Angola: Angola Economy Profile

Overview

The Republic of Angola is a former Portuguese colony located in the south of Africa. Independence in 1975 was followed by a 27-year civil war in which two liberation movements, Popular Movement for the Liberation of Angola (MPLA) and the National Union for the Total Independence of Angola (UNITA), were the main actors. MPLA has dominated the political landscape since the end of the war, with president and MPLA leader José Eduardo Dos Santos being in office since 1979. A new constitution was adopted in 2010, which concentrated power in the hands of the president. The country is a multiparty republic, but dissent is often cracked down upon, freedom of speech is limited and the influence of the MPLA in parliament and beyond leaves little space for the opposition.

The civil war changed both the social and economic landscape. 4m Angolans were displaced and most of them eventually found shelter in cities, accelerating urbanisation. Together with a strong development of the oil sector, this resulted in a reduction of the share in the economy of the agricultural sector from 14% to 8% between 1975 and 2007. However, a buoyant oil sector supported a high average economic growth rate of about 10% in the past decade. Angola is the second largest oil producer in Africa and one of the top 5 diamond producers worldwide. US and increasingly China are important trade partners, as well as sources of foreign investment and aid. The development of a local Chinese business community has led to tensions with the local population. Historically linked to Portugal, Angola currently provides important trade, investment and job opportunities for its past ruler. Economic growth has not trickled down and the society is characterized by high income disparities and widespread poverty.

Strengths (+) and weaknesses (-)

(+) Generous natural endowments

Angola has vast hydrocarbon and mineral resources, ample arable land and a high potential for hydropower generation and tourism. Oil revenues have supported low public and external debt.
(-) Narrow economic base

Oil accounts for 98% of exports, around 80% of government revenue and 34% of GDP. Angola is therefore highly susceptible to volatility on the oil market.
(-) Unfavourable business environment

Doing business in Angola is cumbersome, as underscored by the low ranking on international business indicators, infrastructure is poorly developed, corruption is pervasive and institutions are weak. All this hinders the development of the non-oil private sector.
(-) Persistent tensions and disparities

Angolan society is divided along social, economic and ethnic lines. Besides, unemployment, poverty and inequality are high, while human development is poor. These tensions and disparities contribute to a social environment prone to social unrest.

1. Falling oil exports hurt macroeconomic indicators

In 2013, a slight fall in revenues from oil export hurt economic growth, the budget deficit and the current account surplus. Technical problems and maturation of oil fields kept oil output at an average of 1.7m b/d, around the 2012 level; oil export revenues fell from USD 68bn in 2012 to USD 65bn in 2013, in nominal terms. As a result, economic growth rate almost halved to 3.6% in 2013, though a long-running drought also affected energy supply and performance in agriculture. It should also be noted that that the reliability of Angola’s GDP data is relatively low. Lower income from oil also hurt the budget balance, which fell into deficit for the second time since 2004. The deficit was 1.5% of GDP in 2013, after a 6.1% of GDP surplus in 2012. The current account surplus also decreased significantly, from 12.1% of GDP in 2012 to 5.2% of GDP in 2013. Low levels of public and external debt, at 14% of GDP and 17% of GDP, respectively, provide comfort. However, progress on establishing a wealth fund has been slow, while Angola’s foreign exchange reserves are sizeable, but not overly large. As a result, a prolonged period of low energy prices could still lead to a significant deterioration of the fiscal and external positions.

For 2014, economic growth is projected at about 4.5%, as oil output is expected to increase slightly, despite technical difficulties in the first half of the year. However, the budget deficit is forecast to improve only marginally to 1.4% of GDP and the current account surplus is forecast to deteriorate further to 3.6% of GDP, on the back of increased public spending on capital investments that need to be imported. The deterioration of economic indicators in 2013 is a clear illustration of the country´s dependence on the oil sector and stresses the importance of diversifying the economy to increase its resilience. From that perspective it is positive that the government has adopted a series of reforms to improve the business environment and support diversification of the economy in the past year, such as a reduction of registration costs for companies, the implementation of higher import tariffs to protect local production and legislation aimed at improving market access of small scale farmers. It is also positive that the government is prioritising investment in energy supply and transport, which are currently important constraints to economic development. However, most projects will only be completed in the long term and it is questionable whether recent reforms will be effective while the current infrastructural deficit persists.

2. Vulnerabilities in the banking sector appear to have increased

Angola’s banking sector is the third largest in Sub Saharan-Africa and has grown briskly in recent years. Assets increased from USD 39bn in 2009 to USD 71bn in 2013. But, the sector also experienced a marked decline in profitability, mainly due to higher provisions for bad debt. Profits fell by 31% yoy in 2012 and 2013 preliminary data point at a further deterioration, while non- performing loans (NPL) increased by a remarkable 84% yoy to 6.8% in 2012. The increase in bad debt is related to a build-up in domestic arrears of the government and slow budget execution by the government. Consequently, the high exposure of the banking sector to the public sector is worrisome. Another reason for concern is the high degree of political influence in the sector, which may conflict with adequate supervision. The five largest banks, accounting for 78% of assets in the sector, are co-owned by either the state of influential politicians. The bailout of BESA, the second largest bank, in July 2014 raised questions about supervision. According to 2012 data, the bank, which was for 43% owned by influential politicians, had an extremely high loan to deposit ratio (185%). The fact that, on average, the sector is liquid, well capitalized and follows a classic deposit-based model provides comfort though.
3. Lack of clarity about succession of the president creates uncertainty

A legacy of Angola’s civil war (1975-2002) is a highly influential and politicized military and deeply rooted ethnic tensions. President Dos Santos managed to control these by developing a strong network of influence and patronage, repressing dissent and concentrating power in his function. However, this means his departure is likely to cause a political vacuum that could threaten stability. This is especially the case if health problems force him to leave office suddenly. Health problems in 2013 raised concerns about such a scenario. In June 2014 the president addressed the issue of future leadership for the first time, stating that it will be discussed during the 2016 congress of the ruling MPLA party, and not earlier. In the meantime, the lack of a succession plan and the behind closed doors infighting within the MPLA create uncertainty about future stability and policy direction, which is unnerving for investors.

The implementation of the 2009-12 Stand-By Arrangement (SBA) programme of the International Monetary Fund (IMF) helped the country to regain macroeconomic stability, achieve an improved fiscal position, additional comfortable level of international reserves, a stable exchange rate, and lower inflation. Furthermore, large domestic arrears were settled, and evolution was made in strengthening fiscal transparency and accountability. However, the country continues to face massive developmental policy challenges, inclunding the reduction of the dependency on oil, the diversification of the economy, the rebuilding of the economic and social infrastructure, the development of the institutional capacity, governance, public financial management systems, human development and living conditions of the people. These factors are constraining the pace of diversification of the economy and preventing small- and medium-sized enterprise (SME) development and job creation. Unemployment remains significant at about 25%, and the incidence of poverty remains high at 36.6% of the people.

Much of the country’s increase over the completed decade can be due attributed to the exploration of natural resources. Oil still accounts for nearly 80% of government revenue, 90% of exports and 47% of the country’s GDP. This makes the economy heavily dependent on oil revenues and vulnerable to oil price shocks. In an attempt to further diversify the economy, a 5 billion US dollars (USD) Sovereign Wealth Fund (Fundo Soberano de Angola) was created in October 2012. The fund was endorsed by the IMF, which had long advocated such an instrument to help insulate the economy from volatile oil prices. Nonetheless, the major challenge rests on the government’s ability to ensure transparency, accountability and equitable distribution of the country’s natural resource earnings. Moreover, as Angola continues to access non-concessional financing to meet its development needs and expands the exploration of its natural resources, the government will need to guarantee the preservation of the country’s deficit sustainability, while ensuring better transparency and accountability in the management of oil revenues.

Recent Developments & Prospects

Macroeconomic Policy

Under the 2009-12 IMF SBA programme, the government made significant efforts to tighten fiscal policy and strengthen public financial management. The rationalisation of current spending yielded a fiscal surplus of 8.8% of GDP in 2012 and allowed the authorities to repay domestic arrears of USD 7.5 billion which had been incurred since 2009. Angola’s deficit outlook appears manageable and the ratio of external public sector deficit to GDP declined from 19.7% in 2011 to 19.5% in 2012. However, it is expected to rise slightly to 20.4% in 2013 due to the signing of new lines of credit to finance the country’s infrastructure rehabilitation programme. In contrast, the ratio of domestic public sector deficit to GDP has declined from 11.8% in 2011 to less than 9% in 2012, due to rationalisation of the sources of spending financing. The government’s fiscal policy based on the accumulation of a large all of international reserves insulated the economy from the volatility of oil prices and external shocks. The establishment of the SWF in October 2012 is as well seen as a initial step towards mitigating the impact of oil price volatility on investment spending and ensuring sustainability in the management of oil revenues.

The government is pressing ahead with the Executive Program for Tax Reform (Programa Executivo para a Reforma Tributária, PERT) by broadening the tax base and increasing collection, thus helping to relieve the current burden of taxation on the petroleum sector. In general, fiscal revenue (inclunding grants) as % of GDP increased from 43.5% in 2010 to 48.8% in 2012 owing to the strong performance of oil revenues. Despite this, the overarching fiscal objective of reducing the non-oil fiscal deficit as % of GDP, from 21.9% in 2011 to 20.9% in 2012 was not completed as the deficit remains above 24.7% of the GDP. In the medium term, Angola’s improved fiscal and macroeconomic management is expected to continue, although the primary budget balance will tend to decline to 5.9% in 2013 before falling slightly to 4.7% in 2014, as the government scales-up the public sector investment programme.

Expenditures in social sectors increased from 32.9% of total expenditures in 2011 to 33.1% in 2012 and are projected to reach 33.5% in 2013 as the government continues with its programme to improve social welfare and alleviate poverty. This is in line with the National Development Strategy, 2013-17 and the IMF SBA programme. Public government will as well have its budget increased from 20.5% of GDP in 2012 to 23.6% in 2013, in an effort to improve the quality of service delivery, in particular in education and health. The 2013 budget preparation was set to include a initial ever medium-term (2013-17) macro-fiscal scenario and adopts a benchmark oil price of USD 96 per barrel which is substantially higher than the assumed USD 77 per barrel price used in 2012. This assumption is additional closely in line with international analysts (e.g. the Economic Intelligence Unit (EIU) currently forecasts a price of USD 103.8 per barrel for 2013). However, a risk to Angola’s fiscal health remains the fuel subsidies (about 7.8% of GDP), which are used to keep inflation rates stable.

In 2012, the country performed well on the three major programmatic objectives of monetary policy for the year, namely: increasing gross international reserves by at least USD 3.4 billion; gradually adjusting the price of the domestic currency, the kwanza (AOA) in line with market fundamentals; and bringing inflation to levels below 10%. Gross international reserves reached USD 33 billion (12.1% above the initial target). The kwanza maintained a smooth depreciation trend of only 1.66% against the USD, with the exchange rate standing at USD 1: AOA 95.8 while the spread on the parallel market remained at 5%. Year-on-year inflation declined from 11.4% in 2011 to 9.02% in 2012, helped by a stable exchange rate and fuel price subsidies, and reached unprecedented single-digit values for the initial time in a decade. The National Central Bank (BNA) is expected to hit its target inflation rate of 9% in 2013 and inflation is projected to fall further to 8.3% in 2014.

The monetary policy committee (MPC), which was inaugurated in October 2011, lowered the benchmark interest rate by 25 basis points to 10.25% in January 2012. Market interest rates decreased significantly, with the 181 days to 1 year maturity lending interest rate falling from 21% in September 2012 to less than 17.16% by December 2012. As a result, the credit to the economy expanded by 22% on an annual basis, driving the loans-to-deposits ratio up from 63.7% in September 2012 to 65.3% by end-December 2012. Nonetheless, there is still room for commercial banks to lend additional to the private sector given the prevailing level of non-performing loans (about 2.5%). The authorities have indicated that monetary policy in 2013 will be conducted to accommodate the budget execution (which foresees a fiscal deficit of 3.4% of GDP) and ensure price stability. To this result a subsequent cut by 25 basis points in the benchmark interest rate was implemented in January 2013 in an effort to stimulate better access to credit to the economy.

The Foreign Exchange Law, adopted by Parliament on November 2011, required domestic banks to hold a minimum of 80% of their capital in kwanzas by the end of 2012. The law supports the BNA’s efforts to reduce the level of dollarisation in the economy and improve the effectiveness of monetary policy. In addition, the passage of a new Foreign Exchange Law for the oil sector in 2012 requires international oil companies to shift a large share of their financial transactions from offshore to domestic banks. The measure will help to boost liquidity, although the changes will be phased in over 12 months to October 2013. The IMF has underscored the need to manage the risks associated with the new law carefully, inclunding by taking timely steps to strengthen the Central Bank’s supervisory capacity.

Angola held the one-year rotational presidency of the Southern Africa Development Community (SADC) until August 2012. During its term, the authorities contributed to the approval of the regional infrastructure plan and to the preliminary inventory of regional priority projects. It is as well worth noting that Angola joined the SADC Trade Protocol in 2003 which envisaged the launch of a free trade area in 2008. However, Angola has since failed to submit a tariff-dismantling offer. As a result, the country is a member of the SADC but is not from presently on part of its free trade area. The government of Angola launched a strategy to enhance integrated infrastructure linkages within the SADC region. Two major railway corridors are envisaged as part of this strategy, namely: Moçâmedes-Cunene (with prospective link with Namibia in the south), and Lobito-Zambia and the Democratic Republic of the Congo.

Angola’s external position remains favourable, though the balance of payments is vulnerable to external shocks. The country’s current account (without grants) improved significantly from a deficit of 9.9% of GDP in 2009, to a surplus of 8.2% in 2012, mostly due to increased oil and gas exports. However, it is likely to drop to 7.6% of GDP in 2014, owing to a rising import bill on capital goods. The balance of payments has followed a similar trajectory, improving from a deficit of 8.6% of GDP in 2009 to a surplus of 6.1% in 2012. The IMF projects a positive balance of 1.7% of GDP for 2013 bolstered by favourable terms of trade. The trade balance almost doubled from 24.2% in 2009 to 40.3% in 2012 but is set to decline to 37.8% in 2014 owing to rising imports needed in the public infrastructure rehabilitation.

Angolan exports remain concentrated on oil and petroleum products, mainly directed to China, USA, India, and Chinese Taipei, while imports are mostly dominated by transport materials, vehicles and metal equipment from Portugal, China, Brazil, USA, and France. Angola’s export competitiveness and labour productivity remain low since the lack of access to water, energy and transport services constitutes the major bottleneck for private sector competitiveness. Foreign direct investment (FDI) inflows stood at USD 9.9 billion in 2012 and were mostly channelled to pre-salt oil field investments. China recently surpassed the USA as Angola’s major trading partner and its official co-operation with Angola is dominated by concessional loans to finance infrastructure development programmes. The China Petroleum and Chemical Corporation (Sinopec), which acquired its initial stake in an Angolan oil block in 2004, has recently been granted minority stakes in two new oil exploration blocks awarded to Cobalt and BP. A lot of other nations notably Brazil, Portugal, Germany and the USA have made credit lines available to facilitate and promote their own-country exports to Angola.

Table 4: Current Account (% of GDP)

	2004	2009	2010	2011	2012	2013	2014
Trade balance	42.5	24.2	41.2	45	40.3	38.5	37.8
Exports of goods (f.o.b.)	75	54.2	61.4	64.4	58.1	55.3	53.5
Imports of goods (f.o.b.)	32.5	30	20.2	19.4	17.8	16.7	15.7
Services	-24.9	-24.6	-21.7	-23.4	-21.5	-20.6	-20.1
Factor income	-13.8	-9	-9.9	-11.6	-10.2	-9.5	-9.8
Current transfers	0	-0.5	-0.5	-0.5	-0.4	-0.4	-0.3
Current account balance	3.8	-9.9	9.1	9.6	8.2	8.1	7.6

Figures for 2012 are estimates; for 2013 and later are projections.

http://dx.doi.org/10.1787/888932810894

 

Angola’s total public deficit stood at USD 32.1 billion in 2012, slightly lower than the USD 32.8 billion recorded in 2011. Domestic public deficit as well declined from USD 12.3 billion in 2011 to USD 10.2 billion as a result of the cessation of the Central Bank’s financing operations to the treasury.  In contrast, the country’s external deficit increased from USD 20.5 billion in 2011 to USD 22 billion in 2012, with most of it being channelled to infrastructure investment in ports, railways and roads. About USD 13.3 billion of the current total public external deficit is owed to commercial banks; USD 8.3 billion to official creditors and USD 1.3 billion to the IMF. The national-owned oil company, Sonangol, has by presently a total of USD 10.2 billion in external deficit to fund its investment expansion programme that includes the LNG refinery and the upgrade of its FPSO facilities.

In 2012 the IMF Deficit Sustainability Analysis (DSA) showed that Angola’s deficit position is sustainable. The external public deficit-to-GDP ratio decreased marginally from 19.7% in 2011 to 19.5% in 2012 but it is expected to increase gradually to 20.4% of GDP in 2013. However, this analysis is based solely on public sector external deficit as the government does not from presently on have private sector deficit statistics. Sonangol, the national oil company, is a large external borrower. The in general public deficit-to-GDP ratio declined from 31.5% of GDP in 2010 to 28.5% in 2011 but it is expected to increase to 30.6% of GDP in 2013. Domestic deficit of national-owned enterprises (SOEs) is not currently captured by the deficit statistics.

The major risk to both external and domestic deficit is a current account shock caused by a decline in oil exports or a decrease in oil prices. Uncontrolled deficit acquisition by SOEs represents a further risk. Lastly, there is a need to expand deficit statistics to include external private deficit and SOEs’ domestic deficit in order to derive a additional informed analysis and risk assessment. Meanwhile, the three major international credit agencies Moody’s, S&P and Fitch revised and upgraded Angola’s credit rating in 2011 to Ba3, BB‑, and BB‑ respectively. In 2012, both Moody’s and Fitch revised their outlook to positive from stable, citing a promising increase outlook, rising oil output, a better considerate of the commodity price cycle and additional prudent monetary and fiscal policy making. In 2012 Angola placed a USD 1 billion 7‑year bond issue through Russia’s second major bank, VTB Capital. In addition, it has been reported that the Angolan government plans to raise a further USD 2 billion in financing through VTB in 2013.

Economic & Political Governance

Angola’s business environment is challenging with access to water, energy, infrastructure, credit and high logistical costs among the top bottlenecks to private sector development.²  Nonetheless, Angola improved two places in the World Bank report, Doing Business 2013 from 174^th to 172^nd out of 185 economies surveyed but is still below the regional average (137) for sub-Saharan Africa. Angola scored a dismal 183 in the “enforcing contracts” category which measures the efficiency of the judicial system in resolving a commercial dispute before local courts. In the 2013 rankings Angola declined 13 places in “dealing with construction permits”, which now takes 27 days longer to complete than in 2012. On a positive note, Angola improved 32 places in “getting electricity” owing to a reduction in charges for external inspections by the state-owned energy distribution company, EDEL.

In 2012, USD 700 million were attributed to the Programa de Fomento Empresarial (PFE), aiming to simplify the process of creation of companies and improve access to credit. Other areas with on-going reforms include contract enforcement, property transfer and the regulatory framework for labour markets and customs. A reform programme has been initiated to address weaknesses in the judicial system and the expansion of the court system. In an effort to promote business creation, the Ministry of Economy also launched a fund for operationalisation of Assets’ Venture Capital in Angola (FACRA). The Fund is targeted to micro-, small- and medium-sized enterprises (MSMEs) and stands to provide stable funding for long-term financing to start up and expand MSMEs. It also aims to enhance capacities for entrepreneurship and stimulate business projects with high growth potential while helping to leverage MSME funding through trade credit with lower risk profiles, thus reducing borrowing costs.

Angola’s financial system faces vulnerabilities due to capacity constraints in banking supervision, inadequate banking corporate governance, high dollarisation, and liquidity shifts linked to large oil sector transactions. The system is composed of 23 institutions, divided between commercial, regional, and development banks. The country’s banking coverage expanded from 22.1% in 2010 now reaching 51% of the country’s area, with 22% of population having access to banking services as compared to 13.5% in 2011. The authorities have continued to step up banking supervision and improve the enforcement of prudential standards and credit risk rules. As a result, the level of non-performing loans declined from 9.0% in 2003 to less than 2.5% in 2012, while the levels of capital to risk-weighted assets remains stable at 14.8% in 2012, down from 16.0% in 2008.

The penetration rate of microfinance institutions remains low and the services remain moderately inefficient with more than 30 000 active clients. The insurance market, although leveraged, still lacks diversification and accounts for only 0.24% of GDP. High interest rate spreads, which stood at 12.6% in 2011 before declining to 8.0% in 2012, still contribute to a moderately low ratio of private sector credit to GDP which is currently at 22.0%, down from 30.3% in 2011. The high lending rates and banking spreads, in part reflect elevated credit risks and prevailing banking sector inefficiencies.

In 2012, the Central Bank undertook major reforms to improve the efficiency and effectiveness of Angola’s financial system, namely: i) the operationalisation of the new monetary policy framework which introduced the concept of “Reference Interest Rate” (RIR) used to signal policy orientation of the BNA; ii) the adoption of lender of last resort facilities which include: the rediscount facility of first level, targeting financial institutions facing cash flow imbalances; and the rediscount facility of second level, for financial institutions facing restructuring needs. The BNA is also actively pursuing de-dollarisation by implementing the new Foreign Exchange Law within the oil sector, and prudential regulations for short-term credit denominated in foreign currency, particularly for consumer credit. New bank notes will be rolled-out starting in March 2013 with the innovative introduction of lower-denominated currency coins and a higher-value bank note of 5 000 kwanzas (equivalent to USD 50). This is expected to improve transactions and contribute for fair pricing and inflation stability.

The Ministry of Finance has progressively improved its financial management tools and has several programmes in place to enhance transparency and control over expenses. The government has made significant strides towards greater transparency by publishing financial information and preventing extra-budgetary expenditures. Angola now publishes online the annual state budget proposal as well as a monthly block-by-block accounting of oil production and revenues. Since 2010, the national accounts are audited regularly by Ernst & Young, which is also supporting the government in various ways, on both the expenditure and the revenue side, to improve the levels of effort and transparency in relation to the management of the public finances.

However, despite the overarching role in co-ordinating multilateral and bilateral relations, the Ministry of Planning still lacks technical and institutional capacity. In response, the African Development Bank (AfDB), through the Institutional Capacity Building for Public Investment Programs, is supporting initiatives aimed at improving the capacity for preparation and management of the Public Investment Programs (PIP). These include the design of an integrated economic diversification strategy and the monitoring and evaluation of results and impact. The Ministry of Finance and the Central Bank (which are in charge of debt management policies) have made significant strides towards improving human resource capacities. The External Audit Court and the Inspectorate General of Finance (units under supervision of the Ministry of Finance) are functional but still lack technical and institutional capacity needed to improve efficiency in their procedures. Nonetheless, the implementation of the AfDB’s Financial Management Support Project (PAGEF) is expected to improve institutional capacity through modernisation of procedures and staff training.

Despite recognition of the protection of intellectual property rights, Angola’s judicial system remains inefficient. For example, registering property takes up to six months on average. However, there has been an improvement with the reduction of registration fees from 11.5% of property value in 2011 to less than 3.1% in 2013. This yielded an improvement in the country’s ranking from 132^nd position in 2012 to 131^st in 2013, according to the World Bank report, Doing Business 2013. Corruption is considered a significant bottleneck by firms in Angola, particularly large firms, and close to 40% of them view corruption as a major constraint. The government has made significant strides to curb corruption and conflict of interest in public and private sector through the adoption of the “zero tolerance approach”. The Audit Law requires audits for all public enterprises but only the public electricity company (EDEL) saw its financial accounts approved while 14 out of 60 companies had their financial statements approved but with reservations. The lack of qualified staff and a professional accounting oversight body has impeded the enforcement of audit laws.

In the last decade Angola has developed comprehensive environmental legislation regarding water resources, petroleum, mines, and land, and increased engagement with regional and international partners. The country has also put in place a National Action Plan for Climate Change Adaptation 2013-17. There has been some progress towards achieving the Millennium Development Goal (MDG) of ensuring environmental sustainability with the reduction of CO₂ emissions from 1.5 kg per USD of GDP in 2000 to less than 0.9 in 2011. Moreover, the percentage of population with improved sanitation increased from 49% in 2000 to 58% in 2011, while access to an improved water source also increased from 47% to 51% during the same period. The AfDB is supporting the government in the implementation of reforms in the environmental sector by piloting clean energy solutions, green growth development policies, climate change mitigation and construction of four pilot centres for biodiversity. Angola is a signatory of the Kyoto and Montreal protocols which regulate the substances that deplete the ozone, and is also a participant of the eighteenth Conference of the Parties (COP18). The country has put in place a national strategy for the implementation of the Kyoto protocol, under which a designated Carbon Emissions Authority was created in 2010, with five projects being selected during 2011. As a member of SADC, Angola is also implementing the guidelines for strengthening of river basin organisation, benefit-sharing and transboundary water management and development. In co-operation with the Ministry of Environment, two universities created courses on Natural Resources and Environment, and a faculty solely dedicated to the sector is being considered. Despite this progress, the country is yet to join the Extractive Industries Transparency Initiative (EITI), a move that is expected to contribute to greater transparency and accountability in the management of natural resources.

A long anticipated general election was held on 31 August 2012. Despite a relatively low turnout of about 60% nationally (compared to 87% in the previous legislative elections of 2008) the 2012 elections contributed to the consolidation of a democratic system of rule in the country. Official results indicated that the Movimento Popular para a Libertação de Angola (MPLA), and its leader President José Eduardo dos Santos, won with almost 72% of the votes. Although strong, the margin of victory was ten percentage points down compared with 2008 results. The main opposition party, União Nacional para a Independência Total de Angola (UNITA), took nearly 19% as against 10% in previous elections, despite the potential challenge Convergência Ampla para a Salvação de Angola – Coligação Eleitoral (CASA-CE), which, as a first-time contender, gained third place with 6%. Three opposition parties, namely: UNITA, CASA-CE and Partido de Renovação Social (PRS) challenged the verdict of the National Elections Commission (CNE) but saw their complaints dismissed by the Constitutional Court due to lack of proof. The elections have been declared free and fair by several international independent observers, including the African Union (AU) and Southern Africa Development Community (SADC).

The spectre of large-scale political violence has faded considerably since the country’s devastating 27-year civil war ended in 2002. However, political uncertainties remain. It is also worth noting that the past two years have seen the emergence of a protest movement inspired by the popular uprisings in North Africa. Although public demonstrations have been few and met with a firm response by security forces, and the government is actively seeking to address discontent with measures aimed at improving access to education and employment, it is unlikely that this restive youth movement will be easily discouraged in the immediate future. While there is little immediate prospect of an Arab Spring-style uprising in Angola, this nascent protest movement is a trend worth tracking.

Social Context & Human Development

Angola has made significant strides in improving the people’s living standards next 27 years of civil war. Efforts to achieve the MDG for universal primary education are underway although the share of the total budget devoted to primary education currently stands at 28.6%. In the meantime, additional than 95 000 new teachers were recruited between 2006 and 2012, and the government invested in the building of 29 new primary schools in 2012 with a view to accommodating rising net enrolment rates in primary education which currently stands at 86%. Despite this, the outcomes remain poor with primary completion rate standing at 33%, about half of the regional average. Gender parity has almost been completed in schools, but only 81% of female children complete the primary level. Secondary and technical education has seen significant expansion with the construction of 35 new schools between 2009 and 2012. Enrolment in higher education has grown by additional than 50% a year since 2002 but quality has declined due to the weak regulatory framework.

The government as well made evolution in health financing, human resources, data systems, governance, and service delivery. Nonetheless, less than half of the country’s total people has access to health facilities. Life expectancy at birth has increased from 47 years in 2010 to 52 in 2012, but is still part the lowest in the world. Evolution has been made in reducing maternal mortality from 890 deaths per one hundred thousand live births in 2000 to fewer than 450 in 2011. In addition, the under-five child mortality rate declined from 184.9 per thousand live births in 2000 to fewer than 159.5 in 2011, following massive immunisation campaigns which increased the coverage of children aged 12‑23 months to 93% in 2011, up from 64% in 2000. Improved agriculture output has contributed to reduce the prevalence of undernourishment which declined from 67% in 2000 to less than 41% in 2011. Notwithstanding, Angola has performed poorly in terms of broad-based socio-economic welfare as reflected in its low Human Development Index (HDI) ranking. In 2011, the country was ranked 148^th out of 187 nations on the United Nations HDI, with a score of 0.486.

Three major reforms in the health sector are ongoing with support of UNICEF, namely: i) the fighting of children’s malnutrition in drought-affected areas; ii) the polio eradication programme, and iii) the distribution of mosquito nets to fight malaria. Public spending in health sector increased from 2.9% in 2009 to 5% in 2012 but continues to be relatively low to achieve the MDGs. With an estimated 2.5% of the adult people HIV positive, Angola has the lowest rate of HIV prevalence in southern Africa. The Ministry of Health estimates that the tuberculosis treatment programme has been implemented in only 86% of the health units, while 40% of the health clinics experienced stockouts. Malaria is a major health problem, accounting for 35% of deaths in children under five, 25% of maternal mortality, and 60% of hospital admissions for children under five.

Despite immense natural wealth, poverty in Angola remains a challenge with additional than 36.6% of the people living below the poverty line of USD 2 per day – down from 68% in 2001. Since the end of the civil war in 2002, the government has made significant strides to improve people welfare by improving housing conditions (in particular in the rural areas where additional than 58% of the poor people live), and by expanding health, water and sanitation and electricity coverage. Moreover, public spending in social protection increased significantly and currently stands at 10% of total budget which is above the average in the region. The government has been urged to focus on phasing out fuel and utility subsidies (which account for 7.8% of GDP) in favour of a additional effective social protection system. Angola is presently preparing to revise its social protection framework (Law 7/04 of 15 October 2004) in order to design a national cash transfer programme that entirely targets the poor, vulnerable groups and those lacking services.

Angola has as well reformed its Initial Job Strategy Act (Law 2/2000 of 11 February 2000) to promote additional formal job creation and protection as the majority of the current jobs are in the informal market with no kind of regulation or assurances. The government has established an institutional framework for entrepreneurship development and employment creation through the Ministry of Employment and Social Security (MAPESS). As a result, training capacity has increased from 3 832 vacancies in 2005 to 26 000 by 2011. The programme as well contributed to generate 87 592 jobs and 18 000 new small and micro enterprises. Despite this evolution, the country still faces a massive skills shortage, particularly in technical and vocational training. To tackle this issue, in 2010 a decree was approved which granted subsidies for vocational internships. In parallel with efforts to increase“employability”, Angola has ratified all eight International Labor Organization (ILO) core conventions.

The government has made significant efforts to re-balance the national budget towards social and infrastructure spending. The 2012 budget spending allocation by priority sectors shows an increase in social sector spending from 32.9% in 2011 to 33.1% in 2012, mainly channelled to education, health and social protection services. The government’s priorities include the rehabilitation of water and sanitation systems in the urban areas, construction and rehabilitation of the national road network, expansion and development of quality of education and health services, expansion of the national housing development programme, and promotion of business development activities. Since 2004, Angola has put in place a strategy for fighting poverty (Estratégia de Combate a Pobreza) which as well envisages the protection of vulnerable groups while reducing food insecurity. Since 2004, about USD 600 million (19% of total costs of the strategy) have been allocated through the national budget towards vulnerable groups. 

Women have made evolution with regard to education and political participation. Gender parity has almost been completed in primary education, but gaps remain at secondary and tertiary levels. Women represented 37.5% of parliamentarians in 2011, up from 16.0% in 2000, and have reached 8.0% in local government representation in 2012, up from 1.2% in 2008. Angola ratified the Convention for Elimination of all Forms of Discrimination against Women (CEDAW) on 17 September 1986. Angola’s business legislation does not discriminate against gender. The majority of working women are involved in the retail trade and in Luanda 79% of them are engaged in self-employment activities. The increasing participation of women in political and business activities can be attributed to the approval of the National Policy on Gender which allows mainstreaming gender in national policies. According to the World Gender Gap Statement from the World Economic Forum, Angola’s gender gap improved significantly from 106 (out of 134 nations) in 2009 to 87 (out of 135 nations) in 2011. Nonetheless, the country’s poor are predominantly women, particularly in the rural areas. Women’s participation in the labour force is growing substantially (about 63% of total labour force and 28% of formal employment).