Angola's Development: Challenges And Opportunities

Angola is a developing country in Southern Africa, officially known as the Republic of Angola. It is the second-largest Lusophone (Portuguese-speaking) country in the world in terms of both total area and population, and it is the seventh-largest country in Africa. Angola's economy is heavily reliant on the oil sector, which has resulted in volatile growth and high levels of poverty and inequality. The country has vast mineral and petroleum reserves, and its post-civil war economy was one of the fastest-growing in the world. However, economic growth has been uneven, with wealth concentrated in a disproportionately small portion of the population. Angola faces challenges such as high poverty rates, social inequality, corruption, and a lack of economic diversification.

Angola's economy is heavily dependent on the oil sector

The reliance on the oil sector has made Angola highly vulnerable to global shocks and complicates the government's efforts to achieve sustained economic growth. For example, the collapse in oil prices during the COVID-19 pandemic constrained the government's fiscal response. Additionally, volatile oil prices have adversely affected the Angolan economy, leading to macroeconomic imbalances and a need for stabilisation. The country also faces challenges in diversifying its economy away from oil, as other sectors such as construction and agriculture tend to underperform when the oil sector contracts.

To reduce its dependence on oil, Angola has implemented various measures. The government has introduced a value-added tax to increase revenue from non-oil sources and has taken steps to promote private investment and improve infrastructure. It is also working to address fiscal imbalances and liberalise the exchange rate regime. Angola has established the Programs for National Production Support, Exports Diversification and Import Substitution (PRODESI) to support national production, export diversification, and import substitution. PRODESI aims to increase the production and sales volume of priority products, reduce foreign exchange expenditure, and attract foreign direct investment.

Despite these efforts, Angola remains heavily reliant on the oil sector. Oil production and supporting activities are vital to the economy, contributing about 45% to GDP and 90% of exports. The country's dependence on oil has increased its vulnerability to external shocks, undermined macroeconomic stability, and limited economic diversification and job creation. As a result, Angola needs to urgently invest in removing barriers to private sector investment to achieve economic diversification and support growth, job creation, and poverty reduction.

The country has a high level of poverty and inequality

Angola has a high level of poverty and inequality, with over 15.1 million people living in extreme poverty as of 2022. This number has been on an upward trend, with 10 million Angolans in extreme poverty in 2016, projected to increase to 16.3 million by 2026. The poverty threshold is set at $1.90 per day. The official consumption-based poverty rate in the country is 38%, with 18.7% for urban and 58.3% for rural areas. The poverty rate for Luanda, the capital, is 11.5%, but with a very high level of inequality.

The dynamics of poverty differ between rural and urban areas in Angola. In rural areas, such as the villages in the Municipality of Kalandula, material poverty is more pronounced, with limited access to employment, markets, and social services like education and healthcare. Agriculture is the dominant economic activity, and most people live in mud-and-grass-roof dwellings. In contrast, urban areas, like the shantytowns in Luanda, have denser populations, with a mix of brick houses and shacks. While there are more employment opportunities in these urban areas, including both formal and informal sectors, incomes are often low and insecure.

The child mortality rate is a telling indicator of the inequality in Angola, with 230 deaths per 1,000 children in rural areas and 170 deaths per 1,000 children in urban areas. This means that nearly one in four children in rural Angola die before they reach the age of five. Overall, Angola ranks 147th out of 189 countries in the Human Development Index, indicating exceptionally poor scores in terms of education and health indicators, particularly in rural areas.

The high levels of poverty and inequality in Angola are partly due to the country's economic fortunes being tied to global oil demand, which has led to volatile growth. Additionally, the country's history of conflict, including the war for independence from Portugal and the subsequent civil war, has also contributed to the current state of poverty and inequality.

Angola's economy has been influenced by the effects of conflict

Angola's economy has been heavily influenced by the effects of conflict in the last part of the 20th century, namely the war for independence from Portugal (1961-1975) and the subsequent civil war (1975-2002). The Angolan Civil War was a power struggle between two former anti-colonial guerrilla movements: the communist People's Movement for the Liberation of Angola (MPLA) and the anti-communist National Union for the Total Independence of Angola (UNITA). The war devastated Angola's infrastructure and severely damaged public administration, the economy, and religious institutions.

During the civil war, the MPLA and UNITA controlled different resources, which dictated their methods of conducting war. The MPLA controlled Luanda and the coastal region, benefiting from offshore oil reserves. This allowed the MPLA to rule through a system of patrimonialism, blending the economic with the political and personal. Meanwhile, UNITA controlled the hinterlands, benefiting from diamond reserves. This wealth allowed UNITA to sustain a rebellion against the MPLA, often opting for guerrilla warfare.

The civil war disrupted agricultural production and employment. Pre-independence Angola was a major exporter of coffee, sisal, sugar cane, bananas, and cotton and was self-sufficient in all food crops except wheat. The conflict hindered national economic growth and development, with military leaders and factions controlling strategic territories with diamond mines and selling diamonds illegally for personal gain rather than improving infrastructure, healthcare, and the manufacturing industry.

The civil war also resulted in the destruction of infrastructure, such as railways, bridges, and roads, which created sluggish economic growth. Additionally, the lack of sound economic policies, confiscation of capital assets, and nationalisation of private industries affected the agricultural and manufacturing sectors, leading to growing dependency on imports and lower domestic capital investment. Revenue from mineral resources, particularly diamonds, was used to finance the civil war, amounting to more than a quarter of the government's budget in the late 1970s and achieving over 40% in the 1980s.

The conflict also had a significant impact on the social and political landscape of Angola. By the time the MPLA achieved victory in 2002, between 500,0000 and 800,000 people had died, over one million had been internally displaced, and 70,000 people were left mutilated by landmines. The war left Angola with high levels of poverty and inequality, and the country continues to struggle with the effects of conflict today.

The country has a low standard of living

Angola has a low standard of living for a variety of reasons. Firstly, the country has a very low life expectancy, which is caused by preventable diseases such as diarrhoeal diseases, malaria, neonatal disorders, and influenza. The country also has the 12th highest number of infant mortalities every year.

Secondly, a third of Angolans are illiterate, and literacy rates have been steadily declining since 2001. This lack of education limits people's ability to get well-paying jobs and contributes to the country's high unemployment rate, which is currently at 26%. Youth unemployment is even higher, at 56.1%.

Thirdly, many Angolans lack access to basic necessities such as clean water and electricity. According to the United Nations Children's Agency, 44% of Angolans do not have access to clean water. In rural areas, only 6% of Angolans have access to electricity, while in urban areas, 34% do.

Finally, income inequality in Angola is one of the highest in the world, at 28.9%. Poverty is especially prevalent in rural areas, where 94% of the population qualifies as poor. This inequality is partly due to the country's dependence on the oil sector, which has led to volatile growth and high levels of poverty and inequality.

Angola is a member of OPEC

Angola is a developing country that has been heavily influenced by the effects of conflict in the latter part of the 20th century, including the war for independence from Portugal and the subsequent civil war. Since 2002, when the civil war ended, the government has prioritised the repair and improvement of infrastructure and the strengthening of political and social institutions. Angola's economy has been dominated by the production of raw materials and the use of cheap labour since European rule began in the 16th century.

Angola's dependence on the oil sector has made it vulnerable to external shocks and undermined macroeconomic stability. In 2023, Angola left OPEC, citing a desire to expand its oil production and stabilise crude production above 1 million barrels per day. Angola's departure from OPEC was also influenced by its inability to meet the output quota due to declining investment. Angola's oil sector has faced challenges due to underinvestment and production decline, and the country has been making efforts to boost investment and reverse the decline.

Angola's efforts to diversify its economy and reduce poverty have been supported by the World Bank. The country has abundant agricultural and arable land and favourable climatic conditions, making agriculture a sector with high potential to drive economic diversification. However, Angola needs to invest in removing barriers to private sector investment to achieve sustainable economic growth, reduce poverty, and create jobs.

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