Angola’s capital Luanda needs more competition and infrastructures to leave list of most expensive cities

11 January 2010

Luanda, Angola, 11 Jan – Luanda is considered the world’s most expensive city for foreign personnel, yet this situation could be reversed with more business competition and better basic infrastructures that would allow companies to reduce operating costs, indicate Angolan researchers and managers.

In its most recent (December) update of the global cost of living table for foreign personnel, the ECA International consultancy ranked the Angolan capital as the most expensive for the second consecutive year, ahead of Tokyo, Oslo and Copenhagen, a situation which also penalizes the local population.

In a report on the subject, the Novo Jornal newspaper reveals that besides food and housing for workers, many companies are forced to invest hundreds or even thousands of dollars in water tanks and pumps for running water, and similar amounts for generators to ensure power supply throughout the day. This is especially true in outlying areas of the Angolan capital.

Some factories use tank trucks to supply water at night so that they can operate the following day, while generator fuel outlays mean higher costs for restaurants, hotels and supermarkets.

In Luanda, “everything is more expensive as a rule, with housing at the top of the list”, says Carlos Pinto, a Portuguese manager with the Movicel telecommunications company, before comparing the city with Brazil’s economic capital.

“Sao Paulo is also a very expensive city. The biggest difference is that there’s much more on offer: housing, for example, is extremely expensive, yet you can still find a good house in a decent neighbourhood with suitable conditions,” he told Novo Jornal.

The Brazilian Mauricio Santana of the Engenho Novo communications firm also asserted that the “operating costs [office space, water, power] in Angola are high,” leading to heavy invoice burdens.

The fact that nowadays “almost everything in Angola is imported” means that products’ final costs are also driven up by customs fees, Santana said.

He added that the trend is nevertheless for prices to ease due to recent supply growth, which is visible in housing, especially in Luanda-Sul, a circumstance the Portuguese manager corroborated.

“There are districts [of Luanda] where [rent] prices have been cut in half” recently, said Pinto, the Movicel executive.

ECA International’s ranking of Luanda was based on last year’s prices for a basket of 128 consumer goods and services habitually acquired by foreign personnel in 300 places around the world.

Food items include dairy products, meat and fish, fresh fruit and vegetables. The list also includes beverages and tobacco, services, clothing, electric appliances, cars and restaurant spending.

The basic food basket is currently defined by the Social Coordination agency as being worth US$252.46 dollars for a six-person group, more than double the national minimum wage in Angola (US$110).

The secretary-general of the UNTA union confederation, Manuel Viage, stresses the reduced supply of products and services as well as power and water supply problems faced by companies, which end up “raising prices for consumers.”

Angolan authorities have in recent years unsuccessfully tried to bring the inflation rate down to single digits.

The latest World Bank predictions indicate that this year’s consumer price index variation should be around 14 percent, even though petroleum prices are lower in the first half of the year and the economy is recording slight growth, unlike in previous years.

The price phenomenon is also related to the high salaries earned by foreign personnel and some Angolans, says Angolan economist Alves da Rocha.

“The high salaries put pressure on prices for luxury goods, but also for ordinary goods (…). The arrival of foreign citizens is creating a bourgeois class of people who don’t give up the high lifestyle they enjoy in their countries, though the Chinese are perhaps an exception,” da Rocha told Novo Jornal.

A solution would be to pass a competition law and set up a competition authority to ensure dynamism and transparent price setting for products and services, he said. (macauhub)