Angola economy: Import addiction

Banking development
Improved financing for small and medium-sized enterprises (SMEs) could be on its way, although progress is likely to be slow and steady rather than spectacular. The government is in talks with the African Development Bank (AfDB) regarding possible funding to develop the Angolan banking sector.

The AfDB’s representative for Angola, Septime Martin, says: “Negotiations with retail banks are under way and their aim is to finance, through credit lines, the banks and for them to provide those resources to the Angolan private sector at lower interest rates due to the AfDB’s ability to finance itself at reduced cost.”

At present, the AfDB is investing almost $100m in projects in Angola, covering six sectors: agriculture, fishing, water and sanitation, the environment, governance and transport.

One source of investment could come in the form of the Fundo Soberano de Angola (FSA), the country’s new sovereign wealth fund, which is due to become operational this year.

Although Africa’s biggest banks are increasingly investing in other markets on the continent in a process that may create a premier league of African banks with genuinely pan-African aspirations, Angola has not been among the main targets. The poor regulatory environment and lack of financial accountability are part of the problem, but the limited size of the private sector is perhaps the main stumbling block.

One new source of investment could come in the form of the Fundo Soberano de Angola (FSA), the country’s new sovereign wealth fund, which is due to become operational this year. It already has a war chest of $5bn and that figure should increase if it is managed as the government has promised, with up to $3.5bn a year paid into it.

FSA chairman José Filomeno dos Santos, who coincidentally is the son of the President, has announced that it will target the hotel sector in the first instance. A total of 50 international standard hotels will be bought or built in sub-Saharan Africa to target business travellers. Dos Santos commented: “We believe there’s a lot of investment interest in Africa. It has a lot of mineral potential, almost a commodity hub. We believe this interest will remain there for the coming years. The number of international-standard rooms is still very low and it has a big potential for growth.”

Closer to home, the lack of basic infrastructure, such as power and water supplies, deter industrial and manufacturing investment. Industry accounts for just 6.25% of GDP but is perhaps a better source of short-term growth than manufacturing given the availability of natural gas and port facilities. Indeed, industrial GDP has been growing by 10% a year over the past five years.

Nevertheless, the country needs to begin the transition from a postwar economy run by a liberation movement into a modern, democratic African nation. A vital part of that process is the emergence of a vibrant, diverse private sector that has a life and a vigour independent of the state.