Economic openness in Angola improves prospects for growth

11 December 2017

The economic openness promoted by the new government of Angola, instated following elections in August 2017, particularly in the areas of telecommunications and oil, is improving the country’s prospects in the medium term and leading some analysts to forecast faster growth.

After Angola’s minister of telecommunications announced the launch of an international tender to award a license to a fourth operator, along with the privatisation of 45% of public carrier Angola Telecom, the Economist Intelligence Unit (EIU) said it was likely to revise its economic growth forecast for the country, due to the opening up of the telecommunications market, a potentially significant step “to improve the general business climate.”

The EIU currently expects of 2.7% for the Angolan economy in 2017, which should slow down to 2.4% in 2018, while the International Monetary Fund (IMF) predicts growth of just 1.5% this year, after the Angolan economy stagnated last year, according to official statistics.

The EIU said in its latest report on Angola that there should be “significant interest in the tender” for the new operator, given the potential of the market, and that greater competition between operators should lead to “better and cheaper” telecommunications services, a “positive development for the country’s emerging private sector and for efforts to diversify the country’s economy, avoiding dependence on oil.”

The Africa Monitor Intelligence newsletter said that opening up the telecommunications sector is also seen among investors “as a test of the new government’s ability in relation to resolving constraints on business activity,” in a country where the business climate is among the worst in the world, according to the World Bank ranking.

In the short and medium term, the newsletter added, the oil sector will continue to drive the economy and “was the one in which investors reacted most quickly to expected changes,” in particular a new model for the sector, as recommended by the new board of state oil company Sonangol, led by Carlos Saturnino.

The reaction involved, within two weeks, Sonangol signing two agreements, one with Italian oil company ENI, for production in the Cabinda Norte block and collaboration in natural gas projects projects, and, another with France’s Total, for exploration of Block 48, in ultra-deep waters, development of Block 17 and the creation of a 50/50 company to operate in the distribution of refined fuels.

This agreement also includes the possibility of the partnership importing refined products, following the liberalisation of the market, extending the partnership to the entire fuel cycle, and possibly paving the way for Total to get involved in the new refinery in Angola, that the new president, João Lourenço, intends to resume, in order to put an end to the lack of productive capacity in Angola.

The economic impact of the new political scenario also led the Eurasia consultancy to raise its outlook for Angola to “positive”, in a recently published note.

“Lourenço has quickly moved ahead with major reforms since he came to power,” said Eurasia, highlighting the changes of several officials, as well as doing away with certain situations that favoured some companies, particularly those involving the family of the former President. (macauhub)