Oil and diamonds after Savimbi

The oil industry has driven inward investment in Angola

By Jeremy Scott-Joynt BBC News Online business reporter

The death of Jonas Savimbi has raised hopes of an end to corruption in Angola's oil and diamond industries.

Savimbi's Unita has spent most of the three decades since independence in 1975 fighting the MPLA government, since 1979 run by President Jose Eduardo dos Santos.

The initiative is totally in the government's hands... There's no longer any excuse for not doing the right thing

Patrick Smith
editor, Africa Confidential

In that time, oil - which provides 80-90% of export revenues - and diamonds have fuelled the conflict.

And the changes of fortune in the war have enabled both sides to profit hugely - while the Angolan people have paid the price.

Much of the countryside is mined, or threatened by armed bands. Millions in this southern African country of 13 million people have become refugees, displaced either internally or across the borders.

Losing the focus

The hope now is that robbed of its central figure, Unita will become a spent force.

Bullet-pocked buildings in Huambo show the effects of the 30-year war

It has been heading that way since the mid-1990s, when UN-backed sanctions began to take effect.

And if Unita does lose its strength, observers hope the corruption built into the oil and diamond industries will begin to decline.

According to Global Witness, a UK pressure group specialising in the relationship between conflict and resource exploitation, as much as $1.4bn in oil revenues went missing in 2001 alone.

Huge oil-backed loans shrouded in opaque accounting and used to pay for weapons litter the country's budget, and have been abused by corrupt officials - causing the International Monetary Fund to cease lending in June 2001.

'No more excuses'

Now things have a chance of changing.

"The initiative is totally in the government's hands," Patrick Smith, editor of the influential journal Africa Confidential, told BBC News Online.

"There's no longer any excuse for not doing the right thing (with oil revenues)."

And the revenues are impressive. Oil has driven inward investment, worth more than $600m in the 1990s, and Angolan economic growth is predicted to top 10% in 2002 according to the Economist Intelligence Unit.

But not much of that has made it through to poverty reduction or social spending.

And Mr Smith warned that even should the government clean up its act, there is not necessarily a pot of gold waiting.

Only one offshore oil field - TotalFinaElf's Girassol block - is yet in production. Others are expected to come on line in 2003-4.

And until they do, Angola will see no money from taxes or revenue sharing beyond the signature bonuses, much of which - Global Witness believes - has gone into elites' pockets.

With certain honourable exceptions, Global Witness says many oil companies refuse to make their payments to the government known, preventing any public accounting of oil income.

Diamonds are forever

But oil industry sources make it clear that the death of Savimbi does not immediately mean the end of Unita.

Dos Santos' government has seen oil revenues bleed away

With Savimbi's death, the fragmentation of Unita which began in the mid-1990s as UN-backed sanctions began to bite is likely to accelerate.

That could leave many diamond mining areas - the other fuel for Angola's civil war - potentially in the hands of successor warlords.

Angola-watchers note that Unita's control over the diamond trade is not what it was.

"The government now has control of vast amounts of diamonds," Andrew Bone, head of public affairs for diamond giant De Beers, told the BBC's World Business Report.

As Unita has been pushed back, its ability to use diamonds to keep resupplied has dwindled.

Gradually the industry is putting in place a certification system to try to stop so-called "blood diamonds" from making it to the major cutting centres such as Antwerp, Tel Aviv or New York.

And now De Beers sees the opportunity to go back to Angola, having left in mid-2000.

"De Beers has always stated that it has a very big interest in wanting to be involved in a prosperous, transparent diamond industry in Angola," Mr Bone said.

"I would very much hope (that is now more likely)."