Africa's Oil Tycoons

by Daphne Eviatar

The Nation magazine, April 12, 2004

The red, white and blue helicopter soared through streaming white clouds and sunny blue sky. Below, tiny Lego-like platforms jutted up from the shimmering Cabinda Bay. But as we neared the Takula oilfield, dozens of towering flares breathed huge swirls of fire. The tides of the Congo surged into the waves of the Atlantic, and the ethereal cloud formations were engulfed by a yellow-brown haze.

This is the heart of Angola. Although separated from the rest of the country by the Congo River and a strip of land that's part of the Democratic Republic of the Congo (Portugal only incorporated the province of Cabinda into Angola in 1956), the twenty-four-hour oil operations that suck coffee-colored crude off the coast of Cabinda are the country's economic engine. They are what financed the government's army during a civil war that ended just two years ago. And they're the most obvious sign of the West's relentless tentacles reaching into Angola today.

The constant cough of noxious black fumes is the least of their consequences. Twenty-seven years of civil war fueled by a lethal mix of oil, diamonds and cold war enemies have left one of Africa's potentially richest countries a shambles. Although its own kleptocratic leaders and homegrown revolutionaries deserve much of the blame, it's impossible to divorce what's happened from the constant manipulation of outsiders-from the Portuguese, who kept Angola under the thumb of colonial rule for 500 years, to the United States and white-led South Africa, which bankrolled Angola's rebels during the cold war, to the multinationals draining the country of its natural resources today.

I went to Angola to try to understand how a country so rich in the most coveted resource of our time-oil-can fall to the bottom of almost every scale of human development. Angola pumps almost a million barrels a day; the United States imports more oil from Angola than from Kuwait. But 70 percent of Angolans live in poverty. Eighty percent have no access to basic medical care. Average life expectancy is only forty years, and three in ten children will die before reaching their fifth birthday.

It 's no secret that Angola's leaders are siphoning off huge amounts of state money. But lurking beneath the sinister statistics and corrosive corruption is the murky involvement of Western governments and multinational oil companies. What role are they playing in the postwar transformation of Angola?

Luanda's Hotel Tropico, a favorite among oilmen and World Bank and IMF officials, offers a clue. When I arrived in Angola's capital bleary-eyed early one morning in mid-October, the slick new lobby was packed. While the Angolan staff scrambled to confirm reservations on malfunctioning computers, middle-aged white men elbowed their way to the long mahogany counter demanding to know why their rooms weren't ready. Others dozed in overstuffed armchairs among stacks of suitcases, waking intermittently to drink espresso or whiskey and smoke cigarettes. It was 5 AM, and although Angola has no tourist industry, the hotel was full and our rooms wouldn't be ready before noon. Until then, no one seemed to be leaving the building.

In fact, I'd been warned not to walk outside, and I quickly understood why. Exploring the streets of Luanda is harrowing. It requires careful maneuvering among fragments of broken sidewalk and heaps of reeking garbage. Reckless drivers on rough dirt roads kick up a choking dust that sticks to your sweat in the sweltering heat. And it's almost impossible to make it five blocks without being splashed by sewage. Frequent petty crime in Luanda casts a pall of fear that only ratchets up the tension. This once-thriving "Paris of Africa," now a mix of broken-down colonial villas, 1960s-style apartment blocks and sprawling shantytowns, has essentially been abandoned by the government. Built for a population of about half a million, it's now home to eight times that many, mostly refugees who fled the ravaged country-side during the civil war. They arrived in the capital and built a vast maze of musseques-clusters of cement-block hovels with rusted-scrap tin roofs, held down by stones and patched with plastic sheeting. The government has thrown up its hands: It doesn't provide electricity or running water in much of the city, let alone maintain the roads or pick up the garbage.

To avoid this unpleasantness, most foreigners-whether working for oil companies, aid organizations or the United Nations- travel around the city in chauffeur-driven SUVs. Those who work for ChevronTexaco, which dominates the Angolan oil industry, aren't even allowed to drive themselves. They're also forbidden to venture into the countryside. The limit is the golf course in nearby Luanda Sul, where the company maintains a gated, guarded compound of Southern California-style homes for its employees.

Still, even the most privileged in Luanda can't completely avoid its conditions. When I caught a ride to Luanda Sul with a BP oil executive, the driver had to navigate the Range Rover over jammed mud roads and crater-sized potholes, swerving to avoid the children who picked through mountains of roadside garbage. Men hawked sundries from car to car while women sold produce in the dirt alongside open sewers.

It wasn't always this way. The Portuguese were first drawn to Luanda in 1575 because its port offered access to legendary silver mines. But the slave trade soon became the main attraction: In the seventeenth and eighteenth centuries, the Portuguese captured and shipped up to 2 million Angolans to South America and the Caribbean. Even after slavery was outlawed, the Portuguese used forced labor in Angola's countryside to grow cotton, sugar, rice and tobacco for export; others reaped riches off the country's vast diamond reserves. Luanda boomed in the 1930s, and by the 1970s it was among the continent's most modern and picturesque cities, its wide avenues boasting stunning examples of the finest Portuguese colonial architecture.

But all was not well. Angolans were agitating for independence and, after a military coup overthrew Portugal's forty-eight year dictatorship in 1974, found themselves suddenly free. The bulk of the Portuguese elite professional and middle class abandoned the country. With no foundation for democracy and only the example of half a millennium of exploitation, Angola fell prey to vicious factional fighting. The Marxist Popular Movement for the Liberation of Angola, or MPLA, representing urban, middle-class, mixed-race Angolans, quickly won control of the government with the backing of the Soviet Union and Cuba. The National Union for the Total Independence of Angola, or UNITA, led by Jonas Savimbi, was supported in most rural areas of the country.

But if Angolans viewed the conflict as a civil war over ethnic, geographic and resource control, the West saw it as yet another domino to be defended in the cold war. UNITA quickly won support from neighboring South Africa and the United States.

By the time the war ended, with the assassination of Savimbi in 2002, more than 500,000 Angolans had been killed. Two million more had been driven from their homes. The countryside was scorched and the economy in ruins. Angola has gone from being the breadbasket of Africa to producing almost nothing; its sole successful industry is the manufacture of artificial limbs. Although in 1991 Angola officially abandoned Communism (the United States recognized the MPLA government soon afterward), its overnight transition to a market economy has done little to bolster living conditions. The only difference most Angolans notice is that they no longer get free education or healthcare.

For the mostly foreign elite, though, Angolan-style capitalism provides a warm welcome. Although prices are astronomical-a basic one-bedroom flat can cost twice what it would in London or New York, and the electricity and water go out several times a day-most company employees have all their expenses paid, and generators cushion the inconvenience of power outages. While some foreigners live along the palm-lined Marginal, Luanda's crumbling waterfront promenade, the oil companies maintain separate walled compounds of suburban-style houses for their employees on the outskirts of the city. Most foreign workers, including US Embassy employees, earn more money in Angola than they would almost anywhere else, due to extra "hardship payments." And while just a few years ago there was nothing to buy, a new sporting-goods store filled with Nike products and a Range Rover dealership have opened downtown.

For those willing to leave their homes, Luanda can be fun. Every Friday afternoon the US Embassy hosts a happy hour. Afterward, mostly American and South African embassy workers and businessmen head for the Ilha-a skinny strip of land that juts out into Luanda Bay. There, oceanfront cafes like Miami Beach and Coconuts offer Portuguese wine and South African beer, Brazilian cocktails and a dozen different preparations of prawns, an Angolan delicacy. After a gourmet dinner, expats will hit Bahia, a tasteful open-air Brazilian nightclub, or one of Luanda's all-night dance spots, where middle-aged foreign businessmen have their pick of young Angolan prostitutes.

Much of the fuel for this enclave of opulence comes from California-based ChevronTexaco. Pumping 60 percent of Angola's oil-more than half of which is exported to the United States-the company expects to double its oil production there by 2008. "Angola has been a terrific place to do business," Jim Blackwell, the director of ChevronTexaco's operations in Angola, told me. That's because the horrors of Angola's civil war never really touched ChevronTexaco, which pumps most of its oil from platforms far out in the ocean.

To understand exactly how that works, I went to visit the company's compound, known as Malongo, in Cabinda-the only part of Angola most ChevronTexaco workers ever see. (Although some stay at Malongo, others are ferried by helicopter out to massive steel oil platforms in the ocean, where they spend twenty-eight days before being shuttled back home.) Built in the 1960s, Malongo is a campus of ranch houses, manicured green lawns and smooth paved roads. ChevronTexaco's own well and private filtration system supplies drinkable tap water-a rare luxury in Africa. Spacious dining halls offer a stunning array of fresh seafood, imported meats, salad and dessert bars. The vegetables are all grown in an organic greenhouse on the compound, set up by Norwegians, and bright green Granny Smith apples are flown in from South Africa. For entertainment, there's baseball, basketball, volleyball and tennis, a cricket pitch, horseshoes and a rolling green golf course. Unlike the rest of Angola, where the official language is Portuguese, the language of Malongo is English. If workers still get homesick, they can dial direct from their rooms to the United States-no need for international dialing codes. Indeed, except for the extraordinary bats that hang in ominous clusters from the branches of the compound's mango trees, you'd never know you were in Africa.

ChevronTexaco does everything it can to keep it that way. No one enters or leaves the compound without special permission. And there's no way to avoid the tightly guarded security gates, because the entire compound is surrounded by a double fence of barbed wire that encloses a ring of anti-personnel land mines.

The mines, planted by the government during the war, are just one manifestation of the long-standing relationship between the Angolan government and the oil company. Gulf Oil, as the company was then known, first discovered oil in Angola's waters in the mid-1960s. Although the ascension of the MPLA scared off most Portuguese investors, the oil operations were largely offshore and therefore untouched by the ensuing bloodshed. Despite the new government's Marxist ideology, it signed a contract granting the American corporation drilling rights. (Gulf Oil became Chevron in 1984, which then merged with Texaco in 2001.) The MPLA played its part by guarding the compound, and used Cuban troops to do it. Back in the United States, though, Ronald Reagan was hailing rebel leader Jonas Savimbi as a "freedom fighter" and funneling millions of dollars to UNITA to support its bloody war against the Angolan government. As a result, Chevron in the 1 980s was in the unlikely position of being an American oil company allied with a Communist government and guarded by Cuban troops from potential attacks by US-funded rebels. (Mysteriously, the company's compound was never directly attacked, leading to speculation that the United States paid off UNITA to spare the oil operations.)

The government still maintains an armed base on a hill just outside Malongo's gates to coordinate with the company on security. (In addition to local hostility against the oil company, some Cabindans have been waging a separatist campaign against the government for decades, claiming they're not reaping any benefits from Angola's oil, the bulk of which is in their territory.) But the benefits of the company's relationship with the government these days go well beyond security. When I visited, ChevronTexaco officials told me that the company is working closely with the government to develop the environmental, tax and other regulations that will govern, well, ChevronTexaco. "For a long time there were no real regulations in Angola," Artur Custodio, who holds the bold title of "operational excellence champion" for ChevronTexaco, told me as he showed me around Malongo. "So the government is asking ChevronTexaco to create them." The lack of regulations is why ChevronTexaco has flares burning off the natural gas that's produced during oil extraction, and why it can routinely spill oil into the ocean-there were sixty-nine oil spills reported in just the first ten months of 2003-without any public disclosure. (The company does report spills to the government.)

ChevronTexaco nonetheless insists it is a good corporate citizen, and officials were eager to show me the charitable work it does in the area, along with a group of other international oil companies (most significantly the French company Total, the Italian ENI-Agip and of course the Angolan state-owned oil company, Sonangol) that own a share of the fields it operates. Together, the companies have spent about $24 million on development projects in Cabinda in the past five years. (ChevronTexaco won't reveal its profits in Angola, but the company netted a record $7.2 billion in 2003 worldwide.) "This is part of our corporate responsibility," said Feliciana Ngada, a spokesperson for ChevronTexaco. "We sit down with the government. They tell us we need a school or a health center. Then they are invited to participate in the opening ceremony." Once the project is built, it bears a large plaque with the names of its corporate sponsors. That is the end of the companies' involvement. They do not check to make sure the schools are being used or the clinics are staffed or stocked with medicine. "That's the government's responsibility," Ngada told me.

The consequences of that policy became immediately apparent on a daylong tour. As we drove north, we passed villages of broken clapboard shacks, mud-caked barefoot children and the occasional stray chicken. We stopped outside one of those villages to visit a Catholic boys' school where the companies had built a dormitory. At the end of a rugged dirt road was a one-story stucco building, freshly painted creamy white with a brick-red Spanish-tiled roof. But for 10 AM on a Thursday, it was strangely quiet. I asked Padre Policarfao Futi, who runs the mission connected to the school, where all the children were. "The school is closed," he said, smiling at my surprise. "We have no teachers." Indeed, the schools in Cabinda hadn't had teachers for months. They were all on strike because they hadn't been paid by the government.

Later, we drove to see a small health clinic. Francisco de Amaral, a lanky, bearded medical technician in a white lab coat, was inside alone. Where were all the patients? I asked him. "There were some earlier," he said, "but I couldn't do anything for them. We don't have a laboratory, so I can't determine what disease they have. Usually they have symptoms of malaria. But I don't have any medicines for malaria."

The only project I saw that was functioning well was a blood bank funded by the oil companies housed in Cabinda's decrepit municipal hospital. ChevronTexaco has also committed about $11 million to supporting agricultural projects elsewhere in the country.

Of course, oil companies don't operate in Angola to provide social services. "Our responsibility is to efficiently develop resources in the country for our shareholders and our partners," ChevronTexaco's Blackwell told me. A Louisiana native with a broad, freckled face and reddish-brown hair, dressed in a Levi's shirt and bluejeans, Blackwell oozes corporate American cowboy. "There's an optimism that's capturing the whole country," he said. "We have an opportunity to capture that." To do that, ChevronTexaco has invested more than a billion dollars a year in the country for the past five years, making it one of the company's most significant investments in the world. With the latest deepwater technology giving the company access to ever more reserves of oil, Blackwell and others expect Angola to become Africa's top oil producer-surpassing Nigeria-within five to eight years.

To take advantage of the new technology, it helps to have good relations with the government. The schools and clinics in Cabinda are part of that. So are the contributions by ChevronTexaco to the Eduardo Dos Santos Foundation, ostensibly a charitable foundation run by the president that's long been rumored to be a means for pilfering oil money. More recently, the president's wife has set up a similar organization, supposedly to support disabled.: Angolans. ChevronTexaco contributes about $50,000 per year to the Dos Santos Foundation, and has given another $50,000 to the First Lady's foundation. Blackwell said he was unaware of any concerns about corruption.

But the most widely cited problem in Angola, pointed out not only by advocacy groups but by the World Bank, the IMF and even the US State Department, is that close to a third of the oil revenues that come into the country never make I it into the public budget. No one outside the government knows where the money is going. Organizations like Global Witness have documented that at least a billion dollars has ended up in Virgin Islands bank accounts of close associates of the president.

Blackwell doesn't seem to believe the repeated reports about Angola's financial mismanagement. "I think the government's really taking it on the chin with transparency," he said. "My sense is the government is doing the best it can."

Rosa Maria Joao, a mother of five whom I met as she waited outside a crowded UN-funded health post in a northern bairro of the city, doesn't have the same faith. As she cradled her 6-month-old daughter, who was sick with diarrhea and a high fever, the skinny 28-year-old told me she makes a meager living cleaning homes and washing clothes for Luanda's wealthy. Although she's seen changes in Angola since the end of the war, "they're only for those who have money," she said. "For those who don't, there is nothing." Indeed, the government wants to bulldoze the village where she lives-a former refugee camp where residents have built small homes and a school-to make way for new construction. "I know the country has a lot of money from selling petroleum," she said. "The government can keep most of it. But shouldn't at least some of it go into improving people's living conditions?"

Justine Pinto de Andrade, director of the economics department at Catholic University in Luanda, agrees. "You see some buildings that are improved, like Endiama (the state-owned diamond company), Sonangol and De Beers," he said. "But these are not places for the people to live. There is nothing for them." And the expansion of Luanda Sul, with its sprawl of guarded compounds? "Luanda Sul is the opposite of development," Andrade said with irritation. "Sure, it's creating something, but development is creating works for people, like jobs and houses. This is nothing. It's only for rich people who have houses."

The Angolan government's response to such criticism is that its coffers have been drained not by corruption but by the cost of fighting a brutal civil war. "The government is very concerned about social issues," Manuel Nunes Junior, Angola's deputy finance minister, told me. "But Angola had a terrible, terrible war. We need massive international help." Of course, international aid, which totals about $300 million a year, is dwarfed by the sums paid by oil companies to the government that go missing each year. But Junior denied that the money had been siphoned off. "There is no proof that this money has disappeared," he said. He said the problem is merely that payments made to international creditors by Sonangol, which makes "quasi official expenditures on behalf of the government," were not recorded in the budget.

Benjamin Castello, director of the Angola chapter of Jubilee 2000, a coalition of advocates focused on debt relief, notes that despite their purported charity work, the oil companies give nothing to local pro-democracy organizations, which provide the only hope for holding the government accountable. "Oil companies know that if they support civil society, in the future they won't receive new petrol blocks," he said. (The United States has apparently decided such funding isn't in its interest either: The Agency for International Development has virtually eliminated its prior support for pro-democracy organizations that were critical of the government.) Oil companies are also resisting a campaign initiated by the Open Society Institute and Global Witness, and supported by more than 100 organizations worldwide, that asks companies to publish the payments they make to governments, under the theory that this would make it harder for government officials to steal the money. The companies say it would violate their contracts with the government of Angola and put them at a competitive disadvantage. \

The United States has shown no interest in either making demands on oil companies or pressuring the Angolan government. On the contrary, with its interest in diversifying its sources of oil and staying on the right side of one of the most powerful military forces in Africa, Washington is publicly strengthening ties to the MPLA government. In 2002 the Bush Administration welcomed President Dos Santos to the White House, and that same year Secretary of State Colin Powell visited Angola. The United States is now building a mammoth, $40 million fortified embassy high on a hill overlooking Luanda; a low cement wall across the road hides the musseque built into the slope below. American officials say they prefer a carrot rather than a stick approach. "It's a partnership," said a senior US Embassy official, who spoke on condition of anonymity. "Angola can be a force for democracy, stability and economic development. It could be one of the wealthiest countries on the continent."

Hoping investors will see it that way, the Angolan government is beginning to talk about changing its ways. It has said, for example, that it will publish a complete budget that includes all of the state oil company's expenditures. But it won't allow any independent auditing, so if the private oil companies continue to hide payments, there will be no way to verify the government's revenues.

In the meantime, conditions for most Angolans continue to worsen. In 2002, despite the war's end and an increase in oil profits, Angola slid down the UN's Human Development Index, compared with the three years before. According to a recent report by Human Rights Watch, spending on social programs is now less than 3.5 percent of the national budget-significantly lower even than in neighboring Chad, Equatorial Guinea and the Democratic Republic of the Congo.

For Angola's elite, though, things are looking up. Shortly before I left in November, the Council of Ministers had just declared its support for a $600 million project to build two brand-new islands in Luanda Bay. They would boast a shopping mall, luxury hotels, apartments, restaurants and casinos.

Daphne Eviatar writes frequently about development. She went to Angola as a Pew fellow in international journalism.

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