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 Angola do we see food security being at risk, owing to the increase in fuel costs in 2014, which is expected to result in upward pressure on food prices and could negatively impact on food access, particularly in deficit producing areas. Over...

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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: Angola's insurance market is extremely underdeveloped, even by Sub-Saharan African standards. A fast-growing economy has lead to rising prosperity and levels of disposable income, particularly among the growing middle class elite in Luanda and other cities. As the economy continues to develop this should support growth in non-life lines, including motor vehicle and health insurance through to the end of our forecast period in 2019. However, the size of the life insurance segment is set remain negligible.

The Angolan insurance sector is at an embryonic stage of development. In general, most of the population does not use insurance. The innovation that is evident in other Sub-Saharan African countries (such as development of micro-insurance products, distribution through mobile telephone...

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Mining

Angola Mining

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BMI View: We forecast Angola's mining sector to grow to USD7.7bn in value in 2019, expanding at an average rate of 6.1% a year over the 2015-2019 period. The mainstay of the industry will continue to be diamond mining with continued investment, both domestic and international, in this segment helping to support steady growth in output over our forecast period. While the Angolan government is increasingly turning its attention towards mining as it looks to diversify the economy away from oil, expansion will continue to be constrained by a lack of supportive infrastructure as well as high levels of bureaucracy.

Angola's mining landscape is relatively limited with total output of USD6.1bn forecast for 2015, comprising about 4.6% of GDP. That said, the country is established as one of the most prominent diamond...

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Oil & Gas

Angola Oil & Gas

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BMI View : The outlook for Angola's oil sector remains broadly positive, with highly prospective offshore acreage and a number of major projects under development. However, sustained lower oil prices pose downside risk to production growth post-2020, as rapid natural decline rates and a slowdown in investment combine to undercut output levels. Gas production will remain limited throughout our 10-year forecast period due to low domestic consumption, unfavourable pricing dynamics and demand constraints in key export markets.

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Headline Forecasts (Angola 2013-2019)
2013 2014e

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Pharmaceuticals & Healthcare

Angola Pharmaceuticals & Healthcare

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BMI View: Angola's pharmaceutical market is held back by weak regulatory framework and lack of intellectual property legislation which create a challenging environment for innovative drugmakers. The fall in the price of oil will have a heavy impact the economy as a whole. Despite the dominance of oil revenue for Angola's state funding, the country will go ahead with its plans to decentralise the health system. The government will increase its share of the total healthcare market over the long term; however, state spending will remain modest in the short term given lower oil prices.

Headline Expenditure Forecasts

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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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