After six years overseeing the phenomenal growth of Angola’s economy, minister of finance José Pedro de Morais can look back on a job well done. He spoke to Charlie Corbett in Luanda about the country’s next phase of growth and the challenges that remain.

It is hard not to be impressed by the building that houses the Angolan ministry of finance in Luanda. A recent multi-million dollar refurbishment has transformed a crumbling relic of Portuguese rule into a gleaming 21st-­century edifice that would not look out of place in the financial districts of New York or London. But, like Angola itself, this great achievement must be seen in the context of the shabby infrastructure and extreme poverty that surrounds it. Although much has been done, much more needs to be done.

The minister of finance, José Pedro de Morais, has been at the forefront of the economic reconstruction the country has experienced since the ending of the 27 year civil war in 2002. A modest and unassuming man, he plays down his role as one of the key figures in the transformation of the country from the perennial sick man of Africa to the status of the fastest-growing economy on the continent. Instead, he emphasises the role played by all Angolans, while also accepting the huge challenges that remain.

“When you see the projects that are under way and are planned, one might ask the question: is there enough capacity to do it? Of course not. But there is this will, this strength of the people. We have been many, many years in waiting for this time. When peace came, everybody got mobilised to do the job,” says Mr Morais.

This enormous task would have been impossible without the aid of foreign investment, in particular from China. What Mr Morais calls the “massive technical assistance” required to turn the country around came from across the globe, including Brazil and Portugal, but mostly from China, where 36% of credit still originates.

But the country’s reliance on China as a major source of loans and technical assistance is lessening. “My view is that the part of other contractors in our reconstruction process will grow,” says Mr Morais. “First of all because for quite some time the main constraint was lack of access to financing in Western markets. Now we have that access.”

Macroeconomic stability

Access to foreign loans and assistance has been aided by the country’s tremendous gross domestic product (GDP) growth and macroeconomic stability. GDP growth was a staggering 21.1% in 2007, inflation is under control at 11.76%, Angola’s international currency reserves of about $15bn now exceed external debt by three times, and the non-oil sector – which in growth terms overtook the oil sector this year – is flourishing. For Mr Morais, the next step is to gain recognition on the international capital markets.

“The financial situation is very comfortable, but we need to adjust to the requirements of the international markets and we have taken the decision to start a process towards getting a sovereign rating by the end of this year,” he says. If granted, a sovereign rating will transform Angola’s image abroad and open vast new options for financing.

One of the reasons Mr Morais has won plaudits from across the world, including from a highly sceptical IMF, has been for his efforts to open up the nation’s ledgers. He has been prominent in creating a new transparent culture in the country.

“Internally we are restructuring our processes, we are modernising the way we conduct our budget,” he says. “Three years ago we conducted a study with the IMF on fiscal transparency and they identified a series of areas that needed correcting. We are preparing ourselves for an update of this study and I am sure [the IMF] will be much more positive on the progress made by the government.”

One of the IMF’s biggest concerns was the opaque status of the country’s national oil company, Sonangol. All at once it is a regulator, concessionaire, tax payer and market player. Such dual roles leaves Sonangol open to numerous conflicts of interest. Mr Morais says work is being done to reform the role of Sonangol, but that in the context of the country’s early stage of development, fundamental change has to be seen as a longer-term goal.

“At this point, what the government is concentrating on is making sure the revenues that should be received by the government are indeed received,” he says.

Popular agreements

The government’s management of the oil sector through production sharing agreements is popular with foreign oil firms, according to Mr Morais. “We have one of the best fiscal regimes for oil activity in the world,” he says. “Thanks to this, which gives a very balanced share between foreign companies and the government, Angola is the place where investment in oil has most progressed in the past five years.”

For proof of the stability and popularity of Angola’s oil regime, one need only look as far as another of Africa’s biggest oil exporters. In Nigeria, the relationship between the government and its major foreign oil partners is strained to breaking point, and militant activity in the oil producing regions of the Niger Delta is a constant drain on production. As a result, Angola this year overtook Nigeria as Africa’s biggest exporter of oil.

“The companies are comfortable and the government is comfortable. The result of that is that companies are investing very heavily and the results are there to show,” says Mr Morais.

Another criticism the Angolan government has faced is in the way in which it hands out government contracts. The system dates back to an unreformed, Marxist state, and a lack of transparency leaves it open to charges of corruption.

Mr Morais agrees that the rules for awarding contracts are archaic, and as such he is in the process of reviewing them. “The rules we have are not adjusted to the current situation. In the past, most public investments were financed by specific lines of credit. Those lines of credit had attached to them requirements to use certain equipment and services,” he says.

“Now we are entering a more stable financial situation and we can exercise a more level playing field. That is why we are reviewing those rules. The president [José Eduardo dos Santos] has recently addressed this issue requesting more rigour and discipline in conducting public finances.”

Work in progress

According to Mr Morais, Angola is edging towards its second phase of national reconstruction. For him, the object of the first phase was to rebuild the country from scratch. It is hard for non-Angolans to imagine the sheer devastation that 27 years of civil war can wreak. Barely a scrap of infrastructure remained in 2002. Roads, railways, telecommunications and postal services were destroyed.

“The main target was to rebuild that infrastructure from scratch simply to allow the country to function,” says Mr Morais. “Other generations of infrastructure rebuilding and modernising will now have to appear. I see it coming. We are not there yet but it is inevitable.”

Mr Morais outlines two top priorities: the completion of the modernisation of the country’s infrastructure, and a massive investment to kick-start the country’s productive industries.

“For the reconstruction process, we depend on imports of almost everything. The stadiums [in construction] for the African Cup of Nations in 2010 are mostly being built by Chinese companies. Even the cement has to be imported from China,” he says, referring to Angola’s imminent role as host to Africa’s continent-wide football tournament. “We have to build our own capacity in terms of building materials. The magnitude of our reconstruction makes those industries very viable right now.”

Dig for victory

Another critical priority for Mr Morais is reforming the agricultural sector. Angola, once the veritable breadbasket of Africa, is now almost entirely dependent on imports to feed its population. Of the 1.2 million square kilometres available for arable production just 3% of it is currently exploited.

“We have the arable land, the water and the climate to produce all kinds of food for [Africa’s] needs,” says Mr Morais. Exploiting this land to its full potential will be an enormous task, however. Mr Morais admits this cannot be achieved by Angola’s weak and underdeveloped ­private sector.

“We cannot escape from a massive public investment. We are using the public investment as an engine of growth, while at the same time using intelligent partnerships with international and domestic investors,” he says. Angola’s future must be seen in terms of the non-oil sector, Mr Morais believes, and the country needs to be prepared for when oil revenues begin to dry up. “The important investment we need to leave to generations to come is good, competitive infrastructure, good productive capacity and very well trained people. That is the target for this generation over the next 10 to 15 years,” he says.

Perhaps future visitors to the gleaming finance ministry building in Luanda will be struck not by how it stands out from the crumbling infrastructure that surrounds it, but by how well it fits in.ORIGINS OF CREDIT LINES FOR PUBLIC INVESTMENTS PROGRAMME:Source: Ministry of Finance

BUDGET EXPENDITURE ACCORDING TO FUNCTION (2003 AND 2007)

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