Eight years since the end of Angolas long civil war,
the oil-rich country is breaking out of its post-conflict
reconstruction chrysalis and spreading its wings into a new
phase of economic development and growth.
It has a new constitution and anti-corruption agenda, and a
new relationship with the IMF, which comes with significant
fiscal reform. Authorities are also starting to diversify the
economy away from oil while making the right noises about
poverty reduction. The Portuguese-speaking country is also
strengthening its political and trade ties with the US, seeking
out investment in Russia and India and building on already
strong economic partnerships with China and Brazil.
And on May 19, Angola received long awaited credit ratings
from Standard & Poors, Fitch and Moodys ,
placing the country on a level with Nigeria and opening the
door to international bond issues.
Angolas new dawn comes after a tough 2009
post-conflict, when double-digit growth stalled and GDP shrank
by 0.4% while foreign reserves fell by 30%. The drop in oil
prices coupled with the reduction in Angolas production
levels, enforced by Opec (Organization of the Petroleum
Exporting Countries), ravaged the countrys income and
exposed its over-dependence on oil.
The pressure on foreign reserves created liquidity problems,
and late last year when the central bank, Banco Nacional de
Angola, started to limit currency auctions to commercial banks,
there was a surge in dollar demand, meaning bills and salaries
went unpaid, public spending was slashed, and the national
currency, the Kwanza, unofficially devalued by up to 25%.
It was at this point that Angola swallowed its pride and
turned to the IMF for help.
Angolas last engagement with the fund had been in
2007, but talks about an economic support programme stalled;
Angola was at that time enjoying rapid economic growth on the
back of high oil prices and plenty of no-strings- attached
Two years and a global economic crisis later, things were
suddenly very different. Chinese funding for Angola has not
dried up. On the contrary $10 billion of new loans are to be
signed off shortly, but the Chinese model of credit keeps the
hard cash in Beijing, sending instead labour forces and
materials to Angola. This arrangement may help to rebuild
Angolas war-damaged infrastructure like roads, schools
and hospitals, but it isnt solving the countrys
current liquidity crisis.
So last November a $1.4 billion standby arrangement was
agreed between Angola and the IMF, setting up a new economic
framework for the country.
For a country so resistant to outside interference, this
will not have gone down well in all sections of the government.
There is a deep-seated mistrust of the IMF among some
parts of the Angolan government and a huge resentment as well,
because the IMF wouldnt help them in 2002 at the end of
the war, and that is how the relationship with China
began, says Edward George, Africa editor at the Economist
Intelligence Unit (EIU).
The ruling MPLA (the Popular Movement for the
Liberation of Angola) has a core of strong technocrats who are
well educated and informed, and it is these people who pushed
for the IMF deal and who are driving other economic changes and
policy. But there are also traditionalists within government
who will be suspicious of these new policies, and things like
the IMF and more private-sector involvement in the
At the time of securing the standby arrangement, the Angolan
government trumpeted the fact that there were no strings
attached economy minister Manuel Nunes Jr said
Angola had agreed to the loan because the IMF had agreed not to
put conditions on it.
But in the small print, Angola had made concessions to the
IMF, although they will argue reforms had already been adopted
and so were not new. These include increasing non-oil income
through economic diversification strategies, spending at least
30% of the national budget on social areas such as health and
education, improving tax systems and the private sector and
strengthening debt management.
In a memorandum to the IMF, the government also said:
For the broader public sector, we will initiate a
coherent privatization strategy to address loss-making and
non-viable state-owned enterprises, which will also help to
limit fiscal risks.
The key concession, however, is in the area of fiscal
transparency, especially in relation to state-owned enterprises
such as Sonangol, notorious for its opaque accounting system
and dogged by corruption allegations.
Things are improving: more financial information is being
made available, with monthly oil revenues being published on
the finance ministry website, albeit inconsistently; some
Sonangol accounts are now online; and there is a new probity
law in support of president Jose Eduardo dos Santos call
for zero tolerance on corruption, as well as new
legislation to combat money laundering and bank fraud.
But despite these steps, Angolas ranking in
Transparency Internationals Corruption Perceptions Index
worsened last year, with the country slipping to 158th out of
180, sitting among the 18 most graft-ridden countries in the
Concerns over governance aside, it was the countrys
mounting debt to various construction and service companies
(believed to be around $2 billion) which is said to have
prompted the IMF to delay its March payment until May following
an extended review period.
A source close to the government said: With IMF
agreements, you have regular reviews of performance indicators,
and if the country is not meeting these targets, the IMF refers
it back to the board, which can agree or disagree that the
In Angolas case there were problems with debt
arrears, and the IMF team decided to refer it back to the
board, and the money was withheld.
Questioned at the time, economy minister Nunes Jr
denied any delay in payments from the IMF. He told Emerging
Markets: There are no problems; we are concluding
the first review and are on course. After the conclusion of the
revision, the payments will be made.
Another area Nunes Jr and his counterpart at the finance
ministry, Carlos Alberto Lopes, must tackle is the continuing
fall of the Kwanza, which stands at Kw92/$ in contrast to its
Kw75/$ level where it was pegged for several years. The
most important thing is to reduce the difference between the
official rate and the parallel rate and you can see that
we have done that so that we are within the parameters
set by the IMF for this, Lopes said recently.
Angola has cited investment in agriculture as a key plank of
its diversification strategy to reduce the nations
dependence on oil, which accounts for close to 90% of its
Last year Marcos Nhunga, director-general of Angolas
Institute of Agriculture, said the government has been
investing $1 billion into developing the sector and hoped it
would grow at around 13% every year, leading to food
self-sufficiency within five or six years.
This investment could be starting to pay off. According to a
media statement by Nunes Jr, the sector grew by 29%; leading
non-oil growth and the 2009 maize harvest of 1.20 million
tonnes set a new record, up 87% on 2008, thereby eliminating
the need for costly imports, a recent study shows.
As well as developing agriculture and other industries
outside oil and diamonds, Angola is forging ahead with its
engagement with the private sector, whether the economic
traditionalists like it or not. The National Agency for Private
Investment (ANIP), led by former finance minister and central
bank governor Aguinaldo Jaime, is leading the charge, with
development zones, tax breaks and support for people interested
in investing in Angola.
Jaime and others like Nunes Jr have been clear in explaining
the need for more private-sector investment, reducing reliance
on bloated and ineffective state institutions and bringing
know-how, efficiency and most importantly, more tax
Economist Salim Abdul, co-director of the Centre for
Scientific Studies and Investigation (CEIC) at the Catholic
University of Angola, thinks ANIP is doing good work, but more
needs to be done in terms of investment incentives.
Angola needs a stronger private sector; there is still
far too much emphasis on the state, he says, explaining
the hangover from Angolas quasi-Communist years
post-independence. Angolans have a lot of investing
power, and we are seeing them investing in a big way in
Portugal, for example, but this could be money coming into the
Angolan private sector as well.
But getting a foot into the Angolan market isnt so
easy and there are numerous anecdotes about how deals
are won on the basis of who you know rather than whats on
offer a situation that must change for the private
sector to move forward.
Angola has made no secret of its tactic of spreading its
funding net far and wide. The fact that Angola is going forward
with the IMF while still maintaining its strong relationship
with China Angola is its biggest trading partner in
Africa, with exchanges between the two countries up from $1
billion in 2002 to $25.3 billion in 2008 underlines this
strategy of political diversification.
Ana Alves, a research fellow on the China Africa project at
the South African Institute of International Affairs (SAIIA),
says: I dont see the IMF and China in competition.
They are two different things, and China has given Angola a lot
more money than the IMF has. The main interest for China is the
She says Angola liked borrowing from China because there was
little conditionality attached to the loans unlike what
they find with the IMF.
Historically Chinese credit has been spent on large-scale
infrastructure reconstruction projects, such as roads,
hospitals and schools, but the new loans that come on-stream
this year are directed into agricultural and other development
What is clear is that Angola is moving out of its
reconstruction period and into more general economic
development; the railways should be complete by the end of 2012
and basic water, sanitation and electricity networks are slowly
being rehabilitated. The country is getting back to where
it was in 1975 pre-independence and the civil war, says
George at the EIU: We are starting to see new projects
like hydroelectricity plants, more development than just
reconstructing. The big challenge will be how Angola pushes on
from that and how it moves forward into the future to reduce
its dependence on oil.
The next immediate challenge for Angola is to proceed with
its long-awaited sovereign bond sale, although thanks to the
IMF, this is likely to be substantially less than the
previously predicted $4 billion.
Angolas recent credit rating has helped paved the way.
The countrys creditworthiness was rated at B+ by S&P
and Fitch, four levels below investment grade, and Moodys
ranked the sovereign B1.
Finance ministry spokesman, speaking before the ratings
announcement, said that $2 billion would be issued locally
before the end of May, but added that the amount to be
sold to the international markets is yet to be
With oil prices back up over $80 and Angolas
production set to climb by as much as 16% by the end of 2010,
the country, which has an IMF growth forecast of 7.1%, is
likely not only to spread its wings but to soar.