Angola's oil industry operations

By Maria Lya Ramos | October 30th, 2012
Angola's Oil Industry Operations

Angola’s oil production drives an enclave economy that enriches wealthy political elites and leaves the masses in dire poverty, according to Angola's Oil Industry Operations – a research report commissioned by the Open Society Initiative for Southern Africa.

The state-owned oil company, Sonangol exerts undue political and economic power, and institutions to provide checks and balances are weak. Sonangol is accountable only to the president. There is an obvious conflict of interest in that it both administers and regulates the oil sector. The company’s transactions with the national budget are porous and allow for state funds to be siphoned off. Millions of dollars are being diverted from the state treasury, either through institutionalised or straight up corruption.

Angolan elites and public officials are reaping huge profits from the legal obligations of multinational companies to contract with Angolan companies. Multinational companies, for their part, turn a blind eye to corruption. Oil revenues, which should be invested in social sectors and in diversifying the economy to support the country’s long term sustainable development, are instead reinvested by Sonangol in joint ventures and subsidiary businesses, which benefit just an elite few.

Environmental impacts of the industry go largely unmitigated, while communities in oil producing provinces receive no real benefits.

A well-functioning governance system involves political, economic and legal constraints designed to limit misconduct by those in power. In Angola, people are poor because the country’s institutions are dysfunctional and have not provided the needed checks and balances. Corruption is just a symptom of the deeper malady of weak, failed or missing institutions.

A kleptocracy is unlikely to reform itself voluntarily. It must be prodded. Even if the government does change, it may not be replaced by a better one unless sound governance institutions are put in place.

Recent events in Angola show that if the circumstances are right, external actors can help to kick-start the process of reform. NGOs, international organisations, and some foreign governments have all played a role in pressing the Angolan government to make itself more open. In initiating the process of building checks and balances, pressure from overseas complemented the activities of Angolan civil society.

Transparency is necessary for accountability. But the ultimate constraint on any government – democratic or authoritarian – is its citizenry, the power of the people. Transparency informs the citizenry of abuses. It does not in and of itself solve corruption, but it goes a long way towards speeding up the search for a solution. By building up knowledge, and broadly disclosing information about government misdeeds, transparency can empower the citizenry to take action. And by adopting the following recommendations, the Angolan government will help to ensure that the country's oil wealth benefits everyone not just the lucky few.

Key recommendations in the report

  • Promote public debate and civic engagement on transparency
  • Promote citizen-led calls for fair distribution of revenues
  • Strengthen implementation of current legislation
  • Promote mechanisms to hold Sonangol to account
  • Expand Angolan transparency demands internationally
  • Promote mechanisms to hold multinationals to account
  • Strengthen institutional capacity
  • Promote usage of international anti-corruption instruments
  • Promote Angolan-led, media-driven investigative reporting
  • Promote alternative reporting and access to information

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