Luanda, Angola: Why Is It So Expensive?

Luanda, the capital of Angola, is often ranked as one of the most expensive cities in the world for expatriates. The high costs of living in Luanda are mainly attributed to the limited supply of luxurious housing, high demand for expatriate accommodation, the need for secure accommodation, the cost of importing goods, and the impact of the country's civil war on infrastructure and local production. These factors contribute to high prices for rent, groceries, transportation, and entertainment, making Luanda a costly city for expatriates to live in.

High demand for luxurious housing among expatriates

Luanda, Angola, has experienced a surge in demand for luxurious housing among expatriates, primarily driven by the country's thriving oil industry. The influx of foreign workers, particularly those employed by international oil companies, has led to a significant increase in the demand for high-end accommodation. This demand has resulted in the development of exclusive housing compounds, often located in the southern part of the city, offering a range of desirable amenities.

The availability of luxurious housing in Luanda is limited, which further contributes to the high demand among expatriates. The city's rapid economic growth, particularly in the post-civil war era, has outpaced the development of high-quality housing. As a result, there is a shortage of upscale accommodations that meet the expectations of expatriates. This imbalance between supply and demand has led to elevated rental prices, with expatriates often paying exceptionally high rates for their accommodations.

The demand for luxurious housing among expatriates in Luanda is also influenced by the desire for enhanced security and comfort. The city's history of civil unrest and ongoing security concerns have made expatriates prioritize safe and secure living environments. Many opt for gated communities or compounds that offer controlled access, security guards, and other safety measures. Additionally, expatriates often seek accommodations that provide modern conveniences and amenities, such as swimming pools, tennis courts, and well-maintained green spaces.

The high demand for luxurious housing among expatriates in Luanda has had a significant impact on the city's rental market. Expatriates typically receive housing allowances or have their accommodations sponsored by their employers, allowing them to afford the elevated rental rates. This has resulted in a two-tiered market, where rental prices for expatriates are significantly higher than those for local Angolans. The demand from expatriates has also influenced the development of new housing projects, with real estate companies catering specifically to the needs and preferences of this demographic.

The limited supply of high-quality housing in Luanda, coupled with the high demand among expatriates, has contributed to the city's reputation as one of the most expensive destinations for expatriates worldwide. The cost of secure and comfortable accommodations represents a significant portion of the overall cost of living for expatriates in Luanda, making it a key factor in the city's high expat living expenses.

Poor infrastructure

Angola's poor infrastructure is largely due to the country's long history of civil war and political violence. The conflict, which lasted for almost three decades, resulted in the destruction of much of the country's infrastructure, including roads, railways, bridges, and ports. Millions of land mines were laid during the war, and these continue to pose a significant obstacle to rebuilding infrastructure, as well as causing ongoing harm to civilians.

Even before the civil war, Angola's infrastructure was lacking. The country has always faced challenges in this area due to its limited financial resources and weak regulatory frameworks. However, the war exacerbated these issues and resulted in a near-total collapse of the country's transportation network. According to the Angolan government, it will take 10-15 years to restore the road network to its pre-war state, assuming an end to the fighting.

The poor state of the country's infrastructure has severe economic consequences. The road, railway, and bridge networks are essential for connecting the country's main cities and facilitating trade. With more than 60% of the paved road network in need of repair, transportation has become a significant challenge in Angola, hindering the growth of other economic sectors.

In recent years, Angola has made significant investments in infrastructure repair, expansion, and modernisation as a central element of post-civil war reconstruction and economic development. The country has prioritised infrastructure investment, with a rate of 10.8% of GDP per annum, one of the highest among lower-middle-income countries. However, Angola still trails other countries in financial stability, regulatory frameworks, and infrastructure governance, and the COVID-19 pandemic may have impacted its efforts.

High import costs

The high cost of living in Luanda, Angola, is largely attributed to the country's reliance on imports, with an estimated 80% of consumable goods brought in from other countries. This means that the cost of any imported goods includes the expense of transporting them to Angola and navigating the highly bureaucratic customs process at the congested port. The process of getting goods into the country is time-consuming and costly, and these costs are passed on to the consumer.

The civil war, which lasted from 1975 to 2002, destroyed much of the country's infrastructure, including roads, railways, electricity lines, and water supplies. This has made it difficult for local industries to recover and resume production, and the lack of reliable infrastructure increases the cost of local production, making it cheaper to import goods.

The high cost of imports is also driven by the fact that Angola's business elite control the import companies and have shown little interest in reducing prices. The complicated local tax system and bureaucratic red tape further disincentivize local production, perpetuating the country's reliance on imports.

The cost of housing in Luanda is also exceptionally high. The post-war influx of expatriates, particularly those working in the construction and oil sectors, has driven up rental prices. Oil companies, in particular, have been willing to pay high prices for accommodation, and local landlords have taken advantage of this demand.

The combination of high import costs, limited local production, and high housing prices has made Luanda an extremely expensive city, particularly for expatriates. The cost of basic goods and secure accommodation contributes to the city's high living expenses, making it the most expensive city in the world for expats according to Mercer's annual cost-of-living survey.

Lack of supply

Luanda, Angola's capital, has frequently been ranked as one of the most expensive cities in the world for expatriates. The high costs of goods and security in the city have fuelled rampant inequality. The primary reason for Luanda's high cost of living is the limited supply of high-quality housing, which is further exacerbated by the high demand for luxurious accommodations among expatriates.

The lack of supply of high-quality housing in Luanda, Angola, can be attributed to several factors, including historical, infrastructural, and economic considerations:

• Historical Factors: Angola was affected by a devastating civil war that lasted from 1975 to 2002. This prolonged conflict resulted in the loss of lives for an estimated 500,000 civilians and the destruction of much of the country's infrastructure. As a result, when Angola finally embarked on rebuilding its economy and society in 2002, the supply of high-quality housing was extremely limited.
• Infrastructural Challenges: Luanda has historically faced challenges in maintaining a clean and accessible water supply. The influx of refugees during the civil war overwhelmed the city's public services, including sewage treatment and trash collection. Even years after the civil war ended, the city remained vulnerable to frequent outbreaks of cholera and other diseases due to the lack of potable water.
• Rapid Population Growth: The population of Luanda swelled significantly during the civil war as people fled from violence in rural areas. This rapid population growth placed immense strain on the city's infrastructure and services, exacerbating the existing shortages in housing and other essential amenities.
• Time Lag in Construction: While Angola experienced rapid economic growth after the civil war, fuelled by its oil reserves, the construction industry tends to operate on a longer-term timeline. As a result, the supply of high-quality housing may lag behind the increasing demand, driving up housing costs.
• Limited Investment in Infrastructure: Despite the economic growth fuelled by oil and diamond production, there has been a perceived lack of investment in critical infrastructure in Luanda. The central government allocates funds to all regions, but the capital region receives the majority of these funds. This unequal distribution of resources has likely contributed to the lack of supply of housing and other essential services in Luanda.

In summary, the lack of supply of high-quality housing in Luanda, Angola, is a multifaceted issue with deep-rooted causes. The combination of historical trauma, inadequate infrastructure, rapid population growth, and uneven economic development has resulted in a situation where the demand for high-quality housing, particularly among expatriates, far outstrips the available supply, contributing to the city's high cost of living.

High demand for expatriate workers

The high demand for expatriate workers in Luanda, Angola, can be attributed to several factors, including the country's economic growth, the presence of multinational companies, and the need for specific skills.

Firstly, Angola's economy, heavily reliant on its substantial oil reserves and diamond resources, has experienced rapid growth over the years, making it one of the fastest-growing economies globally. This economic growth has resulted in a demand for expatriate workers, particularly in the oil and diamond sectors. The oil industry, in particular, has attracted many international oil companies, which has increased the demand for expatriate workers with relevant skills and expertise.

Secondly, the presence of multinational companies in Angola is significant. These companies often require expatriate workers for their operations and are willing to offer lucrative salaries and employment packages to attract talent. The jobs are often in the oil or diamond sectors, but there are also opportunities in agriculture, manufacturing, tourism, construction, and telecommunications.

Additionally, the demand for expatriate workers in Luanda is driven by the need for specific skills. Skilled professionals in fields such as finance, engineering, and telecommunications are in high demand as they are crucial for driving the country's growth and economic diversification. Expatriate workers with specialised knowledge and expertise are sought after to fill these roles, as there may be a limited number of qualified local candidates.

The high demand for expatriate workers in Luanda, Angola, has contributed to the city's high cost of living. Companies offering employment in Luanda provide competitive salaries and benefits, including luxurious housing, to attract talent. This demand, coupled with a limited supply of high-quality housing, results in elevated costs for expatriates.

The unique dynamics of the local job market, influenced by factors such as economic growth, industry specialisations, and the presence of multinational companies, contribute to the high demand for expatriate workers in Luanda, Angola.

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