Angola’s Black Gold: Blessing or Curse?

 by Owen McGovern

In Angola, oil is king. For better or worse, it has dictated the success of the southwest African petrostate since the 1980s. 

Having been a Portuguese colony for centuries, in the 1960s Angola began a guerilla war against its oppressors, gaining independence in 1975. The state-owned company Sonangol quickly took control of Angola’s oil industry. By 1980 however, Sonangol, instead of extracting Angola’s oil itself, had begun to auction off oil deposits, opening the door for private companies, usually from Western Europe, to invest. 

Foreign companies paid Sonangol for the right to explore and extract oil from ‘blocks’ of oil-rich territory. The French company TotalEnergies have the biggest piece of the pie, with a market share of 45%, and have been there for nearly seventy years. American businesses Chevron and ExxonMobil are also key players. However, it is not just Western companies that are involved in Angola. Chinese companies also extract oil from Angola, and a quarter of Angola’s national debt is owed to Chinese banks, due to the Angolan government borrowing heavily to expand oil production. 

During the 2000s this influx of foreign companies appeared to be paying dividends. In 1980, Angola only produced 150,000 barrels of oil per day, whereas by 2008 that figure had been ratcheted up to 2 million. Also, from 2001-10 Angola experienced average growth rates of 11.1%, making it one of the world’s fastest growing economies. This boom, however, did not last long. The 2008 economic crisis and the resulting contraction in global demand for oil left a devastating legacy; nowadays Angola produces 1.1 million barrels per day, a far cry from its former glories. Unemployment has plagued the country ever since, concentrated around Luanda, the capital, where Angola’s wealthiest citizens live in luxury while the vast majority of people subsist on $2 per day. 

This inequality is directly linked to corruption of the oil sector. Sonangol has for years been skimming a portion of its revenue off the top to hand out to corrupt directors and officials, preventing money reaching the Angolan government and funding the provision of public services. The IMF estimated that from 2007 to 2010, $32 billion was embezzled. Sonangol has also acted in the interest of foreign oil refining companies by obstructing Angola’s efforts to develop its own domestic oil refining industry, while also turning a blind eye when these companies overcharge the government for their services. Ultimately, those in the upper echelons of Angolan society are the ones who profit most off this rampant corruption. 

These influential beneficiaries find the current state of Angola’s economy, as one dominated by oil, to be incredibly lucrative; as such, they are loath to allow any diversification away from oil. This reticence towards change has led to Angola becoming far too dependent on oil; 90% of exports and 80% of government revenue are from the oil industry, meaning that a fluctuation in the price of oil could make or break Angola. Although Angola’s recession has finally ended, thanks to a rise in oil prices, this is only papering over the cracks. 

President since 2017, João Lourenço, whose predecessor had ruled for 38 years, has instituted some tentative reforms to try to curb reliance on oil. Diversification of the economy to areas like tourism and agriculture could be successful in reducing youth unemployment, standing at 60%. Steps have been taken to reduce corruption, with Sonangol’s operations being taken over by a new government oil agency. Expansion of Angola’s energy industry is also key; solar power has seen investment, while Angola’s many rivers can be used for hydroelectric power. However, it remains to be seen whether the country is turning a corner; the new agency is still selling off oil deposits to foreign companies, many of whom also are the ones cornering the renewable energy market. It is clear that, despite recently celebrating its 50th year of independence, in many ways the development of Angola still remains under the thumb of outside forces who have become deeply rooted in the country’s economy.