Manuel Paulo argues that Angola has unparalleled opportunities, “but it also faces major constraints and challenges, which if not properly managed could have extremely damaging consequences, indeed, cancelling out the opportunities available.” He points out that for a successful consolidation of long-term sustainable peace to exist in Angola, the economy would need to be diversified first.

The rhetoric in Angola has been that the coming of peace brings with it the opportunity to create a strong economy and society in which the entire population will share the benefits of Angola's huge mineral wealth. Indeed, Norway, Chile and Botswana provide evidence where sustainable development has been built on the basis of mineral wealth. In Angola, however, oil companies tend to voluntarily invest large sums of money into social investment programmes, with little developmental impact on the country, and it appears that the primary purpose of these programmes having more to do with public relations motives than any real commitment to meaningful advances for the local greater populace.

The country has unparalleled opportunities, but it also faces major constraints and challenges, which if not properly managed could have extremely damaging consequences, indeed, cancelling out the opportunities available. Firstly, to ensure implementation of a rigorous application of modern procurement system which would limit opportunities for corruption, there must be a capable workforce as well as an operational legal system. Secondly, there should be efforts to boost development in the country as a whole. Failure to improve the business climate outside the oil sector will continue to result in large-scale urban unemployment. Such a situation would worsen urban poverty and allow frustration to simmer, especially among the youth. The latter nowadays turn to alcohol to contain their frustration at not being able to find a job. Lack of jobs for the youth may well be an ingredient for violence or indeed criminal activities to thrive.

It is safe to say that a promising future for Angola and Angolans will require the development of an independent judicial system, a neutral civil service and strong state institutions, which will require more than the current superficial social investment programmes from the international oil companies. Oil on its own will not lead to increasing Angolan economic and social indicators from its current levels. Sustainable employment creation in Angola can only come from broad-based economic development that goes beyond an oil sector, which provides very few direct jobs. In the medium term, large numbers of jobs will only be generated by large government public works programmes aimed at rebuilding the country’s shattered infrastructure, and in the agriculture sector.

International oil companies currently investing in the Angolan oil industry are required to engage in a process known as Angolanisation, a process common to most developing oil producing countries. This process requires foreign oil companies operating in Angola to staff their local operations mainly with Angolans, ostensibly to benefit to a greater number of Angolans. However, the beneficiaries of Angolanisation are predominantly foreign educated Angolans because ordinary Angolans who attend local state schools are unable to compete on an equal level with Angolans who were trained abroad. In addition, most international oil companies operating in Angola have admitted that there is a fierce competition for skilled Angolans amongst international oil companies, let alone the state. This means that competent workers from already fragile and under-performing state institutions are lost to international oil companies - placing the government in a disadvantaged position when trying to attract qualified personnel for its already weak public administration. International oil companies are also in a stronger position to attract well-educated Angolans due to high remuneration, and better working conditions they offer. The government on the other hand, is unable to pay the sort of salary, training and benefits that international oil companies are offering.

This is a short-sighted strategy since the Angolan authorities should see diversification of the economy as a decisive factor in the successful consolidation of a long-term sustainable peace. Additionally, failure to revive the non-oil economy (that provides jobs and sources of income for ordinary Angolans) will result in popular discontentment and continuing high levels of social inequality a potential source for future popular discontent. This situation is seemingly not of concern to international oil companies, because their goal is the formal one of presenting acceptable statistics to the government on their compliance with the process of Angolanisation.

It is well known that the oil industry is not an engine for job creation. The industry is capital-intensive and after half a century of oil production in Angola, the industry employs only about 19,000 Angolans. Only 50 percent of engineers are Angolans and in certain types of technical jobs such as drilling and well servicing the proportion is even lower, which is low by any industry standards (IPEDEX 2003). The government should establish a more supportive regulatory framework and a fund that permits improvements in education and training, and allows apprenticeship schemes and many other economic activities independent of government to thrive as a way to diversify the economy. Subsequently, the country’s substantial oil earnings could be a major source of investment in a National Training Fund to the necessary human resources to unlock other sectors of the economy that generate more jobs than the oil industry.

Nevertheless, many would argue that, oil funds are not an easy – nor necessarily an appropriate – solution to the problem of diversifying the Angolan economy. However, the proposed National Training Fund would require the government of Angola to set up a legal framework to govern it, in order to avoid the problems the Venezuela Oil Fund experienced. In order to address possible allegations and suspicions of cronyism and patronage, the government should open its books to a leading external auditory firm to monitor the Fund management of the resources.

One way to fund the Oil Fund would be to make it compulsory for international oil companies to pay a quota for each expatriate they have in the country. The quota is a way to encourage oil companies to recruit locally, and the quota would vary from exploration to production phase. The benefit of such an initiative is that all spectra of Angolan society would have a stake in the development of Angola, and international oil companies would not be accused of creating another elite in Angola under the Angolanisation programme. The government would also be able to address the lack of human capacity to effectively manage the revenue generated by the country’s resources. This will be a way of facilitating addressing Angola’s severe shortage of professional personnel.

Oil Funds have been into place in Norway, and Kuwait for decades. Colombia, Venezuela, Azerbaijan, and Chad have also embraced such funds. These funds have several purposes such as keeping money out of the economy to avoid ‘Dutch Disease’ and other problems associated with large inflows of money into an economy that cannot absorb it; or saving revenues for future generations. However, in the case of Angola a National Training Fund financed by oil revenue could be used as a mechanism to introduce a comprehensive Angolanisation Programme that goes beyond the oil industry.

This paper has shown that there are constructive ways in which international oil companies could contribute to Angola’s development not by creating another elite within its Angolan workforce or instituting systems of patronage. Instead, all efforts should be direct towards ensuring that the wealth the oil industry brings benefits all Angolans. The National Training Fund proposed above could be decisive to address the weak capacity and lack of professionals for the oil industry, and help Angola to diversify its economy.

• Manuel Paulo is a PhD Candidate at Middlesex University Business School, Fellow on Angola at Chatham House.
• Please send comments to or comment online at www.pambazuka.org