Angola finance minister seeks return to stability

Vera Daves de Sousa

It has been a rough few years for Angola. Once one of the continent’s brightest growth spots, averaging 8.8% gross domestic product (GDP) growth between 2001 and 2010, Africa’s second largest oil producer saw its economy go into reverse in 2016 in the wake of lower oil prices. The International Monetary Fund (IMF) predicts the country will post a 0.3% drop in GDP for 2019, returning to modest growth in 2020.

Despite being sub-Saharan Africa’s third largest economy, much of the country’s wealth was for many years concentrated around the ruling circle of José Eduardo dos Santos, who stepped down as president in 2017, leaving Angola with a reputation as one of the continent’s most corrupt countries.

Mr dos Santos’s designated successor, João Lourenço, has surprised many by waging a public war on corruption. The campaign made international headlines in December, with the freezing of the assets of Isabel dos Santos, daughter of the former president and Africa’s richest woman, in a bid to recover some $1bn of state funds. Earlier in the month, Ms dos Santos’s half brother, José Filomeno, appeared in court accused of illegally transferring $500m out of the country.

Going for growth

Aside from tackling corruption, the government launched its Macroeconomic Stabilisation Programme in January 2018 in a bid to kick-start economic growth. As an early measure, the country scrapped its currency peg to the dollar in the face of falling foreign exchange reserves, a move which has seen the kwanza fall in value by two-thirds.

In August 2019 the government launched an ambitious privatisation programme, announcing plans to sell stakes in 195 state-owned firms in sectors including finance, telecommunications, mining and agriculture by 2022. Some 175 companies will have stakes sold through public tender, 11 by public auction and nine via initial public offering (IPO).

Vera Daves de Sousa was appointed as Angola’s finance minister in October, having previously served as head of the Capital Markets Commission and secretary of state for the Treasury. The Banker met her to discuss the prospects for Angola’s economy in 2020, the next key milestones in the privatisation programme, and the country’s infrastructure spending priorities.

Q: What are your priorities for the coming year?

A: We need to keep working hard to improve the health of public finances, to keep moving with fiscal consolidation and at the same time establish the right environment for Angola’s economy to start to grow again.

[On the fiscal side] we need to keep pushing for [higher] expenditure quality, ensuring the way the government buys goods and services becomes more transparent and efficient, while improving the efficiency of public companies and state-owned enterprises by successfully implementing our privatisation programme.

In terms of revenues, the economy still struggles with a high dependence on revenues coming from oil. [So] we need to find ways to [grow] our non-oil revenues. The IMF is providing us with technical assistance in this area, looking at the different kinds of tax we have, how we can make a fairer fiscal system that is an investor-friendly system, but that also gives the state the right buffers so that it can work to reduce our stock of debt.

Q: Do you have specific debt-reduction targets that you’re working towards?

A: We have an indicative target of reducing debt to 60% of GDP by 2024, so we’re working towards that goal. We know this is an ambitious target but we’ll do our best to at least get close to that level.

Q: Angola introduced VAT in October 2019. What other changes to the tax landscape are being planned?

A: In addition to a more progressive personal income tax regime, we’re also looking at a new real estate tax and land tax. There are a lot of buildings in the country that aren’t being used properly by their owners, as well as a lot of land that was granted as concessions for agricultural exploration but hasn’t been used properly, or at all in some cases.

So there is room to increase tax in these areas, and [force] those who aren’t able to [properly use] the assets to step back and make room for those who have the know-how and the capital to use them properly and generate profit and jobs.

Q: The import and export of foreign currency in Angola is still tightly controlled. Are there plans to relax these restrictions?

A: The central bank is working on an instruction whereby it will remove the requirement to need a licence to import or export foreign currency via the central bank, and instead rely on the compliance processes of the commercial banks. This should make it easier for those who are looking to invest in Angola and those who want to repatriate dividends.

The recent [relaxation of restrictions] on the exchange rate will also help to ensure that the fundamentals of the market are in place, as will the measures we’re taking to strengthen the private sector, investing in products and services that can generate foreign exchange revenues. There is a lot of potential in areas such as agriculture – fruit, coffee and so on – as well as areas such as diamond mining.

Q: Angola launched an ambitious privatisation programme in 2019, identifying 195 companies in which stakes will be sold. What will the highlights of this programme be in 2020?

A: As you say it is an ambitious programme that we really hope will make the economy move; there are a lot of assets and industries that are operating far below their potential. We hope that with a little investment and a bit of effort these industries will start generating both profit and jobs for the country.

While there have already been some small sell-offs, our main focus at the moment is the sale of a stake in [Angola’s main insurance provider] Ensa via an IPO.

Q: What is the timing and size of the stake sale? Will international investors be allowed to participate?

A: We don’t want to disclose the timing just yet, as it is a complex process that we want to get right. If we’re able to complete a sale in 2020, great, but if not we can do it in 2021.

Our current plan is that the state will retain control of the company, but depending on interest from the market we may reconsider. International investors will be more than welcome to participate.

Q: Aside from the privatisation programme, how else are you planning to stimulate private sector investment?

A: We know that we have some [high costs of doing business] that we need to work to resolve.

In our public investment programme we’ve given a lot of priority to infrastructure, particularly roads, to make sure products can reach the points where they can be sold, and also water and electricity.

A number of our industries and farms are struggling with very heavy fuel costs because they have to work with generators.

So we have these costs that we need to remove, to make sure that this diversification happens and these sectors can grow and help us compete with our neighbours and other countries.

We’ve also recently revised our private investment law, removing the requirement for companies coming into Angola to do so with a local partner.

We’ve also been making it easier to get a visa; this is an ongoing process because for many years [there has been] a mindset of making things difficult [for people who are coming in]. We’ve made it easier in the documents to get a visa, but we still need to work on the mindset of the officials. We’re working on making it easier for people to travel around, and also making sure that people feel safe in the country.

Q: Angola’s economy has shrunk for four consecutive years since oil prices began to fall. Are you confident that the country will return to growth in 2020?

A: The IMF forecasts the economy will grow 1.2% [in 2020]. We’re still very exposed to oil price volatility; it is something we unfortunately can’t control or change overnight.

We’ll do our best to make sure diversification starts to happen in a more consistent way, and that we remove the bottlenecks that make this process slower.