Annex B: Conflict Vulnerability Assessment

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In Angola, after over 25 years of continued civil war, the ongoing conflict will, undoubtedly, be the root cause and intertwined with any future social/political conflict. USAID/Angola has identified three potential conflict areas.

Land tenure issues could become a major social crisis because of the number of groups of people it will affect. IDPs who will want to return home or want to resettle elsewhere. The ownership of the land where they would resettle could be an issue. Not all landowners are living on land they own, especially in insecure areas. Once these areas become secure again, however, it is likely that these owners will want to either return to the land or, at a minimum, be compensated if the land is used by others. Lastly, there will probably be claims to land by the Portuguese who fled at the time of independence as well as by the squatters who occupy it now. Some resolution to overlapping claims and compensation will be required for all of these situations. The magnitude of the problem is less serious here than in countries which have larger populations and less fertile land available. One complicating factor, however, is that some of the land has been given to government officials and it is unclear the political ramifications of returning this land to others.

Ethnic issues have been relatively insignificant in Angola’s history. The major independence groups divided themselves along racial/tribal lines in the late 1960s and early 1970s. UNITA initially used this tactic as a means to attract support. If elections occur in 2001, ethnicity could become an issue if we take into account the traditional strongholds of some of the emerging political parties as well as the traditional ones of UNITA, MPLA and FNLA. Though many politicians do not openly admit the existence of tribal interests/agendas in Angolan politics, it is becoming more and more evident that most of the political parties in Angola have strong tribal allegiances. Some political parties are demanding a federation system for the political division based on regions (grouped by tribes). The proponents argue that certain regions/tribes should be controlled by parties that won the elections in those areas.

Another potential crisis could be the way in which benefits from diamond and oil wealth are used and distributed. Most of the mineral wealth has been used to support the war effort. With this effort winding down, expectations are that more Angolans will benefit directly from this wealth. But the truth is that some government officials are benefiting greatly from the oil and diamond businesses where, presently, there is little public accountability. Most of the diamonds are controlled by generals who received mining rights as a reward for their service. Today, the diamond areas are the most militarized areas due to the presence of numerous troops and armed security personnel guarding the mines. Many villagers have been forced to evacuate because of the diamond mining and fighting between UNITA and government generals over the control of diamond areas. Diamonds will continue to be the source of conflict not only between government and UNITA but also with the traditional inhabitants whose communities and livelihoods are being affected because they lack the authority to keep outsiders from exploiting the diamonds in their regions.

Oil will continue to be a source of great social and economic differences between Angolans. Oil and diamonds do not only represent wealth but also power. Social and economic disparities will continue to widen. Families and individuals who are connected with control of oil business will benefit from it more and more. The provinces that have oil exploration are benefiting from 10% of the total oil revenues. This on the one hand may create strong regional feelings, if not separatist expressions. On the other hand, this will create a situation whereby every province would claim a right of the mineral resources on its soil, thus losing the spirit of a "nation."

The unequal distribution of the country’s wealth will most probably create some social conflict, due to the fact that a small number of people will control it leaving out the majority. To some extent oil and diamonds will also be sources of power conflict, because those who can control or benefit from it will have power leaving out the others. Probably as the country becomes politically and militarily stable, and the citizens become more aware of the way the oil business is conducted and who are benefiting mostly, some instability and unrest may take place.

USAID will closely track these potential crises throughout the strategy period and adjust interventions accordingly. Trying to avoid crises is one reason we are testing certain models which could benefit the most war affected parts of the country later. Our food security and health strategic objectives try to create more opportunities for Angolans and establish better systems. For example, we hope to have markets in place that farmers can use once they routinely produce surplus to reduce some economic pressures. In the area of health, we are being proactive, before HIV/AIDS reaches the epidemic levels. We have learned from other countries in the region that the time to act is now and not wait. The strategy includes the private sector and other non-governmental entities such as church groups from the beginning to support the GRA HIV/AIDS plan. USAID’s support to the economic reform program is aimed at preventing disturbances that often occur when unpopular reform measures are taken without debate and without a rationale provided to citizens. We will also support the reform efforts to make the government’s budget process more transparent and that encourage more GRA resources toward the social sectors. Lastly, a strong element of our DG program is how to advocate without being overly confrontational. We will also continue our work with government reformers to strengthen their ability to lobby for change from within. The above, it is hoped, will provide safety valves, to help prevent social and political crises.

The purpose of United States foreign policy is to create a more secure, prosperous, and democratic world for the benefit of the American people. USAID/Angola’s five-year strategic plan supports this foreign policy. The strategy supports four US national interests and strategic goals as outlined under the International Affairs Strategic Plan:

1. Economic Prosperity- we are contributing to the promotion of broad-based economic growth in developing and transitional economies and increased global economic growth;
2. Democracy- we are helping to increase foreign government adherence to democratic practices and respect for human rights;
3. Humanitarian Response- we are working to prevent or minimize the human costs of conflict and natural disasters; and
4. Global Issues- we are playing a role to protect human health and reduce the spread of infectious diseases.

Under the current strategy, USAID contributes to the US Government’s (USG) focus on humanitarian assistance. However, the USG joined an increasing donor consensus that ending Angola’s conflict requires a more flexible approach that utilizes emergency, transition and development assistance tools simultaneously. Providing this flexibility is a high priority under the current MPP and this three-pronged response will contribute to achievement of the US government’s overall democracy, economic reform and development goals for Angola.

USAID directly supports the following US Mission goals of: 1) Strengthening democracy and respect for human rights in Angola; 2) Maintaining capacity of the USG to provide humanitarian assistance to Angola’s war-affected population, while simultaneously increasing transition and development activities that lead to long term solutions; and 3) Continuing Government of Angola (GRA) adherence to economic reform and commitment to develop its social and economic infrastructure.

B. Government of Angola (GRA) Policies

The GRA plans for 2000 are outlined below. While USAID does not have sufficient funds to support all elements of these national programs, we can clearly support many aspects in our strategy. The GRA’s agriculture program and food self-sufficiency focus clearly matches USAID’s proposed strategy for this sector. Land tenure and natural resource management will be topics for policy dialogue. USAID plans to focus some of the transition activities on rehabilitation of small-scale rural infrastructure. Although the GRA may be unable to meet all its objectives for 2000, meetings with the International Monetary Fund (IMF) and the World Bank have been positive, and expectations are that the GRA will achieve many of its 2000 goals.

The GRA objectives in these sectors are to increase agricultural production, particularly basic foods with the goal of achieving food self-sufficiency, promoting rural commerce, alleviating rural poverty, and resettling rural populations. The government also wants to address land tenure issues, and promote good management of natural resources. The key target population is smallholders and small fishermen. The policy includes reactivation of the rural extension system and agricultural research as well as rehabilitation of rural infrastructure. There is also a desire expressed to renovate fish processing and port facilities. These are obviously longer-term goals but no less important in the short term since long-term results depend upon sustained efforts.

The single most important policy for agriculture, however, is not directly aimed at the sector—the unification of the exchange rate and floating it since May 1999 do more than any other policy can in the short run to improve agricultural incentives by limiting artificially cheap imports of competing products from abroad. Similarly, food aid can also be a problem. It requires good coordination to avoid damaging incentives to local production while at the same time providing the humanitarian assistance necessary to basic survival.

The strategy of the government is to take advantage of existing industrial facilities in order to reactivate light manufacturing, particularly food processing, to replace goods that are now imported. There is also scope for increasing the production and sales of implements needed in other sectors, especially agriculture.

Reconstruction and rehabilitation of destroyed and degraded transport infrastructure is a basic requirement for economic progress. Without this, the major coastal cities will remain isolated from productive zones in the interior and it will be impossible to market agricultural goods to the urban populations or manufactured goods to the countryside. Necessarily coupled with a demining program, this is an important area for government investment.

Not surprisingly, the highest priorities for the government are the reopening and improvement of the main transport routes from Luanda and Benguela to cities in the interior. There is also a desire to begin rehabilitating rail lines from Luanda to N’dalatando and from Benguela to Huambo. Also important will be improvements of deteriorated facilities at the major ports.

In urban areas, improved water and sanitation as well as electricity will go far toward supporting not only the well-being of the population, but industrial production as well. Privatization of some of these services has been discussed and may well prove to be a viable route to achieving the needed investments.

The abysmal state of infrastructure throughout the country is such that the GRA will require major external assistance to begin to address even the most pressing needs.

The government has designated health and education as the two social sectors of particular importance. The intention is to prevent needed fiscal austerity from impinging upon necessary expenditures in these areas. Primary health care is emphasized, as the national network of health facilities was severely damaged in the 1992 war and remains inoperative at the present. Many areas in the country have no health facilities or access to medical care of any kind. Vaccinations, maternal and child care, malaria prevention, AIDS prevention, tuberculosis and provision of essential medicines are included in the government’s plans.

The GRA is fully cognizant of the public health problems that the country is facing. Policies are already in place to support child survival. In most cases the treatment protocols are consistent with international standards. The GRA is a signatory to all major international agreements related to health. For the 1999-2001 period, the priorities of the GRA are improving child health, including carrying out Expanded Program of Immunization (EPI) campaigns, National Immunization Days (NIDs), strengthening the cold chain, adopting the Integrated Management of Childhood Illnesses (IMCI) approach for the country, and appropriate malaria and diarrhea management. For maternal health, the priorities are reconstruction and rehabilitation of six provincial maternity hospitals, procurement and distribution of contraceptives nationwide, and training of traditional birth attendants. For HIV/AIDS, integration of sexually transmitted infections (STI) programs within the HIV/AIDS program, purchasing and distribution of condoms, promotion of condom social marketing and carrying out behavior change communication campaigns. For maternal health, child health, malaria, and HIV/AIDS, the GRA also plans to update national policies and service delivery guidelines. Improving data collection and other aspects of the health information system are also a priority of the government.

One of the biggest problems confronting the government is the bloated civil service rolls coupled with a wage structure that is far too low to provide a decent living for civil servants and their families. Over the past 10 years civil service salaries have lagged behind inflation in spite of periodic efforts to raise salaries. These issues together with civil service rolls that contain many ghost workers as well as an excessive number of workers, make public administration an area for urgent reform.

There is already an effort underway to cleanse the rolls of ghost workers. The intention is to follow this with retrenchment in which ministries will reduce work forces. This is to be coupled with efforts to retrain public employees and to improve the pay scales of those who remain. The salary programs will be essential to improving retention and performance, but will also strain the capacity of the government to adhere to fiscal targets.

C. Other Donor Programs

Led by the United Nations’ Office for Humanitarian Coordination (OCHA) and the World Food Program (WFP), there has been consistently good coordination among donors to respond to emergency needs. Better coordination among bilateral and multilateral donors is now expanding into transition and development assistance as well. In the area of economic reform, USAID is already closely collaborating with the IMF and will seek out other donors prior to initiating any assistance under the planned special objective. The World Bank is expected to reopen its office in Luanda next year if the GRA progress on the economic reform program continues.

With regard to social sector assistance, UNDP is emerging as the coordinator of all donors as we move from emergency into transition assistance. The resident representative who is also the UN Humanitarian Coordinator has had several meetings with USAID on UNDP plans to work with the GRA to design a transition program. UNDP strongly supports the philosophy argued in the Reconstruction of War-Torn Economies Discussion Paper by Consulting Assistance on Economic Reform. It argues that in addition to traditional donor response of humanitarian assistance, establishing internal security, elections support and rebuilding of physical infrastructure is not sufficient as conflict draws to an end. Rather, donors and the country must also pay attention to rebuilding the institutional infrastructure, in effect enhancing the capacity of countries to help themselves.

2. Overview of Angola

When considering various USAID strategy options for Angola, it is important to keep in mind that it is twice the size of Texas with 18 provinces. UNICEF estimates Angola’s population as of 1998 at 12 million people. An estimated 25% or approximately 3 million people live in Luanda alone.

War generally dominates the news about Angola; there are, however, areas of the country untouched by conflict, some periodically affected and others almost always in some form of conflict. Historically, the Planalto (Central Highlands), primarily the provinces of Huambo and Bie as well as Malanje (See map page 6), have been the most hotly contested area of Angola. Over the last year, however, even in former National Union for the Total Independence of Angola (UNITA) strongholds, the government has made substantial progress against UNITA forces and has retaken military control of large areas of the country. However, the central government has yet to extend state administration to many of these areas. Although, UNITA no longer has conventional warfare capability there is still a serious guerrilla force. Areas of diamond mining activity in the northeastern part of the country (Lunda Norte and Lunda Sul) also have witnessed periodic conflict. The coast, the southern part of Angola, the northwest parts and the province of Luanda are traditionally not involved in UNITA/GRA fighting.

III. Transitions

Angola’s transition process involves three types of transition. The first is war to peace, the second from an autocracy to a democracy and the third from a central command to a free market economy.

A. War to Peace

In November 1994, after over 20 years of civil war, the Government of Angola and the representatives of UNITA signed the Lusaka Peace Protocol. A gradual cessation of hostilities ensued, though there were sporadic flare-ups of conflict in numerous areas around the country. In spite of the precarious nature of the peace, the GRA and its partners were able to begin the process of reconstruction. Unfortunately, in late 1998, there was an escalation in the fighting and eventual return to all out war in some parts of the country. A government offensive in early 1999 recaptured many areas previously under UNITA control.

Although the military arm of UNITA has not been fully destroyed, the government forces have had sufficient success to eliminate UNITA’s capability to wage conventional war. In anticipation of a return to guerilla warfare, the government is training its forces in counter-insurgency techniques.

Transition from war to peace focuses primarily on reconstruction and rehabilitation, moving from strictly humanitarian activities to community-based reconstruction and rehabilitation programs. Unsurprisingly, as a country ravaged by decades of civil conflict, much of Angola’s basic productive and social infrastructure has been heavily damaged or destroyed and a very large portion of its population has been displaced.

While there is a need to continue emergency support to the most war-affected groups, it is time to create opportunities for transition from strictly humanitarian assistance to assistance targeted at reconstruction and rehabilitation of basic infrastructure and social reconciliation, essentially at the community level. Donors and the GRA should not wait for a conclusive end of conflict. Experience elsewhere in similar conflict environments indicates that precious time is wasted if a reconstruction and rehabilitation strategy is not conceived and pilot programs are not tested until conflict ends.

While larger economic reform programs must be undertaken, peace building requires early and visible peace dividends and pilot physical reconstruction and transitional initiatives should be initiated immediately. These initiatives can build trust and sustain confidence in a war-weary population during the difficult transition to peace. But while it is important to begin quickly, the GRA must continue to demonstrate its commitment to the process of reconstruction and sound macroeconomic policies early in the reconstruction process.

USAID’s strategy focuses on the initial steps being taken to effect a transition to peace. It looks at reintegrating ex-combatants and repairing important physical infrastructure, including key transport communications and utility networks. It also strengthens the foundation for a sustainable public health system, including the rehabilitation and reconstruction of facilities and structures, of basic sanitation, and of delivery systems as well as opportunities for initiatives leading to long-term sustainable development, such as strengthening national programs in immunization, malaria control, and HIV/AIDS. The need for a resettlement program for those presently receiving emergency relief such as general food rations is also taken into account as is increasing food security for other war-affected and smallholder farmers in need of assistance to increase production and expand markets. In the area of governance, the strategy will work towards strengthening local government institutions, including the capacity for local resource mobilization and fiscal management, the restoration of law and order and the strengthening of civil society.

For success, it is critical that BHR and development assistance (DA) funding and activities be fully integrated into one seamless program. Throughout this strategy, reference is made to activities which: 1) fall into those previously and/or currently supported by BHR; 2) those previously and/or currently supported by DA; and 3) those previously and/or currently supported by both. The needs on the ground and in the communities are such that funding sources should be complementary. This strategy addresses this point and allows for the full implementation of the three-dimensional approach of emergency, transition, and development, that was approved by USAID/W during the parameters setting stage.

One of the legacies of both Angola’s colonial and Marxist eras is a political system that allows little opportunity for citizen participation. The concentration of political and economic power in the hands of a core of the majority party (the MPLA) that is most closely aligned with President Dos Santos, allows this group to act with impunity. There are also cases of the abuse of force by security personnel and the curtailment of civil and political liberties, justified on the basis of the war and the resulting social instability. Thus, Angolans suffer not only from the war, but also from crime and the abuse of power. Citizens often do not resist these measures, for fear of retaliation from the State, ignorance of their rights and/or insufficient resources to access the justice system. Those who can access the justice system often choose not to do so because the judiciary is perceived as ineffective and untrustworthy. Indeed, the judiciary lacks the resources and independence to play any effective or meaningful role in the lives of Angolans. Finally, the legal framework is obsolete and incomplete. Much of the criminal and commercial code are remnants of the colonial era, with modifications from the Marxist era.

Insufficient political will, the lack of consensus, the weakness of the rule of law, limited competition and narrow public debate undermine the quality of governance. The executive exhibits little willingness to be accountable to the citizens of Angola – or to the National Assembly or Judiciary. The civil service is drastically underpaid and fails to deliver the services for which it is responsible. Revenues from natural resources could finance the provision of more public services, but a decision to allocate more resources to social sectors would need to be accompanied by measures to address corruption, skills deficits and politicization within the civil service.

There are some hopeful signs, however, that democratic ideals are spreading. Citizens are interested in being more engaged and government counterparts are sometimes responsive, more often at the local and provincial levels. Though demand from within government for institutional reform to promote better governance is minimal, there are some reformers at all levels of government, particularly at the mid-level. In fact, this group frequently reminds the international community that they need our support to continue pressing for change from within. There are also indications that the GRA is beginning to tackle problems of a lack of transparency. The National Democratic Institute has sponsored a series of discussions on political issues such as the rule of law and corruption that have been well attended and well covered by the government controlled radio and TV stations. In the economic arena, the GRA has agreed to conduct, with the assistance of the World Bank, a diagnostic of the oil accounts. (Oil accounts for 85% of budget revenues.) Better information on this sector will clearly be a major step forward to providing more transparency in the GRA’s budget process.

Another bright spot is government’s statement of intent to hold elections in 2001. However, many question whether the elections will provide citizens any meaningful choice and voice in their political leadership. They cite the constitutional development process that has largely been the exclusive domain of the parliament, with little civil society input. Thus far the public has been asked to participate in providing proposals for a new national anthem and country symbol. However, the Angolan Bar Association has been conducting public hearings in order to gather the thoughts and opinions of the people for the constitution. It is intended that these opinions will be presented by the Bar Association to the Constitutional Commission. The GRA has indicated that it will hold public sessions with civil society to solicit feedback on the draft constitution.

C. Marxist Command to Market Economy

While progress to expand political space has been slow, noteworthy achievements have been made to transition from a Marxist to market economy. After several attempts, the GRA and IMF finally signed a Staff Monitored Program (SMP) agreement in April 2000. This nine month program will be the entry point to reestablishing lending by international financial institutions (IFIs) and to initiating discussions of rescheduling Angola’s debt. The IMF negotiating team was impressed by the level of commitment demonstrated by the GRA as well as the measures the government has taken over the past year. Angola’s president is meeting regularly with ministers who are implementing reforms in exchange rates, interest rates, and the banking sector. The removal of the fuel price subsidy, a key reform, was made in one step.

Restrictions on foreign exchange were substantially liberalized with local foreign exchange accounts permitted for all citizens. In addition, importers can now use money from their own accounts without prior approval. This eliminates a major level of government control over trade as it is no longer necessary to go through the banking system to get foreign exchange. However, exporters are still required to sell all foreign exchange to the banking system rather than being allowed to retain it. Through the unification of the exchange rate, it is now possible to buy back the foreign exchange on the parallel market. While not strictly legal, this market is tolerated by the government while it takes steps to improve efficiency and access through formal channels to the point where the parallel market is no longer attractive. The ultimate goal of the GRA policy is for people to have free access to foreign exchange. The exchange rate policy will enable light manufacturing and food processing to compete against artificially cheap imports.

Some liberalization of interest rates has occurred although real rates are still negative. Because there are no incentives for people to keep kwanzas in the bank, dollars will still be preferred and the GRA will have limited ability to direct monetary policy.

Privatization of state banks and improved bank oversight is another area where the government is moving ahead despite political opposition. For example, the Caixa de Credito Agropecuaria e Pescas (CAP) has been targeted for more than five years but has always survived as a result of the intervention of politically powerful parties who have benefited from loans. The CAP is now in the process of liquidation and should be eliminated before the end of the year. The two remaining state banks, the Banco de Poupanca e Credito and the Banco de Comercio e Industria, are being studied for eventual restructuring that will involve at least partial privatization.

The fuel price subsidy was lifted recently, resulting in a price increase of about 1600 percent. Although it results in higher spending by many government entities that consume oil, it will reduce the drain on the budget, estimated at $200 million.

The GRA’s 2000 budget was approved in January of this year. Some of the key elements include: commitment to maintain the free floating exchange rate; stronger financial management; inflation rate target of 87%; recovery of the non-petroleum sector; greater emphasis on health and education; and the need to increase civil service salaries.

Below are some of its goals for macroeconomic performance for 2000:

Oil Production 775,000 barrels/day

Average Export Price $15

Average Exchange Rate 9.33

GDP Growth 3%

Oil Sector Growth 1.3%

Non Oil Growth 3.5%

Inflation 87.5%

Increase in International Reserves 78.6%

Deficit as a Percent of GDP 6%

Although oil prices have nearly doubled beyond the projected $15, Angola’s current production is already pledged as collateral against previous commercial loans. However, the high prices will benefit GRA coffers in the future. Production will increase from 775,000 to 1,300,000 barrels a day over the next five years.

There is an important linkage between the expected increase in oil receipts and the reform program in 2000. Painful austerity measures will be far easier to implement during a period in which receipts have taken a sharp upward turn than they will be after spending has adjusted to the new constraints. Past increases in oil production receipts have been dissipated through a combination of increased spending and increases in oil-guaranteed foreign debt. There is a chance now to break out of this pattern, but the window of opportunity will be lost if this effort at reform breaks down or if it is significantly delayed.

Macroeconomic targets apart from oil production may be harder to meet. Inflation in particular will be difficult to keep to targeted levels. Bringing it down to a total of 87.5% for the year will require annualized levels substantially below that for the remainder of 2000. (Last year inflation was about 325%.) This will require that the fiscal expenditures be controlled to an extent that has never before been achieved. Indeed, this problem has been at the root of all of Angola’s failed stabilization attempts in the past and will be the key to the success of the GRA’s current reform program.

The exchange rate target is difficult to assess. There appears to still be substantial overvaluation built into the exchange rate even at current levels. The stated target level does allow for some devaluation, but not as much as would be necessary to correct for accumulated inflation. However, the target is stated as an average, leaving open the level to which the rate is targeted to fall by year’s end.

There is some reason for hope that GRA performance will improve over that seen in the past. Conversations with government officials and with the IMF team reveal an appearance of determination and political will greater than was apparent before, while the Minister of Finance has published public notices in the press that government suppliers should not expect to be paid if the items they supply are not included in the budget and the expenditures officially approved at the Ministry of Finance. If this can be strictly adhered to then there is hope that targets can be met.

Table 1 shows the planned investments of the government during 2000. While current expenditures are designed to give new emphasis to education and health, it is clear that the main thrust of the investment budget is on infrastructure and public works. This reflects the extremely deteriorated state of much of this public capital, and the essential role it plays in reactivating production.

This strategy will address all three transitions to varying degrees. The food security, democracy and governance, and health strategic objectives (SOs) and the economic reform special objective (SpO) contribute to the various transitions and are all interrelated. These relationships will be discussed in more detail in the descriptions of each sector.