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Angola - moving beyond the resource curse?

Angola - moving beyond the resource curse? Anthony Harrington

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Judging the state of the Angolan economy is a real balancing act. Looked at from the standpoint of a country with enormous agricultural potential and fantastic mineral and oil wealth, one has to say it is failing massively to live up to its potential. Looked at from the perspective of a country recovering from being the victim of a really nasty proxy war between Marxist Cuba and a white South Africa posing as the bastion of western freedoms - an ideological muddle if ever there was one - there is much to hope for from the recovery made so far.

In its latest Article IV mission to Angola, the International Monetary Fund (IMF) looked in some detail at the current state of the Angolan economy and at the country’s efforts to diversify away from oil, as well as at government efforts to promote inclusive growth and to alleviate poverty. (Angola remains a highly impoverished country).

Pre-independence, Angola was the world’s fourth largest coffee producer and is also blessed with the Benguela current offshore, which is rich in phytoplankton and thus in fish stocks. Well managed, there is no way Angola should be either poor or in economic difficulties. But decades of civil war and an absolutely horrific legacy of landmines from the conflict, which still make parts of the country a no-go zone have decimated the economy.

Corruption is endemic. In the Soviet era, despite the fact that Angola was a client state, the Soviet press routinely slated the ruling MPLA as deeply corrupt and infested with nepotism and graft. “Corruption has flourished on a scale which is unprecedented, even in Africa...” the press commented.

In more recent times, Human Rights Watch accused the Angolan Government of “misplacing” some US$32 billion in oil revenue, which amounts to a quarter of the country’s GDP. Transparency International ranks  Angola 153nd out of 163 countries in its 2013 Corruption Perception Index.

However, there is also a good bit to celebrate. Luanda has been enjoying a construction boom since the ending of the civil war and there is a major biofuels project, based on sugar cane, which has real potential. According to All Africa, the Angolan Bio-energy Company (BIOCOM), which is based in the northern Malanje province, expects to produce some 70,000 tons of sugar in the second half of 2014. By 2018/2019 BIOCOM expects to produce 256,000 tons a year which will support the production of 30 million liters of ethanol, and 28 MW of electricity for the high tension line between Capanda and Cacuso. BIOCOM itself is a partnership between the Angolan State and two private companies, Angolan Damer and the Brazilian firm Odebrecht, which specializes in ethanol production.

The $220 million project results from an appeal by the Angolan government in 2011 to Brazil for help in getting a local biofuels industry off the ground to diversify somewhat from the country’s mainstream oil production. As one of the world’s top biofuels producers, Brazil was a natural choice as a partner and the result represents the first significant investment in Angola’s once thriving sugar industry for over 30 years.

According to the IMF, GDP growth in Angola in 2014 is expected to slow to 3.9% since growth in 2013 was boosted by exceptionally high crop production, plus there has been a slowdown in oil production. However, by 2015 the IMF expects real GDP growth to accelerate to 5.9% with a robust contribution from the country’s non-oil economy. Angola has been plagued with high inflation and that too, seems to be coming under control, falling below 7% by June 2014.

However, the IMF warned the Angolan government that it was putting its foot on the gas, in terms of extending its public spending plans, precisely at a time when oil revenues were softening, potentially leading to a worsening of the country’s balance of payments. The IMF wants to see Angola developing an oil stabilization fund “with clear deposit and withdrawal rules”.


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Tags: Angola , biofuels , corruption , Cuba , IMF , landmines , Marxist , oil and gas , resource curse
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