ECONOMIC REPORT OF ANGOLA 2011

Luanda, June 2012

PRESENTATION

In 2012, Universidade Católica de Angola (UCAN) celebrates two important anniversaries - 10 years of the Scientific Investigation Stu-dy Centre (CIEC) and Angola´s Economic Report - and another one of great political and historical significance for the country: ten years of peace.

The Scientifc Investigation Study Centre of UCAN is at a crossroads regarding its future and the sustainability of its business.

The commission, charged by the university’s Rector to study the feasibility of establishing a Studies and Research centre and to propose its status, was integrated by Carlos Leite, Emilio Grion, Justino Pinto de Andrade, Adão Avelino, Ennes Ferreira and Alves da Rocha. There were many meetings and heated discussions. Significant advice of the then Rector and Vice Rector, D. Filomeno Vieira Dias was taken into consideration.

Created on March 6, 2002 by order of the Rector of UCAN, CEIC developed its activity in the first two years in an atypical manner, as it did not have investigators and the few studies made were on the basis of an external collaboration. Although, at the time of its constitution, a body of directors was appointed, composed of an executive director and an academic director (who requested his withdrawal less than one year after his appointment) there were no conditions for the structuring of a sustained investigation and research. A new academic director was appointed, but his activity and the one of the executive director was

exercised in part-time. Even so, in 2003, the first Economic Report re-lative to 2002 was drawn up and published, and was launched during a public ceremony where students and professors of UCAN, other uni-versities, members of the Government and the countries most credited diplomats were present. Between 2004 and 2006 CEIC benefited from significant funding that allowed USAID to start thinking in terms of its structure in a more effective and lasting way. It was during this period that the Dean appointed a full-time executive director and began to ad-mit people with some experience in research. From 2007 the first con-tacts with the Norwegian Embassy in Angola and the first Norwegian funding for CEIC began to flow, allowing three researchers admitted full-time and start thinking in a consistent program of work and research activities. Until the present moment, Norwegian financing has been the only one sustaining CEIC’s permanent activity although other sources of funding exist purely ad hoc, such as the Open Society, the Friedrich Ebert Foundation, the Portuguese Embassy, and World Learning, but that does not support structural fund spending, which includes salaries. It is felt that the financial support of the Embassy of Norway is coming to an end, although the cuts will be gradual, giving us the opportunity to find alternative routes. Universidade Católica of Angola has, from the moment of creation of CEIC, put at its disposal any financial direct means to support/cover the expenses of the establishment. The use of the physical space available to the Centre by UCAN is certainly an un-derlying cost, which can be computed, at current market prices at around 60,000 dollars. But it can be said that the provision of physical space is an obligation of the university, moreover, as with other organic structu-res. It is therefore urgent to reflect on the sustainability of CEIC beyond Norwegian fundings.

Many thanks are due:

» To the Rector of UCAN who has always encouraged and sponsored CEIC’s activity and considers it as one of UCAN flags of quality.

» To Monsignor Jose Manuel Cachadinha, for the cons-

tant support to CEIC, for the relevant suggestions, for the encouragment of its researchers, and administrative em-ployees.

» To CEIC sponsors, without whose support the ongoing activity would not have been possible: USAID/ U.S. Em-bassy and Embassy of the Kingdom of Norway, whose su-pport comes from 2007.

» To the funders of concrete research projects, such as the Friedrich Ebert Foundation, the Open Society Foundation, GTZ, World Learning, the Embassy of Portugal in Angola, BNA, BFA, BNI, ENI, Statoil, Esso, Total, Endiama, the BAI, the Ministry of Finance.

» To CEIC’s permanent research staff.

» To the two first executive directors - Emilio Grion and Noelma Viegas d’Abreu and the first academic director, Prof. Ennes Ferreira.

The first economic report was edited and released in 2003, referring to the economic situation of the country in 2002 and was entitled Relatório Económico de Angola, 2002 (Economic Report of Angola, 2002). Let us remember the first team that elaborated it: Alves da Rocha, Idalina Va-lente, Carlos Leite, Marinela Amaral, Marília Poças, Ondina Neto and Ramos da Cruz. It is a professional duty to transcribe the words of the Rector in the prologue: “It is with great pleasure that I write these few lines about the publication of the Economic Report, written by UCAN’s Scientifc Investigation Study Centre. Our joy is part of the desirability of UCAN to promote the spirit and atmosphere for a scientific research at the University. In fact, since the first time this, amongst others, was one of the priorities of the mission and vision of UCAN, without, however, wanting to replace anyone. Meanwhile, since this is the first report, I will not hide potential gaps that, in fact, are sometimes inevitable and might even be an incentive for improvement in the provision of servi-ces in future issues and/or other protagonists, according to the different themes. It is an appropriate time to equate the sacrosanct trinomial-

-University-Government-Similar Institutions and the business world, because the report is a timely and welcome preamble. I am convinced that our university units can and should, according to their possibilities, contribute to the development of the science that they minister, through Reports, as the one presented here. I wish to reaffirm, regionally and nationally, in line with the international university-academic world, that research and/or scientific investigation is an important and essential part of a true university unit. The opposite would truncate the mission of the University itself. I would like to take this occassion to congratulate the authors, benefactors and all who, in one way or another, contributed to the emergence of this Report. I do not intend to recall the easy and di-fficult times of the different stages of work. Just highlight the dedication, sacrifice and transcendent attitude of the work, which is not common to all, especially when the material and financial reasons outweigh the ethical-moral and dignified place of the human. I conclude by predic-ting that this first number might be the antechamber of other contribu-tions in different fields of knowledge such as environment, citizenship and so on. “

Some of the great challenges of post-conflict situations were defined and analyzed, such as ensuring macroeconomic stabilization, the cons-truction of the national economy (internal economic circuit), poverty reduction and mitigation of regional differences in the context of SADC. The chapters of the Report went through what is most essential for an economic analysis and, ten years later, can be found in the first Econo-mic Report of Angola by UCAN, something that can help to write the economic history of Angola after independence .

But, as said, 2012 is also the year of 10 years of peace, certainly from the standpoint of historical, sociological, political and economic point of view, the country’s most important event after independence. To date, the balance of 27 years of civil war has not been made and we still do not understand the underlying reasons for such a long dark period in the history of Angola 1.

1 There are reports, studies and books that address this issue, some of them placing the burden of prolonging the war on UNITA (Savimbi No Lado Errado da História, Emídio Fernando, D. Quixote, 2011). Other analysis argue that the continuation of the war led to the accumulation of the first fortunes in the country, and this factor and the privatization of the business assets of the state’s the vehicles to the pragmatization of the ideological principle of the MPLA to create a national bourgeoisie to confront the capital and foreign

There are many expected balances. First, the real balance of lost lives. Approaches from the outside (some UN agencies, for example) talk about a million dead. It may be hard to take a definitive and realistic number, given the conditions in which the actual military conflict unfol-ded. But it is necessary, officially, formally and collectively to take up a number, as a form of social catharsis for this dark period. Human losses have, primarily, family significance, but they also have an economic value that it would be interesting to asses.

Then, the economic balance of the 27-year civil war, in terms of lost opportunities for GDP growth, employment and income, but also in relation to the costs of expenses opportunities incurred in the acqui-sition of warfare and maintenance of two armies of significant staffing. Of course the two warring sides made expenditures that surely would have been much better if used to create investment bases of sustaina-ble growth and development (physical infrastructure and human capital) and consolidation of democracy. It is here that we should trace back the real reasons for an internal armed conflict that lasted for so long.

capitalists that would eventually arrive in the country after the reverse transition from capitalism to socialism, for socialism to capitalism.

THE EFFECTS OF PEACE(value in million dollars)

VARIABLE 1997 1998 1999 2000 2001 2002 2005

Gross Domestic Product 7486 6387 5990 9040 8911 10156 30272

Oil Gross Domestic Product 3586 2417 3519 5506 4562 5025 17039

Non oil Gross Domestic Product 3900 3970 2471 3534 4349 5131 13233

SOURCE: Anual Economic Reports - CEIC/UCAN - based on official data.

There is the clear 2002 boundary, thereafter, the non-oil GDP increa-sed in nominal terms, almost 258%, equivalent to an average annual rate of 37%. Losses that should be directly allocated to the 27 years civil war.

Again, the financial statement: how much in taxes was the cost of civil war to society? It is not difficult to calculate the amount of SGB expenses that between 1976 and 2002 was allocated to the war effort. After 1985 (accession of Angola to the mechanisms and bodies of the Bretton Woods) reports from the International Monetary Fund are a cre-dible source to make this estimate.

WEIGHT OF EXPENSES FOR DEFENCE AND SECURITY FOR A FEW YEARS OF CIVIL WAR

(in % total public expenditure)

1992 1993 1994 1995 1996 1997

EXPENSES WITH DEFENSE AND SECURITY

21,2 42,6 51,6 29,8 23,7 27,8

SOURCE: Alves da Rocha – Por Onde Vai a Economia Angolana? - based on information from FMI, Banco Mundial and OGE.

The displaced (and refugees) are another phenomenon associated with the civil war. More than four million people were forced to migrate to urban and coastal areas of the country and abroad, looking for secu-rity and survival. It is not known how much the displaced and refugees represented in direct costs to the economy - the degradation of national agriculture and human desertification of the interior are two consequen-ces that experts and researchers point as the weakness of the domestic agricultural sector - and for public finances. It is known that this was one of the issues that the Government solved without the support of the international community, which in 2002, was invited to participate in the efforts of economic reconstruction and national reconciliation, and refused to be part of this adventure of rebuilding the foundation for the development and progress.

The social balance of 27 years of internal war is one that should be developed. The degradation of population primary sources of income, generated by agricultural activities, the massive displacement of people depopulating the countryside and rural areas, lack of financial resources to invest in these activities, hesitation and mistakes of economic policy, primarily focused on release of funds for the war, fostered the deepening poverty and the emergence of a huge mass of unemployed and underem-ployed 2. For purposes of peace we can see that, after 2002, the non-oil economy had very high growth rates and certainly provided an oppor-tunity for job creation. Poverty, social exclusion and unemployment, as well as inhumane conditions, are important market and government failures.

2 The first official version of the Estratégia de Luta Contra a Pobreza (2002/2003) (Stratergy Fight Against Poverty) identified some of the factors that explain the phenomenon: the internal military conflict, some wrong economic policies, the excessive dependence on oil, the weakening of agriculture.

WEIGHT OF EXPENDITURE ON EDUCATION AND HEALTH IN A FEW YEARS OF CIVIL WAR(in % of total public expenses)

1992 1993 1994 1995 1996 1997

EXPENSES WITH EDUCATION 7,4 6,1 2,4 4,3 4,0 2,7

EXPENSES WITH HEALTH 3,8 4,9 3,3 4,9 2,6 1,2

SOURCE: Alves da Rocha – Por Onde Vai a Economia Angolana? Based on information from FMI, Banco Mundial and OGE.

The 27-year civil war was, to a considerable degree, lost to the ins-tallation and consolidation of democracy if, in fact, this form of social organization corresponds to the innermost yearnings of people, busines-smen, political leaders and civil society in general . The 1992 elections, following the Bicesse Agreements in Portugal, represented the first ex-perience of democracy in Angola, which had been completely lost by political positions taken until then, and the return to war – UNITA’s responsibility, due to their rejection of the election results, inflaming an outburst of violence, never before witnessed.

Another event occurring in 2012 is the third legislative election, the second in an era of peace and expected to arise in an environment of transparency and credibility, with respect for the basic principles of freedom of thought, expression, manifestation and assembly, such as enshrined in the Republic’s Constitution.

In fact, in September this year, another election cycle will take place, this time, simultaneously for parliament and president of the Republic. It is an event of great importance for the Angolan people.

Political point of view is essential for development. Open, democra-tic, participatory, liberal and responsible societies are key ingredients for the happiness of people. Happy citizens are more productive workers, entrepreneurs, teachers, researchers, government officials, writers and

artists. From a political point of view, the situation appears to be critical in Angola. As we know, there are many and divergent internal opinions on this item and, therefore, to illustrate an independent point of view, we used the Democracy Index 2010 and 2011 built by The Economist, the most prestigious business magazine in the world 3. Its study on the conditions for the exercise of democracy in the world is now in its four-th edition and, for the authors, the political situation in the world in 2011 had some setbacks. 167 countries are investigated, grouped into “full democracies”, “incomplete democracies”, “hybrid regimes” and “authoritarian regimes”. In 2011, Cabo Verde managed to be the first of incomplete democracy, ahead of some European countries. Still within this category appear, in the SADC context, countries like South Africa, Botswana, Lesotho, Namibia, Zambia and Malawi. Mauritius was con-sidered a country of full democracy. Angola is ranked in 133 th place in the group of authoritarian regimes 4. And the situation worsened from 2010 (131 th) to 20115.3 Democracy Index 2011 – Democracy Under Stress, A Report From The Economist Intelligence Unit, 2011.4 Some political facts are relevant about this authoritarian regime. No longer just from the internal point of view. It is known the cancellation of the hearing that the Head of State should give the U.S. Secretary of State Wendy Sherman, allegedly for having to meet first the representatives of the three opposition parties (UNITA, FNLA and PRS). We also know the subtle obstructions so Ban Ki-moon could not meet with representatives of civil society, during his recent trip to Angola. As is known the manifest displeasure at the fact that the official German Chancellor Angela Merck, in July 2011 when he visited Angola, has visited the headquarters of UNITA in Luanda. These demonstrations of authoritarianism meant to convey the message to external partners that who controls the country is the MPLA and the opposition should not be given space to present its own and different points of view. (See Africa Monitor Intelligence, No. 648, March 12, 2012).5 In the Economic Report of the CEIC/ UCAN several sources of national and foreign information (international) have been used. As a rule, they are always available in the normal time limits, while not always internal. Moreover, the reserve and confidentiality surrounding national sources, is always necessary to send letters to request them. There are schools of thought in the country to devalue quite a few international sources of information, including those of social and political nature, claiming they are purposely designed in an outrageous form and based on opinions not independent and not objective. Interestingly, some national statistics may also be accused of these same defects. However, when you want to know the state of the country in certain political attributes, such as corruption, transparency, democracy, governance, there are no national statistics, and therefore the use of the international ones is the only route. And political statistics abound, made by African institutions seeking to know the state of the art in Africa (Mo Ibrahim Index, The East African Magazine Index). And the interesting thing is that they coincide with those produced by institutions in developed countries.

The Economic Report has always been prepared, in accordance with the building blocks of the Social Doctrine of the Church, as a set of texts defining a line of Christian behavior based on three principles: solida-rity, charity and subsidiarity. Centered in the person of Jesus Christ, the Church’s social doctrine is expressed in the Gospels and the various Papal encyclicals that were written over time. A collection of various texts of the Magisterium of the Church, for some is the Church’s social doctrine, i.e., the current manifestation of an ancient struggle of proclai-ming and living the Gospel. The Christian approach to the problems of the economy can be summarized in a very simple thought: the economy goes to the man and the man goes to God. This simple idea can be drawn that the utility function of the Christians is to move towards all men and the whole man.

Solidarity starts with the idea that, all being children of God and sharers of the life on Earth, it is important to feel solidarity in their choices and attitudes. So everyone should include the “neighbour” in their individual utility function. Thus, the positions on the role of human labor in society, justice applied in salary and correct understanding of the meaning of property result from that essential principle. He directs all economic relations, be it work or consumption, production and distri-bution, issues that are central to the definition of a Christian role model in economic life.

The preference for the poor is part of the Christian distinctiveness. As the demand for justice, Christian seeks charity. Thus, the construc-tion of the new approach is complete.

From these fundamental principles, which define the baselines of the preferences of the Catholic Church, a large number of conclusions can be reached on the most varied aspects of life such as:

» The right to work. The central concern with the human person and the fact that labor is the main asset held by the poor justify their inclusion in the set of preferences on Ca-

tholic issues in economic and social teaching of the Chur-ch. Highlights from this central concern: the relationship between labor and capital and the problems of unemploy-ment, the right to means for a decent living, to fair wages, private property and economic initiative, the defense of the dignity of work and problems of promotion of gender equality towards work.

» One of the most interesting aspects of the Social Doctrine of the Church, from the standpoint of economic theory, is the thesis of a fair wage. Presented since the beginning of the social thought of the Church, expressed the possibility of the free market to generate a salary below the minimum needed for a decent life.

» The social function of property. Always defending the principle of private property, the Church has also highli-ghted the limits to this right.

» The economic system. The Catholic Church recognizes the fundamental and positive role of business, market, pri-vate property and the resulting responsibility for the means of production, as free human creativity in the economic sector, circumscribed within a strong juridical framework which places it at the full service of human freedom. It is in this framework of unbridled capitalism, without a hu-man face, and forms of embezzlement, illegal and immo-ral that all that is criticized. These questions are examined and developed by Benedict XVI, calling for the inclusion of charity as an element of the economic decision and the maximization of corporate profits 6.

The raw power, neuralgic, nuclear and essential Economic Report matter, since its first issue have been poverty, unequal distribution of national income, human development, regional disparities that force people to emigrate, unemployment that refers the worker to crime or underground economic forms for survival, improved conditions of life, the dignity of work, being able to find almost a theoretical framework based on national reality.

6 Encyclical Caritas in Veritate.

Never in the Economic Report was any thought or reflection produ-ced against wealth. What has been discussed relates to the channels, me-chanisms and influences to be rich overnight in Angola and models of perpetuating this wealth. It is within the parameters of the Social Doctri-ne of the Church. The analysis developed in the Economic Report were always manifestly against poverty and public policies that have genera-ted and preserved it in a vicious circle and whose concrete manifestation is the social division between rich and poor, which tends to worsen.

Solidarity, as a principle of Catholic Social Doctrine, is not practi-ced in the depth and extent that Jesus Christ recommends. In Angola, , selfishness and obsession with wealth are the most common and current behaviors and public policies have not been able to counter attack, es-pecially the market distortion it inevitably introduces, in an economic functioning system per se already filled with defects and irrationalities.

The social challenge that arises from businesses goes far beyond mere social responsibility, in the strictest sense of the term. That is, corporate social responsibility cannot hold social interest, social pro-blems, poverty as the essential and determining focus. Corporate so-cial responsibility can be selfish: to achieve certain social objectives of communities in order to improve the climate for conducting individual business profits. The provocation of Benedict XVI shakes the principles of market economy - of course, without falling into Marxist, socialist or communist considerations - and questions about what should be the true function of corporate profit.

It is a challenge to find a new paradigm of market economics 7 - capitalism in its essence, is so individualistic - no longer based on in-dividual profit/business, but on social profit: the investment decision and choice of activities cease to be based on the marginal efficiency of Keynes capital (or internal rate of return), but on a social rate of return, which takes into proper account the good conditions of distribution of income and people’s lives. Are companies prepared for this new social responsibility?

7 If this innovative papal proposal, essentially moral in nature, has some scientific basis, surely the Nobel laureates in economics will try to build a new axiomatic of the market economy, then nothing will be as before.

The article by Frei Luís de França is worth following, as it retains what is essential in terms of description and interpretation of the papal encyclical Caritas in Veritate of Benedict XVI 8:

» “Charity really means that you need to give form and or-ganization to those economic initiatives which, without rejecting profit, aim to go beyond the logic of exchange of equivalents, of profit as an end in itself.”

» “Caritas in Veritate is a principle around which revolves the Church’s social doctrine, a principle that takes prac-tical form with criteria that govern moral action, such as justice and the common good.”

» “The principle of gratuitousness and the logic of the gift as an expression of fraternity can and must find their place within the normal economic activity. This is a human de-mand at the present time, but also by economic logic. It is a requirement both of charity and truth. “

The introduction of the principle of free in a functioning logic of market economy is what constitutes the major challenge for theoretical reflection of Economic Science. It is not getting the social (or national) welfare (as a result of the exercise of an appropriate business/indivi-dual activity- the example of the economic circuit and the realization of economic and social function for the individual activity given by Adam Smith in The Wealth of Nations is absolutely phenomenal - but to incor-porate the logic of business decisions for allocating resources and inputs the principle (the requirement?) of charity. That is, the social sharing of business profits will no longer be only ex post (through corporate social responsibility or tax pay payment to the state and the correspon-ding satisfaction of community needs), but must be incorporated in the functioning mechanisms and rules of the market economy, an economy individualistic by nature.

Joseph Schumpeter businessman- innovative, entrepreneurial, risk 8 Source: França, Frei Luís de – Caridade na Verdade: Uma Sinfonia Teológica, Revista LUCERE nº 7, Junho de 2011, Universidade Católica de Angola.

acceptor and individualist - has to become, or at least incorporate new elements, a social entrepreneur, where the main criteria for the alloca-tion of scarce resources (sometimes unrelated) is the well-being of the community and its citizens: “... economic, social and political develop-ment needs to give room for the principle of freedom, as an expression of brotherhood, in order to be authentically human.”

The terms of future development and economic convergence with the more developed economies are challenges that will face Angola, in a permanent way, from now on. Some are known and complete the range of favorable conjunctures for a sustained increase in productivity and competitiveness. Aspects that are examined in specific chapters. Even-tually, the new issue is related to the growth of social needs determi-ned by the increase in population, income and the demonstration effect encouraged by globalization: the growth of social needs, coupled with budgetary constraints, will require new models of public service. What does this mean for the State? More efficiency, obviously. But also a new vision, able to mobilize and engage society in the creation of new solutions. The most obvious way to reduce the deficit is to eliminate or reduce public services. The smartest way, is to mobilize society, in order to create new solutions to social issues.

Instead of reducing the supply of public services - to fit the budget deficit - the top priority is to reduce demand (by way of greater direct involvement of communities and society at large in meeting this demand for private social services of public nature).

How do we do it? Crime prevention is cheaper than putting more po-lice on the streets. Improving autonomy of the chronically ill will reduce their need for constant travel to the hospital. Greater autonomy of the elderly in their homes reduces the need to build homes for the elderly.

Another area of emphasis for the future relates to the centralization and concentration of power of governance: a strong central government can help to establish new regulations favorable to growth and, without question, ensure its implementation. However, the excess concentra-tion in Angola - which means that the country is considered a poor and authoritarian democracy- has fostered corruption and ilicit and ilegal embezzlement (violation of the Public Probity Law), clearly a factor of

instability and retraction of private investment.What factors could contribute to economic convergence between

Angola and the most representative economies of the world? We can mention a few:

• Openess to trade.• Degree of ease for setting up a business (Doing Business

2011: 165th place, requirement of 151.1% of income per capita and initial cost to set up the business and 29% of average income per capita and minimum capital; China: 151 th place, 4.9% of GDP per capita as initial cost and 131% of GDP per capita and minimum capital; South Afri-ca in the same order: 67th place, 5.9% and 0%).

• Corruption (in short-term may be covered by high yields, but long-term corruption inhibits or decreases private in-vestment).

• Productivity and competitiveness.

INTRODUCTION

We now know the official balance sheets in terms of growth of the Angolan economy in 2011: from a projected rate of 7.6% at the begin-ning of the year, it moved, after a correction in mid-year, to 3.6% and the latest estimates give account of an actual value of 3.1%. For 2012, official estimates put the real rate of GDP growth at 9.8%, surrounded by high uncertainty, many are the risks of global economic recession9. Growth decrease occurred in 2009, 2010 and 2011 will certainly in-fluence the growth trend rate - about 15% between 2002 and 2008 - but there still is a good and safe margin for improvement.

Therefore, in terms of growth the country is on track. Because growth is what economies should ensure, that is why they exist. It could be said that it is their natural condition, after the stage of subsistence economies like Robinson Crusoe. The Economic History of the twentie-th century by Angus Madison says exactly that the tendency of market economies around the world was the gradual and systematic increase of GDP over time.

However, it is necessary to signal that the growth has been sectorally uneven, with the large enclave sector dominating the economic structure and the ability to generate foreign income and tax10. One of the recogni-

9 As is proper in the field of economic forecasts, the facts, which we do not dominate the causes of its changes, may require consideration of adjustments in some of the variables of economic systems. In the GDP for 2012, the first government forecast for 2012 was a GDP growth rate of 12.8%, later corrected to 9.8%. And the adjustments might not stay put, not meaning that we do not master the techniques for forecasting macroeconomic aggregates.10 Sometimes we refer to the successes of Angola’s growth designating it as a real case study. However, it is the oil industry enclave the sole or at least the main responsable.

zed risks to this type of imbalance is the Dutch disease, which manifests itself in Angola by the large asymmetry in the distribution of national income and wealth associated - which can weaken democracy - which raises the question of development11.

Are we on track in this important and central economic and social item? In another words: for whom is the difference (significant) re-versed between the GDP growth rates and population? Of course, the answers are much less convergent than in relation to growth. This item is the more difficult to attain because it relates many economic, social, cultural, environmental and political variables, being complicated and time consuming to achieve convergence, synergistic movements, funda-mental consistencies and adequate directions.

The prevailing situation in the country, in this area, is the social ex-clusion of the vast majority of the population12. This exclusion has many faces, unemployment, poor living conditions13, difficult access to public goods and services of education, health, water, sanitation and housing. Moreover, the existing opportunity structure is flawed, socially unjust and disproportionate. Without significant changes in this item, social equity will not cease to be merely a constitutional right.

The Angolan economy has several internal bottlenecks that can slow the pace of growth experienced in recent years. Some are structural in nature, such as high inflation14, the low quantity and poor quality of Soares de Oliveira points, “A top executive of the oil area of a large European company, with decades of work in Angola, did not hesitate to say that the Sonangol is the Angolan miracle,” Soares de Oliveira, R - Angola Style, 2007, African Journal of Modern Studies, 45.11 Ricardo Soares de Oliveira: “the success of Sonangol’s top administration and loyalty to the president, to whom it reports directly (rather than the Government) are seen as a key factor to maintain the sector as an enclave consolidating power and wealth in a few hands, “Soares Oliveira, op.cit.12 Poverty is one of the items in the index of social exclusion, built by some international organizations of the UN system.13 According to the results of the IBEP, the 20% least poor of the country earned an average monthly income of just over 26,000 kwanza in 2008/2009 (something like 300 dollars or 10 dollars per day).14 The reduction of inflation has been one of the most successful areas of macroeconomic management 2003 (along with the balance of financial accounts of the State and the country’s external accounts and exchange convergence). Their policies have earned the approval of the IMF, although their reports are noted in areas where progress has to be much more expressive, such as transparency and good governance. When the text refers to inflation as a structural bottleneck is to signal that, apparently, monetary policy is close to

infrastructure, the availability of quality human resources at all levels (basic, intermediate and top), the weakness of the marketing and dis-tribution systems and transport systems and the sectoral and regional asymmetries, derived from the Dutch disease. Other cyclical in nature, directly related to the institutional organization of the State and its ad-ministration.

But in the current state of the Angolan economy, external factors are those that, in a more robust way, may impair or stimulate national economic growth. And with one more international crisis approaching, its extent and depth more severe than that of 2008/2009, of course the intensity of GDP growth will not be, surely, the one in official docu-ments, nor the one mentioned in the international projections referen-ce. Certainly during the first half of 2012, all projections of the IMF, OECD, World Bank, EIU, ADB and other institutions may be adjusted downward.

The enclave model, which excellently served the needs of war and the economic and political interests that formed in its orbit, does not ser-ve in a peace situation. Firstly, mining income - oil and diamonds - must no longer be dominant, which is only possible if the rest of the economy, where over 90% of the economically active population is, assumes her role of employment creation and multiplication of income.

Then, the logic of accumulation inherent to the income structure must start being endogenous to serve as many sectors and economic agents.

Finally, the distribution of mining income has to obey to social rules and economic criteria, to abolish the political codes that currently go-vern it.

To the economic model centered on the exploitation of nonrenewa-ble natural resources several weaknesses are associated, which leads to the conclusion that it is almost sold out (essentially as reliever of ine-qualities and contradictions and to give the people the conditions of life promised by political independence):

• Has been responsible for the current unequal distribution of income, expressed as an index of concentration within

exhaustion as a means of controlling and reducing the value of the general price index.

which the 20% least poor 20% hold 60% of national in-come15. This extraordinary inequality in access to income annually created is a central aspect of a development mo-del that has as main concerns to turn the economic process more national, ensure national reconciliation and turn the military peace socially effective.

• Has contributed to the structuralization of poverty, where the average annual income per capita did not exceed, in the last 10 years, 800 dollars (2.2 dollars per day)16. This aspect, complementary of the previous one and synergisti-cally amplifier of inequalities in income distribution, calls to coercion the issue of national purchasing power: the economic development to promote national reconciliation needs to build a model that increases the purchasing power of national families and businesses.

• It has not been a factor of internal economic integration and in this sense, it can be argued that this model turned out to exert a perverse influence on the transformation in-ternal ability, playing therefore an important role of de--industrialization of the country.

• Does not come together to create a true and genuine pro-cess of accumulation, but, instead, facilitates an individual enrichment, individualistic and restricted, based on the distribution, more or less free and without discretion, of a portion of oil and diamond revenues. The distributive lo-gic underlying the rent model supplanted the productivist logic, a prospect that has to be dramatically changed in fa-vor of a greater extensification of endogenous cumulation.

That is why there is a need to create a new structure of opportunities in the country, because the existing one, biased and promiscuous, accen-tuates the concentration of income and wealth, and promotes incompe-

15 The least poor are not necessarily the wealthiest, and it is not known, specifically, what percentage that very reduced social class withdraws from the national income. These values are listed in IBEP 2008/2009.16 The current poverty line in the country is given by a monthly income of about 4,700 kwanza (less than 50 dollars), equivalent to the price of a meal in a average quality restaurant.

tence and influence peddling. It requires:

• Expanding the education system in order not to exclude anyone of the picture of education, at whatever level. Edu-cation – even if only in long term can release visible and significant economic returns - is the best way to assure a social income through increases in labor economic pro-ductivity and high wages compensatory demands. Wides-pread access to education functions as a sign of freedom and democracy, because it makes all citizens equal and responsible for the decision of profession choice, based on the education they received.

• Change the nature capital/technology intensive production processes and focus on energetic productive methods on skilled labor in Angola.

• The result of the combination of the two previous results is the increase of labor income, the increase in personal and family savings and the improvement of living conditions. The increase of income and savings enables the acquisi-tion of decent housing, in accordance with the standards of every family or individual and refusal of what the State considers to be the model for citizen housing. The housing projects are proof of the existence of deep social differen-ces, often incapable of being explained, unless by corrup-tion and influence and information peddling, and probably a unworthy way of respecting people who are the light of the Constitution equal among them.

• Addressing the problem of land ownership - for produc-tion purposes and housing – in a perspective of a market economy and private ownership of means of production. The provisional title of ownership is a source of instability, uncertainty and risk that may contribute to rising prices.

Therefore, the development is not on track yet, even if we have to recognize achievements in this direction. But the most essential - that is to put the vast majority of the population as subject and object of econo-

mic growth - is still to be done.

The resolution of the military conflict that affected the Angolan eco-nomy and society was the starting point for the structural changes that have occurred since then. Clearly something had to happen. It was not possible to maintain a situation of trampling of the fundamental econo-mic balance and degradation of living conditions of the population.

Restoration of macroeconomic fundamentals (fiscal deficit, exchan-ge convergence, international reserves, external deficit, inflation, public debt) to acceptable levels and internationally recommended was an im-position of a new period of peace. And it was in this sense that the An-golan government, over the course of 2000, began to prepare macroe-conomic policies, whose results were important for the recovery of the economy through very high variation rates in Gross Domestic Product.

Another important vector for the reconfiguration of the national eco-nomy is the construction and rehabilitation of economic and social in-frastructures. The former have been an important factor to encourage the operation of the productive sector and the diffusion of economic growth throughout the country. The second are also emerging as indispensable to a greater socialization of education, health, housing, sanitation and other services.

However:

• Excessive dependence of the enclave sectors remains little mingled with the rest of the economy, essentially facing the international market and enhancers of the unequal dis-tribution of national income.

• Weight of the structuring sectors of a new international economic order - industry, agriculture, financial system and information technology - is still low, despite high growth rates of their added value.

• Strong economic growth has not yet turned into develo-pment, much less progress, due to the model of income

distribution that prevails and to which only have access the social fringes related to political power.

• Much of the population still lacks access to housing, water supply and electricity in normal conditions and sanitation services. Proof is given by the chaos repeatedly caused by the rain on the outskirts of large urban centers, with rele-vance to Luanda.

• Structural and sustainable economic and social transfor-mation is a long-term process that requires good develop-ment policies, safeguarding the fundamental macroecono-mic balances, transparency and competitive bureaucracy.

1.- WORLD ECONOMY AND EXTERNAL FRAME OF ANGOLAN’S ECONOMY

The title of the World Economic Outlook September 2011 - Interna-tional Monetary Fund is eloquent about the world’s economic situation in 2011 and what is expected for 2012, “slowing growth, rising risks”. The devastating effects of the 2009 financial and economic crisis were dramatic for developed economies and 2011 and in 2010 there were some remains of a not completely solved situation, particularly in va-rious banking systems and real estate assets, particularly in the United States, Japan and Europe.

Global economy is in a new phase of danger: its growth ability has weakened, it became much less confident and stagnation risks have been incremented.

The overall picture of world’s economy in 2011 was a relatively weak growth dynamic, with a fall, compared with almost 22% in 2010. Advanced economies have been, and continue to be, the main part of this growing problem worldwide and although records show a positive growth of their respective GDPs, shortfalls against the good situation that occurred in 2010 were important, averaging around 48%.

In 2011, the world economy was affected by the confluence of two situations with a high degree of adversity: slow recovery in the advan-ced economies of the OECD since the beginning of the year, which was not considered possible (it was predicted that global GDP exchange ra-tes of 4.4% and 2.4% for advanced economies in early 2011) and consi-derable uncertainty about the outcome of financial and fiscal situations

for European economies and the U.S. economy.Economic growth was strong in 2010, but fell substantially in 2011.

Some international agencies have predicted this slowdown, but not to the extent that it occurred. Indeed, when the effects of fiscal consoli-dations in some countries are considered - especially at the expense of a contraction of the external and domestic demand - and stocks closing cycle, a certain economic slowdown was predictable. However, some unexpected factors exacerbated the decline in GDP growth intensity. One was the natural disaster in Japan (earthquake followed by tsunami and nuclear disaster) which implied consequences on budget balances and private investment.

The other somewhat unexpected event was related to unforeseen shocks in oil prices, that have reached average values above 108 dollars per barrel, an increase of more than 30% over 201017.

Moreover and as a result of the general decline in world’s economic activity, oil demand only varied by 1.3% in 2011, against 3.2% in 2010.

WORLD OIL SUPPLY AND DEMAND

(million barrels per day)

2009 2010 2011

DEMAND 85,5 88,3 89,5

United States 19,1 19,5 19,3

Euroarea 10,6 10,6 10,4

Japan 4,4 4,5 4,5

China 8,1 9,1 9,6

Índia 3,3 3,3 3,5

SUPPLY 85,6 87,4 89,5

Opec 34,1 34,8 36,5

Russia 10,2 10,5 10,6

Other non Opec 20,5 21,1 21,5

SOURCE: IMF, World Economic Outlook, September 2011.17 IMF, World Economic Outlook, September 2011. The World Bank points to 104 dollars average price of an oil barrel in 2011 (Global Economic Prospects 2012) and the Economist Intelligence Unit 110 dollars a barrel (The Economist, The World in 2012).

World private demands did not pick up the expected variation pace, due to the slow recovery of the financial sector, the legacy of the 2008 “housing boom” and the high unemployment rate of the active popula-tion in all OECD countries18.

Market distrust was the most recurring in 2011, with rating agencies expressing doubts as to the permanent capacity of many countries to consolidate their internal and external debts,. Initial reactions and penal-ties of these agencies targeted some of the European periphery countries (Portugal, Greece, Spain and Ireland), but as the low economic growth was confirmed, other countries (Europe and beyond) have become in-volved in discredit, relevance to Japan and the United States.

Market distrust and the penalties of rating agencies have extended to financial systems and those fears have caused banks to retreat their loans, preferring to maintain reasonable levels of liquidity. This shrinka-ge in the flow of loans for economic activity has amplified the crisis of GDP growth.

The problem of fiscal consolidation turns out to be the center of global economic recovery: if done in a very hard and fast way it will hurt the ability of economic growth, if accomplished slowly, it undermi-nes market credibility and confidence. The solution is not universal and depends on the economic and political conditions of each country. But the key remains a credible consolidation program. Some countries have received, and continue to receive, financial assistance from abroad, but the key is how to foster economic growth.

The group of advanced economies has proved to be the more sensi-tive to contraction of economic growth, for reasons already adduced, gi-ven the fact that it includes countries with poor economic growth dating for some time, at least for some European economies.

In 2009, the GDP average reduction rate was 3.7%, mainly in Japan (-6.3%), Italy (-5.2%) and Germany (-5.1%). Although 2010 was a year of some recovery in this area of the world economy (3.1% average an-

18 In the European Union the average unemployment in 2011 was about 10%, Spain had the highest (18%).

nual growth), 2011 was disadvantageous, with an average overall GDP growth of 1.6%. Only two countries in this group rose above its average: Germany (2.7%) and Canada (2.1%).

SOURCE: World Economic Outlook September 2011, IMF.

In the group of emerging economies - apparently without the proble-ms of consolidation of sovereign debt and fiscal balance - the economic situation in general was positive, although, of course, there were coun-terproductive effects of the crisis in more advanced economies.

The member countries in this group resisted better to 2009 crisis (the average rate was 2.8%) and in 2011 the combined GDP increased 6.4%. Of course China and India are the main responsible for these positive notes on the economic activity of this group.