At night, when the darkness masks the scars left by Angola’s brutal 27-year civil war, the Ilha de Luanda resembles a down-at-heel corner of Ipanema. Like the neighbourhood in Rio de Janeiro, the locals speak Portuguese in the bars and restaurants dotted along its narrow beach. The weather is balmy, the music is loud and the parties run late.

These days, the upmarket restaurants along the Ilha are filled with oil executives who hope that Angola and Brazil have even more in common: their geology.

Although separated by thousands of kilometres of ocean, Angola’s west coast has geological features that are similar to Brazil’s east coast – a legacy of the separation of African and South American tectonic plates. Offshore, hundreds of metres under the seafloor, both countries have a thick stratum of salt.

 In Brazil, geologists have found vast hydrocarbon reserves beneath that layer, giving rise to a booming “pre-salt” oil industry. Now, some of the world’s largest oil companies are betting billions of dollars that Angola has similar pre-salt reserves.

The wager is crucial to the economic and social future of Angola, the third-largest economy in sub-Saharan Africa behind Nigeria and South Africa. Whether the discovery of more reserves helps the 20m local population remains to be seen. If Angola’s recent history serves as a guide, the record is, at best, mixed. The petrodollars have propelled economic growth but much of the wealth remains concentrated in a small circle of plutocrats. After years of oil production, more than a third of the country’s population remains in poverty.

“People feel that things are happening, but they are not happening in a just manner so that everybody is really benefiting,” says Elias Isaac, country director of the Open Society Initiative of Southern Africa, a campaign group. “It’s very obvious that those who are benefiting are not the majority, it’s just a small group.”

The pre-salt oil wager is not only important for Angola. If the bet pays off it will resonate well beyond the southern African country’s borders – providing a new source of oil as China consumes more and more energy.

In 2011 Angola awarded 11 new licences to major oil companies – including BP, Petrobras of Brazil, Total of France, ConocoPhillips of the US and Statoil of Norway – to conduct pre-salt deepwater exploration in its Kwanza Basin. Maersk of Denmark and US-based Cobalt, which counts Goldman Sachs as an investor, have already found oil in commercial quantities in the pre-salt Kwanza basin.

People feel that things are happening, but they are not happening in a just manner so that everybody is really benefiting– Elias Isaac from the Open Society Initiative of Southern Africa

Big Oil will this year follow up by drilling more than a dozen exploratory pre-salt wells. “This activity will go a long way to deciding whether the Kwanza offshore can deliver the next successful chapter” of Angola’s oil history, according to Wood Mackenzie, an oil consultancy.

The excitement about pre-salt oil in Angola is growing as drillers hit new pockets of oil, boosting the potential of a country that is aiming to challenge Nigeria’s position as Africa’s leading crude producer.

The rapid expansion of Angola’s oil industry – and the prospect of more to come – is the most visible sign of the turnround in the country’s fortunes since the end of fighting in 2002. More than 500,000 people were killed and 4m displaced in the conflict, which erupted in 1975 after Angola won independence from Portugal. The war’s brutality was symbolised by the proliferation of landmines that indiscriminately blew the limbs off old and young, combatant and civilian. The conflict set back education, health and development for generations.

Today, however, Angola fits into the “Africa rising” narrative. It has enjoyed some of the world’s fastest growth rates over the past decade, with an average gross domestic product growth of 10.1 per cent, according to the International Monetary Fund. But it is also an example of a country battling the resource curse: instead of creating universal prosperity, its oil has helped underpin the second-longest serving president in Africa and has fostered corruption that undermines economic development.

Oil production has more than doubled from about 800,000 barrels a day in 2001 to 1.6m b/d today, much of which is shipped to China. The southern African nation has been the second-biggest supplier of oil to Beijing after Saudi Arabia since 2005. In return, China has been a vital source of credit to Angola. Li Keqiang, Chinese premier, said during a visit this year that of the 1m Chinese living and working in Africa, roughly a quarter live in Angola.

The government hopes to lift oil output to about 2m b/d by 2015, even before counting the impact of the pre-salt discoveries. Total recently announced one of the biggest ever investments in Africa, saying it would spend $16bn developing Angola’s Kaombo oilfield. “Angola remains a priority country for Total,” says Yves-Louis Darricarrère, head of exploration and production.

Over the past decade the country has surfed a perfect wave of rising oil production and prices, and the trend is continuing. As a result, Angola’s oil revenues hit $68bn in 2012 – the latest estimate available – up from just $13bn in 2004, according to the US Department of Energy.

But Angola is not just oil-rich: it also has diamonds and fertile land. With a young population and massive reconstruction and development needs, foreign banks, retailers and construction companies are pouring into the country.

In January Standard Chartered became the first big international lender to open an onshore subsidiary in Angola. Diana Layfield, the bank’s Africa chief executive, says the opportunities go beyond oil.

“Angola’s economy is diversifying,” she says. “The non-oil sector is forecast to grow at around 10 per cent this year – with especially strong growth in utilities, trade and agriculture. Angola is also a big part of the fast growing China-Africa trade corridor, accounting for a fifth of the continent’s total trade with China.”

KFC, the US fast-food chain, is among the latest franchises to open in the capital city of Luanda. This would have been unimaginable a decade ago.

But in spite of its resource wealth – or perhaps because of it – Angola remains a notoriously expensive and challenging place for businesses to operate, with basic services such as taxis barely in existence.

Poverty is visible everywhere, with slums dotting the outskirts of Luanda minutes from shiny new buildings. Neighbourhoods of shanties have been bulldozed to make room for new development.

Education is another significant problem. Only 66 per cent of girls achieve literacy, according to the UN. Life expectancy is 51.5 years – but has improved notably from 1970 when it was only 37 years. But the elites are enjoying a boom, with new shops and restaurants catering to the newly rich. Shoprite, Africa’s largest grocer, sold more bottles of JC Le Roux sparkling wine last year in its 19 shops in Angola than in all its 382 stores in South Africa.

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The economic boom has not been matched by political progress. It is here that Angola displays many of the traits that show the flip side of the “Africa rising” narrative. It is highly dependent on one commodity – oil accounts for about 80 per cent of government revenue – and is ruled by a dominant political party, the Popular Movement for the Liberation of Angola (MPLA). José Eduardo dos Santos, the 71-year-old president, has been in office for 35 years – the second longest-serving leader in Africa, only behind Teodoro Obiang of Equatorial Guinea and ahead of Robert Mugabe of Zimbabwe.

Critics accuse President dos Santos of running an autocratic regime that is intolerant of criticism. As in other post-conflict countries ruled by former liberation movements, the MPLA – once a Marxist group backed by the Soviet Union and Cuba – dominates over a weak and fractured opposition and governs in a stiflingly bureaucratic and often opaque manner.

Allegations abound that corruption and cronyism have enriched members of the elite, including members of the dos Santos family, at the expense of the broader population. Critics point out that Africa’s richest woman is Isabel dos Santos, the president’s oldest daughter.

Many of the residential developments that have rapidly changed the face of Luanda are far beyond the means of the majority of the population. The capital is among the world’s most expensive cities, with burgers in hotels costing about $40 and rents sky-high for expatriates, while the country is ranked a lowly 148 on the UN’s Human Development Index.

José Filomeno dos Santos, the 36-year-old son of the president and chairman of a new $5bn sovereign wealth fund, asks critics for patience. His constant refrain is that Angola should be judged on the progress made in the 12 years since the killing of Jonas Savimbi – the leader of the rightwing guerrilla group the National Union for the Total Independence of Angola (Unita) – marked the end of the civil war.

“It’s a trend towards transparency,” he says. “This will not be a revolution or a change overnight. But it’s a gradual thing and there will be changes along the way and it will be a learning process where you try things.”

Since the conflict’s end, GDP per capita has soared from $690 to $6,000, while the number of Angolans surviving on less than $1 a day has fallen from 68 per cent to 37 per cent, according to the UN.

. . .

But frustration at the huge gap between the haves and have-nots, coupled with concerns about widespread corruption, helped spark a series of sporadic protests since 2011 by angry youths and opposition supporters. The security services’ reaction to the demonstrations has drawn widespread condemnation from activists. In November members of the presidential guard allegedly shot and killed a protester after a demonstration was called to show support for two people said to have been abducted at a previous protest, according to Human Rights Watch, the US-based group.

“In Angola we have a multi-party democracy but not a pluralistic society,” Mr Isaac says. “The MPLA controls everything.”

Still, Mário Cruz, an executive at Banco Atlântico and a member of the emerging young Angolan business class, is confident his country is moving in the right direction given its history. He cites the mushrooming number of people holding bank accounts, seeking credit, buying cars and using social networking sites – statistics that Africa watchers use to bolster the “Africa rising” story – to support his case.

“We have a long way to go but I’m very optimistic about it,” he says. “The government is slowly changing, Angola is slowly changing, but you cannot look forward without looking back [at the damage of the wars].”

And just as oil executives preach patience and caution in their search for the next big pre-salt oil discovery, there are warnings against expectations of a radical economic or political transformation of a nation still nursing the scars of war.

Describing Angola as a “12-year-old” country, Mr Cruz’s argument is that the process of change should not be abrupt. “The first thing we have to have is stability,” he says. “We know what it’s like not to have stability.”

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Fiscal management: State maintains a tight grip on the economy

Barely a view in Luanda is complete without cranes standing over the next construction site in the capital, which bears all the hallmarks of a poor, ramshackle city in the midst of a property boom.

Yet on closer inspection it becomes clear that many of the cranes are idle as a slowdown from a sprint-like pace takes hold. The nation’s economic growth has decelerated from a high of 22.7 per cent in 2007 to 4.1 per cent last year as oil production growth plateaus and energy prices cool.

They don’t want to repeat what they did before the crisis – it’s easy to spend but it’s not easy to do so wisely and effectively– Local observer

The result has been an intake of breath by the authorities while they attempt to get to grip with government spending – a fiscal surplus equal to 5.1 per cent of the economy is expected to have fallen into deficit in 2013 – and desperately weak capacity.

Foreign observers say the slowdown may be no bad thing if it helps focus the government on reforms and better management of petrodollars. “They don’t want to repeat what they did before the crisis – it’s easy to spend but it’s not easy to do so wisely and effectively,” says a local observer.

In March, the International Monetary Fund expressed concern with “continued weakness in public financial management and called for decisive efforts to address arrears”, which at one point reached about $4bn. The problems are blamed partly on weakness of capacity in the public sector but also critical is the opacity with which the country has handled its oil revenues.

For decades, Sonangol, the all-powerful state oil company, has been the unrivalled force across Angola’s economy – the holder of the keys to the chest that holds the nation’s oil wealth. There was no transparency as the petrodollars were used to fund the ruling People’s Movement for the Liberation of Angola’s war effort against National Union for the Total Independence of Angola rebels and boost the coffers of the political and military elite. Sonangol for years was a state within the state, often financing and managing projects unrelated to the energy sector.

At the urging of the International Monetary Fund, the Angolan government is now slowly curtailing the role of Sonangol outside the oil industry. It has taken over so-called quasi-fiscal operations, mostly in housing and industrial projects, that in the past were financed and controlled by the state-owned company.

Yet the authorities are still using the company to operate projects in new cities across the country, arguing that the decades-old experience of Sonangol in managing construction is invaluable.