'We went from a war to oil and diamonds'

After a 27-year civil war, Angola is now growing rapidly on a wealth of natural resources. However, the greatest challenge is to diversify the economy, tackle corruption and improve debt management capacity and the quality of life of its people.

High-rise construction fills the Luanda skyline.

LUANDA // Through the window of Mohammed Tajideen's run-down office building on Luanda's main avenue along the bay called the Marginal, the profiles of dozens of ships can be made out on the horizon. They have been waiting for weeks, in some cases months, to deliver their cargo to the overburdened port. "On average, everything here costs about 300 per cent more," says Mr Tajideen, the president of the import and export conglomerate Golfrate Holdings.

"It's better than it was but there is increasing pressure on the ports. Almost everything is imported - building materials, food, you name it." Each day a ship is delayed costs shippers US$180 (Dh661.17) for each container on board. The freight tax is $4,000. All of these expenses are ultimately passed on to consumers in Luanda. A 250 gram pack of Lurpak butter at a grocery store costs 895 kwanzas (Dh35.50). A meal at one of the decent Portuguese restaurants in town will set a visitor back $100 on average, even if they stick to the basics.

These are the symptoms of one of the world's fastest-growing cities. In 2002, Angola emerged from a 27-year civil war that saw the former Portuguese colony in ruins. Yet the country is endowed with some of the richest natural resources in Africa. "We went from a war to oil and diamonds," Mr Tajideen, 32, says. "I have never seen a country with so many resources but it is very far behind." Mr Tajideen is a member of one of several Lebanese families that came to Angola during one of the toughest periods of the civil war - the early 1990s - to set up import businesses.

Golfrate trades with companies around the world, including the Al Ghurair Group in the UAE. The company makes some basic products such as laundry detergent and biscuits. Lately it has started investing in property. The Lebanese are joined by the largest construction companies and property developers from Portugal and Brazil, such as Soares da Costa and Odebrecht, as well as a growing contingent of Chinese companies that are rebuilding the country's roads, railways and other infrastructure.

Enterprising businessmen from around the world descend on Angola each week, keeping Luanda's few hotels fully booked at rates of $425 for a basic room. A senior UAE delegation is due to visit Angola in the near future. Executives from the Dubai Multi Commodities Centre visited mining operations in the country last year to identify new opportunities. The skyline of Luanda is testament to its growing aspirations. New skyscrapers rise above the old colonial buildings and socialist-era housing blocks.

These include a complex four-tower development, comprising hotel rooms, apartments and offices, that will be run by InterContinental Hotels. At night, the gleaming new Escom building stands out with its four-sided LED screen. The Marginal, which runs outside Mr Tajideen's window, has been cleared and is scheduled to be renovated into a $2 billion waterfront promenade with gardens and cafes. Residents frequently say Luanda has aspirations to be the Dubai of Africa.

But these are just decorations for average Angolans, most of whom live in sprawling shanty towns that are known as "musseques" and surround the city. Only a privileged elite, many with connections to the president Jose Eduardo dos Santos, enjoy the new nightclubs and restaurants opening around the city. Life expectancy for Angolans is 44.8 years for men and 44.9 years for women, according to the UN. The infant mortality rate is 130 for every 1,000. About two thirds of the population live on less than $2 a day.

The enormous wealth created by oil exports - about 1.9 million barrels of crude are pumped a day - and diamonds do not trickle down to the population for the large part. The oil industry requires about 30,000 skilled workers, who are almost entirely foreigners that live in secluded compounds in and around Luanda. Ricardo Gazel, a senior economist in Angola for the World Bank, says the country's greatest challenge is to diversify its economy. While it has begun to expand its agricultural sector, which was once a jewel in the Portuguese colonial empire, it is starting from a low base, Mr Gazel says.

Its exposure to the fluctuations in the price of oil led to a near crisis in its economy in late 2008 and early last year. As the price of oil dropped to $30 a barrel, the country's oil revenues dropped as low as $600 million in February last year from $3.2bn in October 2008. The country quickly started spending its foreign reserves, which fell to $12bn in April last year from $20bn in November 2008.

The Angolan Central Bank then tried to slow the situation down but almost "broke the banks", Mr Gazel says. After years of 15 per cent annual growth in the economy, it fell to about 2.7 per cent last year and many projects were slowed down. Angola had to borrow $1.4bn from the IMF last year to continue funding some of its crucial infrastructure projects, which has required the country to become more transparent about its budget and spending.

The IMF also required Angola to improve its debt management capacity so that it could tap into the global bond markets in the years to come. Last month, Moody's Investors Service rated Angola as "B1", while Fitch Ratings and Standard & Poor's gave it a rating of "B plus". It was previously unrated. Angola has also announced its intention to create a sovereign wealth fund to help it weather difficult times in the future.

Mr dos Santos has made a recent highly publicised clean-out of corruption in the government, says Elio Codato, the country manager of Angola for the World Bank. "There is a clear effort to get rid of the image of corruption," he says. "Government officials are now required to disclose assets publicly. But the ingrained corruption will take longer to get rid of. It remains a problem." Human Rights Watch says that while country's efforts had not yet "gone far enough to remove barriers to transparency and accountability, there are renewed prospects for reform", citing the pressure from the IMF to be more accountable.

Angola is looking to make a bigger impact on the world. It spent $1bn to build four new sports stadiums, upgrade infrastructure and put on elaborate fireworks displays for the Africa Cup of Nations football competition this year. But those efforts were overshadowed by a gun attack on the Togo team's bus in Cabinda, a province that juts into Democratic Republic of Congo and is home to most of the country's oil resources.

Nine people, including two of the team's players, were injured and the driver of the bus was killed. The government called it an "act of terrorism" by the Front for the Liberation of the Enclave of Cabinda, which has fought for independence for decades. Despite the incident, Angola is pushing ahead with major building projects. Ridge Solutions, an up-and-coming conglomerate, sponsors the Williams Formula One racing team and is planning to build a grand prix circuit in the country in the coming years.

Two former executives from Aldar Properties, Ian Mackie and Martin Shaw, are working at the company. "The country is open to investors," says Jose Ramos, the founder and chairman of the company. "God put a lot of things in this country and it is time to build." [e-mail]