The government, under the control of the MPLA-PT Central Committee, directly controlled most of the economy (see Structure of Government , ch. 4). Government-owned enterprises took the place of private enterprises and businesses. Because most Portuguese owners of manufacturing concerns and agricultural plantations fled the country at the time of independence, the new government was forced to nationalize factories and farms to keep them operating. The government also intervened directly to protect the country's wealth from foreign exploitation by creating companies to control Angola's mineral and petroleum wealth. State-owned companies in the oil industry have negotiated attractive terms of operation with the foreign companies that pump the oil, keeping a large percentage of the profits inside the country. The government's economic policies thus have combined ideology with necessity to fill the gap left by the Portuguese, without emulating the economic system created under colonialism.

But in the mid-1980s, Angola's centralized economy had fallen on hard times. Despite a 21.5 percent rise in the volume of oil production in 1986, government oil receipts fell to only 45 percent of the budgeted level because of the serious drop in worldwide oil prices that year. As a result, government revenues were barely half of the level budgeted for 1986 (see table 4, Appendix A). The government responded by cutting overall expenditures by 5.5 percent, mostly for items related to economic development, although expenditures for social services rose by 14 percent. The war against UNITA compounded the effect of lost oil revenue--defense expenditures rose to a record 40.4 percent of the 1986 budget (see War and the Role of the Armed Forces in Society , ch. 5).

Weak economic performance since independence has led government planners to reorient economic ideology, endorsing programs to liberalize many state policies and return some state functions to the private sector. In December 1986, the government decreed the liberalization of agricultural marketing, allowing for some free trade of agricultural goods to motivate farmers to produce more for the local market. Since the departure in 1975 of the Portuguese traders, who traditionally had monopolized rural trading, the inefficiency of the National Company for the Marketing and Distribution of Agricultural Products (Emprêsa Nacional de Comercialização e Distribuição de Produtos Agrícolas--Encodipa) and the scarcity of basic consumer goods and manufactured agricultural inputs have discouraged peasants from producing surpluses (see table 5, Appendix A). Most peasants have retreated to a purely subsistence form of farming. Similar inadequacies by the state livestock marketing company have resulted in serious overstocking in the cattle-raising southwestern region of Angola. Since 1984 the government has also been dissolving the 1066 e state farms established on land formerly owned by Portuguese commercial farmers and has been turning the land over to the workers. Agricultural development stations have been set up to provide these farmers with services such as mechanized plowing. Furthermore, local peasant associations and cooperatives have been established throughout the country to organize production and consolidate resources.

On August 17, 1987, President José Eduardo dos Santos announced plans to restructure the economy. These reforms, called the Economic and Financial Rectification (Saneamento Económico e Financeiro--SEF), put the economy in line with the policy guidelines approved by the Second Party Congress in December 1985. In his speech, the president listed several factors affecting the economy, including the steep fall in oil prices in 1986, the "excessive centralization of socialist planning methods," the poor management of state enterprises, and corruption. The SEF program mandated a strong move toward the private sector domestically and abroad, including membership in the International Monetary Fund (IMF--see Glossary) and World Bank (see Glossary). The foreign investment law was therefore being reviewed, and an office was to be established to promote investment and reduce negotiating costs. The SEF program also called for the privatization of nonstrategic state enterprises, ending budget subsidies to the remaining state enterprises, shifting from state farms to the peasant sector, raising prices, enacting monetary reforms, and devaluating the kwanza. The president noted that because the state had tried to enter so many different areas of economic activity, it had been unable to prevent the deterioration of the services for which it was traditionally responsible, such as education, health services, police, and civil administration. One area that the government was unlikely to relinquish to the private sector, however, was control over imports (see Foreign Trade and Assistance , this ch.).

In addition to the general liberalization of economic policies that the government proposed, the MPLA-PT Central Committee also launched a campaign against graft and the parallel market. The parallel market offered at exorbitant prices a full range of goods normally unavailable inside Angola. By June 1987, forty-two work teams had been established to oversee government efforts to end this illegal trade, and the provincial authorities had ordered the closing of all parallel markets. In addition, the government directed the military to supervise more closely the movement of goods at the intraprovincial and interprovincial level. The government also started an educational campaign of "consciousness raising" on farms and in factories to discourage the theft and pilfering that fed goods to the parallel market.

These efforts notwithstanding, in 1988 sources estimated that approximately 40 percent of the goods imported through Luanda never reached their intended destinations because of theft. Moreover, because the purchase of basic foodstuffs required ration cards, in 1988 the parallel market was thriving.

Data as of February 1989