Angola, a West-Coast country of South-Central Africa, is finally on the road to recovery following years of turmoil, mismanagement, rampant corruption and unchecked greed. While the country may not be facing an economic crisis of epic proportions, it could very well find itself in a similar situation.
The seventh-largest country in Africa is struggling to control its foreign and domestic debt, which is estimated at nearly $80 billion.
The country is still shaken from the effects of its civil war and corrupt government officials have only made matters worse in recent years. The country has been making moves to counter corruption but the pace has been somewhat slow.
This has been exacerbated by the fact that Angola’s economy, which is heavily reliant on oil, has taken a major hit. Angola’s economy after contracted by 0.7% in 2018.
Meanwhile, the country’s rate of inflation, which rose in 2018 due to currency devaluation, is expected to remain high.
And in February of this year, it emerged that Angola’s oil production fell to 1.478 million barrels per day (bpd) in 2018, from 1.632 million bpd the year before, due mainly to ageing oil fields.
This is according to Sonangol, a state oil company heavily invested in the otherwise lucrative industry.
Angola, which is Africa’s second-largest crude producer, said late last year it was negotiating contracts for new exploration blocks to curb the steep decline in output that has seen its economy stagnate and the currency lose more than 40% of its value.
Since the global economy has been less than stable in recent years, developing nations that are poorly managed are at greater risk of failure than their First World counterparts.
Malicious Political Greed will be a Problem
Angola now risks suffering the same fate as Zimbabwe, a country whose economy is in shambles following decades of mismanagement, corruption and malicious political greed.
To make matters worse, Angola has been under an international microscope with scandals plaguing the country’s administration.
Angola is working to develop its infrastructure, but like Zimbabwe, these projects stand the risk of failure if they are given to the wrong hands.
Zimbabwe has adequate internal transportation and electrical power networks yet a lack of maintenance has left the systems in a dilapidated state.
Truth be told, Zimbabwe seems to be on the road to recovery. The country’s economy is projected to grow by 4.2% in 2019 and 4.4% in 2020, according to estimates from the African Development Bank (AfDB).
Zimbabwe’s government has also adopted prudent fiscal policies aimed at reviving the country’s economy. The country’s Central Bank recently announced plans to introduce a discounted currency in order to reverse a series of cash shortages that left people struggling to get hold of basic goods.
However, the AfDB warns that “the country’s protracted fiscal imbalances have constrained development expenditure and social service provision, undermining poverty reduction efforts.”
This is something that could potentially be experienced in Angola as well.
Also, Zimbabwe’s unemployment pressures have been mounting as employment opportunities continue to dwindle.
Meanwhile, Angola’s President Joao Lourenco has not been waiting to see how his own country’s story will play out. He has been waging a war against corruption at a time when the country is desperately trying to woo foreign investors. His campaign has received praise from leaders both foreign and domestic. But his country still has a long way to go.
Given the fact that certain officials within his ranks have been accused of corruption, the Head of State has the uphill task of weeding them out. And if history has taught Africa anything, it’s that greedy, corrupt politicians do not go down without a fight.
For instance, the former Governor of the Angolan capital of Luanda was recently summoned over financial crimes in February.
Angolan media reports that Governor Higino Carneiro and other leaders are being investigated over abuse of power and money laundering among other criminal activities.
Carneiro, who was in charge of Luanda between 2016 and 2017, is just one of many who President Lourenco’s administration will have to strike down before the country makes real strides in the fight against corruption.
But Investors are still interested in Angola
Nevertheless, investors are still keen to capitalize on the country’s lucrative opportunities. Corruption rarely stops capitalists from doing what they can to increase their fortunes. This has been evidenced by the fact that Angola is set to spend billions of US dollars and euros on new projects in the coming months.
Angola’s Defense Ministry, for instance, reached a €495 million contract to buy ships and maritime construction capacity from a company known as Privinvest.
And last December, the International Monetary Fund (IMF) approved a three-year $3.7 billion loan to help revive the country’s economy, which is facing a decline owing to the global upheavals in the oil sector.
This year, Angola is seeking further investment from both existing and new upstream partners. Recent reports indicate that the country plans to stave off production declines from its maturing mainstay oil fields.
In fact, Bráulio de Brito, Chairperson of the Angola-United Kingdom Chamber of Commerce, said in February, 2019 that the British Government’s Capital Expenditure Fund has $700 million to invest in several domains in Angola.
De Brito was speaking on the sidelines of a meeting between Angolan businessmen and members of a UK business mission that visited the country in February.
China is also keen to pump money into the country. According to China’s Ambassador to Angola, Cui Aimin, the industrious nation intends to start a new investment cycle in Angola to support the country’s economic and social development. The country already announced a $2 billion credit line for the country in the last quarter of 2018.
If all goes as planned, Angola may become a top tier economy that runs like a well-oiled machine.
However, if things go south and rampant corruption re-emerges, Angola risks a devastating economic downturn. It takes some countries years to recover form an economic crisis and some even suffer for decades.
Venezuela, for instance, is facing levels of inflation that some countries can barely imagine.
Of course, Angola seems to be faring better, but the country still suffers from issues such as income inequality, unchecked levels of poverty and slow levels of development. Recent data indicates that between a third and a half of Angola’s population suffers from poverty. A report known as the Global Multidimensional Poverty Index says that nearly 48% of Angolans are poor. This is up from about 20 to 32% about 20 years ago, a sign that poverty is on the rise and will remain so unless something is done.
Looking to the Future
Despite its many hurdles, Angola’s government is actively looking for solutions to its economic crisis.
Angola’s Ministry of Mineral Resources and Petroleum, for instance, has identified 55 blocks that will be licensed between 2019 and 2025.
The announcement follows the official presentation of Angola’s new National Oil, Gas and Biofuels Agency (ANGP) board by Angolan Minister, Diamantino Azevedo.
The government believes that the licensing strategy will ensure the replacement of reserves, promote exploitation activity in a rational and adequate manner, and boost the exploitation of natural gas.
Angola’s government also aims to promote foreign direct investment in the national industry, disseminating universally accepted knowledge, technological innovation, and governance practices.
The current administration hopes to shift proverbial gears and put the country back on the right track. If all goes well, Angola could become a regional powerhouse and a global leader within the international oil industry. If things go sideways, the rate of poverty may continue to rise as economic development slows to a crawl.