Almost ten years since the Angolan ceasefire, the country’s economy has risen like the proverbial phoenix from the ashes. The article below sets out some of my views and thoughts on Angola’s economic performance since independence, the economy's remarkable rise over the past decade and the country's economic prospects as the tenth anniversary of the declaration of peace approaches in April 2012.

When Angola gained independence from Portugal in the mid-1970s, the country was the fourth largest coffee producer in world. Alongside coffee, this large, fertile country exported other cash crops, including sugar, cotton and more than half a million metric tons of maize a year. Angola had become the fourth largest diamond producer in world by the early 1970s while oil production, which started in 1955, was ramped up by large offshore reserves that came online in 1970. In addition, a small, but diverse and modestly successful manufacturing sector had developed since the end of World War II.

Despite these signs of success, by the turn of the century, Angola’s economic engine had been obliterated by four decades of strife: a 14-year war of independence against its former Portuguese masters was waged until 1975, followed by a civil war that continued for 27 years.

By April 2002, when the civil war ended with a ceasefire after Jonas Savimbi’s death, the Angolan economy had been shredded and the country devastated. The population of 10.5 million lived in appalling conditions: 80% of all schools had been destroyed during the war, and a whole generation had missed their education; three-quarters of factories had been wiped out; 60% of hospitals lay in ruin; and land mines meant that Angola, along with Cambodia, had the unenviable record of having the most amputees per capita. To make matters worse, at the end of the war some seven million unexploded land mines remained in the interior of the country.

During the war, the country’s woes were compounded by a flight of skills: 300,000 Portuguese fled, depleting Angola’s managerial and technical skills. Coffee production had fallen from 220,000 tons in 1974 to just over 1,000 tons in 2004 and Angola had been turned from a food exporter into a food importer. The country’s per capita income of $550 in 2002 was one of the lowest in the world.

But an economic miracle has been taking place in Angola since peace was declared in 2002. Under Jose Eduardo Dos Santos, the resource-rich economy has gone from strength to strength and the socio-economic fabric has begun to repair. Over the 2001-2010 decade, the Angolan economy grew by 11.1% per annum, making it the fastest-growing economy in the world (the second fastest, China, grew at 10.5%). As a result, per capita incomes have risen steadily to reach $5,608 per person, a figure ten times that of just a decade before.

This trend of rising per capita incomes seems set to continue as high fiscal deficits of the 1990s had been turned into budget surpluses by 2005. This year’s government’s budget of $43bn, which is 75% oil derived and based on oil prices of $65/barrel, seems set to produce further high windfall gains given current oil prices. Importantly, the government sector represents about one-third of economic activity.

Whilst Angola is benefitting materially from economic reconstruction, it would be naïve to suggest that the country is rebuilding in isolation. Since the end of civil war, Angola has successfully attracted foreign direct investment (FDI) into the country, especially into the oil sector. From 1993-1998, the estimated investment in that sector was $6.8bn, but in 2009 alone Angola received $13.0bn in FDI for the sector. In some ways, this result is unsurprising: Angola’s proven oil reserves stand at about 13.bn barrels – or 40% more than the United States’ estimated reserves of 9.5bn.

Beyond oil, the agricultural sector is being revitalised while the small manufacturing sector is also recovering, aided by investments in ports, roads and railways. Angola feels like a gigantic building site, as roads, ports, railways, hotels, shopping centers, hospitals, universities – even whole new towns – rise up out of the bush. Luanda has changed out of all recognition, as the dilapidated red-tiled colonial buildings and encroaching slums make way for a forest of elegant high-rise hotels, offices and apartment blocks.

From history, however, we know that a key driver of sustained economic growth is international integration: the extent to which capital, goods, services and people move across borders and between countries. In this regard, it is noteworthy that data obtained from a global payments and technology company show that Angolans are spending increasingly in other countries, which points to rising economic integration.

Given historical ties, it is unsurprising that the data point to high levels of spend in Portugal. But interrogation of the data also highlights other features: utilisation of credit and debit cards by Angolans in other countries rose by more than 50% in dollar terms over the past year and almost doubled over the past 18 months. This figure represents a growth rate in spending by Angolans that is more than ten times the global average growth rate over the same period. This data reflect strong economic growth and rising economic integration. Importantly, this pattern is reflected in the 91% increase in spending by Angolans in neighbouring countries, including Namibia, Mozambique and South Africa, over the past 12 months. This underlines an even more important aspect of Angola’s economic miracles, namely that the miracle is taking place in the context of rising regional collaboration and economic integration, which augers well for all of the economies involved.

As Angola approaches the tenth anniversary of the 2002 peace agreement, the country has rebuilt much of its economy and social fabric and looks poised to fulfill the IMF’s expectation of 7.1% per annum economic growth from 2012 to 2016.