Under the Portuguese, the manufacturing sector grew rapidly because of the substantial increase in the size of the white settler population, the creation of a large domestic market for goods, and the strict exchange controls imposed in 1962 that encouraged investment in local industry. The manufacturing sector was dominated by light industries that produced consumer goods, especially the food-processing industry, which accounted for 46 percent of the value of manufactured output in 1973. In contrast, heavy industries accounted for only 22 percent of output. When the settlers fled, most small manufacturing firms were left without their clerical work force, their managers, and even their owners; in 1976 only 284 out of 692 manufacturing businesses were operating under their old management. In reaction to the decline in the manufacturing sector, in March 1976 the MPLA government enacted the Law on State Intervention and nationalized all of the abandoned businesses. However, by 1985 industrial production was only 54 percent of its real value in 1973.
In the years immediately following independence, the government spent large sums to put plants back into operation, but its plans were overly ambitious, and it overestimated the state's capacity to keep factories supplied with necessary materials and inputs. In the early 1980s, investment was cut drastically, as the government sought to control expenditures and the foreign exchange deficit. Because of limited funding, projects were more carefully selected, and there was clearer recognition of the need for simultaneous restructuring in other sectors, particularly those supplying raw materials for manufacture. By 1986approximately 180 companies were operating in the manufacturing sector, and their output was equal to about 13 percent of GDP. Of that amount, state-run companies accounted for 56 percent.
Among the most acute problems for industrial rehabilitation were shortages of raw materials, unreliable supplies of water and electricity, and labor instability. The decline in domestic production of many raw materials has been especially critical in the decline in local manufacturing. For example, by 1986 only a small fraction of the 8,000 tons of cotton needed annually by the textile industry was supplied locally, while during the early 1970s Angola exported raw cotton. The deterioration of the water supply system has also damaged many industries, especially breweries, as have cutoffs in electricity supply. Furthermore, labor problems, a consequence of a shortage of skilled workers and disincentives to work for wages in an inflated economy, have depleted the local work force. Foreign exchange constraints have also prevented many industries from importing the necessary raw materials.
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