ANGOLA: 45 YEARS OF ECONOMIC CHALLENGES

The economic matters continues to be one of the great challenges of the Angolan authorities in the analysis of the 45 years of National Independence, achieved on 11 November 1975.  

Theorists from various latitudes consider that a country is only truly free when, in addition to political independence, also achieves economic independence.

Angola's post-independence history is characterised by advances and setbacks, as the country's development plan was affected by a 27-year war, which killed, mutilated and displaced thousands of people, impoverished most Angolans, lacerated human fabric and destroyed important infrastructure.

When, on 11 November 1975, the then president of the MPLA, António Agostinho Neto, proclaimed the independence of Angola from the former colonial power (Portugal) and assumed the leadership of the State, Angolans created enormous expectations in the construction of a country that would provide them with social welfare, development and progress.But these expectations were frustrated by the fratricidal war, which only ended definitely in 2002. 

During this period, many cadres and valuable human resources, who could contribute to the economic development of the young nation, left the country, causing a huge deficit in this regard.

The Government had to deal with this constraint, combining the country's economic management with war efforts, whose expenses consumed a large part of the country's resources that could otherwise be used to build infrastructure.

 Macroeconomic reforms

 After independence and the adoption of an economic model centred on the State, in 1976 the Government created the Banco Nacional de Angola and Banco Popular de Angola, which inherited the assets and liabilities of Banco de Angola and Banco Comercial de Angola, then just nationalised.

 In this way, the premises for the implementation of macroeconomic reforms were created. The first of which was the approval, on 11 November 1976, of the Law on National Currency, which made it possible, in 1977, for the replacement of the colonial Escudo with the Kwanza (AKZ), an important measure in terms of the affirmation of the  national sovereignty.

 In 1981, 1984 and 1986, in order to secure greater currency security and combat counterfeits of the money then introduced in the market, small changes were made to the notes, with José Eduardo dos Santos as President of the Republic, after replacing, in 1979, Agostinho Neto, who died in September that same year.

 Also within the scope of the economic model in force at the time, in 1978 the National Insurance and Reinsurance Company of Angola (ENSA) was created, which, with the liquidation, in 1981, of the insurance companies and other mutual institutions then existing, took over their assets and liabilities, grabbing the monopoly in this sector at national level.

 In the new banking system, the National Bank of Angola started to perform the functions of a central bank, commercial, issuer and treasury box, being a body of the Central Administration of the State, created by law, in May 1983, while the Banco Popular de Angola was just a fund for raising private savings.

 Another relevant reform was the creation, in 1987, of the Economic and Financial Reform Programme (SEF), which aimed to adopt the market economy model, greater openness to the private initiative and other actions that favoured the mobilisation of financial resources, investment (domestic and foreign) and macro-economic stabilisation.

 At the time, the Angolan economy was plagued by a serious crisis caused by the drop in the price of an oil barrel from USD  30 to USD 10, which was unsustainable given the enormous war effort. With the launch of SEF, the Government was looking for an alternative to the then socialist system of centralised economy, according to several economists.

 “There was a clear orientation towards the market economy, the banking system, the payment system and the financing of the economy. Basically that. The IMF, with its programmes, created a certain economic duality in Angola”, according to economist José Cerqueira, one of the members of the team that worked on the designing of the SEF.

 

José Cerqueira said, in an interview with Jornal de Angola, that this duality consisted of calculating the fiscal price of oil, with, for example, up to USD 50 a barrel, all resources were managed under the supervision of the International Monetary Fund, thereafter, as a special programmes for the President of the Republic.

 It was also in that period that the National Private Investment Agency (ANIP) was created, being extinguished in 2015 and replaced with the current Private Investment and Export Agency of Angola (AIPEX), whose mission is to promote exports and attract private investment.

 Transition and market economy

 The New York Agreements, signed in 1988 between the Government and UNITA and which dictated the withdrawal of South African and Cuban troops from the Angola soil, as well as the independence of Namibia and eradication of the apartheid regime in South Africa, enabled the achievement of peace and stability in Angola.

 As a result of this understanding,  the Angolan Government started negotiations with international financial institutions and bodies, being, for example, in this context that it joined, in 1989, the International Monetary Fund (IMF), the World Bank (BM) and the International Bank of Reconstruction and Development (IBRD).

 Economic reforms continued and, in 1990, again within the scope of the fiscal policy, the national currency, the Kwanza, was replaced by the New Kwanza (AON) and, in 1991, the Government devaluated the New Kwanza.

 After the signing of the Bicesse Agreements, in May 1991, between the Government and then rebel UNITA, which temporarily put an end to the civil war, the bases were laid for the emergence of multiparty system and the resulting  liberalisation of the country's economy, which came into effect after the 1992 General Elections.

 For example, new public banks were set up and the first foreign banking institutions in the country were authorised, such as Totta & Açores (BTA), Foreign Promotion (BFE), Português do Atlântico (BPA), among others, which essentially operated in foreign exchange transactions in the secondary market and in medium and long term investment financing.

 The definite end of the war, in April 2002, made it possible to revive the economy, with the country being considered one of those with fastest growth in the period until 2014, translated into a reduction in the incidence of poverty from 68 percent in 2001 to 36, six percent, in 2009, according to data from the National Statistics Institute (2010).

 In 2014, the Stock Exchange and Derivatives of Angola (BODIVA), responsible for ensuring transparency, efficiency and security of transactions in regulated securities markets, to stimulate the participation of small investors and competition between all operators, was created.

 This period was also characterised by the reconstruction of the infrastructure destroyed during the armed conflict (mainly hospitals, schools, roads, bridges, factories, railways and airports) and construction of others.

 However, despite the significant progress made in macroeconomic stabilisation and structural reforms, Angola continued to suffer the effects of falling oil prices and production levels, a sector that contributes a third of the Gross Domestic Product (GDP) and more than 90 percent of the country's exports.

 "The transformation of a State-led oil economy to a growth model led by the private sector is a complex and long-term process and the oil sector will continue to play an important role during this transition period", warns the BM, in a study updated in July this year.

 The reforms also included the approval of the Law on Public Finance Sustainability, which introduces instruments with a multi-year horizon and defines the main mechanisms for monitoring its performance.

 In the tax domain, highlight for the introduction of the Value Added Tax (VAT), in 2019, whose collection volume went from AKZ 75 billion per quarter to around AKZ 145 billion, for the same time span.

 With regard to regional integration, significant steps have been taken to enhance the participation of the Angolan economy in regional and international markets.

 At the SADC level, discussions for the implementation of a Free Trade Area is expected, whose protocol Angola has already ratified.

 The country has also started the process of preparing the Tariff Offer for the African Continental Free Trade Area, the protocol of which has already been ratified as well.

 Credibility, diversification and sustained investment

 In another respect, in 2019, the Integrated Municipal Intervention Programme (PIIM) was launched, being implemented in the country’s 164 municipalities, with priority to the sectors of power and water, health, education, basic sanitation and road construction.

 The programme is funded with the amount to the tune, in Kwanzas, of two billion dollars from the Angola Sovereign Wealth Fund (FSDEA).

 Of the 749 projects planned, 1,200 are underway, 12 have already been completed and 537 are in preparation to start, with the aim of significantly improving the living of the population.

 In addition, the Government established the Action Plan for the Promotion of Employability (PAPE) and the Reinforcement of the Default Regularisation Process, involving the 83 programmes that envisage the implementation of the National Development Plan (PDN) for the 2018-2022 period and which continues annually as a priority item under the State Budget (OGE).

 Among the Executive's measures, the laws on Preventing and Combating Money Laundering and on Privatisations, the creation of the Balcão Único for Investors, to improve the business environment, in addition to the establishment of a social protection register, stand out, to protect the most vulnerable from the effects of the reforms.

 The BM predicts, however, a decline in growth in the non-oil sector, due to the indirect effects of falling oil prices, reduced imports of capital goods, more restrictive financing conditions, exchange rate depreciation and limitations in the movement of people and goods.

 “The Covid-19 pandemic and the global economic turmoil caused by it are jeopardizing the achievements of Angola’s macro-economic stabilisation and the country's transition to a more sustainable and inclusive growth model”, concludes the BM study.

 Projections from international institutions, such as the IMF, World Bank, AfDB and others of financial risk assessment, released in 2019, estimate that Angola could, four years after an unbearable recession, experience again a rise in its growth indicator between one  and three percent.

 The almost exclusive dependence on oil exports means that Angola, the 2nd largest producer of this product in sub-Saharan Africa, after Nigeria, continues to suffer from the price drop in international markets since the crisis began in 2014, when the crude oil barrel was at USD 117.

 The crisis has had such a negative impact that it caused the postponement of the implementation of several important economic projects, with a direct influence on the life of the population, faced with unemployment, insufficient health, educational and housing structures, in addition to drastically reducing their purchasing power.

 Added to this is the fact that the revenues resulting from the oil boom were embezzled by a group of individuals who, taking advantage of their privileged condition in the state apparatus, emptied the State’s coffers and took over the treasury, leaving the country and the people in enormous difficulties.

 In this regard, the Government's investment is focused on diversifying the country's economy, with a strong stress on promoting agriculture and improving the business environment, seeking to place Angola's position in the global “doing business” ranking among the best in the coming years, and combating corruption and impunity.

 In the field of agriculture, measures have been taken to increase national production, make the private business sector stronger and more competitive, reduce imports of essential consumer goods and contribute to exports from the non-oil sector of the economy.

 In July 2018, the Government approved the Production Support, Export Diversification and Import Replacement Programme (PRODESI), with a view to the goals contained in the National Development Programme (PDN).

 Already in progress and aimed at accelerating the diversification of national production and generation of wealth, in a group of productions with a greater potential to generate export value and import substitution, the programme focuses on the food and agro-industry sectors.

 Other areas are mineral resources, oil and natural gas, forestry and textiles, clothing and footwear, construction and public works, information and telecommunication technologies, health, education, training and scientific research, tourism and leisure.

 As part of the promotion of national production, until September this year, 589 financing requests were approved, under the initiatives of the Credit Support Programme (PAC) to support PRODESI's goals, according to President João Lourenço, in his recent message on the State of the Nation.

 Highlight for the financing of more than 300 cooperatives of family farmers and ranchers, as well as artisanal marine, continental and aquaculture cooperatives. The total amount disbursed reaches about Akz 144 billion.

 New laws on Private Investment and Competition were also passed, the latter being the first in Angola, which dictated the creation of the Competition Authority, tasked with preventing situations of abuse of a dominant position and promoting and defending a sound market competition.

 In order to reduce the State's participation in the economy, as a direct producer of goods and services, and to promote favorable conditions for private initiative, foreign investment and the acquisition of know-how, the Government launched the privatization of several companies in which the State is the current owner or shareholder.

 According to the holder of the Executive Branch, “of the 195 assets to be taken into account, until 2022, some 40 are in the public tender phase and 14 have already been privatized, resulting in a holding for the National Treasury of more than 31 billion Kwanzas”.

 "With the increase in national production, we will have more jobs, increase the income of the population and, therefore, improving the quality of life of Angolans, thus fighting poverty", emphasised the President of the Republic, in his recent message on the State of the Nation.

 Regarding corruption, the country approved the Law on Coercive Repatriation of Capitals and Extended Loss of Assets, which establishes that holders of patrimonial assets obtained with the resources from the treasury return the illegally acquired resources to the State.

 Before that, another law had been in force for a period of 180 days that allowed the voluntary return of assets illegally obtained.

 President João Lourenço revealed that the State was defrauded of at least USD 24 billion, an amount that exceeds the value of Angola's debt to its main creditor, China.

 According to João Lourenço, the State has recovered USD 4,9 billion, of which USD 2,7 billion cash and USD 2,1 billion worth of real estate, factories, port terminals, office and housing buildings, radio and television stations, graphic plants, commercial outlets and others.

 Still with regard to fighting corruption, impunity and money laundering, several criminal and civil proceedings are underway across the country, while others have already been finalised.

 In addition to this, highlight for the approval, in November 2019, of the Law on Preventing and Combating Money Laundering, Financing of Terrorism and the Proliferation of Weapons of Mass Destruction, replacing that on Combating Money Laundering and Financing of Terrorism, approved in 2010.

 The new law leaves politically exposed persons (PEP) subject to increased due diligence and is a recommendation of the International Financial Action Group (FATF), with the intention of inhibiting the payment of financial entities domiciled in offshores, connected with criminal organisations.

 It is under the sign of the fight against corruption, the main banner of the electoral campaign of the party winning the August 2017 elections, the MPLA, and assumed by its leader and President of the Republic, João Lourenço, that country marks the 45th anniversary of its national independence.

 It is a hard and complex task, with strong opposition from those who unduly and illegally seized public funds, but which has the support of the majority of Angolans, who want the moralisation of the society and the fair distribution of the country's wealth.

 Basically, Angola celebrates 45 years of independence in a context in which the Government is endeavouring to revitalise the country's economy, deeply affected by cyclical economic and financial crises, resulting from the sharp fall in the price of oil, its main source of income, seconded by diamonds, and now by the Covid-19 pandemic.

 In order to revive the economy, the Angolan Executive, now led by President João Lourenço, has adopted, over the years, several macro-economic measures, with  a view to the economic diversification, with an emphasis on the investment in the sectors of agriculture, mining, fisheries and manufacturing industry