Oil and Wealth in Angola and Chad

Henry Srebrnik, [Charlottetown, PEI] Guardian

Two oil-rich African countries have been using their newfound wealth in very different ways, demonstrating that valuable resources need not always lead to corruption.

Thanks to oil, Angola, which emerged from a decades-old and devastating civil war in 2002, has emerged as sub-Saharan Africa’s third-largest economy. 

Now a petro-state producing 1.8 million barrels of oil a day, the southwestern African country has become China’s principal trading partner on the continent.

The country’s political elite, centred on the ruling Popular Movement for the Liberation of Angola (MPLA), has used its wealth to build highways, railways, and modern buildings in Luanda, the capital. But little of this benefits the masses and the country’s human rights record is, to say the least, less than stellar.

Instead, a small coterie has become immensely wealthy. They have managed this through their control of Sonangol, the national oil company, which has effectively emerged as a parallel state, controlling the flow of oil revenues, and enabling a fortunate few to create an African oligarchy.

China’s rapid economic growth necessitated a huge demand for oil, regardless of who was selling it. A turning point in Angolan-Chinese oil relations took place with the visit of Sonangol’s chief executive officer Manuel Vicente to Beijing in 2004. 

Soon, the China National Petroleum Corporation (CNPC) and China Petroleum and Chemical Corporation (Sinopec) had major stakes in Angola’s oil sector. 

However, the economy is built on the sale of one product and there has been little attempt to diversify. The country remains one of the most unequal societies in the world. Oil money has fueled corruption, an example of what economists have called the “resource curse.”

A better outcome can be found in the northeastern African state of Chad, where Chinese energy companies have also been active.

Chad has earned at least $10 billion since Exxon Mobil opened began production in 2003. Three years later, a deal was signed with CNPC to open a second field. 

The country now produces about 180,000 barrels per day and relies on crude exports for more than two-thirds of its income. It is the seventh-biggest producer in sub-Saharan Africa.

But unlike in Angola, civil society in Chad has demanded more transparency and social and environmental standards for production.

In 2014, Chad decided to withdraw five exploration permits issued to CNPC and fined the company $1.2billion for environmental violations that had led to noxious spills around drilling sites. Oilfield workers also went on strike to denounce their conditions and demand salary increases.

In the end, CNPC promised to pay about $400 million to end the environmental disagreement and also agreed to provide a larger share of royalties in a new deal with the government. 

Also, much of the building work in N’Djamena, the capital, has been carried out by Chinese contractors in deals that exchanged production rights for promises to improve the country’s infrastructure, such as roads, railways and power networks.

So in Chad the industry is closely monitored and operates under greater constraints than in the Angolan case. It demonstrates that resource extraction need not involve simple plunder and environmental degradation.