The Most Expensive City in the World: Luanda?

As far as most expensive cities to live, London, Oslo, Tokyo and Moscow usually top the list. I can certainly attest that London is no place to start saving for a pension, and I'm told Olso is much worse. But all of these have been surpassed in cost-of-living by a city in a small African country that has just emerged from a three-decade long civil war. That's right: Luanda, the capital of Angola, is now the world's most expensive place to live.

Imagine, if you will, a classified ad that reads...
"For sale: a two-bedroom apartment in a Soviet-style 1960s apartment block in a mediocre neighborhood. Fourteenth floor, elevator last operated in 1990. Erratic plumbing, no maintenance in the past 22 years."
Asking price? 300,000 USD. Brand new single-bed apartments start at $1 million.

As you may have guessed, the driving force behind this property boom is oil, with diamonds coming in a distant second. Angola is now Africa's 2nd largest oil producer, with something to the effect of $30 billion worth exported last year (I'm citing Stephanie Nolen, the Globe's indomitable international correspondent, who is spending her week there). As expected, representatives from American, European, Russian and Chinese firms are pouring into the place trying to get a piece of the action and paying little heed to the longer-run implications of the country's recent transformation.

This is too bad because there is reason to be hopeful. This past weekend, Angola held reasonably fair parliamentary elections for the first time in 16 years. This is also the first glint of democratic shine since the country emerged from a 27 year civil war in 2002 - a conflict that the Americans, Chinese, Soviets and South Africans all played a role in exacerbating in one form or another. Moreover, there is huge potential for social progress waiting to be extracted from the oil fields and diamond mines of this coastal African country. 40% of the country lives in poverty (<$2/day) - 70% in Luanda itself - and the literacy rate is somewhere around 60-70%. If handled properly, the massive influx of FDI can lift many of these people from a perilous lifestyle of begging to one where they can apply their entrepreneurial spirit to grow and diversify the economy.

But there are many potential pitfalls along the way. That expensive property mentioned above? Most of it is occupied by squatters who are unlikely to have anything resembling a legal deed to their homes. This leaves them vulnerable to mass relocation programs that so far have displaced 20,000 people to the outskirts of the city. Moreover, many of the "suburbs" in Luanda are built on literal mountains of garbage that are susceptible to "trashslides" during the rainy season. Corruption is also a severe problem, with each member of the (re-elected) government owning parts of the joint-ventures made with foreign firms. The President's eldest daughter is the majority shareholder for about a dozen companies.

What should be clear from Nigeria is that oil wealth alone is not enough to create sustainable progress, not even when coupled with democratic elections. Unfortunately, I dont expect the foreign investors or governments to be pushing very hard for reform so long as they are reaping the benefits of this newly-peaceful arrangement. I say again: that's too bad, because it's partly neglect and narrow self-interest that left this country devastated for almost thirty years.