FACTBOX-Key political risks to watch in Angola

LUANDA, Sept 1 (Reuters) - Angola's ruling MPLA party emerged victorious from a 27-year civil war in 2002 promising a better life for Angolans but this dream is fading as corruption is rife and the government is seen failing to help the poor.

Despite their nation's vast oil resources, millions of Angolans live in poverty with an estimated two-thirds of people in the country living on less than $2 a day.

Other problems include uncertainty around a possible successor to President Jose Eduardo dos Santos, liquidity problems in the banking sector and heavy dependence on oil.

Many of the issues feed demands for more government transparency and accountability as Angola tries to regain investor confidence after the global financial crisis.

TRANSPARENCY

Dos Santos has been uncharacteristically loud about corruption after his government turned to the International Monetary Fund for a $1.3 billion loan last year.

His comments on zero-tolerance on corruption prompted parliament to pass a law this year to punish public officials caught stealing from the state.

But it is hard to change the rules of the game when the players remain the same.

The elites in government often have financial interests in particular domestic firms that get preferential treatment.

As a result, the decision-making process in Angola tends to be opaque, with access to the key players in government limited. The private media is also seen controlled by members of the government. [ID:nLDE67A112]

The perception of corruption is so high that U.S.-based firms run the risk of violating the Foreign Corrupt Practices Act, even though U.S. investors have generally done well in Angola and most have avoided crossing any FCPA lines.

Solid statistics and market relevant information are also scarce in a country where the MPLA holds a huge sway over the media. Some investors may feel as though they are entering the market half-blind.

Such lack of transparency can lead to unwelcome surprises, such as when the Angolan government announced commercial arrears of an estimated $6.8 billion far exceeded prior expectations.

Watch out for:

-- Signs of falling investor confidence.

-- Detention of corrupt government officials.

SUCCESSOR

The MPLA's landslide victory in the first post war election in 2008 left political rivals in tatters, enabling dos Santos to change the constitution and further increase his powers.

The 68-year-old is widely expected win the 2012 election.

The big question inside the MPLA is who will dos Santos pick as vice-president and possibly the successor to one of Africa's longest-serving leaders.

Despite criticism for holding power for more than three decades and having a huge sway over politics and the economy, many investors see dos Santos as key to peace and stability.

Vice-President Fernando Piedade Dias dos Santos is seen as a natural successor to dos Santos but his chances have been marred by health problems and he could easily be outflanked by ministers of state Manuel Vieira Dias or Carlos Feijo.

Watch out for:

-- Changes in the government ahead of the 2012 elections.

-- Any comments from dos Santos about his plans to retire.

-- Bickering inside the MPLA party ahead of the elections.

LIQUIDITY PROBLEMS

Angola's government has said that some banks in the African nation face liquidity problems and has offered to loan them money if they follow a restructuring and recapitalisation programme [ID:nLDE6721F8].

A lack of liquidity in the banking sector could hurt investor confidence and weigh on economic growth in what was once one of the world's fastest growing economies.

These problems likely began in May last year when the central bank began limiting the amount of dollars it sells to banks and doubled the reserve requirement to 30 percent, leaving lenders with less money available.

A rise in bad loans, triggered by the global economic slowdown, also made the liquidity problems worse.

The government did not single out any single bank of an estimated 20 lenders operating in Angola, which include Banco Fomento Angola, controlled by Portugal's Banco BPI (BBPI.LS), Banco Africano de Investimentos and Banco BIC.

Other lenders include South Africa's Standard Bank (SBKJ.J) and BESA, which is controlled by Portugal's Banco Espirito Santo (BES.LS).

Watch out for:

-- Banks adhering to the government's bank rescue programme.

-- A run on some banks by clients concerned about the safety of their deposits.

-- Measures by the central bank to increase liquidity in the banking sector.

OIL DEPENDENCY

Oil has helped Angola pick up the pieces of a devastating civil war to become sub-Saharan Africa's third biggest economy after South Africa and Nigeria.

But as in many oil producing nations, Angola's oil dependence can also be a curse.

Despite moves to diversify and invest in sectors such as agriculture, oil still accounts for 90 percent of Angola's export income but employs less than 1 percent of the population.

The oil price slump in 2008 left Angola struggling to pay salaries to civil servants and forced it to delay billions of dollars in payments to construction firms rebuilding the nation after the war.

In Angola's oil-rich province of Cabinda, rebels from separatist group FLEC, which has waged a war against the government for decades, fatally attacked the Togo soccer team in January as they made their way to the African Nations Cup.

The roots of the conflict are long and complex but one grievance is that many Cabindans have is that they see little of the oil that comes from their land.

The IMF, the World Bank and ratings agencies, which have given Angola the same B+ rating as Nigeria, have all urged the African nation to do more to diversify its economy.

Should Angola fail to broaden its economy, it risks becoming another Nigeria where quarrels about the distribution of oil wealth have fuelled civil unrest.

Angola rivals Nigeria as Africa's biggest oil producer.

Watch out for:

-- Concrete moves to diversify the economy into sectors such as agriculture.

-- The outcome of peace talks between government and FLEC.

-- Ability of the government to pay back $6.8 billion in late bills to construction firms.