Crashing Oil Prices, Propaganda and the Angolan Recipe for Disaster

Throughout the Angolan capital, Luanda, strategically located billboards announce a country being happily stewarded through development by the government. “Building a prosperous Angola based on solidarity”, is the boastful slogan across all ads celebrating the government’s achievements in all spheres of life. One such billboard celebrates “more electricity, more development”, in spite of the regular power outages.

Such a massive propaganda exercise outside the electoral period has a precedent only in the early 1970s, when the Portuguese colonial authorities desperately tried to sell the idea that their rule was making people very happy, and independence could ruin all such great achievements.

Nonetheless, this propaganda is in full swing at a time when the steady drop in the oil price on international markets could be good news for the Angolan people and a bad omen for their rulers. As a major countermeasure, last December the presidency decreed a 20 percent rise in retail fuel prices boding ill for the people. This was the second rise decreed in a span of three months. More than 80 percent of oil derivatives consumed in Angola are imported owing to a lack of processing capacity in Angola, and the authorities continue to spend up to US $ 3.5 billion a year subsidizing them. The International Monetary Fund (IMF), in exchange for helping the government with a bailout, has suggested a radical cut in such subsidies. The authorities have obliged, and they can always blame the West, through the IMF, for the deterioration of the situation.

Hence, as the second largest oil producer in Africa, and a major global exporter, Angola has become possibly the only producer that has sharply increased domestic fuel prices at a time of the oil price crash on global markets.

Between propaganda and reality, this article explores the impact of the oil and fuel prices on the president’s 35 year-old rule, and on society at large. This year’s budget provides a critical illustration of how the authorities are set to deal with the economic crisis. Corruption, propaganda and repression will effectively be the main measures to deal with the situation.

Good News, Bad News

Angola’s celebrated cartoonist, Sérgio Piçarra summarizes the government’s current predicament, in a January 22 cartoon.  The government is portrayed as a kamikaze pilot manning a plane named “virtual economy”. It is heading straight into a thunderstorm formed by four cloudy and menacing barriers: namely, oil price, social and economic crises, bad governance and corruption. Agriculture and industry stand at the control tower calling “hello… hello, virtual economy? Here real economy calling… do you hear me? Over…” There is no response as the pilot is clenching his teeth apparently in an attempt to stop the plane from hitting the clouds right before him.

The oil price crunch could be good news because the government of president José Eduardo dos Santos would have to tackle institutional corruption, squandering and mismanagement as well as diversification of the economy. To take any other route would lead to the self-destruction of the regime.

Why is this?

It is because Angola’s rulers have consistently used revenue from oil and its distribution as a means of maintaining a hold on power and increasing their personal wealth.

Last October, parliament passed the 2015 state budget, with oil prices benchmarked at US $81 per barrel. Over 95 percent of Angola’s export revenue derives from oil. Its decline to US $50 has significantly shrunk the revenues of US $72.5 billion assumed in the initial budget. The government has estimated the loss US $14 billion in oil revenues, earmarked to support the initial budget, due to the fall of the oil price.

From the initial amount, the government expects to raise US $30.6 billion in loans, more than half of which is to be on the local market. As commercial banks in Angola are overly dependent on state deposits and on private companies doing business with the state, this raises two main concerns: First, senior public officials’ ill-gotten fortunes might be the source of funding in money-laundering schemes through the purchase of state title bonds; and, second, this portion of the budget might be fictitious to simply prop up the GDP for a hopeful economic outlook. For instance, this year’s public debt is set to reach US $47 billion, equivalent to 35.5 percent of the GDP, according to the estimates in the budget.

On January 23, Dos Santos’ economic team set the “terms of reference” to revise the budget, with the oil price now benchmarked at US $40 per barrel. How  the authorities will bring down expenditures projected over US $45 billion is a big question mark. A third of it, US $15 billion, is earmarked for public sector salaries alone.

But in his classical legalistic approach, president Dos Santos has covered his back in case money cannot be found to cover the expenses. The 2015 Budget Law gives the president full powers to “withhold up to 100 percent of the budget’s allocations for projects under the Public Investments Program, and expenses for the Support of Development [Program].” This has been justified as a measure to “prevent eventual behaviors stemming from the insufficient collection of revenues.”  A total of US $11.1 billion has been earmarked for Public Investment Programs.

However, the president has already demonstrated that he will not address institutional corruption, but rather rely on it. His recent appointment of a once-disgraced former minister of Finance José Pedro de Morais, as the new governor of the Angolan Central Bank, has surprised even his most fervent supporters. The same happened at the end of 2013, when he appointed another disgraced former minister, André Brandão, as his secretary for Public Contract Affairs.

In preamble to this year’s budget  there is a veiled criticism of the president’s resistance to transparency in tenders for public contracts. This year the state budget calls for the massification of open tenders, as well as for strict compliance with the Law on Public Contracts. This is hypocritical self-criticism to signal that the president is improving on transparency. Nevertheless, there is no sensible explanation as to what the secretary for Public Contract Affairs does, beyond being cog in the system designed to bend the law.

But the critical element remains the size of central government, and the fact that the president has a cabinet of 33 ministers and 55 deputies, one of the largest governments in the world. In addition, Dos Santos has his more influential shadow cabinet within the presidency, run by two ministers of state, one minister and 12 deputies, including Mr Brandão.

Conservatively, just in formal salaries and benefits, this mammoth central government costs the taxpayers over US $30 million a year.  This does not include infrastructure and overhead costs for all these individuals to perform their duties.

For the past four years, the president has avoided regulating the Law on Remunerations for Members of the Government (Law 11/10) Why? “It enables the president to interpret and dispose of it as he wishes, as only the regulation sets the limits for the operationalization of the law”, explains a lawyer speaking on condition of anonymity.

“Thus, ministers can have more than one official vehicle, and can sign off on more subsidies and perks for themselves for they see no limits”, he adds.

According to the same lawyer, “that is why it is difficult to combat corruption. The president does not regulate the laws that could help stem corruption. The laws are only to provide a veneer of the rule of law, but he leaves them undefined to protect the status quo.”

It is extremely hard to calculate the total yearly cost of the fat cats sitting in government, given the liberties ministers have with the budgets and assets at their disposal.

As far as the diversification of the economy is concerned, it will not happen under president Dos Santos’ tenure. Here is why.  The economy, in both state and private sectors, remains overwhelmingly centralized in the hands of a few decision-makers. These, in turn, are also the main businesspeople in the country, who engage in contracts using state funds in order to plunder the state.

Agriculture is often regarded as the sector that might most contribute to the diversification of the economy. For a year, this writer has been mapping out land grabbing by tens of public officials, in the most fertile areas of the country, as well as their access to hundreds of millions of dollars in state loans for agribusiness. Much of that money ends up in foreign bank accounts or serves to fund lavish lifestyles. Yet hundreds of rural communities are being dispossessed of the land they have used for generations for subsistence farming, and offered nothing in return.

Furthermore, institutionalized corruption has eroded any efforts to diversify the economy, and to spur job growth and sustainable free-market enterprises. Public officials often give contracts to foreign companies that establish joint-ventures with their own private companies, or to those enterprises in which they have vested interests.

Today, corruption is the principal factor determining unity and loyalty at the heart of the ruling MPLA’s 40 years of power, just as it is the backbone of the suppression of civil and political rights of the citizens.

However, the president is crafty. He has been funding two different groups of experts to advise two different economic commissions under his tutelage, to the tune of US $3 million a year. One is the Economic Commission, and the other is the Commission for the Real Economy. Go figure. And, if that is not enough of a joke, this year he is also paying US $11.2 million from the presidency’s budget for the Yeosu Expo 2012, which took place in South Korea three years ago. In 2012 Mr Dos Santos earmarked US $9.1 million for the Yeosu Expo 2012. A year later, in 2013, he allocated US $5.7 million more for the same world fair that had already happened. In 2014, he claimed to have spent an extra US $6 million for Angola to be represented at the fair. In total, the fair has been used by the presidency to claim more than US $30 million in expenses. There is no official information on the obsession with the Expo 12, and what has actually happened with the money. There are many more such examples, but this suffices to make a point.

Furthermore, this year’s budget has US $3.85 billion for non-specified “other services”.  The Angolan Political and Social Observatory (OPSA) has reckoned that this amount corresponds to 5 percent of the total state budget. “As it is evident, this fact does not contribute to the transparency and credibility of the state budgets”, OPSA warns.

This is a bad omen for the regime. Without war, and without the oil cash flowing like a river, how can it disguise the president’s apparent obliviousness to reality?

Here Comes Propaganda

Propaganda has been used both to promote the actions of the president and the MPLA and as a psychological tool to neutralize social criticism.

The propaganda campaign, referred to earlier, is rather impressive. For instance, a picture of the newly-built US $280 million National Assembly, is portrayed as “consolidating democracy”. The token parliament is rebranded as a force of democracy. A silo for cereals built in the municipality of Cubal in the coastal province of Benguela is celebrated as part of the “new industrial hub”. Then, one of the favourites, the Chinese-built town of Kilamba in Luanda, is cast as “solving the people’s problems”. But the most riveting one is the picture of a turbine south of Luanda, which shows that it is fuelled by two diesel tanks, one of 2,500 cubic meters, and the other of 250 cubic meters. The caption is priceless: “more electricity for everyone”. The turbine does not provide power beyond one neighborhood; it burns fuel galore; it is highly polluting. But propaganda wants to make people forget that the government claims to have spent billions on two dams, Kapanda and Laúca, to power the capital city.  Given the endemic power outages in Luanda, these investments have failed to deliver as promised.

For this year of crisis, the president has earmarked US $33.4 million for his propaganda office, known as GRECIMA.

As part of their comprehensive efforts, the MPLA’s basic structure, the network of Party Action Committees (CAPs) operates as a propaganda machine and personalised intimidation weapon in all neighborhoods and villages. In turn, Speciality Committees perform the same function for the MPLA in public institutions and companies. The State Intelligence Service (SINSE) and other secondary forces provide the muscle, which instils fear and intimidation into the heart of society, the essential conditions for the people to adhere to the MPLA. Personal security disseminates the message that socio-economic stability is dependent on citizens’ collaboration with the plot. Socio-economic rights are used as privileges and rewards.

State media complements the mission. Propaganda in Jornal de Angola, the country’s only daily newspaper, the Angolan Public Television (TPA), and the National Radio of Angola (RNA) amounts to psychological torture, administered in daily doses, about what the government is doing or plans to do. It is a tactic of ad nauseam propaganda, endless repetition.

But even all this is not enough to convince people that what the government is doing is a personal gift rather than a service that any government is obliged to perform.

Protest, Repression and Plotting

Now, president Dos Santos’ rule is fast becoming the common adversary.  There are fewer options to justify why, after 35 years of incompetent rule and the squandering of billions of dollars from oil revenues, he needs to remain in power.

Sectors of the ruling elite, concerned with their own self-preservation, are coming to the conclusion that the president may no longer be the lord protector of the status quo. It is possible now to hear generals and senior members of his cabinet suggest that it is time for Dos Santos to go. State coffers may soon have no liquidity to keep institutional corruption as the main incentive for political support for the president. This may lead to a breakdown of his patronage network.

Currently the president is unable to tolerate even small protests against his rule, often by just a handful of youth. Military intelligence has taken command of operations against such dissenters. But discontent among the rank and file of the military, the police and security forces is leading to talk of conspiracies, whether real or imagined, against the president, making him a sitting duck. There are serious concerns that if the government fails to honour on time the monthly pay checks of military and police personnel it will jeopardize the stability of the regime.

Across the political and social spectrum the idea that the president and what he represents must go, is fast becoming common currency. For it to be good news for the people, a new social and political mindset must be forged. How to build a state in which the government serves and respects the sovereignty and the rights of the people must be the central question to be addressed.