Oil: Economic Overview
Angola’s economic prospects remain positive and its real gross domestic product (GDP) growth is expected to expand to 8.2% and 7.1% in 2012 and 2013 respectively. Despite oil price volatility, output remains strong and the government hopes to receive OPECÂ´s authorization to increase production gradually over the next few years. According to the International Monetary Fund (IMF), in July, inflation remained on a downward trend of 10%, but vulnerable to rising food prices. High import dependency and rising global food prices threaten to reverse the downward inflation trend of the last couple of years.
Angola’s Stand-By Agreement (SBA) program with the IMF ended in March 2012. The program included fiscal and monetary reforms to improve the exchange rate system, improved public financial management, the maintenance of a sound banking system, and fiscal transparency. Following considerable progress toward macroeconomic stabilization in the context of the SBA program, the authorities are now seeking to build a more resilient and diversified economy. This will require stepped-up investments in human and physical capital.
Although there are some reports of diamonds being exported from Angola by the Portuguese as early as the eighteenth century,modern diamond mining began in 1912, when the gems were discovered in a stream in the Lunda region in the northeast. In 1917 Diamang was granted the concession for diamond mining and prospecting, which it held until independence. Control over the company was obtained by the government in 1977. In April 1979, a general law on mining activities (Law 5/79) was enacted and gave the state the exclusive right to prospect for and exploit minerals. Accordingly, a state diamond-mining enterprise, the National Diamond Company (EmprÃªsa Nacional de Diamantes–Endiama), was founded in 1981 and acquired the government’s 77 percent share in Diamang. UNITA, which selected the diamond mining industry as a principal target, soon crippled mining efforts, and by the beginning of 1986 the two foreign companies involved in servicing and operating the industry pulled out of Angola. By mid-1986 Diamang was formally dissolved, leaving large outstanding debts
Attacks by UNITA on mining centers, disruption of transport routes, and widespread theft and smuggling caused diamond sales to fall to US$33 million by 1985 and to an estimated US$15 million in 1986. In late 1986, Roan Selection Trust (RST) International, a subsidiary of the Luxembourg-registered holding company ITM International, began mining in the Cafunfo area, along the Cuango River, the site of Angola’s most valuable alluvial diamond deposits. Mining had been halted there for more than two years after UNITA attacked the mining camp in February 1984, kidnapping seventy-seven expatriate workers and severely damaging the mining equipment. After the subsequent kidnapping of a British expatriate in November 1986, defense forces in the area were strengthened, allowing the resumption of mining operations. In 1987 production there averaged 60,000 carats (12 kg), and about 120,000 carats (24 kg) were produced in the other two mining areas, Andrada and Lucapa. By 1987 diamond production had risen to 750,000 carats (150 kg), compared with less than 400,000 carats (80 kg) produced in 1986. The 1987 figure, however, was still not much more than 1985 production and only a little over half of 1980 output
This increase in production has benefited from the rise in the price per carat received for Angolan diamonds. The resumption of mining in the area along the Cuango River and a decline in theft of stones of higher value in the Andrada and Lucapa areas have increased the value of output. Furthermore, Endiama, which was responsible for overseeing the industry and for holding monthly sales, has benefited from a general improvement in the world diamond market as well as dealers’ willingness to pay higher prices in the hope of securing favored treatment in the future. As a result, average carat value established by the monthly sales in 1987 exceeded US$110, more than twice as much as in 1985 (US$45) and at its highest level since 1981 (US$119)
In addition to diamonds and iron ore, Angola is also rich in several other mineral resources that had not been fully exploited by the early twenty- first century. These include manganese, copper, gold, phosphates, granite, marble, uranium, quartz, lead, zinc, wolfram, tin, fluorite, sulfur, feldspar, kaolin, mica, asphalt, gypsum, and talc. The government hoped to resume mining in the southwest for crystalline quartz and ornamental marble. It has been estimated that 5,000 cubic meters of marble could be extracted annually over a period of twenty years. A state-owned company mined granite and marble in HuÃla and Namibe provinces and in 1983 produced 4,450 cubic meters of granite and 500 cubic meters of marble. Since then, the company has ceased production to re-equip with modern machinery. Quartz production, however, was suspended indefinitely because of the military situation in the areas close to the extraction sites in Cuanza Sul Province.
Angola was self-sufficient in most food crops and a major exporter of coffee and sisal at independence. The potential remains to redevelop the once very prosperous agricultural sector. The United Nations estimates the country has from 5 million to 8 million hectares of prime agricultural land as well as areas suitable for grazing. The country’s different climatic zones enable farmers to grow a wide variety of crops, including: cassava, yams, maize, bananas, beans, cotton, manioc, palm oil, potatoes, sunflowers, citrus and numerous vegetables.
Prior to war, Angola was the world’s 4th largest coffee producer with outputs totalling 200,000 tons each year. In 1995-96, Angola more than doubled its coffee output thus demonstrating that this once rich export sector is making a recovery. Coffee production during the 1996-97 seasons is forecasted at 8,000 tons and is projected to reach 120,000 by 1998-99. Angola recently submitted a plan to the International Coffee Organization that would overhaul the sector over the next two years. Under its privatisation program, the government plans to liquidate all 33 state-owned coffee companies and to invite international investors to bid for the largest plantations.
Angola also has considerable timber resources. Valuable tree species, including rosewood, ebony, and African sandalwood, as well as mahogany, tola and mulberry can be found in the northern forests that have been untapped since independence. Nearly 150,000 hectares of eucalyptus, cypress and pine plantations are waiting to be rehabilitated.
Angola’s 1.600-kilometre coastline offers some of the richest fishing grounds in Africa. The annual catch once averaged 300,000 tons a year. The government has deregulated fish prices and, with World Bank assistance, set up the Angolan Support Fund for Fisheries Development to support the development of the industry. The U.S. Trade and Development Agency recently commissioned a feasibility study on this potentially lucrative sector.
Electric Power Generation
Angola possesses enormous hydroelectric potential because of the large and powerful rivers that cross the country. Once completed, the 520-mw Capanda Hydroelectric Dam on the Kwanza River will double Angola’s generating capacity and provide enough power to meet the country’s needs for the next four decades. Angola currently generates more electricity than it needs and could very well be a regional exporter of hydroelectric energy. Angola is part of an international consortium to develop power stations along its border with Namibia.
Before independence, Angola’s manufacturing sector employed 200,000 people and produced $650 million worth of goods. With the end of the war and an infusion of capital, technology and training, food processing and light industry should recover quickly. Angola previously produced beer, sugar, wheat flour, cooking oil and soft drinks as well as textiles, soap, paint, plastic and glues. Heavy industry, including cement and steel tube production, oil refining, vehicle assembly and tire production, account for about 15 percent of the country’s manufacturing output.