Background
Angola is the second biggest producer of Oil in Africa, and her third-largest economy, riding on huge petroleum revenues. Tucked into the south-west of Africa, the former Portuguese colony is considered a developing country and one of Africa’s most promising nations today.
Oil in Angola
Like many emerging markets, which are at the same time petroleum producers, Angola’s dependence on petrodollars was swift and predictable. Beset by more than two decades of civil strife followed by an uneasy truce, Angolans, especially the ruling elite in the country, were in their own estimation, long overdue for some R and R funded by the country’s black wealth.
Even though Angola is blessed with a variety of minable, exploitable minerals, the ease of procuring oil-related investment and revenues, coupled by the high global demand for petroleum resources quickly established Oil as Angola’s benchmark export, currently accounting for 90 percent of export earnings, and 45 percent of its GDP.
Unsurprisingly, just like across the regional border in other oil-dependent countries, this official fixation on crude has led to a state where other national industries, such as mining, are currently near moribund.
Angola Oil Economy and Impact of Lower Oil Prices
In the face of slumbering prices precipitated by lukewarm demand across nations for petroleum, Angola is finding it a tad strenuous to fund its Kz13 trillion ($45 billion) state budget in 2018.
Angola’s 9.5 million barrels in Oil reserves and another 11 trillion cubic feet in Natural Gas have made the African nation somewhat complacent, now her people are paying a stiff price. Angola used to have one of the fastest growing economies in sub-Saharan Africa with an estimated 11.1% annual growth, but sporadic falling revenues for three years since 2015 from low oil demand has seen the country slide into recession.
Sadly, and predictably Angola’s 30 million population of which 48 percent are poor, and 77 percent in abject poverty, remain the main victims of the economic downturn. Many of Angola’s people subsist on low-scale agriculture, and rising interest rates, fueled by a steadily growing inflation, mean access to credit could become even more stringent than usual.
Unfortunately, 16 years after a devastating civil war, Angola’s infrastructure still remains under-performing and significantly less developed when compared with other countries of similar mineral strength. Petro-dollars are needed each year to fund sorely needed improvements in the educational and medical sector, as well as both public and private enterprise.
Government spending is the main driver for economic initiative, and Angola’s dwindling fortunes mean the present government led by Joao Lourenco since 26 of September 2017, is hard put to find the financial resources to fund capital projects and efficiently service the current expenditure.
For now, the government has been forced to radically cut its spending, leading to a loss of $5 billion in infrastructural planning. Hospitals have been forced to shut their doors as a result of lost funding, and empty provision stores are a common sight across Luanda, the capital city.
Mr. Joao Lourenco’s administration is pursuing a program of economic diversification, designed to wean Angola off Oil earnings and exploit its riches in diamond, coffee, and other resources. Whether it is too little or too late time is expected to reveal that.
Angola’s petroleum, called Cabinda Crude, since the last quarter of 2018 has been experiencing an upsurge, and predictions across economic think-tanks are that the country will see some sustained growth and a revamped economy starting 2019. For now, serious economic reforms, which should impact on economic diversification, are called for in order to produce the promise everyone sees in this nation.
References:
https://en.m.wikipedia.org/wiki/Economy_of_Angola
https://www.investopedia.com/articles/investing/102215/4-reasons-why-price-crude-oil-dropped.asp
https://www.focus-economics.com/countries/angola
https://www.wsj.com/articles/are-low-oil-prices-good-for-the-economy-1479092581
