Angola: Agricultural diversification stalls

Since the end of the civil war in 2002, Angola has banked on the re-emergence of the agricultural sector to redevelop the eastern half of the country. Although the transport infrastructure needed to carry production is being put in place, financial incentives and support for the private sector are still lacking.

Angola’s overdependence on oil income has long been recognised but has been thrust into the spotlight over the past two years because of low oil prices. Risk analysts Verisk Maplecroft consider it to be the least diversified economy in the world, below even other oil-dependent states, such as Kuwait, Venezuela and Congo-Brazzaville.

It is true that a lot of progress has been made on rehabilitating the main three railway lines in the country; running east-west to the three ports of Luanda, Lobito and Namibe. Allied to the upgrade of roads connecting to each of these railways, the three lines provide the physical infrastructure required to move crops to the cities and overseas; and fertilisers, seeds, tools and machinery to farming areas.

However, it will take time for this to benefit the rest of the economy, even if the required reforms on mining, agriculture and other sectors are successfully implemented.With the possible exception of the oil industry, agriculture is probably the most important sector in terms of national development.

Although it generates far less income at present, it has huge potential; can help spread development to the poorest parts of the country; and can create the millions of jobs that the country needs. The government of Angola has acknowledged the importance of agriculture in its plans for economic diversification but the same old problems continue to undermine investment.

The concentration of wealth in the hands of the political and economic elite, coupled with opaque systems of government and financing, make a bad combination. According to the US Department of Agriculture’s Foreign Agriculture Service, just 8% of the available agricultural land is cultivated.

Maja Bovcon, senior Africa analyst at Verisk Maplecroft said: “Many grand agricultural schemes, financed primarily by Chinese loans, have been a complete failure. They often did not materialise as the money intended to finance them ended in the pockets of the political elite.” This leaves the country dependent on a recovery in oil prices to improve government finances and boost growth.

State initiatives

The Angolan Development Bank (BDA) was set up in 2006 to fund a wide range of projects, particularly in the agriculture sector. Bovcon says that it is “in a dire financial situation today. Over the years, its ratio of non-performing loans has hit 70%, resulting in losses of $400m. This is a good indication that several large agricultural schemes never saw the light of day.”

Other state organisations continue to make announcements about new initiatives. Angola’s sovereign wealth fund, Fundo Soberano de Angola (FSDEA), announced plans in late January to invest in several large-scale agricultural projects.

Its biggest commitment, of $32.5m, will be made in wood fibre plantations covering 80,000 hectares in the Planalto region. It is also providing $18.2m of the $250m investment needed for seven agricultural projects covering another 72,000 hectares.

In addition, the Angolan Agency for Regulation and Supervision of Insurance (Arseg) has announced that it is working with insurance companies to offer agricultural coverage. Arseg chairman Aguinaldo Jaime said: “There must be a division of labour between the state and the agricultural companies themselves so that it is not only the insurers that take on these risks, as if they did they would have to pass these risks on to the price of insurance and this would make it impossible to afford.”

With President Jose Eduardo dos Santos due to step down in August, João Lourenço has been chosen as the ruling Movimento Popular de Libertação de Angola’s (MPLA) presidential candidate. Lourenço is confident that there will be a quick economic recovery but this seems unlikely. Bovcon said: “Corruption is endemic and will continue to undermine many well-intentioned projects aimed at economic diversification and agricultural development.”

Neil Ford