Angola Infrastructure 2011

Angola's construction industry continues to show dazzling growth despite receiving abysmal scores on a number of indicators. Year on year (y-o-y) growth of 28.7% is forecast for 2011 kick-starting a phenomenal growth trend that is expected to last until 2015. Industry value will stand at US$6.1bn in 2011 and this will more than triple by the end of the forecast period when the industry value will be US$18.4bn. Foreign investment driven by the country's plentiful natural resources is the key driver, both encouraged and hampered by rampant corruption in the sector.

Key factors contributing to forecasts include:

• A new cement factory in Hanha do Norte, in Benguela province, will help the country reduce its dependence on imports to address cement demands. Grupo Gema, Portugal's Escom and Brazil's Camargo Correa will develop the Palanca Cimentos factory project as a joint venture (JV) in which the three companies will hold 40%, 30% and 30% stake respectively. The project is worth nearly US$430mn.
• The government announced plans to boost capacity to 7,000MW by 2017 through harnessing the country's vast hydropower potential. The announcement comes only weeks after the Minister of State, Carlos Feijo, announced plans to invest US$18bn in the country's power sector using the proceeds of a specially established oil fund. The US$18bn investment will go towards generation capacity, through investment in hydropower dams, and upgrading and expanding the power grid. By 2016, the government hopes to end all power cuts in the country.

Despite a strong performance in the oil economy, Angola is still struggling to make a full recovery from the sudden shock caused by the downturn in 2008-2009. We are forecasting real growth of 7.0% in 2010 and 8.6% in 2011, with government consumption and investment being the main areas of weakness.

The prospects for economic recovery in Angola continue to be clouded by a number of factors, including questions over domestic arrears, falling rates of credit growth, reports of liquidity issues at banks and monetary conditions that remain generally tight. As we have argued since the middle of 2010, these factors constitute a real constraint on growth: our forecast for 2010 was initially lowered to 7.5% (from 9.7%), and thereafter to 7.0%. While we are more sanguine on the prospects for 2011 - our current forecast is for growth of 8.6% - these rates of growth are below Angola's potential. They are also at odds with the general expectation that the trend in the overall economy would mirror the rebound in the oil sector that has been underway since mid 2009.