Angola

In-depth country-focused analysis on Angola’s economic, political and operational risk environment, complemented by detailed sector insight

Angola

Our comprehensive assessment of Angola’s operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Angola, as well as the latest industry developments that could impact Angolan industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Angola before your competitors.

Country Risk

Angola Country Risk

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Core Views

  • Angola's economy will suffer from significantly lower oil prices, with GDP growth expected to decelerate to 3.8% in 2015. Private consumption will be subdued owing to a weaker kwanza and government spending will contract following a revision of the budget.

  • Despite embarking on a severe fiscal austerity drive, Angola's budget will deteriorate owing to sharply-lower oil revenues and increased borrowing. We have revised down our forecast budget deficit from 6.1% to 6.7% of GDP in 2015. We expect a surplus to return in 2018 as spending cuts and higher oil prices filter through.

  • Fuel subsidy cuts, currency depreciation and rising inflation have stirred resentment in Angola, one of the world's most unequal countries. While not an immediate threat to stability, rising living costs will fuel political discontent...

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Angola Operational Risk Coverage (9)

Angola Operational Risk

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BMI View: Investors operating in Angola must navigate high levels of crime and endemic corruption, as well as a lack of adequate regulation and capacity to prevent and combat crime. Underdeveloped financial legislation exposes businesses to fraud and money laundering activities, while violent assaults and armed robberies are a constant threat. However, with the exception of lingering border disputes with the DRC and Congo Republic, Angola enjoys stable relations with its neighbours and is...

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Angola Crime & Security

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BMI View:  Angola's poor overall security environment poses a number of risks to investors, including violent crime from informal and organised gangs; a prevalence of legal and illegal firearms; an unresolved border dispute with the Democratic Republic of the Congo (DRC); and low levels of professionalism and competence in the national police. These conditions pose a number of security threats to foreign companies. Expatriates and their property are the preferred target of attacks by formal and informal criminals, and foreigners enjoy little protection from the police, whose low accountability and reliability necessitate investment in private security systems. Difficulties could also arise from potential border closures...

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Angola Labour Market

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BMI View: Angola's labour force is weak as a result of years of civil war that damaged the country's infrastructure. Poverty and limited access to healthcare perpetuates low life expectancy rates, while inadequate and overcrowded teaching facilities and resources limit the educational attainment and skills of the Angolan workforce. Despite a severe shortage in qualified local labourers, firms face high costs and difficult bureaucratic procedures to import high-skilled expatriates, which affect business productivity. Nonetheless, increased government spending on education and healthcare is likely to strengthen the labour force in the long term. Angola therefore receives a score of 37.9 out of 100 for its Labour Market Risk, ranking 25th out of 48 Sub-Saharan African s...

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Angola Logistics

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Angola has only recently emerged from a civil war that raged from 1975 to 2002. The war decimated the economy and left Angola's infrastructure in tatters. In the post-war era, the Angolan government faces the onerous task of rebuilding what was lost. In doing so, it could boost the country's already booming oil sector, while also diversifying its economy into other important industries.

Its agricultural potential, in particular, is very important. At the time of its independence in 1975, Angola was largely self-sufficient in agriculture production, was the largest staple food exporter in Sub-Saharan Africa (SSA), and the third largest coffee exporter in the world. By 2000, its agriculture and mining sectors were in shatters, with landmines rendering much of the country unsafe, transport systems broken, and just 3% of its land arable. Angola now ranks seventh in the Global Food Security Index due to the fact that the country imports around 90...

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Angola Trade & Investment

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Angola's wealth of natural resources has attracted high levels of foreign investment and allowed the country to develop its financial system, facilitating transactions for businesses. However, significant trade barriers remain in the form of costly and lengthy import and export procedures. Government intervention benefits investors by providing fiscal and tax incentives to encourage foreign direct investment (FDI), but businesses continue to be burdened with difficult and expensive bureaucratic processes. Corruption poses a major risk to investors in terms of costs, delays, and potential partiality on the part of Angolan courts, which endangers business viability. Finally, investors face considerable challenges from poor legal and intellectual property protection and a lack of rule of law. All of these factors result in a relatively low score for Angola in the Trade and Investment Risk segment, at 27.2 out of 100 ranking the country 40th out of 48 countries...

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Angola Industry Coverage (10)

Agribusiness

Angola Agribusiness

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BMI View: We expect food security in South West Africa to improve over the short term, as we expect higher corn production from Zambia in 2014/15. Only in parts of Namibia do we see food security being at risk, owing to an expected decrease in cereal production in 2015 and consequently tighter household food supplies. Over the medium term, we see downside risks to sugar production in the region due to a...

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Autos

Angola Autos

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Despite its small overall market size and large informal sector, we are optimistic about the Angolan automotive industry's future. Passenger car sales in Angola increased 37.8% in 2014, to 39,938 units, due to strong private consumption in the country and we expect this positive growth story to continue, forecasting a 10% increase in passenger car sales in 2015 to 43,931 units and up to 57,560 units by 2019. We expect inflation to moderate somewhat over the course of the year and for access to credit for many Angolans to improve which should continue to boost car sales. Furthermore, we expect the exchange rate to remain relatively steady, which should help to stabilise the cost of imported vehicles into the country and further boost sales.

However, despite this optimism, it is important to note that the used car segment is far more developed and substantial than the new car market, as is this case in many emerging markets. We expect...

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Food & Drink

Angola Food & Drink

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BMI View: We maintain our view that Angola is one of the most attractive, yet risky food and drink markets in the region. Continued economic expansion combined with a young and rapidly growing population and plenty of untapped market niches offer a lot of opportunities for foreign investors. That said, we highlight downside risks to our forecast arising from an increasingly subdued outlook for the country's oil-dependent economy as well as a challenging regulatory and operating environment.

Key Forecasts

  • Total food consumption (local currency) growth year-on-year (y-o-y) in 2015: +16.3%; compound annual growth rate (CAGR) 2014-2019: +15.8%.

  • Per capita food consumption (local currency) growth (y-o-y) in...

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Infrastructure

Angola Infrastructure

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BMI View: Lower oil prices have seen a significant downgrade in Angola's construction sector real growth forecasts. Lower government revenues, macroeconomic headwinds and less capital expenditure in the oil sector will see opportunities reduce significantly in scope. The country has cut a significant amount from the budget and is reviewing all road construction. Longer-term fundamentals are more robust and the 2013-2017 National Development Plan offers some upside.

As crude prices have collapsed Angola has been forced to reach out to the World Bank...

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Insurance

Angola Insurance

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BMI View: The Angolan insurance industry is extremely underdeveloped even by Sub-Saharan standards. The economy continues to grow and the energy sector is vibrant with a small but sizeable expatriate community and a small elite population. However, the population at large remains largely in poverty and with chronically low disposable income. We do forecast growth in non-life insurance, including motor vehicle insurance and health insurance, but this is not presently attractive for large scale foreign investment.

The Angolan insurance sector is at an embryonic stage of development. Most of the population does not use insurance and the regional Sub-Saharan trend of micro-insurance, mobile insurance distribution methods and the arrival of large multinational insurance companies is not present in Angola. Nevertheless, the demand for non-life insurance...

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Mining

Angola Mining

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BMI View: Angola's mining sector growth will continue to be driven by the country's diamond sector. We expect diamond mining growth will be supported with continued investment, both domestic and international, over our forecast period. Although the Angolan government keen to diversify the economy away from oil, mining expansion will be constrained by both inadequate infrastructure and high levels of bureaucracy.

We expect Angola's mining sector to expand at a steady pace through to 2019, reaching USD7.7bn in terms of overall output in 2019. Nevertheless, mining will remain far from a core industry...

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Oil & Gas

Angola Oil & Gas

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BMI View : Angola is among the most resilient of Africa's oil producers against sustained lower oil prices. This is due to a strong projects pipeline - with several major developments post-FID - and highly prospective deepwater acreages. However, we see downside to output post-2020, due to rapid decline rates at major maturing fields and prospective delays to projects which are pre-FID. Gas production will remain limited throughout our 10-year forecast period due to low levels of domestic consumption and unfavourable pricing dynamics and demand constraints in key export markets.

Headline Forecasts (Angola 2013-2019)
2013 2014e...

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Pharmaceuticals & Healthcare

Angola Pharmaceuticals & Healthcare

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BMI View: Growth in Angola's healthcare sector will remain subdued over the near term as lower oil prices persist. A consequence of the oil price crash has seen a sizeable cut in the much-needed government funding for the healthcare sector following the revised state budget in February 2015. The funding cuts and weak consumer purchasing power amid the economic slowdown will result in increasingly unfavourable conditions for multinational pharmaceutical companies.

Headline Expenditure Forecasts

  • Pharmaceuticals: AOA32.09bn (USD326mn) in 2014 to AOA34.25bn (USD302mn) in 2015; +6.7% in local currency and -7.4% in US dollar terms. Forecast revised downwards from last quarter.

  • Healthcare:...

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Power

Angola Power

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BMI View: The government is investing heavily in rehabilitating the country's antiquated power sector, with a focus on distribution systems and generating capacity, especially hydropower and oil. Demand for electricity will grow rapidly due to rapid economic and population growth. However, risks remain, such as corruption and a lack of transparency in tendering, while the lack of a robust regulatory framework will limit the opportunity to exploit new forms of energy.

The outlook for Angola's energy sector is good. The state is rehabilitating the country's antiquated power sector, building hydroelectric dams and oil-fired power stations, and rebuilding dilapidated distribution networks. The centrepiece will be the Cacombo and Lauca dams, the latter of which...

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Telecommunications

Angola Telecommunications

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BMI View : BMI's Q315 Southern Africa report analyses the latest industry, regulatory and macroeconomic developments in the telecoms markets in Angola, Botswana, Mozambique, Mauritius and Namibia. It also contains our estimate of the market data relating to the end of 2014 and an update of our five-year forecasts to 2019 for the mobile, fixed-line and internet sectors. From the five states...

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