The United States–Angola Chamber of Commerce and The Corporate Council on Africa Angola Working Group
Prof. Manuel Jose Alves da Rocha, Special Advisor, Angolan Ministry of Planning
GoodWorks International Offices, Washington, DC
Wednesday, February 15, 2006
Minutes of Discussion


The United States–Angola Chamber of Commerce and The Corporate Council on Africa Angola Working Group hosted a meeting with Professor Manuel Jose Alves da Rocha, Academic Director of the Center for Economic Studies at the Catholic University of Angola and Special Advisor to the Angolan Ministry of Planning, on February 15, 2006.  Professor da Rocha briefed the working group on Angola’s economic, social, and political status.

Socioeconomic and Political Conditions

Angola has had political stability since its twenty-seven year old civil war came to an end in April 2002. However, the country continues to wrestle with a multitude of challenges stemming from the war. The government quickly found itself confronting the following socioeconomic and political issues: 1) Angola has one of the highest poverty rates in Africa, with 68 percent of its population living in poverty; 2) The country lacks recent national census data and therefore reliable voter registration data. Yet general elections were originally scheduled to take place in 2006. (Angola’s last census was carried out in 1970 and the government plans to conduct another one in 2010.); and 3) the difficulty of internal communications with the country’s eighteen provinces because of the destruction of basic transportation infrastructure during the years of war. In addition, some indications suggest rural populations are afraid of elections because they associate them with war; conflict erupted after Angola’s last elections held in 1992. Considering the inadequate electoral preparation, Prof. da Rocha’s personal opinion is that elections will likely be postponed to 2007 (after the first quarter).

Corruption, particularly in the public sector, is a serious impediment to the provision of services and private sector activity. Prof. Rocha said there was a “culture of corruption” that impacted upon the daily lives of citizens. Ambassador Diakite said that the issue of corruption was of serious concern to government leaders who are committed to addressing the problem. One of the factors feeding the corrupt culture is civil workers’ low wages amidst high living costs.
 
Economic Indicators

Although peace had been achieved, Angola’s economy suffered from several distorting imbalances. Inflation exceeded 100 percent in 2002. The Government nevertheless managed to reduce the inflation rate significantly in a few years. Inflation rate had declined to 18.5 percent in 2005.[1] However, the economy continues to face additional structural problems such as its heavy reliance on oil production. Oil revenue accounts for 55 percent of the country’s Gross Domestic Product (GDP) and contributes 65 percent to fiscal revenue. Like other oil producing countries, Angola’s agricultural sector is relatively undeveloped and represents only 8 percent of GDP.

In the first nine months of 2005, the oil sector grew by 16.3 percent, the non-oil sector expanded by 11 percent, diamond mining rose by 17 percent, agricultural production increased by 17 percent, and electricity generation and water experienced a growth of 14 percent. Overall, GDP grew by 16 percent during this period. Other important results included the decrease of the annual exchange rate spread from 20% in 2002 to 4.6% in 2005; a decrease in the annual fiscal deficit from –6.2% of GDP in 2003 to +0.5% of GDP in 2005; and an increase in international net reserves from $623 million at the end of 2003 to $3190 at the end of 2005.

Prof. da Rocha also provided a brief outlook of the Angolan economy’s performance in 2006. Keeping in mind that these figures are projections, the Central Bank anticipates that the inflation rate will fall to 10 percent. Annual oil production for 2006 is expected to be 597 million barrels, with 1.2 million barrels produced daily. Finally, the economy is expected to grow by 27.9 percent, which would make Angola one of the fastest growing countries in the world.    

2006 Institutional Reforms

The Angolan government has planned several ambitious institutional reforms for the year. Several specific reform processes were highlighted at the meeting. First, the government intends to create a national development bank with approximately $2.5 billion to $3 billion in oil revenues. Angolan and Brazilian economists have already conducted a feasibility study for the project. The development bank would provide long-term financing to small and medium-size projects in non-extractive sectors such as manufacturing and aquaculture. Secondly, the government will publish an Annual General Account, which will point out how government revenues were spent. Thirdly, new rules for public procurement will be established. Fourthly, the government is creating a new protocol to guide relations between the state-owned oil company, Sonangol, and the Ministry of Finance. Fifthly, new rules of public procurement will be published. And finally, the process for authorizing new economic activities will be simplified.

Public Investment Program

Prof. Rocha said that the best way to address the serious imbalances of the Angolan economy and to improve the conditions of its citizens were to reduce further the rate of inflation and increase social public expenditures. He pointed out that the Government has progressively increased its allocation for social expenditures since 2002. The 2006 Angolan budget is $22 billion and approximately $7.1 billion is allocated to a Public Investment Program. Among the program’s many objectives are the following: 1) build 100 schools, 2) rehabilitate 55 schools, 3) build 85 hospitals, 4) rehabilitate 57 hospitals, and 5) rehabilitate 1,700 kilometers (1,054 miles) of main roads.