December 1, 2010 / 12:32 PM / 9 years ago

FACTBOX-Key political risks to watch in Angola

LUANDA, Dec 1 (Reuters) - Rising tension between the ruling MPLA party and the main opposition UNITA party and questions over policy-making are worrying investors in the major African oil-producing nation of Angola.

The MPLA, which emerged victorious from a 27-year civil war against UNITA in 2002, has been accused of corruption and of not doing enough to tackle widespread poverty.

Other concerns include uncertainty about a successor to President Jose Eduardo dos Santos and heavy dependence on oil revenue, feeding demands for more transparency as Angola tries to regain investor confidence after the global financial crisis.

ECONOMIC GROWTH

Conflicting economic growth forecasts from senior Angolan leaders and the sacking of powerful Economy Minister Manuel Nunes Junior have raised uncertainty about the economic outlook.

Finance Minister Carlos Alberto Lopes predicted economic growth of 6.7 percent this year, up from 2.4 percent in 2009 and above a 4.5 percent growth forecast by Dos Santos in October.

The divergent forecasts puzzled analysts and were well above an International Monetary Fund projection of 2.5 percent growth made in November.

A Reuters poll on Nov. 23 showed that the economy was expected to grow by 7 percent in 2010.

Analysts said the conflicting forecasts could be linked to a government-estimated $6.8 billion in overdue bills to local and foreign builders. The government admits receiving requests from building firms to pay up to $9 billion in late bills.

The replacement of Nunes Junior by former Central Bank governor Abraao Gourgel is seen as a setback for reform.

New National Bank of Angola governor Jose de Lima Massano has been received more favourably. The former head of Angola’s biggest private bank is highly regarded by markets,

Nunes Junior oversaw monetary policy, a $1.3 billion loan programme with the IMF and set up the country’s first sovereign wealth fund.

Stubborn inflation also remains a concern. Lopes predicted overall inflation in 2011 at 12 percent and the oil minister said last month Angola’s long-delayed stock exchange will only be opened after inflation fell to single digits.

Watch out for:

— Conflicting views on the economy from Angolan leaders

— Criticism of Angola’s new economic team

POLITICAL BICKERING

The campaign for 2012 elections is off to a shaky start with the opposition UNITA party saying deadly riots in Mozambique over price increases earlier this year could lead poverty-stricken Angolans to do the same.

UNITA leader Isaias Samakuva made these comments after the government raised fuel prices by up to 50 percent.

The polls will only be the second since the end of the civil war that pitted the Russia- and Cuba-backed Popular Movement for the Liberation of Angola (MPLA) against UNITA, backed by the United States and apartheid South Africa.

The MPLA, which won the war in 2002 and 82 percent of the vote in elections two years ago, is almost certain to win the 2012 elections, but it looks increasingly worried about UNITA’s accusations of not doing enough to fight poverty and corruption.

The army and police have so far deterred unhappy Angolans — an estimated two-thirds live on less than $2 a day — from publicly protesting against the government.

Watch out for:

— Protests from taxi drivers forbidden from raising fares

— Signs of civil unrest in shanty towns around Luanda

TRANSPARENCY

Dos Santos has been unusually vocal about corruption after his government turned to the IMF for a loan last year.

His comments on zero-tolerance for graft prompted parliament to pass a law this year to punish corrupt officials.

But it is hard to change the rules of the game when the players remain the same.

The decision-making process tends to be opaque, with access to the key players in the government limited. The private media is also seen to be controlled by members of the government.

Reliable statistics and market-relevant information are scarce, with the MPLA holding a huge sway over the media.

Such lack of transparency can lead to unwelcome surprises, such as when the Angolan government announced commercial arrears of an estimated $6.8 billion far exceeded prior expectations.

Watch out for:

— Government delivering on pledges to fight corruption

— Government announcing further surprising debt numbers

SUCCESSOR

The MPLA’s landslide victory in the first post-war election in 2008 left political rivals in tatters, enabling dos Santos to change the constitution and increase his powers.

The new charter will enable the 68-year-old ruler, widely expected win the 2012 election, to remain in power until 2022 although there is speculation he will retire before then.

The big question is whom dos Santos will pick as vice-president for the race. That person will be seen as the successor to one of Africa’s longest-serving leaders.

Despite criticism for holding power for more than three decades and having huge influence over politics and the economy, dos Santos is widely seen as key to peace and stability.

Vice-President Fernando Piedade Dias dos Santos is a natural successor but he has health problems and could be outflanked by ministers of state Manuel Vieira Dias or Carlos Feijo.

Watch out for:

— Changes in the government ahead of the 2012 elections.

— Any comments from dos Santos about his plans to retire.

OIL DEPENDENCY

Oil has helped Angola pick up the pieces of a devastating civil war to become sub-Saharan Africa’s third biggest economy after South Africa and Nigeria.

But as elsewhere, oil dependence can also be a curse.

Despite moves to diversify and invest in sectors such as agriculture, oil still accounts for 90 percent of Angola’s export income but employs less than 1 percent of the population.

The oil price slump in 2008 left it struggling to pay civil servants and forced it to delay paying the billions of dollars to construction firms rebuilding after the war.

The IMF, the World Bank and ratings agencies, which have given Angola the same B+ rating as Nigeria, have all urged Angola to do more to diversify its economy.

Should Angola fail to do so, it risks becoming another Nigeria, where quarrels about the distribution of oil wealth have fuelled civil unrest.

Chinese Vice President Xi Jinping said on a visit to Angola last month that he believed relations with his country’s biggest African trading partner would be stepped up.

Chinese officials have said Angola’s plans to cut its dependence on oil could see relations between the countries improve further, with China seeing potential in agriculture, service industries, infrastructure and renewable energy.

Angola rivals Nigeria as Africa’s biggest oil producer.

Watch out for:

— New policies to diversify the economy into sectors such as agriculture.

— Ability of the government to pay back $6.8 billion in late bills to construction firms.

POVERTY

More than eight years since the end of the civil war, millions of Angolans still live in shanty towns while unemployment is around 50 percent. Last year’s recession has only increased their anger and frustration.

Their resentment is stoked by reports of government corruption and plans to relocate millions living in huts around Luanda to unfinished housing projects further from the capital.

Dos Santos has pledged to build 1 million homes for the poor in four years at a cost of $50 billion but such plans have repeatedly been delayed.

The war between the MPLA and UNITA devastated Angola’s farming sector, forcing millions to flee to the cities.

Watch out for:

— A repeat of street protests last year over forced evictions

— Government uses security personnel to force residents out of shanty towns, which could spark protests. (Writing by Marius Bosch; Editing by Giles Elgood)

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