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Angola has a fast-growing economy largely due to a major oil boom, but it also ranks in the bottom 10 of almost every socioeconomic indicator. Aside from the oil sector and diamonds, it is in economic disarray because of 27 years of nearly continuous warfare, corruption, and economic mismanagement. Despite abundant natural resources, output per capita remains among the world's lowest. Subsistence agriculture and dependence on humanitarian food assistance sustain the large majority of the population.
By contrast, the rapidly expanding petroleum industry--now producing up to 993,000 barrels per day (bpd), behind only Nigeria in Africa--accounts for 51.7% of GNP, 90% of exports, and 90% of government revenues. Oil production remains largely offshore and has few linkages with other sectors of the economy.
Block Zero, located in the enclave of Cabinda, currently provides the majority of Angola's crude oil production. ChevronTexaco, through its subsidiary Cabinda Gulf Oil Company, is the operator with a 39.2% share. Sonangol (the Angolan state oil company), TotalFinaElf, and ENI-Agip are partners in the concession. ChevronTexaco also operates Angola's first producing deepwater section, Block 14, which started pumping in January 2000 at the rate of 80,000 bpd and is scheduled to add 180,000 bdp in production by 2006. Production from these Cabinda fields will be eclipsed by deepwater production further south in the Kwanza Basin scheduled to come on-line between 2002 and 2010 that will more than double current production.
TotalFinaElf brought the first Kwanza Basin deepwater blocks on-line with production from its Block 17 concession that began in February 2002 and now produces up to 30,000 bpd. Additional sub-fields will begin production in 2006 at the rate of 200,000 bpd. ExxonMobil brought the first of its Block 15 sub-fields on-line in 2003 at the rate of 70,000 bpd. Two additional discoveries of 3 billion barrels in reserves each are to begin production in 2004 and 2005 at a rate of 250,000 bdp each. Both ExxonMobil and TotalFinaElf made new discoveries in these blocks in 2003. Exploration is ongoing in recently awarded ultra-deep water concessions and in deep water and shallow concessions in the Namibe Basin. BP made the first significant ultra-deep water find in its Block 31 concession in 2002 and followed up with two more in 2003. Marathon also drilled a successful well in its Block 32 ultra-deep water concession. TotalFinaElf operates Angola's one refinery (in Luanda) as a joint venture with Sonangol; plans for a second refinery in Lobito are moving forward. ChevronTexaco and Sonangol are exploring the feasibility of a liquefied natural gas plant at Soyo. The United States purchases more than half of Angola's petroleum production, by far the largest importer. Exports to Asian countries, particularly China, have grown rapidly in recent years.
Diamonds make up most of Angola's remaining exports. Despite increased corporate ownership of diamond fields, much production is currently in the hands of small-scale prospectors, often operating illegally. The government is making an increased effort to register and license these prospectors. Legal sales of rough diamonds may occur only through the government's diamond-buying parastatal, although many producers continue to try and bypass the system to obtain higher prices. The government has established an export certification scheme consistent with the "Kimberley Process" to identify legitimate production and sales. Other mineral resources, including gold, remain largely undeveloped.
In the last decade of the colonial period, Angola was a major African agricultural exporter. Because of severe wartime conditions, including extensive laying of landmines throughout the countryside, agricultural activities were brought to a near standstill, and the country is now forced to import much of its food. Small-scale agricultural production is increasing as IDPs are returning to the land. Some efforts at commercial agricultural recovery have gone forward, notably in fisheries, but most of the country's vast potential remains untapped. Coffee production, though a fraction of its pre-1975 level, is sufficient for domestic needs and some exports. Overlapping traditional land use rights, colonial-era land claims, and recent land grants must be sorted through before significant commercial agricultural development can move ahead.
An economic reform effort launched in 1998 was only marginally successful in addressing persistent fiscal mismanagement and corruption. In April 2000, Angola started an International Monetary Fund (IMF) staff-monitored program (SMP). The program lapsed in June 2001 over IMF concerns about lack of adequate Angolan progress. Under the program, the Government of Angola did succeed in unifying exchange rates and moving fuel, electricity, and water prices closer to market rates.
In December 2002 President dos Santos named a new economic team to oversee homegrown reform efforts. The new team has succeeded in decreasing overall government spending, rationalizing the Kwanza exchange rate, closing regulatory loopholes allowing off-budget expenditures, and capturing all revenues in the state budget. New procedures are being implemented to deposit all government revenues in a single Central Bank account. The Angolan Government has adopted a new investment code. Concerns remain about quasi-fiscal operations by the state oil company Sonangol, continued oil-backed commercial borrowing by the Angolan Government, and inadequate transparency and oversight in the management of public accounts. The Angolan commercial code, telecommunications law, and land tenure law all require substantial revision.
The Angolan Government has reopened dialogue with the IMF in order to negotiate a new staff-monitored program. In its published July 2003 Article IV report, the IMF endorsed four prerequisites to proceeding with formal negotiations: (1) disclosure of foreign debt data; (2) timely provision of macroeconomic statistics; (3) full implementation of the single government account at the Central Bank, and (4) additional dialogue on oil revenue management. A December 2003 IMF staff mission to Angola found some progress in these areas. In February 2004, the Angolan Government and the IMF reached agreement on the steps necessary to conclude SMP negotiations.
Angola is the third-largest trading partner of the United States in sub-Saharan Africa, largely because of its petroleum exports. About 5.1% of U.S. non-OPEC oil imports in 2002 were from Angola, a share that should continue to increase. By the same token, U.S. companies account for more than half the investment in Angola, with Chevron-Texaco and ExxonMobil leading the way. U.S. exports to Angola primarily consist of industrial goods and services--such as oilfield equipment, mining equipment, chemicals, aircraft, and food. On December 30, 2003, President Bush approved the designation of Angola as eligible for tariff preferences under the African Growth and Opportunity Act (AGOA) for 2004.
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