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Fuel Reserves Oil the Wheels of Corruption and War: A Case For Angola’s Debt Cancellation

By Roxanne Lawson, American Friends Service Committee

Angola, located on the southeast coast of Africa, is a nation rich in natural resources. As sub-Saharan Africa’s second largest oil producer and with potential wealth in diamonds, coffee, gold, and iron ore, Angola’s exports should be positioning the country to become one of the continent’s economic powerhouses. However, Angola’s people remain among the poorest in the world. In 1973, per capita income had been $1,300 USD (1); by 2003 it had dropped to just $740.

Angola’s Three Wars

This decline was due in large part to the 27-year internal war begun shortly before the nation achieved its independence, when the National Union for the Total Independence of Angola (UNITA) declared war on the Movement for the Popular Liberation of Angola (MPLA) for control of the country.

After Angolan independence, South Africa became threatened by the MPLA’s alliance with the Soviet Union and Cuba, and wanted to retaliate for the MPLA’s support of the South West African People’s Organization that fought to end South Africa’s occupation of Namibia. As a result, South Africa began providing military support to UNITA. By 1979 the South African Defense Force was the greatest threat to Angola’s security.

In addition, throughout the 1960s, 70s, and 80s, the newly emerging nations of Africa were the battlegrounds of the Cold War as the United States and the Soviet Union competed for allegiance through covert operations and economic aid in the form of loans. U.S. covert assistance to UNITA totaled about $250 million between 1986 and 1991, making it the second largest U.S. covert program.

These three wars destroyed much of Angola’s economy and infrastructure, displaced an estimated four million people, and retarded the country’s economic development.

Angola relied on expensive oil-guaranteed loans to help it fight its war for independence and to rebuild. By 2004, the combined impact of thirty years of hostilities and post-conflict reconstruction resulted in a massive build-up of unsustainable debt.

Angola’s Debt to Foreign Creditors

Angola’s external debt, as of 2003, is approximately $10 billion (2). Debt servicing expends more than five times the combined total spent on health and education; Angola spends 1.4 percent of its GDP on health compared to 33.3 percent on debt servicing (3).

Despite Angola’s tremendous natural resources, a non-transparent government and an illegitimate debt burden all continue to result in very little for Angola’s 12 million impoverished citizens. In 2004, the Angolan Planning Ministry reported that 58 percent of adults were illiterate, 75 percent lacked basic sanitation, and 65 percent had no health care.

In 2006, a mere four years after the end of armed conflict, there is persistent corruption among government officials and oil company representatives. TotalFinaElf, ExxonMobil, and BP, among others, operate in Angola. Their actions are consistently nontransparent. The Angolan government has scored poorly on both Transparency International’s Corruptions Perception Index and Freedom House’s Democracy Index. While oil accounts for an estimated 90 percent of the annual $3 billion to $5 billion state budget, a 2004 Human Rights Watch report alleged that between 1997 and 2002, nearly $4.22 billion of Angola’s oil revenues were “unaccounted” for by the Angolan government (4). This roughly equals Angola’s spending on all state-funded social programs during that period.

Billions of dollars of potential oil revenue were used as collateral for Angola’s borrowing in the last century. Therefore, Angola’s loans are severely over-leveraged. Even with the doubling of oil prices in recent years, the country cannot make any major investment in reconstruction because oil revenue is being used to repay loans or going to corrupt government officials. In 2002, oil exports accounted for approximately $7 billion USD, money that should provide about $400 USD a year to each Angolan citizen. Instead, 70 percent of Angolans lived on half that amount—less than a dollar a day.

Numerous studies have reported that oil-producing countries tend to be poorer, more violent, and more corrupt (5). International governments, financial institutions, and transnational corporations compound these dynamics through bribes, collusion, and conditions imposed on loan repayment

Who Owes Whom: A Case for Cancellation

At the heart of the call from civil society to cancel Angola’s debt is the desire to ensure good governance that will result in healthy living standards for the millions of Angolans suffering under unfair debt burdens.

Furthermore, those who have profited, and continue to profit, from “missing” oil revenues are accountable to the Angolan people. And it should be recognized that corrupt deals and odious debt are only possible through the complicity of three other parties: transnational corporations, international financial institutions, and foreign governments. Real justice requires both transparency and regulation by Angolan civil society and full cancellation of Angola’s debt.

1. All Figures are in U.S. Dollar amounts.
2. Angola’s external debt was $9.3 billion USD in 2003 according to the Energy Information Administration (EIA), U.S. Department of Energy, http://www.eia.doe.gov/emeu/cabs/Angola/Background.html and was recorded as $11 billion USD in 2002 by African Forum & Network on Debt & Development, http://www.afrodad.com/angola and as $8 billion USD by Aguinaldo Jaime, Deputy Prime Minister of Angola.
3. African Forum & Network on Debt & Development, Fact Sheet on Angola, 2003.
4. Human Rights Watch, “Some Transparency, No Accountability: The Use of Oil Revenue in Angola and Its Impact on Human Rights,” Vol. 16, No. 1 (A): January 2004.
5. Kretzmann, Stephen and Irfan Nooruddin. Drilling Into Debt: An Investigation into the Relationship Between Debt and Oil. Washington, DC: Oil for Change International and Jubilee USA Network, 2005.

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