Economy of Angola

By | April 29, 2022

The civil war that lasted a quarter of a century destroyed the country’s economy. Plantations, railways, highways, factories, power lines were destroyed. The only productive industries remained the oil and diamond industries. In 2001, GDP in consumer prices amounted to 13.3 billion US dollars, i.e. $1,330 per capita. The working-age population is estimated at 5 million people, and unemployment exceeds 50%. Agriculture accounts for 85% of the employed population, while industry and services account for 15%. Inflation 110% (2001). Distribution of GDP by sectors of the economy (2000,%): agriculture 6, industry 70, services 24.

According to businesscarriers, the most important industry is oil production, in terms of the export of which Angola ranks second in sub-Saharan Africa. It provides 44% of GDP and 80% of government revenues. Most of the oil is produced in the province of Cabinda. In April 2000, the country produced 845 thousand barrels. per day (36.4 million tons per year). The development of new deposits has made it possible to raise this level. Oil Minister J. de Vasconcelos said that in 2003 oil production will reach 1.4 million barrels. in a day. According to the 1978 Petroleum Law, the only concessionaire for exploration and production of oil is the state-owned company Sonangol, to which the oil companies operating in Angola, without fail, transferred 51% of the shares, although the entire management remained in their hands. The American companies Chevron, Gulf Oil, and others operated mainly in Cabinda. In 1994, Chevron discovered and began exploiting offshore oil. Following her, the companies Agip, Elf Akiten, Conoco and Texaco began mining from the seabed. In 1997-2000, more than 15 deposits were discovered, and not only in Cabinda. In 2002, new deposits were reported on the coast, offshore and inland. All exploration and production is carried out by foreign companies, Sonangol independently produces oil in only one section of the shelf.

Angolan kimberlite pipes contain a high percentage of gem-quality diamonds. In 2000, their production amounted to 5.4 million carats, and the production of industrial diamonds – 600 thousand carats. Until 2000, the monopoly right to mine and sell diamonds belonged to the Andiama state company, which granted concessions to foreign firms and had to sell rough diamonds only through the channels of the South African corporation De Beers. However, in the context of the civil war, Andiama was unable to control the production and sale of all diamonds. UNITA led the development of the diamond deposits he seized and sold precious stones on the black market. It is believed that in some years UNITA accounted for more than 2/3 of the national production. In 1999, the leadership of Andiama was removed due to corruption, and in 2000 the diamond industry was reorganized. All licenses for exploration and production of diamonds have been reviewed. A state-owned company, Askori, was established to sell diamonds. The end of the civil war immediately caused an increase in applications for licenses from firms in different countries. The Russian company ALROSA announced the expansion of its activities in Angola. Since 1998, it has been developing the Katoka kimberlite pipe, whose reserves are estimated at 200-500 million carats of diamonds. The prospects for the development of the diamond industry in Angola look encouraging.  There are enough deposits under development to bring the volume of production up to 7 million carats per year within three years, and meanwhile geologists are discovering new kimberlite and alluvial deposits.

Of the other minerals, two iron ore deposits were developed before independence. The mines were destroyed during the war. There are 4 deposits of copper ore, deposits of manganese, phosphates, feldspar, uranium ore, platinum, gold.

The energy potential of Angola is so significant that it not only makes it possible to ensure the economic development of the country in the 21st century, but also allows exporting electricity to neighboring countries. Energy in Angola is divided into three unrelated systems – northern, central and southern. 60% of electricity is generated by hydropower plants. During the war, most of the power lines, transformer substations and some power plants were blown up. The largest hydroelectric power station is in the north of the country in Cambamba (capacity 450 MW). The World Bank and the African Development Bank provided the bulk of the $64 million loan to rehabilitate the transmission line linking the HPP with the capital, Luanda, and work was completed in 1999. With the help of the Russian Federation and Brazil, the construction of a hydroelectric power station in Kapande on the Kwanza River with a capacity of 520 MW is underway. This $2 billion project financed by international organizations, identified by the World Bank as the key to the post-war reconstruction of Angola. In the central energy system, one of the two hydroelectric power plants operates, supplying the cities of Lobita and Benguela. The southern energy system is the most promising. Two HPPs (one of them is disabled) are the first stage of the project for the construction of a 1000 MW hydrocascade on the Kunene River, in which Namibia and South Africa are interested.

At present, only 65% of hydropower and 53% of thermal power plants are used. In 2000, electricity generation amounted to 1.19 billion kWh.

The largest enterprise is an oil refinery in Luanda, processing 35 thousand barrels. in a day. In 1998, plans were announced to upgrade it to bring its capacity up to 60,000 barrels. There is a plan to build a second oil refinery in Lobito with a capacity of 200 thousand barrels. per day, the People’s Republic of China has offered financing of the project, with the implementation of which the neighboring countries will be supplied with oil products. However, there are doubts about the possibility of its implementation before the restoration of the Benguela Railway.

Other branches of the manufacturing industry fell into complete decline during the war and practically began to be created anew. After a 10-year break, the steel plant resumed its work, an enterprise for the manufacture of equipment for the oil industry was built, a Dutch bus assembly plant and 3 small pharmaceutical factories operate. The construction of a hydroelectric power station in Kapanda stimulated the creation of a cement plant, whose capacity in 1999 reached 356,000 tons. In 2000–02, several dozen small enterprises in the food, clothing, and footwear industries appeared in the private sector.

Arable and cultivated land covers 3% of the entire territory of Angola, and there is great scope for expansion. Commercial agriculture was dealt a crushing blow after the nationalization of the plantations, the departure of the Portuguese settlers, and as a result of the civil war. Plantations of coffee, cotton, sisal, rice and other crops ceased to exist. Thus, before independence, Angola ranked second in Africa in coffee production (200 thousand tons per year, now 7 thousand tons are collected). Thanks to Cuban specialists, many sugarcane plantations have been preserved, but their yield has declined from 1 million tons in 1973 to a little over 300,000 tons at the present time. In 2001, the government began the privatization of sugar plantations and idle sugar mills.

The main crops in the diet of most Angolans are cassava and corn. In 2000, the cassava crop was estimated at 3.1 million tons, and corn 428 thousand tons.

Animal husbandry is developed mainly in southern and central Angola, where there is no tsetse fly. Over the past 25 years, the number of livestock has decreased by 1/3. In 2000, it was: cattle – 4 million, goats – 2.1 million, sheep – 350 thousand, pigs – 850 thousand.

River fishing plays an important role in the nutrition of the population. Sea fishing is based in the ports of Namibe, Benguela, Tombwa. Most of the trawlers are of old construction, the equipment is worn out, and fishing is carried out, as a rule, not far from the coast. In 1999, 177.5 thousand tons of fish were caught; 250 thousand tons were produced under licenses by foreign ships, incl. Russian. Fish stocks in the economic zone of Angola, according to the UN, allow catching approx. 1 million tons per year. A program for the renewal of the fishing fleet and the creation of enterprises for the storage and processing of seafood has been developed and launched.

The length of four railways is 2952 km. All of them are badly damaged, movement is possible only in short sections. The volume of traffic does not reach 0.5 million tons. According to Angolan experts, 80% of highways worth $4 billion need to be restored. The length of roads is 72,626 km, but in many places the road surface is destroyed, bridges are blown up. In 2000 the government developed a road and bridge rehabilitation program.

There is an oil pipeline 179 km long.

Luanda has an international airport. Domestic flights carry out transportation between 14 cities of the country.

The communication system – mail, telegraph, telephone – was destroyed, the restoration of the telephone network began, but three provincial centers still remained in 2002 without telephone communication with other provinces of the country. The Telecom digital telephone network project has so far been implemented in two cities, Luanda and Benguela. The number of telephones is 98 thousand, of which 25.8 thousand are mobile (2000). There are 33 radio stations and 6 TV stations broadcasting. The number of radio receivers – 815 thousand, television sets – 196 thousand (2000). 60 thousand people use the Internet. (2002).

Trade accounts for 17% of GDP. Until 1990, all wholesale and most of the retail trade was in the hands of the state. With the transition to a market economy, trading enterprises were privatized, but the government controls the prices of some goods, such as gasoline.

The government’s economic policy is aimed primarily at overcoming the post-war devastation and transforming the wartime economy into a market economy. Abandoning the course of creating a socialist national economy, the government returned 100 nationalized companies to their former owners and transferred to private firms up to 49% of the shares of large state-owned firms such as the national airline, but the public sector is still significant and very corrupt. The most acute problems remain food shortages, the fight against hunger and inflation. The end of the war will help to solve them, especially since positive changes are already being observed. Thus, over the past 6 years, inflation has decreased from 1650 to 100% per year.

An important reform was carried out in the financial system in 1996, which deprived the Central Bank (CB) of its monopoly on all monetary transactions. Private and state-owned banks emerged independent of it, the Central Bank handed over commercial operations to them, reserving the functions of financial licensing and control, development of monetary policy and money issue. The national currency kwanza changed several times, the last exchange of old kwanza for new ones took place in December 1999 at the rate of 1 new kwanza for 1 million old ones. For the first time, a free floating exchange rate for the kwanzaa was introduced, ending black market currency speculation. Since January 2000, the practice of transferring currency from oil exports to the accounts of special off-budget funds, where a significant part of the funds was embezzled, was canceled. Now all transfers of petrodollars must go through the Central Bank. These measures contributed to strengthening financial and budgetary discipline. The state budget is chronically in deficit.  In 2002, revenues were $928 million and expenses were $2.5 billion, of which $963 million was for capital investment. The most significant revenues to the budget are taxes on the income of oil corporations and on oil supplies. The next largest are taxes on goods and services, of which 85% also falls on the oil sector. Taking into account taxes on foreign trade and other oil provides 80% of budget revenues. However, already from 2003 this share will gradually decrease, despite the continued growth in oil production, as a result of putting things in order in the diamond mining industry and restoring other sectors of the economy. External public debt $10.4 billion However, already from 2003 this share will gradually decrease, despite the continued growth in oil production, as a result of putting things in order in the diamond mining industry and restoring other sectors of the economy. External public debt $10.4 billion

Information about the standard of living is not published, but, according to indirect data, it is extremely low for the majority of the population. In rural areas, due to hostilities, peasants often flee the villages, leaving the harvest unharvested (in 1999, 780 thousand people left their homes during the harvest season), and returning, drag out a half-starved existence or replenish the army of unemployed in the cities. The cost of living index data has only been published for Luanda and the latest figures are from 1997. They show a 2.5 times increase in the cost of living in three years. The real growth of average wages was the same, but it should be borne in mind that the salaries of officials and military personnel grew at a faster pace (4 times). The improvement in the life of the population cannot be evidenced by the growth in 1990s bank deposits by 400% per year, for these are the deposits of the narrow upper stratum of society, and the problem of hunger is before the majority of the population. According to SADC, the annual volume of Angolan imports of grains to combat hunger is 414 thousand tons. Most of the grain is purchased by the government. The UN Food Program annually provides assistance to save 2-3 million hungry people. The United States is the second largest food donor after the UN.

In 2001, exports amounted to 7 billion dollars (estimated), and imports 2.7 billion dollars. The positive balance of trade was 4.3 billion dollars. However, the current account was passive – approx. $1 billion Main export items: oil (90%), diamonds (7%), coffee, fish, timber. The main import items are weapons, foodstuffs, vehicles, electrical equipment, textiles, medicines. Main trading partners (2000): export – USA, EU, China, Republic of Korea; import – EU, Republic of Korea, South Africa, USA, Brazil.

Economy of Angola