The Angolan president Eduardo dos Santos, in power since 1979, has previously been praised by various media outlets and institutions for his effort in creating peace, stability and economic growth in the country. After three decades of civil war (1975-2002) the country experienced two elections (2008 and 2012) that were deemed credible by the international community. The 2012 presidential elections ensured the continued firm grip of the ruling party, the Movimento Popular de Libertação de Angola (MPLA), on Angola. The MPLA fully controls the country’s political and economic institutions, public administration and civil society.
Three years ago Angola had one of the fastest growing economies in the world, with an annual GDP of 12%. The high oil price and Chinese appetite for commodities created a hyper economy with huge potential. The country’s oil sector was the motor for Angola’s post-civil war political and economic development; in 2012 the oil industry accounted for 97% of total export revenues and over 80% in tax revenues. The government focused on infrastructure projects in order to rebuild the war-torn country, Chinese investment, equipment, and labour were vital in this process, especially since the talks with international financial institutions failed to deliver favourable outcomes.
However, the huge drop in oil prices in the second half of 2014 slashed the country’s budget by a quarter, resulting in major delays in infrastructure and construction projects. Aside from this the national currency, the Kwanza, went into free-fall and inflation increased by a record high of 9%. An effect of these developments is the government’s inability to deliver investment in the area of social development. This failure is a threat to the country’s stability as it could increase social tension, especially as the government has started to cut subsidies. As well as cutting social benefits, the government has been implementing several policies in order to stabilise the economy; the latest drastic actions to be implemented are strict capital control and freezing the circulation of the dollars as a means to fight capital flight, Angolan banks are also restricted when issuing new credit cards. There are many explanations as to why the Angolan government was unable to capitalise on the growth that occurred during the commodity super cycle and shield its economy from future oil shocks.
One factor that is often overlooked in this explanation is that of human capital and the ability of policy-makers to deal with critical situations and apply sophisticated strategies in order to stabilise the economy. A country facing similar issues as a result of falling commodity prices is Nigeria, the continent’s leading economy. Nigeria has major security, political and economic issues however, despite all these problems, the country has managed to maintain a steady course. Angola does not have any major security or political issues, the problem is purely economics and human capital is what separates both countries in terms of dealing with these core issues. The number of Nigerians in top universities has been increasing in recent years – Nigeria is in the top four beneficiaries of UK academic education. When one looks at the amount of effort put into the training of Angola’s civil servants and other policy-makers, one could conclude that, unlike in Nigeria, it was never a priority. The government prefers to train oil engineers over economists, lawyers and civil servants. Aside from this, the current policy-makers are mostly men in their late sixties who were trained in the Soviet Union or fought together in the independence (1961-1975) and civil wars. These elements create a tight network of insiders who mistrust outsiders who did not participate in the struggle and, as a result, are implementing policies that might have worked in the 1970s. These elements of mistrusting those who were not part of the struggle can be found in various African countries which went through brutal independence struggles.
In the current global economy maintaining good relationships and understanding various international (financial) institutions is paramount in order to save one’s economy. The Angolan government has tried to normalise its relationship with international financial institutions but the relationship has never been warm due to US support for the rebel group the União Nacional para an Independência Total de Angola (UNITA) during Angola’s civil war, and so a level of suspicion remains.
A country which has benefitted from having a good relationship with the IMF is Cote d’Ivoire. The current Ivorian president, Alassane Ouattara, is a trained economist who previously worked for the IMF and, as a result, has been exposed to different economic tools and prescriptions. Aside from this he has been able to recruit a dynamic team of technocrats with the sole aim of Angolan economy diversification. After the civil war in 2012 Cote d’Ivoire started a process of economic recovery resulting in real GDP rates of 8.7% in 2013, 2014 figures showed a growth of 8.3%, 7.9% in 2015 and a projected 8,5% real GDP growth in 2016. Ouattara’s economic team is a well-balanced mix of economic veterans and young policy makers who previously worked in various international public and private organisations. Angolan policy-makers, meanwhile, have very limited exposure of this type.
Angola’s Eduardo Dos Santos, for instance, graduated in 1969, he received his degrees in petroleum engineering and radio communication in Azerbaijan (then part of the Soviet Union), and it is a similar story for the vast majority of policy-makers in Angola. Enlightening the Angolan elite through education and exposure to the global economy will bolster the capacity of future policy-makers to implement the right prescriptions in order for Angolan economy diversification and management.
The Angolan government tends to take China as the perfect example for its own development (as do many developing economies). But one of the key elements of Chinese success is its ability to educate and revitalise a wide range of policy-makers abroad. As a result it has the right people in place producing the policies and strategies which enable the country to manage its economy efficiently and effectively, as well as implementing change towards a free-market economy. The current oil crisis presents a massive challenge for Eduardo Dos Santos to preserve his reputation of bringing stability and peace to the country, but it is an opportunity to learn how the economy can become more flexible when so that it can better deal with future crises and for this, it can learn from China.