By Janine Zacharia
New York Times
September 15, 2009
Letter from Africa
LUANDA, ANGOLA — Donald Steinberg arrived in Angola in 1995 as U.S. ambassador to find American oilmen doing more than drilling for coastal crude.
“They were, in fact, the American ambassadors to Angola in that period,” Mr. Steinberg recalls. “The only real relationship was through the oil companies.”
Angola, currently Africa’s top oil producer, is now a priority in Washington. Hillary Rodham Clinton’s overnight visit last month — the first for a U.S. secretary of state — sent the message that America is eager to help transform the former Cold War battleground into a stable energy giant with strong democratic institutions and transparent business practices.
Angola is poised to become a hub of liquefied natural gas and diamond exports. It is also a potential growth market for Coca-Cola of Atlanta, Bechtel Group in San Francisco and other American companies seeking to take advantage of the government’s push to diversify the economy and improve conditions for the country’s 17 million people, most of whom live on $2 a day.
“We are definitely interested” in Angola, says David Welch, the former U.S. diplomat who is president of Middle East, Africa, Europe and South Asian operations at Bechtel, the largest U.S. engineering company. “They have every single infrastructure need.”
Angola topped Nigeria’s crude output in July and August partly because unrest cut production in the Niger Delta in Nigeria. Angola joined the Organization of the Petroleum Exporting Countries in 2007 and, as this year’s president, will host a Dec. 22 meeting in its capital, Luanda. Within three years, it will expand energy exports when it begins shipping natural gas with help from Chevron, based in San Ramon, California.
Angola gets about 84 percent of its fiscal revenue from petrodollars, making it vulnerable to price swings like the drop last year to $33.87 a barrel on Dec. 19 from $145.29 on July 3. So Angola is turning to foreign investors for help in developing nonenergy industries, including agriculture.
Only 5 percent of arable land is under cultivation since farmers fled to cities during the 27-year civil war, which began after Angola’s 1975 independence from Portugal. If farmed to its potential, Angola could meet not only its own needs, but also those of sub-Saharan Africa, Mrs. Clinton said.
The war pitted the ruling Soviet-backed Popular Movement for the Liberation of Angola against the U.S.-supported National Union for the Total Independence of Angola, led by Jonas Savimbi. Half a million people died, including Mr. Savimbi, who was killed by government troops.
Devastation from the conflict is evident across the country. Many buildings in Luanda are abandoned, and roads need repair. Embassy employees were relieved when the lights stayed on during Mrs. Clinton’s stay there; outages are routine because there isn’t any effective power grid.
Peace brought investment from China and the United States, which are the top recipients of Angola’s oil shipments. China, the No. 1 importer, has granted Angola loans of more than $5 billion and is building stadiums, roads and an airport expansion. The United States makes more modest loans through the Export-Import Bank, which extended a $120 million credit line.
Ties with China are closer than those with the United States. In exchange for financing, Angola guarantees China a percentage of oil output, and a top Angolan military official visited Beijing on Sept. 1 to announce enhanced cooperation.
Long lag times for starting a business have deterred American investment. In 2007, it took 119 days to register an enterprise, according to the World Bank.
Government corruption is also “widespread,” according to a Feb. 25 report by the U.S. State Department. It said that Sonangol, Angola’s national oil company, didn’t consistently report revenue to the Ministry of Finance and that “the business climate continued to favor those connected to the government” with “no laws or regulations regarding conflict of interest.”
While Angola held a legislative vote last year, its presidential election, scheduled for this year, has been postponed, and José Eduardo dos Santos has ruled since 1979. At an Aug. 9 news conference alongside Mrs. Clinton, Foreign Minister Assunção Afonso dos Anjos said Angola needed more time for balloting.
When asked about alleviating poverty, he said there was no “magic wand.” Angola needs “well-structured, well-designed programs, meaning programs that will gradually create wealth.”
Angola has taken steps toward financial transparency by publishing oil-industry revenue, according to the United States. The Treasury Department is sending an adviser to help Angola manage debt and take advantage of international currency markets to raise funds.
The Corporate Council on Africa, which promotes commercial relationships, is hosting a U.S.-Africa summit in Washington from Sept. 29 to Oct. 1 that will dedicate half a day to doing business in Angola, especially in the nonoil infrastructure, housing and communications sectors.
SABMiller, based in London, the world’s second-largest brewer, is expanding operations in the country, opening a new Coca-Cola bottling plant last year and now completing another north of Luanda. Delta Air Lines of Atlanta, the world’s largest carrier, applied with the U.S. government to begin direct commercial flights from the United States.
“It’s not easy to invest in Angola,” says Rosa Whitaker, former first assistant U.S. trade representative to Africa and now a consultant. “But for the investors willing to take the risk, Angola is a country that can produce high rewards.”
Janine Zacharia is a Bloomberg News columnist.
