Angola’s rise as a major African economy has continued unabated in the past two years. Since its downturn in late 2008 and 2009, the Lusophone country has recovered its position as one of the world’s most buoyant economies. Gross domestic product (GDP) rose almost 8% in real terms in 2012 and could do so by even more this year, according to Standard Bank.
More in this report
Angolan policy-makers have, moreover, learnt from the financial slump of four years ago and since rectified some of the oil-rich country’s most glaring macroeconomic weaknesses. The problems during that period, while caused by a fall in crude prices, were exacerbated by high inflation and a lack of foreign exchange (FX) reserves to counter a balance of payments crisis. After signing a standby facility with the International Monetary Fund (IMF) in 2009 and completing an adjustment programme last year, Angola’s financial situation has improved. Inflation fell to single digits for the first time on record in August 2012, while FX reserves stood at an all time high of $33bn at the end of last year.
Improving picture
The government has also carried out many of the IMF’s recommendations to increase fiscal transparency, thus bolstering its position should there be further external shocks. Spending controls have been tightened to stop ministries signing contracts without having the necessary funds, something which contributed to the country accruing $7bn of arrears during the crisis. And the billions of dollars-worth of quasi-fiscal activities carried out by Sonangol, the state oil company, were incorporated into the budget for the first time earlier this year.
The latter development was particularly significant, not least because the IMF, soon after signing the standby agreement, disclosed a $32bn hole in Angola’s public finances, chiefly a result of Sonangol’s spending on behalf of the government not being accounted for properly.
“[It has] done well,” says Nicholas Staines, the IMF’s resident representative in Angola, referring to the government’s performance since 2009. “It restored macroeconomic stability, which wasn’t a pain-free process, and completed a standby agreement. [The government has] bitten the bullet when it comes to important macroeconomic institutional reforms. It needs to be given credit for that.”
Although the country, Africa’s second biggest oil exporter, remains highly dependent on the commodity, those changes have resulted in a more balanced economy developing. The financial sector is generally thriving, while Angola’s breweries and telecommunications companies are among the most lucrative on the continent. “The non-oil sector is growing faster than the oil industry, which is a very good sign,” says José de Lima Massano, Angola's central bank governor. “It shows that the country is achieving some results in terms of diversifying the economy.”
Voting shifts
Reforms and economic robustness have been accompanied by political stability. Parliamentary elections were held in August last year, marking only the second time Angolans have gone to the polls since 1992. They were easily won by the ruling Popular Movement for the Liberation of Angola (known by its Portuguese acronym MPLA), which garnered 72% of the votes, thus extending the 33-year rule of president José Eduardo dos Santos.
The run-up to the polls was marked by sporadic street protests, including by young Angolans irked by perceived corruption among business and government elites and the widespread prevalence, despite the country’s huge oil riches, of poverty. Few analysts believe, however, that they presage any major changes in Angola’s political structure. “The risk of political instability in Angola has sometimes been overstated,” says Victor Lopes, an economist at Standard Chartered. “At this stage, I don’t see any major risks.”
Nonetheless, the elections did suggest a rise in apathy towards the government. The abstention rate was 37%, higher than that of 13% in the previous polls in 2008. In the capital of Luanda, for a long time an MPLA stronghold, the party garnered about 60% of votes, well below the national average. Several analysts say that while the overall result was good for the MPLA, the fairly low turnout hinted at a cooling of enthusiasm for the party, which likely resulted in part from its failure to fulfil previous election pledges, not least one in 2008 to build 1 million low-cost homes.
“The MPLA is relentless in its use of developmental language,” says Ricardo Soares de Oliveira, a lecturer in African politics at the University of Oxford. “This language puts a lot of emphasis on service delivery. You could argue it’s the government itself that increases the expectations of the population.”
Successor undecided
Still, the MPLA, which dominates access to the media and tightly restricts political freedom, faces little competition from other parties. The National Union for the Total Independence of Angola, the main opposition group and which took 19% of the vote in the latest elections, up from 10% previously, remains weak. And a newly formed party, known as Casa-CE, which came third, lacks experience or a nationwide network of activists.
Mr dos Santos is eligible to run for one more five-year term in 2017. Yet there is speculation that the 70-year-old will step down at the next elections or even before then. Many Angolans take it for granted he will be succeeded by Manuel Vicente, who became vice-president in September shortly after finishing a 13-year stint as head of Sonangol.
However, several foreign analysts doubt that Mr dos Santos has made up his mind about who will follow him as head of state. Some even suggest he could try to manoeuvre his son, José Filomeno de Sousa dos Santos, who sits on the three-man board of Angola’s recently launched sovereign wealth fund, into the position.
But whatever the outcome, most experienced Angola-watchers doubt the transition will lead to volatility. “The handover will be pretty smooth because power will stay within the ruling elite,” says Paul Collier, an economics professor at the University of Oxford. “It is in everybody’s interests to keep the show on the road with a new president who keeps the structure of power largely unaltered.”
Generational change
It is difficult to overstate how far Angola has come since it ushered in peace in 2002 after 27 years of civil war. One banker describes the country in the late 1990s, when he made his first visit, as chaotic. “Pretty much every city was blown up and people were dying in their thousands each week,” he says.
Such has been the progress in the meantime that Angola has evolved from a basket case to the third largest economy in sub-Saharan Africa. Nonetheless, the MPLA can scarcely afford to rest on its laurels. It is likely to face growing pressure from younger Angolans (more than 60% of the population is under the age of 25) who judge it by different standards to their parents. “Those above the age of 35 or 40 compare their current life to that during the civil war,” says Mr Soares de Oliveira. “In that context, the comparison is always positive. For the younger people, the war is not a reference point.”
Keeping them satisfied in the coming years will hinge to a large extent on how well the government manages to diversify the economy and increase employment, both of which will be crucial to reducing poverty and boosting standards of living. Further reforms to modernise what is still viewed as a highly opaque and corrupt economic system will also be needed.
Angola has plenty going for it. It has an abundance of natural resources and a manageable population of just 20 million. And, unlike Nigeria, another African powerhouse, it lacks deep religious and tribal tensions. “It is a huge opportunity,” says Mr Collier. “Angola has got a lot of land without too many people. There’s a trajectory of rising oil revenues pretty well regardless. So, it’s really quite an easy situation to manage. But it doesn’t necessarily mean they will manage it well.”
