Angola's Economic Engine: Oil And Diamonds

Angola's economy is overwhelmingly driven by its oil sector. Oil production and its supporting activities contribute about 50% of GDP, more than 70% of government revenue, and more than 90% of the country's exports. Angola is a member of the Organization of Petroleum Exporting Countries (OPEC) and is the largest oil producer in sub-Saharan Africa. The country also holds significant proven gas reserves and extensive mineral resources, including diamonds, which represent 5% of exports. Angola's economy grew by 2.6% in 2022, ending a five-year recession, and is expected to grow by 3.2% in 2023.

Oil exports

Angola's economy is heavily reliant on its oil sector, which contributes about 50% of its GDP, more than 70% of government revenue, and over 90% of the country's exports. Angola is a member of the Organization of Petroleum Exporting Countries (OPEC) and produces around 1.16 million barrels of oil per day. The country's oil production has experienced a slight decline from 1.18 million barrels per day previously.

Angola's oil exports are primarily directed towards China, which receives more than 40% of its total exports. The United States is also a significant export partner, along with India, France, Taiwan, and South Africa.

The country's oil sector is dominated by major international companies such as Chevron, ExxonMobil, BP, and Total. Angola's exports to the United States consist primarily of petroleum, with smaller shipments of diamonds and wood.

While the oil sector remains the backbone of Angola's economy, there have been efforts to diversify. The country has significant diamond reserves, contributing about 5% of exports. Additionally, Angola has been working to develop its agricultural sector, which currently provides the main livelihood for most of the population. However, half of the country's food still needs to be imported.

Angola's economy experienced a boost in 2022, with a growth rate of 3%, attributed to the growth in non-oil sectors and a slight increase in oil production. The services sector recovered to pre-COVID-19 levels, and construction activity expanded due to higher government investment.

Diamonds and other minerals

Angola is a country rich in mineral and petroleum reserves. Diamonds represent 5% of exports, and the country has reserves of over 50 critical minerals. Angola is a member of the Kimberley Process, which it has chaired, and joined the Extractive Industries Transparency Initiative in 2022 to increase transparency in the oil, gas, and mineral sectors.

Angola's diamond mines include partnerships between state-run Endiama and companies such as ALROSA. In 2022, the government increased its stake in the Catoca diamond mine to 59% after acquiring shares linked to corrupt former officials. The mine is also 41% owned by Russian state-owned company Alrosa.

In addition to diamonds, Angola has reserves of gold, copper, and fossil fuels. However, the country's wealth is concentrated in a disproportionately small part of the population, and most Angolans have a low standard of living.

Agriculture

Angola has a large amount of fertile agricultural land, with 57.4 million hectares of agricultural land, including 5 million hectares of arable land. However, the country is heavily dependent on food imports, importing over half of its food. This is due to the fact that only about 10% of the country's arable land is currently under cultivation, with per-acre productivity being one of the lowest in sub-Saharan Africa.

Historically, Angola was a major exporter of crops such as coffee, maize, sisal, bananas, tobacco, and cassava. However, the Angolan Civil War (1975-2002) severely disrupted the country's agricultural sector, and by the 1990s, production of many crops had ceased almost entirely. The war also led to a massive exodus from rural areas, with people flocking to towns and cities for safety, which further contributed to the decline in agricultural productivity.

Since the end of the war, the agriculture sector in Angola has been slowly recovering. In 2018, Angola produced significant quantities of cassava (8.6 million tons), bananas (3.5 million tons), maize (2.2 million tons), sweet potatoes (1.2 million tons), and sugarcane (572 thousand tons). However, smallholder farmers, who make up about 80% of the country's farmers, continue to face challenges such as limited access to agricultural inputs, infrastructure issues, and the presence of landmines in rural areas.

To improve food security and support poor rural communities, the Angolan government, along with international partners, has implemented various programmes and initiatives. These include providing grants and technical assistance to farmers, promoting climate-resilient agriculture, and improving access to markets and infrastructure. Despite these efforts, the agriculture sector in Angola still faces challenges, and the country continues to rely heavily on food imports to meet its needs.

Fishing

Angola's fishing industry was a major and growing sector before its independence from Portugal in 1975. In the early 1970s, the country had around 700 fishing boats, and the annual catch was over 300,000 tons. Including the catch of foreign fishing fleets in Portuguese Angola's waters, the combined annual catch was estimated at over 1 million tons.

However, after independence, the fishing industry went into decline due to the departure of local white ethnic Portuguese fishermen and fishing industry entrepreneurs. By 1986, only 70 of the 143 fishing boats in Moçâmedes (then called Namibe), the port that typically handled two-thirds of the Angolan catch before independence, were operational. The country's fishing infrastructure was further devastated by the civil war that lasted until 2002.

Since the end of the civil war, Angola has been working to rebuild its fishing industry, with a focus on coastal and aquaculture value-added production. The government is prioritising the development of the fisheries sector to advance economic diversification, generate employment, and expand food production for both national consumption and export.

In 2021, the production volume for the fisheries sector, including industrial, semi-industrial, artisanal, continental, and aquaculture activities, exceeded 400,000 tons. Most semi-industrial and industrial fishing is based at four main ports: Namibe, Benguela, Porto Amboim, and Luanda. Some fishing activity also extends to the Zaire and Cabinda provinces in the north.

There is a large artisanal fishing fleet in Angola, with around 100,000 people earning their living in the fishery sector, including 50,000 artisanal fishermen organised into groups that fish in teams and share equipment. The coasts of Benguela and Luanda provinces have the greatest concentration of artisanal fishing.

The Angolan government is providing support to artisanal fishing communities through initiatives such as microcredit and regional support centres with facilities for boat and gear maintenance, fish processing, and docks. Additionally, the government is addressing illegal fishing through the operation of patrol vessels and collaboration with neighbouring countries like Namibia and South Africa to protect and survey fishing grounds.

Companies from various countries, including Poland, Portugal, Spain, Russia, South Korea, Taiwan, and Italy, are active in the fisheries business in Angola. The country's vast coastline and strategic location offer solid medium to long-term potential for fisheries development.

Transport and infrastructure

Angola's transport and infrastructure have been severely impacted by the country's history of warfare. Millions of land mines were laid, and while efforts to remove them are ongoing, they continue to pose a significant challenge to the development of the country's infrastructure. The transport sector has been particularly affected, with roads, railways, and bridges suffering extensive damage. Additionally, the country's ports are run-down and antiquated.

Angola has a total of 2,952 kilometres of rail tracks and 19,156 kilometres of paved roads. However, more than 60% of the paved road network is in need of repair. The Angolan government estimates that it will take 10 to 15 years to restore the road network to its pre-war status, assuming an end to the fighting. The road, railway, and bridge networks are crucial for connecting the country's main cities and facilitating the transport of goods.

The lack of external investment in Angola's infrastructure is largely due to ongoing political violence and instability. However, there is recognition that building and improving infrastructure is essential for the country's economic development, particularly in sectors such as agriculture.

In recent years, Angola has made efforts to upgrade its critical infrastructure, leveraging funds from the development of its oil resources. The country has also benefited from international investments, such as a $2 billion line of credit from the Exim Bank of China in 2004, which was aimed at rebuilding Angola's infrastructure.

One notable infrastructure project is the construction of a new airport in the capital city of Luanda. With an investment of $3.8 billion, the airport is expected to accommodate some of the largest aircraft in the world and will be equipped with modern satellite air traffic control technology. The new airport is designed to attract new international airlines, reinforce Angola's strategy for developing an African hub, and significantly increase the passenger capacity of Luanda's airport.

Another significant infrastructure development is the construction of the Laúca dam on the Kwanza River. This dam, built by a Brazilian company, has a production capacity of 2,070 megawatts, which is enough to supply a city of 8 million inhabitants. The dam is expected to double the country's energy capacity and will enable the establishment of new industries, as they will benefit from cheaper and more reliable energy sources.

Angola's infrastructure landscape also includes five major sea ports: Namibe, Lobito, Soyo, Cabinda, and Luanda. Luanda is the largest and busiest port on the African continent. Additionally, Angola has three separate railway systems totalling 2,761 kilometres and 243 airports, 32 of which have paved runways.

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