By Devon Maylie
LUANDA, Angola—Home to one of the most expensive cities in Africa and one of the least diversified economies, Angola wants to be known for something entirely different: being a magnet for private investment.
The country’s economy has been fueled by oil, which accounts for a third of its GDP and 95 percent of exports. This has been a boon for a few segments of the population, spurring the development of glossy high-rises in Luanda. But the dependency on oil has also presented challenges: Angola is slowly recovering from a four-year recession caused mainly by weak oil prices and falling production.
Now, with a relatively new government and a reform mission underway, the country has a vision to transform its economy by attracting private investment to help reduce inequality and provide jobs for a young and fast-growing population. If it does it right, Angola has the potential to be an investment and trading hub.
Luanda, the capital of Angola, is one of the most expensive cities in
Africa.
Since taking office in 2017, President João Lourenço and his administration have begun to enact reforms to promote investment and boost competitiveness. The government embarked on a comprehensive privatization process with an initial 195 companies or assets across all sectors expected to be privatized. Laws establishing principles for private investment and promoting market competition have been approved, and anti-corruption measures have been taken. The government has also liberalized the exchange rate.
“Up to now the incentives in Angola were very focused on using the revenues from the oil sector. The government is fully committed to having a proper ecosystem to boost the economic diversification the country needs,” said Daniel Santos, chairman of the executive committee at Banco Millennium Atlântico, one of the country’s largest banks.
One of the areas with the biggest potential? Agriculture. Angola was once a significant producer and exporter of agricultural products from coffee to sugarcane, but exports nearly ceased by the 1990s due to poor global prices and lack of investment. Angola was importing more than half of its food before a currency devaluation accelerated in 2019, increasing the cost of goods from abroad.
Agriculture output has been rising, though—and more private investment could facilitate agribusiness diversification, as highlighted in the World Bank Group’s Country Private Sector Diagnostic (CPSD) for Angola. The report, published in 2019, examined key areas where private investment could play a pivotal role in opening the economy and driving growth.
Agriculture is the main source of income for 90 percent of Angolans living in rural areas, and small-scale farmers represent over 80 percent of agricultural production in the country. With most smallholder farmers focused primarily on subsistence farming of staple crops with few connections to bigger markets, there is room to increase productivity and output.
Enabling these smallholder farmers and small agribusinesses to grow and better link them to supply chains and markets would create jobs and economic diversification, the CPSD found—in addition to boosting agriculture output.
Feeding an Entrepreneurial Spirit
Angola’s agricultural sector is already seeing an investment uptick. Major retailer Alimenta Angola is expanding horticulture production to feed into its stores, agriculture company Nova Agrolider is investing in its farms and its exports of bananas and other fruits to European and regional markets are growing quickly. Angonabeiro, part of Delta Group, is betting on the country’s coffee producing and processing future by investing further in local origination and processing. Beverage company Castel Group has recently announced an investment in corn production.
“We are building a company that processes the local coffee, builds up the local coffee brand and can support the farmers in coffee production,” said José Beato, the International Markets Manager for Delta Group, operating in the Angolan coffee industry with the brand Ginga Coffee.
Smallholder farmers account for more than 80 percent of agricultural
production in Angola.
Still, several barriers exist for greater investment in agriculture and in the country in general.
The CPSD noted that Angola’s investment climate would benefit from broad reforms and improved regulations, and that the transport, power, and ICT sectors need sustained investment, improved regulations, and increased know-how to deliver reliable, affordable services. The report also found that Angola’s businesses need greater access to foreign exchange—although this is expected to improve soon with the recent liberalization of the exchange rate. In agriculture, specifically, most rural land is not formally registered or part of a database. Agribusiness value chains are weak and poorly coordinated.
Additionally, only a fifth of the country’s roads are paved and less than a third of its people has access to electricity—leaving most businesses reliant on diesel generators. Financial services are also limited. Around 92 percent of small businesses in Angola don’t have access to finance while less than a third of the population has banking accounts. Adults in rural areas have even more restricted access to financial services—only 18 percent have checking accounts.
Efforts are underway to help alleviate these challenges and facilitate investment. IFC and the World Bank are working in collaboration with the Angolan government and the private sector on the agribusiness space in Angola to strengthen the agriculture supply chain, promote investment in the sector, and link small businesses to agriculture markets.
“Angola has a lot of potential to do high-value, large-scale agriculture,” said Hector Gomez Ang, IFC’s Country Manager in Angola. “The recent reforms have unleashed Angola’s entrepreneurial spirit, creating an exciting, fast-moving environment.”
Published in January 2020