Nirit Ben-Ari
ANGOLA has one of the world’s fastest- growing economies, with growth of 5.1 percent in 2013. As major public infrastructure investments in energy and transport kick in, its growth is projected to reach 7.9 percent in 2014 and 8.8 percent in 2015.
Yet the UN Development Programme (UNDP) reports that about 36 percent of Angolans live below the poverty line and one in four is unemployed. According to the International Monetary Fund (IMF), it is a “post-conflict country that produces a lot of oil and faces the challenges of both”.
Despite being the fifth-largest economy in Africa, ordinary Angolans have seen little change in their standard of living. Only 37.8 percent of its 21 million people have access to electricity.
While about half have access to safe drinking water, this falls to 34 percent in rural areas, says the World Bank.
There are few jobs for the unemployed, mostly under 25 years, who make up 60 percent of the population.
Analysts say the solution is for it to diversify its economy, save and invest for the future – especially in skills and infrastructure development – and improve governance.
Angola is Africa’s biggest oil producer after Nigeria. Its oil comes almost entirely from fields off the coast of Cabinda and from deep-water fields in the Lower Congo basin, and small-scale production from onshore fields.
Last year, according to the US Energy Information Administration, an agency that provides energy statistics and analysis, Angola produced 1.85 million barrels of petroleum a day. Oil revenue could top $60 billion (R664bn) this year, notes the African Economic Outlook, a report produced by the African Development Bank, the Organisation for Economic Co-operation and Development, the UNDP and the UN Economic Commission for Africa.
But oil has not proved to be a benefit. It has produced few jobs and has increased inequality and allegations of corruption, say analysts.
Angola’s mineral product exports as a share of total exports is more than 95 percent, according to data from the World Bank and Opec. Oil production and its supporting activities contribute about 45 percent to gross domestic product (GDP) and 80 percent to government revenue.
With little diversification, the economy has limited investment and generates growth only for a small group of elites, economists say. In terms of the composition of its exports, Angola is the world’s most concentrated economy after Iraq, says the UNDP.
The World Bank identified three problems: high dependence on oil revenue, making the country vulnerable to price volatility; an economic system that is prone to corruption; and the absence of a diversified job market. The Economist reported last April that Angola was “still much too oily”, because oil provided few jobs, especially good jobs, and by the government’s own admission there had been a “failure to develop the non-oil economy”.
The oil industry employs 1 percent of Angolans, which is a factor in the 26 percent unemployment rate.
The Centre for Scientific Studies and Research at the Catholic University of Angola sees the oil-dominated economy expanding substantially since independence, particularly since the end of the civil war in 2002. While conceding that diversification was absent from government policy until 2011, it says other sectors are now contributing to GDP, although not substantially.
In addition to oil, Angola exports diamonds. It is Africa’s largest source of rough diamonds after Botswana and the fourth largest in the world. Diamond production generates over $650 million annually, although exact numbers are uncertain due to illegal diamond mining and smuggling. The industry is a significant source for foreign revenue. In 2003, Angola sold between 5.3 million and 6 million carats at a value of about $1bn through the state-owned Sociedade de Comercialização de Diamantes de Angola.
But the industry is alleged to be involved in human rights abuses such as forced overtime without adequate compensation and environmental degradation. Rafael Marques de Morais, an Angolan journalist, human rights activist and anti-corruption campaigner, recently filed a criminal complaint against two diamond mining companies and their directors, including top military officers.
In response, authorities labelled him an “official suspect” and officials from some mining companies have accused him of defamation. Isabel dos Santos, the billionaire daughter of the president, is said to be one of the main beneficiaries of the diamond trade, an article this year in Forbes business magazine shows.
Besides oil, other contributors to GDP include non-oil energy, agriculture, fisheries, manufacturing and construction. Angola has high-quality soil and good water supplies, which could make commercial farming a valuable industry, says the African Development Bank. Agriculture accounts for 11 percent of GDP but 70 percent of total employment.
In 2013, farm output grew by 8.6 percent, mostly through strong growth in cereal production, the African Economic Outlook notes. The National Cereals Institute of Angola says the country requires 4.5 million tons of grain a year but grows about 55 percent of the maize, 20 percent of the rice and 5 percent of the wheat needed for local consumption.
More government spending on agriculture could change that and make Angola self-sufficient, suggests the Food and Agriculture Organisation.
However, its agricultural sector is growing impressively. The Comprehensive African Agriculture Development Programme, an initiative of the AU, reported in 2011 that it grew at more than 25 percent, surpassing the 6 percent target set for African countries. That growth rate made it the fastest growing on the continent.
Angola has also become a magnet to economic refugees from China and Portugal.
“Definitely more Portuguese people are coming here in recent years, not only because of the bad financial situation in Europe but because Angola is one of the fastest-growing economies in the world,” observes Ribeiro, a Portuguese national who runs a pizzeria in Luanda.
They are joining an influx that includes Chinese, Brazilian and, to a lesser extent, British investors.
“We’ve always been one of the biggest communities, but we’re slowly being surpassed by the Chinese,” Ribeiro told The Guardian newspaper.
Portuguese engineers, for example, might make e900 (R12 700) a month in Portugal, but they made four times more in Angola, reported the BBC.
As a consequence of this reverse population flow, Luanda “has overtaken Tokyo as the world’s most expensive city to live in for expatriates”, according to CNN.
Chinese investors are heavily involved in Angola’s large-scale public works such as road, rail and other infrastructure. But critics say these investors do not create sufficient jobs because they bring most of their workers from China.
In 2008, the Angolan consulate in China issued more than 40 000 visas to workers, the World Affairs journal reports. For example, the China International Trust and Investment Corporation employed 12 000 Chinese workers and only a handful of Angolans during the peak of the Kilamba Kiaxo social housing development project in Luanda.
The journal states that while most Chinese in Angola work in the construction sector, thousands branch out into property, retail and street hawking.
In 2013 the economy weakened because of lower-than-expected oil spending and mismanagement of public debt.
But the African Economic Outlook predicts that with increasing diversification, the non-oil sector could expand by 9.7 percent and the oil sector by 4.5 percent in 2014.
Worried about the uneasiness among its population over growing inequality amid rapidly rising economic growth, the government is taking steps to improve the lives of its citizens.
There are ongoing investments in electricity, water and transport. As part of the infrastructure-for-oil trade agreement between China and Angola, rail infrastructure is expanding.
To create jobs, the government has introduced a foreign exchange currency law for the oil industry and reformed the regulations governing mining.
Introduced in November 2012, the law cuts business taxes from 35 percent to 25 percent, which has led to significant investments by companies including diamond producers De Beers and Sumitomo Corporation, and companies are currently developing an ammonia and urea plant.
This year, Angola’s central bank plans to de-dollarise the foreign exchange market to limit the use of foreign currency in local transactions. In the past, most oil receipts were conducted offshore; new laws require transactions to be handled onshore.
But Angola needs more sound policies to attract investors to all sectors, not just diamonds and oil, experts say. The World Bank’s Ease of Doing Business report ranks it 179 out of 189 countries. This low ranking has to change for the economy to live up to the expectations of its 21 million people.
This article is provided by the UN’s Africa Renewal Features Service