Angola’s finance minister is confident the economy of Africa’s second-largest oil producer will finally start to rebound after a brutal multiyear recession.
In an interview, Vera Daves de Sousa said Angola’s economy, which has shrunk by nearly 10 per cent since 2016, would grow 0.2 this year, rising to 2.4 per cent in 2022, underpinned by economic reform and higher oil prices.
“We are going to start coming out of the recession now,” said Daves de Sousa, who, at 37, is part of a new generation of technocrats within the MPLA, the party that has ruled Angola since independence from Portugal in 1975. “We would be comfortable growing 4 per cent a year, so 2.4 per cent is still low.”
Since President João Lourenço, took over from José Eduardo dos Santos — who critics say ran the country as a crony capitalist state for four decades until 2017 — Angola has embarked on ambitious economic reform and an anti-corruption drive that swept away members of the dos Santos family.
2.4%
Forecast growth in 2022 for an economy that has shrunk by 10% since 2016
Last month, the president lifted most lockdown restrictions that had been in force since March 2020. Daves de Sousa said the government had undertaken many reforms, including the sale of state companies, but “we just couldn’t do more because we’re in an economic recession made worse by having a pandemic in between” that a took a toll on the battered economy.
Much like Venezuela, Angola is one of the most crude-dependent economies in the world, with oil accounting for more than 90 per cent of exports. Until oil prices crashed in 2014 Angola was one of Africa’s fastest-growing economies.
But output in the ageing wells of the southwestern African country, which from 2015 to 2017 surpassed Nigeria as the continent’s top oil producer, has dropped from a peak of 1.9m barrels a day in 2008 to almost 1.3m in 2020.
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“The main cause of the recession has been the dependence on the oil sector. It all started when the price fell from its peak,” Daves de Sousa said in her office in Luanda.
“It has been below that level ever since. It never returned to the levels pre-2014. Also, in the last 10 years, we haven’t made major investments in terms of new oil discoveries. Lower oil production doesn’t help us either.”
Thanks to a rebound in oil prices and some IMF-backed reforms, including a commitment to fiscal discipline, the government is trying to lure in foreign energy investors to focus on new fields but also on natural gas. In a delicate balancing act, it also wants to diversify Angola’s economy away from oil dependency into areas such as agriculture and tourism, which would take time.
“We are trying to make the sector more dynamic by creating a good environment for oil companies to develop marginal fields, to make new discoveries and stabilise production, which has been in freefall and we want it to go up a little bit,” she said of an economy that is trying to move further from public to private investment after decades of a heavy state hand.
William Jackson, chief emerging markets economist at Capital Economics, is not so bullish, and expects the Angolan economy “to suffer its sixth consecutive annual decline in GDP this year” and said, despite policy shifts, “it’s hard to see much new investment taking place as peak oil demand nears.”
“We are working on all fronts. We know that it will take time to reach the levels of economic diversification we need for the economy to grow above 3 per cent,” because Angola’s population is growing at a rate of 3 per cent a year. “We need to grow more than that,” Daves de Sousa said, “otherwise, we’ll be in a recession again.”
One such “front” is restructuring and selling parts of Sonangol, the state oil company, which had been mired in corruption scandals. Many Angolans called it a “Lava Jato moment” — a reference to Latin America’s biggest-ever corruption investigation that uncovered billions in kickbacks at Brazil’s state-controlled oil company Petrobras that shook the political and business elites.
“Sonangol itself is selling assets starting at the end of next year, a percentage that has not been defined yet, but it is to sell a stake,” she said, adding that the goal is to launch an initial public offering in the local stock market, Bodiva.
“There are many lawsuits that have to be dealt with before that, and only after all this complex mesh, when the company is normalised, can we go out to the market.”
Carlos Rosado de Carvalho, an economics commentator and professor at the Catholic University of Luanda, is sceptical of the official agenda. “Reforms might help, but the problem with reforms in Angola is that although we have privatisations we have done very little so far with little money coming in,” he said.
