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Angola: New magazine out now

Article - November 27, 2014

If Africa is a continent of contrasts, nowhere are they as stark as in Angola.


This piece can be also be found in our new magazine, which can be read online for free here.

Africa’s second-largest oil producer and one of the fastest-growing economies in the world, Angola has a per capita income of more than $4,500 a year, qualifying it as an upper-middle income nation. Yet government officials admit that 36% of its people live below the poverty line.

The country holds vast tracts of arable land and an abundant water supply, but oil revenues and a robust currency have led it to import nearly all the food consumes. Still, agriculture - or rather subsistence farming - continues to be the largest employer, occupying more than two-thirds of the work force.

The contrasts are not only in the numbers. A nighttime view of the skyline of Luanda, the world´s most expensive city, shows new hotels lining the Ilha, the fashionable beachfront area, while rows of illuminated construction cranes bear witness to the ongoing building boom; this could easily be Doha, the capital of Qatar, minus the minarets. Daytime reveals a city where the majority of the housing is substandard and power outages so frequent that even the most exclusive buildings have their own electricity generators.

Angola’s story is not simply that of a petro-state which has come into enormous wealth in a short time and is suffering growing pains. Twenty-seven years of civil war which ended in 2002 shattered the country’s infrastructure and stunted its economic growth. The war years were followed by a decade of dizzying expansion based almost exclusively on oil revenues, to the detriment of the rest of Angola´s considerable natural resources. The world financial crisis and the decline in crude oil prices provided a reality check, as GDP growth plummeted from 13.8% in 2007 to 2.4% in 2008.

Thanks in part to a standby program from the International Monetary Fund, the government of President José Eduardo dos Santos managed to put public sector finances in order, stabilize the exchange rate and bring inflation down to historically low levels. 

Today, Angola’s government has embarked on an ambitious plan to develop the non-oil sectors by investing petroleum revenues in a variety of sectors: infrastructure, mining, telecommunications, agriculture, tourism, all of it designed to create jobs and build a diversified, sustainable economy.

In this premier issue of  The Worldfolio magazine, we take a look at these and other sectors of Angola´s economy. We also tell about the risks and rewards of doing business in the country and what it´s like to live there on a day-to-day basis.

More importantly, we provide a platform for experts within the country to give us their views on Angola´s near and medium-term future. In separate articles, two leading economists  - Nicholas Staines, the IMF´s resident director in Angola, and Manuel José Alves da Rocha, professor of economics at the Catholic University of Angola -provide differing and stimulating viewpoints on what needs to be done to assure Angola´s ongoing economic and social stability.

Our cover story explains how diamonds came to be “forever,” and describesAngola´s place in this worldwide industry, which has been benefitting from an increase in demand for luxury goods  in India and China. The return of the diamond giant DeBeers to Angola in 2014 is just one indication of how important the country´s role is in this $72 billion annual business.

Diamonds notwithstanding, oil and gas are today the lifeblood of Angola´s economy and will continue to be for years to come. During 2014, the industry has been vexed by technical problems that have lowered crude production and brought Liquefied Natural Gas (LNG) exports to a halt. Still, as Aled Bryon explains in his article, Angola looks set to be a major power in the world oil industry over the coming decades as more and more new reserves are discovered each year. In an accompanying story, we examine the government´s sovereign wealth fund, which is meant to channel oil resources into other productive areas, in order to diversify the economy and create jobs.

As Angola struggles to rebuild its war-damaged infrastructure and provide housing and social services for a growing population, the building trade is on a roll. Construction companies from Portugal, Brazil and most notably, China, have been getting the business, and it’s hard to compete with the latter, whose projects are financed by their own Export-Import Bank.

In a separate article, we examine the overall role of Chinese companies in the Angolan economy, where they have come to occupy a unique if not always welcome position, based on China´s need for petroleum and Angola´s requirements to finance the rebuilding of the country.

While the Chinese have been making inroads in Angola and throughout Africa over the past decade, the United States has sought to recover its position across the continent with trade agreements and export financing for U.S. companies doing business in the region.  Jonathan Meaney explains how Angola has become the focal point for this struggle for influence between the world’s two largest economies.

Even with the advantage of government financing, it´s difficult to do business in Angola, due to a complicated set of regulations, frequent bureaucratic delays and ongoing concerns about transparency. Our article examines the recent Private Investment Law, laying out the rules, but also provides some caveats, telling what organizations such as the World Bank and Transparency International are saying about doing business in Angola.

Setting up new companies requires credit and Angola´s banking and finance sector has seen rapid expansion in the past seven years, with the number of banks nearly doubling. Even so, nearly 80% of the assets in the banking system remain in the hands of half a dozen major institutions. Our article describes the finance system as a whole and how recent reforms have made it more attractive for foreign investors. In an interview, Teodoro Poulson of the public venture capital fund FACRA explains how the government is exploring new ways of financing for companies.

While companies from abroad have been seeking entry into resource-rich Angola, the country itself has been doing some foreign investing in its former colonial master, Portugal. We take a look at how Angolan investors, including the state oil producer Sonangol, have acquired major stakes in some of Portugal´s largest companies and the controversy these investments have sparked between the two governments.

Among the other sectors we examine are agriculture, which is undergoing a renaissance thanks to public-private partnerships such as the Biocom project to extract ethanol from sugar cane and turn it into fuel; and the nascent tourism sector, which is just beginning to attract travelers to the extraordinary hidden treasures in Angola´s vast and varied landscape.

Finally, in our Lifestyle article, we take a look at what it´s like to live in Angola on a daily basis, including the tribulations and satisfactions of life in the capital, Luanda.

This first issue of  The Worldfolio magazine is meant to provide an overview of the country, its economy and the rewards and pitfalls of living and doing business there. We hope you enjoy it and we welcome your comments at contact@theworldfolio.com

Edward Holland, Editor, The Worldfolio.