By Verner Ayukegba
Over the course of 2022-2023 Angola aims to consolidate its post COVID-19 economic recovery agenda on the back of stronger oil and gas prices. Given the landmark USD$100 per barrel price threshold being exceeded, analysts are projecting an upbeat economic outlook for the country with real GDP growth expected at an average of 5.1% for 2022-2025.
The 2014 global oil price crash ushered in a period of economic crisis for Angola and other major oil producers dependent on oil revenue as their main source of income. This, however, triggered the realization that the economic model of overreliance on a sector that has long been the source of billions of dollars for Angola and led to the country becoming one of Africa’s largest economies needed to change. Since 2016, government efforts to address the crisis have led to sweeping changes both within and outside the oil sector. Within the oil sector, these changes have included pragmatic tax incentives intended at encouraging exploration, reducing the cost of production per barrel as well as making operations more competitive when compared to other oil producing regions globally. Angola’s plan to run bid rounds from 2019-2025, during which new exploration acreage is expected to be ceded to interested parties, is one of the most aggressive globally. Another major revamp of the oil sector nationally initiated by the government has been the ongoing and largely successful restructuring of the National Oil Company Sonangol, aimed at refocusing it on its core oil and gas activities. This revamp also led to the creation of a separate upstream regulator, the national Oil, Gas and Biofuels Agency (ANPG), tasked with regulating the sector and ensuring that it creates greater value for Angolans, whilst at the same time increasing its attractiveness for investors.
Angola’s economy, similar to that of other major hydrocarbon producers in Africa, remains vulnerable to volatile oil prices. The crude oil sector currently accounts for over one-third of GDP and for 90% of total exports. In order to mitigate against the risk of external oil price shocks, as well as reduce the country’s dependence on imports, the administration of H.E. President Joao Lourenço is strengthening efforts to diversify the economy beyond oil and gas. Not only does the government seek to broaden its industrial base by offering tax incentives, special programs to promote agriculture, attract foreign investors and the creation of free trade zones, a key objective is to create more employment opportunities for the country’s young and rapidly growing population. Four key sectors expected to witness investments and rapid growth from the ongoing diversification efforts include agriculture, logistics infrastructure, Telecommunication and the finance sector.
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Agriculture
Angola has one of sub-Saharan Africa’s largest freshwater reserves and is home to vast areas of highly fertile agricultural land. Prior to major oil discoveries, Angola was a major exporter of agricultural products, with Coffee and palm oil being one of the main exports. Despite more than 70% of Angolans dependent on Agriculture for their livelihoods, the country still imports over 50% of its food needs.
The government has made it a priority to increase investment in agriculture and by doing so, create jobs for its youthful population as well as reduce dependency on food imports. Multiple programs have been initiated by the government to help local farmers modernize their operations, increase crop yield and produce at competitive costs. Food processing, as part of the sector, is also a priority for the government, which has sought to attract investors into its free trade zones.
Despite challenges brought on by the pandemic, Angola´s agricultural sector saw growth of over 5% in the past 2 years, offering good prospects for future performance. The government seeks to do even more, given the ability of the sector to employ more Angolans than any other sectors. Angolan authorities are eager to attract new FDI into this sector by means of privatization, rural extension programs, and facilities to help fund the operations of rural agribusinesses.
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Logistics infrastructure
The port city of Luanda is a particularly important oil and gas hub and is today the primary logistical support for Angola’s energy sector. The Sonils Integrated Logistics Base is located next to the strategic Port of Luanda and is a hub for industries in the business of supporting the offshore oil and gas industry. The Sonils Base provides services for every single aspect of the offshore oil and gas industry value chain in areas such as bunkering, dredging and supplying floating, production, storage and offloading (FPSO) vessels as well as offshore platforms. The projects operating from Sonils Base support over 60 % of Angola’s current oil and gas production, including all of Angola´s major offshore projects.
New developments within Angola’s oil and gas sector, as well as promising new frontiers like neighboring Namibia are likely to ensure that the demand for well-developed logistics infrastructure remains strong over the coming decade. Global port operators like Dubai-based DP World are expected to continue investing in Angola’s ports, in an attempt to strengthen their global footprint along key trading routes. Currently, DP world is undertaking a USD$190 million investment in the development of a multi-purpose terminal at the Port of Luanda.
Telecommunication and ICT
As in many sub-Saharan African economies, mobile telecommunications and access to the internet is a catalyst for growth in business and entrepreneurship. By extending and upgrading telecom networks, the government seeks to empower businesses to become more efficient and for e-commerce to stimulate economic growth. In addition, optimized networks will facilitate rural access to education and health care.
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In recent years, Angola´s telecommunications and ICT industry has benefited from political stability, which has encouraged foreign investment in the sector. The leading player in Angola´s mobile telecommunications sector is the Angolan mobile phone company, Unitel. The Angolan authorities are, however, eager to open up the telecom sector to new competitors. In this regard, pan-African operator Africell has secured a universal license to be the country’s fourth mobile network operator. Africell has over 12 million mobile subscribers throughout sub-Saharan Africa and in June 2021, secured a $105 million loan facility to build Africell´s mobile network in Angola. More investments are expected in the sector, especially in the provision of data services, as well as the creation of web and mobile-based platforms to service the major city of Luanda.
Finance and Banking
After years of turbulence, following the 2014 dip in the oil price and the resulting economic crisis, the banking sector seems to have stabilized. This stability, which is also manifested by an easing in inflationary pressures, provides the perfect opportunity for the government and the central bank to pursue their policy of encouraging the banking and finance sector to consolidate and reduce the risks associated with any future dip in oil prices. Rules restricting ownership in the banking sector have been relaxed and are likely to see investment into the sector from foreign banks seeking to increase their African footprint.
New regulations in the oil and gas sector that make insurance a service meant to be provided exclusively by local businesses will also increase the attractiveness of the sector for foreign investors.
These, and many other opportunities, are expected to be in the spotlight at this year’s edition of Angola Oil and Gas, scheduled to be held on 29,30 November and 1 December 2022. Angola Oil and Gas 2022 is the official conference of the Mineral Resources, Petroleum and Gas ministry of Angola and will bring together stakeholders from Angola’s oil and gas industry, as well as global investors and services companies interested in opportunities in Angola.
Verner Ayukegba, Senior Vice-President of the African Energy Chamber.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry