Anybody who cares about the privacy of their communication can still use an open source stack. So yes it works as a tool for oppression and for catching extremely inept criminals, but it doesn't do much else for national security.
Yes, it's plausible that the non-approved software stack on your phone isn't doing any illegal encryption, but that fails if having non-approved OS on your phone a crime by itself.
Yes, it's plausible that the TrueCrypt volume you have doesn't contain anything bad, but that fails if mere possession of TrueCrypt tools is a crime by itself.
Yes, it's plausible that the encrypted traffic sent to/from your phone didn't contain anything bad, but that fails if having any encrypted traffic not going through state-approved MITM https is a crime by itself.
Etc ad infinitum. Don't underestimate the coercive power of gov't if they actually want to restrict something. Technical means can protect you only if you physically live outside of their reach.
The point I'm trying to make is that in an oppressive regime the only thing that actually provides plausible deniability is having and using the exact same hardware/software as everyone else uses; a rooted phone with an opensource OS, unusual chat apps or cryptography tools won't give you any plausible deniability but actually make everything even more risky for you.