of Angola (MPLA) government has brutally suppressed.
Angola’s long-standing president Jose Eduardo dos Santos, 74, announced recently that he would stand down as president ahead of the elections in August. He has been in power for 38 years.
Not surprisingly, Dos Santos will stay on as president of the governing party, the MPLA, where he will be controlling power remotely.
Dos Santos introduced electoral reforms in 2010, which no longer saw the president of the country being directly elected by the people; instead, the leader of the party winning an election automatically became the president. This means Dos Santos will be the real power on the throne, and will probably pick the country’s presidents as long as he is president of the party.
He will still have the power to appoint parliamentary candidates and the heads of the security forces.
Opposition parties, civil society and observers had doubts over the fairness of the national elections in 2012 in which the MPLA captured 72percent of the vote. Angola’s 220-seat unicameral National Assembly is largely toothless. Most of the laws are made by the executive, the president, who appoints his deputy, Cabinet and provincial governors.
Local government elections have been repeatedly delayed until after this year's elections.
Last year, Dos Santos appointed his daughter, Isabel dos Santos, as head of the state oil company, Sonangol, the country’s most powerful entity. His son, Jose Filomeno, is the chairman of the country’s sovereign wealth fund. This means the Dos Santos family control all the main sources of economic and political power in Angola.
Dos Santos will probably buy time to appoint either his daughter or son as his political heirs.
Angola plunged into a civil war between 1975 and 2002, when the MPLA, then a liberation movement supported by the Soviet Union, fought with Unita, supported by the US, the West and apartheid South Africa.
Transparency International ranks Angola among the world’s 20 most corrupt countries. In 2015, it was ranked 163 out of 168 countries.
Last year, in flagrant travesty of justice, an Angolan court sentenced 17 youth activists, including a leading rapper, to between two and eight years in jail for opposing Dos Santos. Rapper Luaty Beirao, who embarked on a hunger strike to protest his detention, was given five-and-a-half years in jail.
Dos Santos has harassed independent media, journalists and researchers critical of the government. Civil society groups have to secure authorisation from the government to operate or receive foreign funding. The major trade union federation is an uncritical affiliate of the MPLA, and independents ones are marginalised.
In the short term, Angola will have to concentrate on securing hard currency to import desperately needed basic food, medicine and inputs. It must stabilise and integrate monetary and fiscal policy, and bring greater coherence to both.
Angola needs to step up efforts to wean the country off its dependence on oil exports, diversify the economy, and produce what it can for local use. The country imports almost everything from abroad. With the decline of the currency, imports have become prohibitive.
The MPLA government must bring Unita into a government of national unity, rather than monopolise the spoils of the government. This will not only bring about political stability, reconciliation and national unity, it will also boost investor confidence.
William Gumede is chairman of the Democracy Works Foundation. His latest book is South Africa in Brics: Salvation or Ruination? Tafelberg (http://amzn.to/1UmFvdK)