Since independence, the economy has been dominated by the oil export industry and drained by the need to carry on the war against the UNITA insurgents. Because of the collapse of the cash-crop economy, particularly the cultivation of coffee by large-scale plantations, in 1988 the economy depended totally on the oil sector to generate funds. As a result of increased oil production, GDP had risen steadily from Kz109.4 billion in 1982 to Kz144.9 billion in 1985.

Unfortunately, however, as the war against UNITA continued, most revenue from oil sales was quickly spent on the nation's defense forces. The relationship between oil profits and defense requirements became most acute in 1986 when the price of oil dropped, reducing government revenues and resulting in a jump in the percentage of government spending on defense.

At the same time, the war has also wreaked havoc in the already suffering agricultural sector, forcing the government to use precious foreign exchange to import food. Once a food exporter, Angola by the late 1980s was importing half of its grain requirements to compensate for reduced production in the war-torn rural areas.

Although the war has caused much rural-to-urban migration, industries based in the cities have been unable to harness this potential work force. Most of the Angolans coming into the cities have little education or training, partly because education in the rural areas has been disrupted by the war. Furthermore, the industries in the cities have been hurt by the lack of raw materials, including grain, timber, sugarcane, and cotton, normally produced in the rural areas. Consequently, industries have come to depend on high-priced imported materials. The frequent unavailability of industrial inputs, particularly during 1986 when the government severely restricted imports to protect foreign exchange reserves, has led to underproduction and underuse in the manufacturing sector.

As a result of the general dislocation in the economy, particularly in the transportation and distribution systems, many goods were unavailable in the 1980s. Thus, the black market (also called the parallel market, or kadonga) had come to dominate trade and undermine government efforts to impose order on domestic production. Consequently, the value of the kwanza also dropped, making it increasingly difficult for the government to attract wage earners to either agricultural or manufacturing enterprises. Furthermore, pilfering and graft in most economic enterprises had become common, as workers recognized that goods used in barter were more valuable than wages paid in kwanzas. As a result, inflation was high, goods were scarce, worker absenteeism was widespread, and productivity was low.

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Source: U.S. Library of Congress