After a difficult period of armed conflict, Angola has embarked on a new era of economic recovery and development, presently standing as the third largest economy in the African continent. Although experiencing some economic vulnerability, as a result of its enduring dependence on the oil sector, the country has been growing and diversifying its economic activity, with its GDP/capita already reaching average income levels.
Between 2003 and 2008, the average economic growth rate was 15.3% per annum, one of the highest growth rates worldwide. From 2009 onwards, and up to 2013, the average economic growth rate slowed down to 4.3% per annum, standing at 3.9% in 2014. The IMF estimates for 2015 point to a 5.9% growth, but this figure may be revised downwards if the devaluation of oil becomes more pronounced.
Despite the oil sector’s importance in the Angolan economy, the growth recorded in recent years (2013 and 2014) is not associated with it. In both years, the sectors that contributed the most to GDP growth were Agriculture and Energy, and this trend is expected to continue in the coming years, with these sectors and those of light industry and agribusiness positively propelling economic growth.
Focus on Diversification
In 2013, the government approved the National Development Plan, the general objectives of which are stability, growth and employment. To this end, it laid out a strategy based on the diversification of the economy, particularly the development of the primary sector and industry, in order to reduce economic dependence on oil production.
The Angolan economy is thus in a transitional stage in its development, from being factor-driven, heavily dependent on crude oil exports, to efficiency-driven, geared towards growth and diversification of domestic production sectors not related to oil production.
New Customs Tariff
Major changes were made to the Angolan fiscal architecture and the industrial tax rate was reduced to 30% in 2014; the new Foreign Direct Investment system, created in 2011, features important incentives for the market environment and the new Customs Tariff, which imposes quotas and increases duties on non-essential imports, creates investment opportunities in domestic production, in order to replace those imports.
In its 2014 report, the Business Development Institute of Angola also notes that the development of the real economy and related developments is only possible with four key supporting vectors. The first of these concerns education and training: the literacy rate increased from 65.6% in 2009 to 68.6% in 2011, and the Government is committed to improving the quality of vocational education and training.
The second key-vector relates to energy: completing the electrification of the entire country is essential for economic diversification. Angola intends to achieve an electrification rate of 60% in 2020, which is substantially above the group of all African countries (41%) and the country’s current rate (30%). From 2012 to 2013, electricity generation increased by 32%. In order to support the diversification of the economy, the total installed capacity, as well as the production and distribution capacity of electricity, are expected to increase fourfold by 2017.
The third vector key is taxation, which recently underwent changes as part of the reform of the aforementioned tax system. The fourth and final key vector is information society, with an emphasis on the level of technological sophistication. Along with the country’s electrification, a significant expansion of television coverage is envisaged, as well as a doubling of Internet access service and media subscribers.
In the third quarter of 2014, the Angolan trade balance recorded a surplus of around 345,413 million kwanzas (around 2.8 billion euros). In the same quarter of 2013, the same trade balance showed a surplus of 1036 billion kwanzas (8.4 billion euros), recording, between 2013 and 2014, a 66.7% decrease, which is explained by the drop in international oil prices, this being the country’s main export.
According to data released by the National Institute of Statistics (INE) for Q3 2014, the main partners in international trade continue to be China, the main destination for Angolan exports, with 49.5% of total exports, and Portugal, the main partner for imports, representing around 14.7% of total imports. However, the US are beginning to take on a more prominent role and, according to INE data, imports from this region have increased by 126.8% YoY.