Angola is a nation of extremes. A country rich in resources, Angola currently stands as the second largest oil producer on the African continent, not to mention holding an abundance of gold and diamonds. Yet its infrastructure is dysfunctional and poverty levels are high, oil exports do not benefit the average Angolan. This is primarily the consequence of the rampant corruption that has characterised industry and state officials since gaining independence in 1975. However, the newly elected President Joao Lourenco seemingly intends to make good on his promises for economic reform at the expense of corruption.
One of Angola’s greatest problems is lack of diversification in its economy. With oil making up 97 percent of the country’s exports, the country’s economic climate is at the mercy of global oil prices. The extensive borrowing needed after the oil price drop in 2014, caused the national debt-to-GDP ratio to rise to 60 percent that year. In 2011, it had only been 47 percent.
The crash also caused a distinct shortage of foreign currency. This spelled disaster for Angola, who is heavily reliant on goods purchased from abroad due to its extremely small scale manufacturing base.
President Lorenco’s economic and social improvement plan essentially reverts the inadequate 2013-17 national development plan and lays the foundation for fresh development in the 2018-22 period.
Lorenco hopes that his action in devaluing the Kwanza by 20 percent and relaxing visa restrictions will encourage more direct investment. Additionally, by July the government plans to have tapped into the international bond market. These plans, offer bonuses for local manufacturing firms and is designed to stimulate infrastructure based projects. If needs be, commentators have noted that Angola will most likely establish a deal with the International Monetary Fund, to ensure financial stability.
In 2017, Angola ranked the 13th most corrupt nation on Amnesty International’s Corruption Perception Index. Indeed, bribery and extortion are a particularly serious issue for the nation, in terms of appealing to foreign investors. According to Transparency International, almost every company that operates in Angola has undertaken in bribery of public officials in some capacity. A distinct lack of institutional checks and balances along with the general prevalence of clientelistic networks in the private sector are the root causes. Prosecutions of bribery and illicit enrichment are rare. The oil and gas sector is particularly susceptible to corruption, with ‘gifts’ and facilitation payments regular business expenditures. In order to even register a company in Angola, one has to wait around six months, during which time bribes are often required in order to resolve fabricated ‘issues’ with the application.
However, since September Lourenco has replaced the administrations of numerous utilities and companies in an attempt to disrupt the clientelistic networks. The most significant of which being, the governor of the central bank, and the children of Lorenco’s predecessor Isabella dos Santos and Jose Filomeno as heads of the Sanangol and sovereign wealth fund. To reduce money laundering, he has initiated a policy whereby Angolans must repatriate funds illegally held abroad, offering pardoning those who comply and prosecuting those who resist.
In February President Lourenco urged his five newly appointed Supreme Court judges to tackle white collar crime and corruption.
This action has led to suspicion of a power play on the part of Lourenco, to uproot any remaining tasset of dos Santos’ control, whilst installing his own supporters in key positions. Consequently, improving the business environment may not be the primary goal, which could make investors hesitant.
On the face of it, Angola’s political environment appears in line with the recent pattern of anti-corruption initiatives adopted in many African nations. In January, the African Union met for its 30th summit, themed ‘Winning the Fight against Corruption: A Sustainable Path to Africa’s Transformation’. Other countries such as Ghana, Rwanda and South Africa have also exhibited transparency promoting enterprises that are in keeping with this focus.
The reforms appear to be a step in the right direction for Angola, however the country is primarily attractive to multinationals who are willing to take the gamble. Until the issues pertaining to infrastructural constraints and white collar corruption are met head on, this is how Angola will remain.