Sunday, October 19, 2008

Signs Point to Continued Growth in Angola Despite Global Credit Crisis

Sources:
Financial Times
Africa.Rueters

Angola is one of the fastest growing economies in Africa and in the World. The country has seen rapid growth after a 30 year long civil war ended in 2002, fueled by its large oil supply. Besides oil, Angola is also blessed with 35 hectacres (or about the size of Germany) of prime agriculture land. Angola is looking for $6 Bn over the next five years in foreign investment to boost its agricultural potential.

Angola had once been an agricultural powerhouse, providing its own citizens and the world with large supplies of coffee, sisal, bananas and sugar before the protracted civil war halted production. It is looking to diversify an economy largely based on oil and is in the early stage of discussions with many foreign investors ranging from Brazil to Canada. Some two-thirds of Angolans earn a living on the land, but agriculture only accounts for less than ten percent of the economy. An investment of $6 Bn would certainly go long way towards bolstering agriculture in the economy and raise the income of many Angolans.

Some experts are skeptical, however, that Angola can successfully attract that level of foreign investment. Last year non-oil foreign investment was less than $1 Bn and many sight vast bureaucracy and red tape that exists in Angola and the poor condition of Angola’s ports as a limiting factors. The Angolan government seeks to counter these criticisms with an ambitious reconstruction plan and by continuing to cultivate a business friendly environment.

Another sign of Angola’s potential for growth is its red hot real estate market, which is its second most profitable sector after oil. Jose Camargo, head of the Angolan real estates unit of Brazillian construction company, Odebrecht claims, "Everyone wants to be here. I predict growth in real estate prices during the next three years." While real estate markets in the US and Europe struggle, Angola’s strong economic growth continues to fuel construction.

The Angolan government plans to invest $2 Bn to revitalize its ports and hopes to spend $50 Bn on one million new homes. Whether it fully achieves its goal of attracting $6 Bn for agriculture is yet to be seen, but it is clear that the global credit crisis will not be hampering economic growth in the near future.

Questions:
1) As a recent post discussed, many African oil companies may be adversely affected by the credit crisis. Is it then a good idea that Angola try to bolster its agricultural sector?
2) One article suggests that red tape and bureaucracy in Angola makes it so difficult to start a business that it often take over 100 days to open shop. What policies can Angola adopt to insure red tape will not hamper its growth?

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