Lusophone Africa: Energy drives growth

While it is true that Mozambique’s and Angola’s rate of economic growth is faster than for other African countries, it would be wrong to paint too rosy a picture. Aside from their energy exports, neither Angola nor Mozambique are enjoying widely based growth, while two of the other three Lusophone African states are enduring rather than enjoying current economic conditions on the continent.

The latest Forbes magazine list of the best and worst countries in the world in which to do business cast Portuguese-speaking Africa in a negative light. The publication collates the results of research carried out by other organisations, including the World Bank, Transparency International and Freedom House, relating to 145 countries. Guinea-Bissau came rock bottom of the list, with Angola little better at 141st, while Mozambique came 101st and Cape Verde 71st. In the World Bank’s latest Ease of Doing Business survey, Angola fares little better, ranked 179th out of the 189 countries assessed.

There is one factor that could benefit the three smaller Portuguese-speaking states but its influence remains to be seen. Growing interest in Mozambique and Angola could encourage greater investment in Guinea-Bissau, São Tomé and Príncipe and Cape Verde, particularly from Brazilian and Portuguese companies that are comfortable working in a familiar language and legal system.

Sustained annual growth in the region of 7-10% in both Angola and Mozambique, coupled with economic diversity, should create corporations of greater size and greater ambition.

Moreover, emerging Angolan and Mozambican companies that are keen to expand across the rest of the continent may target their three much smaller counterparts more readily than they would other similar-sized economies elsewhere on the continent.

This effect is currently rather limited because of the lack of Angolan and Mozambican companies of sufficient heft. As the results of the recent African Business survey of the ‘Top 250 African Companies’ illustrate, there are no Lusophone companies among the biggest 250 listed African firms.

However, sustained annual growth in the region of 7-10% in both Angola and Mozambique, coupled with economic diversity, should create corporations of greater size and greater ambition. As the third-biggest economy on the continent, with GDP of $114bn last year, it might be expected that Angola would be first into the breach. Yet strong state control over the economy, opaque commercial practices and the limited size of the domestic private sector in the face of the domination of foreign and state-owned oil interests mean that Angola is currently a limited economic player in Africa as a whole.