The Changing Face of the Angolan Economy

The Angolan landscape expands far and wide across the African central plateau, with an formidable coastline peppered with plenty of diversity. The country borders the DRC, Zambia, Namibia, and Botswana. The principal language is Portuguese, and the country has started mass exporting petroleum to the world in recent years. Several challenges remain however, notably falling oil prices (Brent crude oil is priced at $58.55 and WTI crude oil is priced at $53.25 per barrel, in late-October 2019).

Given that oil exports account for 90% of all exports from Angola, and the oil sector comprises 33% of gross domestic product, global economic trends have an outsized impact on Angola. Changes are afoot however, with increasing liberalization of economic policies helping to fuel private sector growth and enhanced competitiveness. On the currency front, Angola has opted for greater flexibility in its exchange rates vis-a-vis monetary policy. Agreements are firmly in place with the International Monetary Fund (IMF) in the amount of $3.7 billion and World Bank Development Policy Financing (DPF) in the amount of $500 million. These international financing options are geared towards reducing indebtedness in Angola, in conjunction with business-friendly regulations and the encouragement of economic growth.

The central bank has also slashed interest rates to spur private enterprise, despite rampant inflation. On the political front, Angola has made tremendous progress and is now a beacon of hope and change for many other African countries. Yet despite all the progress, there is a high degree of income inequality (Gini Coefficient) between the haves and the have-nots, and government is teaming up with private sector to redress these challenges.

Local Business is Working Hard to Remedy the Economic Disparities

Angola is also home to a growing number of entrepreneurs intent on leaving their mark on the economy. Among them is an active cohort of recently empowered women now rising through the ranks of the Angolan business elite. While only a handful of female business executives currently populate the elite scene, one business leader is well-known - Isabel Dos Santos.

She is the self-made owner and founder of multiple Angolan corporations. Among them are many innovative companies, including a digital satellite TV operator named ZAP, chairwoman at Unitel, SODIBA, Candando, and EFACC - a pioneering energy giant with multiple subsidiaries across many different markets. Dos Santos is best known for investments in local communities, such as strawberry plantations in Humpata, the provision of basic human services like a children's hospital, running water, literacy initiatives, and the eradication of disease.

Her companies actively promote women through the ranks, helping to drive female participation at the highest levels of economic activity. Isabel spoke on behalf of the country at the World Economic Forum on Africa, where she went to great pains about the importance of education for Angolans across the board. As a business leader, she impressed upon delegates the need for substantial investment in telecommunications and infrastructure networks, highlighting many of the challenges that currently face the country.

As it stands, Angola's unemployment rate hit 28% in 2018, and the majority of the population (45%) is under the age of 15. While oil remains the mainstay of the economy, Dos Santos is seeking to encourage economic growth and development in many other sectors and industries, including the Internet of things, electric vehicle technology, the provision of education and skills training opportunities to men and women across the board, and the ability to lock in financing for investment opportunities in Angola.

The Current State of the Angolan Economy: Challenges and Opportunities

Foreign countries are the mainstay of multinational investment initiatives in any country, Angola included. Unfortunately, Angola suffers from a severe shortage of forex. This means that foreign corporations cannot repatriate their earnings easily. This impacts imports in a country which is heavily dependent on foreign-produced goods and services. As a result of the forex crunch, many countries advise their investors to request cash in advance from Angolan corporations.

The central bank has advanced letters of credit as the preferred instrument for import/export activities, although there is a substantial lead time involved in processing these transactions. Angola also fares poorly in terms of its ability to conduct business quickly, easily, and efficiently. Indeed, the World Bank Doing Business Index Report of 2019 ranked Angola at #173 from 190 participating countries.

Foreigners struggle to pay the astronomical costs of hotel accommodation, housing, translators, et al. Yet, the salaries commanded by Angolan executives are comparable with those in the Western world. Most all communication in Angola is in Portuguese, complicating matters for English-speaking professionals seeking to invest in the Angolan economy. Translators are available, yet they can cost up to $800 daily, a significant expense item. Distribution channels remain limited, given that the Civil War had a disruptive effect on the country.

In Q2 2019, the Angolan economy chugged along with little signs of robust growth. Once again, it was crude oil prices determining Angolan GDP. Further weakness is expected heading into 2020, which likely prompted the Angolan government to implement a flat rate value-added tax (VAT) of 14%. The latest population figures indicate Angola's total population is 28.4 million people, with a GDP per capita of $4,304. Negative economic growth indicates a contraction in overall activity, largely due to falling oil prices. External debt comprises 35.5% of Angolan GDP, and much work needs to be done. The focus is now on government and leaders in the private sector to help drive economic growth and advance education, skills training, health and wellness for all.