Angola's Economy: Unique Features And Characteristics

Angola is a country in west-central Southern Africa with a diverse range of economic features. It is the seventh-largest country in Africa and has the second-largest Lusophone (Portuguese-speaking) population on the continent. Angola's economy is heavily reliant on oil exports, which constitute a substantial portion of its revenue. The country is the second-largest producer of crude oil in Africa and the seventh-largest in the world. This reliance on oil has made Angola vulnerable to global price fluctuations. However, steps have been taken to diversify the economy, with the government promoting sectors such as agriculture, manufacturing, and tourism.

In addition to oil, Angola is also known for its diamond production, with approximately 6 million carats produced annually. The country has vast mineral and petroleum reserves, and its economy is among the fastest-growing in the world, especially since the end of its civil war in 2002. Angola's other economic features include a focus on arable agriculture and food production, as well as investment in renewable energy sources such as solar power and green hydrogen. The fishing industry is also significant, with Angola being a leading country in this sector due to its rich coastal resources.

Angola's economy is heavily reliant on oil exports

The country's economy is vulnerable to fluctuations in global oil demand, which has led to volatile growth and high levels of poverty and inequality. Angola's economic growth is highly uneven, with most of the nation's wealth concentrated among a small portion of the population.

The oil sector's dominance has hindered economic diversification and job creation, with 80% of employed individuals working in the informal sector. The country's overreliance on oil means that the economy is susceptible to external shocks and has struggled to achieve long-term macroeconomic stability.

While Angola has the potential for economic diversification, particularly in the agricultural sector, it needs to address barriers to private sector investment and build climate resilience to increase agricultural productivity.

Diamonds are Angola's second-largest export product

Angola is a country on the west-central coast of Southern Africa. It is the second-largest Lusophone (Portuguese-speaking) country in both total area and population and is the seventh-largest country in Africa. Angola's economy is among the fastest-growing in the world, especially since the end of the civil war. However, economic growth is highly uneven, with most of the nation's wealth concentrated in a disproportionately small part of the population.

Angola's diamond industry has faced several challenges, including corruption, human rights violations, and diamond smuggling. The government has implemented measures such as Operation Brilliant to combat diamond smuggling, but the country still loses $375 million annually due to this issue. The industry has also been associated with "murders, beatings, arbitrary detentions, and other human rights violations," as described by journalist and human rights activist Rafael Marques.

The diamond industry in Angola is dominated by state-run companies such as Endiama, which often partner with international mining companies. Angola's diamond exports are primarily destined for the United Arab Emirates, Belgium, India, the United States, and Israel. The country's diamond production is expected to continue growing, and it is on track to become the second-largest producer of rough diamonds globally by 2030.

Angola has diverse natural landscapes and ecosystems

The ecological importance of the major physiographic divisions in Angola was recognised as early as the 1850s by the pioneer Austrian botanist Friedrich Welwitsch who categorised the 5000 plant species that he collected in Angola within three regions: região litoral, região montanhosa, and região alto-plano.

Angola's landscape changes are dominated by woodland and forest losses due to clearing for crops, bush fires (which convert woodland into shrubland) and the harvesting of fuel (as wood and charcoal) and timber. The country has 12 main landscape groups, with which its ecoregions are closely aligned. The country is drained by six major transnational hydrological basins, providing the ‘water towers’ of southern and central Africa.

The country's economy is vulnerable to global oil price fluctuations

Angola's economy is heavily reliant on the oil sector, which accounted for over 90% of exports by value and 64% of government revenue in 2017. This over-dependence on oil makes the country's economy highly vulnerable to fluctuations in global oil prices.

When global oil prices dropped in 2023, Angola's economy was severely impacted. Oil production fell short of expectations, leading to lower-than-expected exports and a reduction in the supply of foreign currency. This triggered a 40% currency depreciation in May-June, causing a surge in inflation, primarily driven by food prices. The depreciation of the kwanza, the country's currency, also pushed the debt-to-GDP ratio up from 69% in 2022 to 87% in 2023.

The impact of the oil price drop was further exacerbated by the country's high debt service payments, which further reduced the availability of foreign currency. As a result, the government was forced to trim expenses, affecting various sectors of the economy.

Angola's vulnerability to global oil price fluctuations is also due to its limited economic diversification. The country has historically relied on the production of raw materials and cheap labor, with a lack of investment in other sectors. While there have been recent efforts to diversify the economy, particularly in the agricultural sector, these efforts have yet to yield significant results.

The country's dependence on oil revenues has also hindered macroeconomic stability and limited job creation. The lack of economic diversification has resulted in a situation where most of the nation's wealth is concentrated in a disproportionately small part of the population, contributing to high levels of poverty and inequality.

To reduce its vulnerability to global oil price fluctuations, Angola needs to urgently invest in economic diversification, remove barriers to private sector investment, and promote growth in sectors other than oil. With its abundant agricultural land and favorable climatic conditions, the agricultural sector has the highest potential to drive this diversification.

Angola is a Portuguese-speaking country

Angola, officially the Republic of Angola, is a Portuguese-speaking country on the west-central coast of Southern Africa. It is the second-largest Lusophone (Portuguese-speaking) country in both total area and population and is the seventh-largest country in Africa. The capital and most populous city is Luanda, which is also the country's principal city. Luanda is one of the biggest Portuguese-speaking cities in the world, with over 8 million inhabitants in its metropolitan area.

Angola's economic fortunes have been tied to global oil demand, which brought volatile growth and left the country with high levels of poverty and inequality. 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 has vast mineral and petroleum reserves.

Angola's economic growth is highly uneven, with most of the nation's wealth concentrated in a disproportionately small part of the population. The country's economy has been dominated by the production of raw materials and the use of cheap labour since the sixteenth century when Portuguese colonisation began. Angola's economy is expected to grow by 3.9% in 2024, driven by non-oil sectors. Angola's financial system is maintained by the National Bank of Angola.

Angola is a founding member state of the Community of Portuguese Language Countries (CPLP), also known as the Lusophone Commonwealth, an international organisation and political association of Lusophone nations across four continents, where Portuguese is an official language.

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