The head of Angola’s central bank – The Banker’s central bank governor of the year for Africa – discusses the development of the oil-rich country’s rapidly growing financial sector and whether the government plans to open up to foreign portfolio investors.
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Q: Angola’s inflation fell to less than 10% for the first time on record in August 2012. How did the Banco Nacional de Angola [BNA] help bring this about?
A: We are satisfied with the course of monetary policy. We’ve been able to reach the lowest level of inflation in the country for the past 20 years. It’s something we’ve been fighting for. We changed the instruments that we had been using to conduct monetary policy. In the case of Angola, the foreign exchange rate is still one of the key anchors [of monetary policy]. But one of the main things for us has been to improve the channels to transfer monetary policies to the market. The monetary policy committee [which was established in 2011, along with a reference interest rate] has improved transparency when it comes to the decisions of the central bank.
We have also strengthened our coordination with the Ministry of Finance so that we have a better understanding of the flows [in the economy].
Q: What have been the central bank’s other priorities?
A: One of the things that really pleases me as governor is the work we are doing in terms of financial inclusion. Eighteen months ago, only 11% of Angolans had access to banking services. This figure is now about 23%. For us, that is remarkable. This will help increase the sustainability of the Angolan financial system and make sure everyone can benefit more from the economy’s growth.
[This success has resulted in part] from a new financial education programme we initiated and which we’re communicating through the press and other public [outlets]. We are trying to convey to people the basic notions of what a bank is, how it operates and how they should deal with it.
With commercial banks, we have encouraged them to create accounts which people can open with just Kz100 ($1.04). And with Kz1000, they can have a savings account. Most of the retail banks are fully on board. We’ve given them regulatory incentives – these accounts will not, for instance, count towards the compulsory reserves.
Q: The BNA implemented a controversial law last year requiring oil and gas producers to pay local suppliers through domestic, rather than offshore, banks. Has this been successful?
A: The change in the foreign exchange law for the sector has been critical. Producers now have to work with the Angolan banking system. Where we stand today, all payments to local suppliers have to be done through local bank accounts [in dollars or kwanzas]. From July 2013, all payments have to be made in local currency.
If you talk to those oil companies [which felt Angolan lenders would struggle to handle such big transactions], they will tell you they are positively surprised with the way the banks have reacted and the quality of their service. Their initial fears have disappeared. We don’t have a perfect system, we have to keep on working on quality, but everything is calm. We don’t have any major complaints.
Q: Is the new foreign exchange law also designed to help de-dollarise the Angolan economy and increase the use of the kwanza?
A: Yes, it’s another fight we’re taking on. And it’s something we are making tremendous progress on. For the first time, in 2012 the ratio between dollars and kwanzas in terms of loans was favourable towards the kwanza. That is critical. If we want to strengthen the BNA’s role as the conductor of monetary policy, we have to strengthen the role the kwanza plays in the economy.
Q: Are you planning to introduce mobile banking to Angola?
A: Yes. We are working on it. We expect to have the legal framework ready by the end of the first quarter of 2013. And by mid-2013, it’s our expectation that the first services will become available. We are trying to learn from other parts of the world, especially in Africa. What we want to make sure is that interconnectivity between the mobile operators is fully achieved.
Q: Angola’s banks are among the fastest growing in Africa. Is their expansion sustainable?
A: It is for this reason that we need to keep modernising the system and adopting the Basel recommendations for effective supervision. In 2012, we established a financial stability committee, which meets quarterly. We are addressing the need to keep the market’s growth sustainable.
We have to recognise that the Angolan economy keeps on growing. The non-oil sector alone was expected to expand almost 9% in 2012. As long as that continues, the Angolan financial system will grow. That brings challenges. We have to make sure banks are part of Angola’s economic growth, but that financial stability is always maintained.
Q: Will Angola open up its capital account in the next few years and allow foreign investors to buy local securities?
A: We have to be careful. We are basically adopting the recommendations that we are receiving from the likes of the International Monetary Fund. On the current account, we are doing ok, even though there are things we can and will improve. But when it comes to capital, we still have a few concerns. Where we can bring flexibility without creating unnecessary exposure for the economy, [we will]. But it’s a long-term process.
