The Pandemic Depression
The Global Economy Will Never Be the Same
In early 2014, Angola, sub-Saharan Africa’s second-largest oil producer and third-largest economy, was flush with cash and confidence. The economy had expanded tenfold over the previous decade, and the government, which in 2002 won a resounding victory in the country’s long civil war, was unchallenged at home, a towering presence in regional politics, and a major investor abroad, including in Portugal, the former colonial power. Its national reconstruction agenda funneled tens of billions of dollars into infrastructure and transformed Luanda into a would-be African Dubai that attracted thousands of expatriates. The rule of Angolan President José Eduardo dos Santos seemed secure: the government had insulated itself from civil society groups working on human rights and governance issues, improved its relationships with business-hungry Western states, and deepened its strategic partnership with China.
What a difference a year can make. Since June 2014, oil prices have plummeted nearly 60 percent, and the dos Santos regime, which is highly dependent on extraction, is now struggling to pay the bills, continue its infrastructure spending, and buy off key constituencies. Beneath the surface, many of these challenges were already developing during Angola’s boom years. Luanda failed to use its oil wealth to diversify its economy, and its rhetoric of state building and poverty alleviation obscured the fact that dos Santos’ allies were benefiting massively from kickbacks and contracts generated by government investment. As Angolan oligarchs and profiteering foreign consultants reaped astonishing sums in a free-for-all reconstruction economy, the broader Angolan society was growing restless. Most Angolans, especially urban youth, felt excluded from the benefits of the boom. There was also rising elite disquiet about dos Santos, in power since 1979, and his reluctance to retire gracefully.
Angola’s boom years were a lost opportunity of monumental proportions.
Nevertheless, there was little anxiety at the summit of power. The regime of the ruling People’s Movement for the Liberation of Angola (MPLA) was sturdy, and it had enough money to pay for its extravagances, build the usual white elephant infrastructure projects, and co-opt the constituencies necessary for its survival. All of that, however, is now in jeopardy.
Luanda hasn’t done a bad job of managing the oil downturn, at least not in comparison with its floundering response to its last fiscal crisis in 2009. It has shelved infrastructure projects and cut down on expenditures, including fuel subsidies; it has even slashed the salaries of government ministers. In February, Luanda trimmed its budget for 2015 by some 25 percent, from around $69 billion to $52 billion.
Yet in view of Angola’s dependence on oil, which constitutes some 95 percent of the country’s export revenues, the consequences of the current crisis will be dire regardless of how the government manages them. Luanda has increased oil production to the highest levels since 2010, but the increase in output still has not compensated for the loss of income from low prices. To address its budget deficit, the government has desperately sought money abroad—so far, it has approached China, Goldman Sachs, and the World Bank, though not yet the International Monetary Fund. Yet Angola’s revenue shortfall is so spectacular that it is increasingly accepting very poor deals. The full terms of the hasty agreements signed with China in June remain a state secret (it is widely rumored, however, that the government leased huge areas of the Angolan hinterland to Chinese agribusiness concerns). Yet it is nevertheless clear that Beijing is becoming increasingly dominant in the bilateral relationship, which until last year Luanda had managed to carefully balance.
Domestically, the dos Santos government is struggling to cope with a situation that is deteriorating so rapidly as to render many of its responses obsolete. The local currency, the kwanza, is severely depreciated, with exchange rates on the street three times higher than official rates. Constituencies traditionally pampered by the regime, including veterans and the urban and state-employed middle classes, have been hit hard by the downturn, as the state has left salaries unpaid and restricted credit card use. But the poor are suffering the most. Cuban medical workers, the backbone of the country’s decrepit health system, haven’t been paid for months and may leave within weeks. Cuts to fuel subsidies have produced a 50 percent increase in bus fares. And to make matters worse, crime rates have risen, demonstrations by taxi drivers have turned violent, and a bungled garbage collection policy has blanketed Luanda with waste and a pestilential stench. Gustavo Costa, a prominent Angolan journalist, has written that a “winter of discontent” has fallen upon the country.
As a result, the grievances of many Angolans, until recently manageable, have come into the open. Keen in recent years on putting up a more technocratic face, the MPLA regime has responded by massively increasing repression. The highest-profile crackdown was the June arrest of 15 young activists who had intermittently organized small protests since 2011. Police took them into custody after breaking up their book club discussion of nonviolent resistance to authoritarianism and also dealt harshly with the solidarity vigils that followed, beating up attendees and even unleashing dogs against one of the activists’ mothers. One member of the group, a rapper and prominent critic of the regime named Luaty Beirão, went on a hunger strike for around a month. Other activists have likewise come under pressure: in September, authorities sentenced José Marcos Mavungo, a human rights campaigner from the Angolan enclave of Cabinda, to six years in prison on trumped-up charges of organizing a rebellion; in May, Rafael Marques, Angola’s most prominent activist, received a suspended jail sentence for writing about the complicity of Angola’s military leaders in violence committed in the country’s diamond fields.
About a month earlier, a tussle between police and followers of a Christian sect in Huambo Province led to violence on a massive scale. The event is still shrouded in mystery: Luanda has refused to allow an independent investigation of the incident, despite international demands (including from the UN) that it do so. But the account offered by the National Union for the Total Independence of Angola, the main opposition party, suggests that as many as 1,080 people were murdered after members of the sect killed between four and nine police officers. That would make the massacre the single biggest act of violence in southern Africa over the past decade—one that has gone largely unnoticed in English-language media.
Tensions are rising not just at the popular level, but also among elites. Prominent artists and intellectuals, whose support or silence the dos Santos regime has always treasured, have belatedly come out against the persecution of government critics.Inside the MPLA, meanwhile, there is no overt factionalism—but many cadres are quietly fearful of the growing unrest and unhappy with dos Santos’ seemingly never-ending rule.
In view of Angola’s dependence on oil, the consequences of the current crisis will be dire regardless of how the government manages them.
Even as it ramps up domestic repression, the regime has claimed that it is trying to improve its management style. Dos Santos now speaks of the need for a “new model” focused on “development,”and his government has said it will prioritize increasing non-oil taxation and eliminating ghost workers from the state payroll. MPLA cadres now admit that industrialization and agricultural expansion have not proceeded as planned and promise improvements. Even Sonangol, the national oil company and cash cow, which is one of Africa’s largest corporations, underwent an unprecedented attack from its own CEO, who in June deemed it on the verge of bankruptcy and blamed previous management.
On closer inspection, however, the reforms and criticisms offered by Angola’s elites promise only to shore up the system, not change it. The Sonangol attack, for example, was likely an attempt by dos Santos to undermine Vice President Manuel Vicente, a former Sonangol CEO who was once considered to be a possible successor to the presidency.More generally, regime insiders cannot easily be divided into well-intentioned technocrats and self-serving apparatchiks. Intraparty disputes belie a broad elite consensus about Angola’s political economy: few contest the enormous wealth that has accrued to government insiders over the last decade.
Angola’s oil boom was not entirely negative: the country has maintained the peace it reached in 2002, and it has rebuilt some of its shattered infrastructure. Nevertheless, Angola’s boom years were a lost opportunity of monumental proportions. State funds were squandered in pointless projects or hoarded by the few, and most Angolans were left with nothing. As those citizens awake from their dreams of petro-prosperity to leaner times, the key question is where their dissatisfaction will lead, especially now that the state’s resources to buy off rising constituencies are dwindling.
Although Arab Spring analogies abound, it would be foolish to dismiss the staying power of the dos Santos regime. The MPLA is a formidable machine that is still relatively cohesive: Angola’s security sector expenditure is larger than that of Nigeria and South Africa combined, and the armed forces, intelligence services, and police remain loyal to the president.
Yet the regime’s overreaction to apparently innocuous, peaceful forms of protest suggests that it is indeed fearful of losing control. For dos Santos and his allies, parliamentary opposition is not the major concern. Rather, the MPLA fears popular mobilization, especially in Luanda’s vast shantytowns. Public-spirited critics of the regime hope that the civic route will prevail and point to the inclusive ideas articulated by those activists now under arrest. But Angola is rent by complex ethnic, racial, and regional divisions, as well as by rampant xenophobia, all of which could channel popular dissatisfaction against the regime. Whether the status quo, the yearning for a more just society, or the country's atavistic divides prevail, there is no guarantee that Angola will navigate a future of low oil prices unscathed. In such a volatile atmosphere, it takes only a little friction to start a fire.