The year of 2019 will be critical for Angola, as it aims to recover from three years of economic decline, and for its new president Joao Lourenco. Many players, foreign and domestic, are impatient for improvement.
That is the judgement of “Africa Report Angola 2018”, the latest report by Africa Monitor.
With the economy still heavily dependent on oil, Angola’s GDP fell by 2.6% in 2016, 0.1% in 2017 and 1.1% in 2018. That was due to the continued volatility in global oil prices. The country is receiving financial assistance from the International Monetary Fund. The State Budget for 2019 forecasts growth of 2.8%.
The report said: “If in 2019 the prolonged economic and financial crisis has not yet seen improvements that lead to a reduction of its most harmful social effects, Lourenço will begin to lose the confidence of the population, including some from the middle class … There is an increasing number of cases of declared impossibility of complying with financial obligations linked to housing loans, with a consequent knock-on effect on creditor banks.” Some of these banks already have liquidity problems.
The strengthening of commercial banks, in financial robustness and compliance with international standards, is a “sine qua non” for the government to work directly with international institutions attracted to the Angolan market. These include KfW and the German DEG, the English DFID, the French Proparco and the Spanish Cofides.
The report said that President Lourenço had already been informed that “these large bilateral development banks — as well as multilateral development banks, such as the World Bank, the African Development Bank and the China Development Bank (the managing entity of the China-Africa Development Fund) — will not work in Angola without a clean-up of the financial system”
While the country attempts to diversify its economy, the report says, growth in the short term will still depend on the oil industry, which has witnessed significant price volatility in international energy markets.
Because of oil sector reform, “the declining trends in Angola’s oil production in recent years (from 2016 onwards) may soon begin to give way to a stabilisation and recovery cycle,” it says.
“Sonangol’s new policies have been calculated to achieve two objectives in particular: to attract independent and effective investment companies to exploit the marginal fields (peripherals of the blocks) and stimulate large operators to invest in the exploration of new reserves”, the report adds.
In political terms, the transition of power from former president José Eduardo dos Santos was led by a “risky”, but successful strategy by Lourenço, to distance himself from dos Santos and the former presidential family.
This strategy culminated with dos Santos´ exit from the post of MPLA president in September 2018 – after the former president himself had opened the door to stay until 2019 – “a door that was promptly closed by party members”.
“Lourenço chose the most risky way – that of imposing his powers (which the Constitution confers on him)”, the report says in its introduction. “Today Lourenço is popular, and even positively surprised the opposition. First, he changed the discourse, raised the tone against corruption, then changed the attitude and political priorities, taking effective measures to stimulate the non-oil sector (agriculture, industry) and economic diversification.”
“Now we have to change the country,” he said. “And that is the real challenge, and the one that will determine the success or failure of the new cycle.”
Africa Report Angola 2018, in partnership with the Legis-PALOP + TL legal database, follows previous reports on Cabo Verde and Mozambique.
In addition to information on the political and economic situation, the report focuses on the oil sector, the driving force behind the Angolan economy, and relevant legislation recently approved. It also has an extensive biography of the new Angolan president.