Angola’s economy has been devastated by decades of almost continuous war. Output per capita in the country is among the lowest in the world despite the abundance of natural resources in the country. Economic weaknesses such as lack of adequately trained personnel and the absence of sound economic policies, resulted in a severe loss of economic capacity after independence.

The agricultural sector, once an important player in the economy, was also devastated by the war. Since independence, the only sector which has expanded has been the oil sector, although Angola was once the fourth largest producer of diamonds in the world, had a sizeable iron ore mining industry and a thriving manufacturing sector.

The oil industry is presently the backbone of the economy. The upstream oil industry is the country’s major source of foreign exchange and oil production and supporting activities contribute about 45 percent to GDP and 90 percent of all exports.

In recent years the Angolan economy has received several boosts from multilateral groups, such as the IMF, as well as through bilateral debt cancellations. The oil sector is well-positioned to continue to keep the economy afloat, and efforts in some of the more secure areas of the country could help to broaden the economic base.

The country has the potential to become one of the most important nations in the SADC region, if the peace process continues. But rehabilitation of the economy will be a massive task, involving macro-economic discipline, institutional reform, credit and financial system restructuring, foreign investment incentives and investment infrastructure.

Since the resumption of the civil war in 1992, economic performance was mainly hampered by high levels of money supply and inflation, economic controls, damaged infrastructure and the lack of productive performance by the non-oil economic sectors.

The Angolan government is committed to restoring macro-economic policies including financial sector reforms, which are expected to lead the country towards greater financial prudence. Measures implemented by the Angolan government aimed at improving the economic situation include liberalisation of selected sectors and drawing up of a privatisation plan. Bringing public spending under control is one of the main challenges facing government.

Source: IMF, International Financial Statistics.

Exchange Rates (year-end)

1997

1998

1999

KZr: US$

262,376

741,000

5,579,920

Gross Domestic Product (market prices)

1996

1997

1998

6.5

6.4

Per head (US$)

574

660

533

Sources: IMF; World Bank.

Gross Domestic Product by Sector (% of GDP unless otherwise indicated)

1995

1996

Agriculture, forestry, fishing

7.8

7.5

Oil and gas

56.0

59.3

Diamonds

2.7

3.3

Manufacturing

4.0

3.4

Trade and commerce

17.6

14.8

Non-tradeable services

7.3

8.1

Import duties

1.4

1.9

GDP at market prices (Kzr m)

14.5

845.6

Angola is a key player in Africa’s oil industry as both a major producer and exporter. It is the second largest producer of oil in Sub-Sahara Africa after Nigeria, and offshore, Angola has great potential for oil exploration and production.

Portuguese oil company Petrofina first discovered oil in Angola in 1955. The onshore deposits at Kwanza were exploited by Petrofina and the Angolan government through a joint venture company Fina Petroleos de Angola (Petrangol). A refinery was constructed in Luanda. The expansion of the country’s upstream oil industry took off in the 1960s when the Cabinda Gulf Oil Company (CABGOC) discovered offshore deposits of oil in the coastal enclave of Cabinda. By 1973, oil was Angola’s main export and further discoveries have consolidated Angola’s position as a major oil-producing country.

Sociedade Nacional de Combustiveis de Angola (Sonangol), the national oil company, was founded in 1976 to oversee all fuel production and distribution. In a bid to attract foreign companies under production sharing agreements, the Angolan coast, excluding Cabinda, was divided into 13 exploration blocks in the late 1970s. A further round of licensing was held in 1997 when Sonangol released a further six deepwater blocks for tender. More recently, three more ultra deepwater blocks have been offered. Under the production sharing agreements, Sonangol has a 51 percent interest in all oil companies operating in Angola, with management of operations controlled by the foreign companies. By 2000, Angola had a total of 29 offshore and onshore blocks under licence to 30 companies. Over the past decade, 200 exploration and appraisal wells have been drilled. The largest block, operated by CABGOC in partnership with Sonangol, Elf Aquitaine and ENI-Agip, has an average output of 510,000 barrels per day, and accounts for 70 percent of production.

Onshore production is in Kwanza, near Luanda and in the Congo Basin. These sites have been badly affected by the civil war and massive rehabilitation projects are now underway.

Angola has estimated natural gas reserves of 1.6 Tcf. At present, around 85 percent of the gas is flared, although some is re-injected to enhance recovery of the crude. The government is in the process of implementing strategies to reduce flaring and to increase the commercial use of natural gas, including its conversion to LPG for domestic consumption.

Angola’s sole refinery, located in Luanda, has a capacity of 39,000 barrels per day. The refinery is operated by Petrangol and refines about 30,000 barrels per day for domestic consumption and exports lubricating oils, bunkering oils and heavy fuel oil. The government is planning to build a larger refinery in the southern part of the country, near Lobito. At a cost of US$2 billion, the new facility would export about 80 percent of its production regionally. China and Angola have signed a letter of intent on joint construction of the refinery, although other participants have also expressed interest.

The non-oil mining sector contributes 12 percent to GDP, with diamonds accounting for 98 percent of government earnings from the sector. While oil and diamonds dominate the Angolan minerals sector; prior to the outbreak of civil war in 1974, the country was an important producer of iron ore, gold and copper.

Angola’s diamond industry is currently being scrutinised following the implementation of the Kimberley Process that was set up by diamond producing nations to deal with the issue of conflict diamonds. The trade of rough diamonds by the rebel UNITA group has largely funded Angola’s civil war.

Base metals and gold potential exists, but has not been fully exploited due to the ongoing civil unrest. Ashanti Goldfields and Anglo American have exploration programmes prospecting for gold and base metals, mainly in the south west and north west regions.

An estimated 100 million tonnes of low to medium grade iron ore have been identified at Kassala-Kitungo in addition to the deposits at Cassinga. The national iron ore company, Ferrangol, was established in 1981 to rehabilitate Cassinga which ceased production due to low world prices and the destruction of the railway line to the coast during the civil war. Investors have expressed interest in the development of a direct reduced iron plant using Cassinga ore as the main stock feed.

The World Bank and British Geological Survey have been assisting the Angolan government with the promotion of the minerals sector, including the drafting of new mining laws. The Mining Law of 1992 reflects the new mining policy, which aims to reduce the dominance of the State-owned companies by eliminating monopoly of mineral rights and providing opportunities for the private sector to invest in the mining sector.

1997

1998a

1999a

2000a

395

405

430

465

443

5

5

4

5

2

90

100

95

87

72

200

205

195

182

148

10

11

9

7

8

13

13

12

13

10

2

1

1

2

0

0

0

0

0

61

715

740

746

761

678

2,569

3,600

4,800

9,900

11,000

10.3

25.9

17.6

38.9

42.9

228

243

251

254

256

4,650

4,506

3,018

4,406

6,951

20.4

18.6

12.0

17.9

27.0

14.5

13.0 

...

...

13.9

784

833

666

720

734

104

101

62

75

132

...

...

...

...

1.4

397

397

...

...

427

249

249

...

...

448

118

118

...

...

147

55

55

...

...

80

50

50

...

...

...

932

932

...

...

1,297

1,580

1,581

...

...

1,626

1,508

1,543

1,094

624

1,475

24

22

11

9

37

15.8

15.0

10.0

15.0

25.5

1997

1998

1999

2000

2001

1,417

2,715

3,471

4,014

5,100

648

681

577

739

730

6.8

10.0

20.7

59.2

62.8

Angola's highlands are some of the richest agricultural land in the world. Only 3 percent of its eight million hectares of arable land is under cultivation at present. Under a new agricultural strategy, the government has removed most price controls and has set up a rural credit programme to assist farmers.

Prior to the civil war, Angola was the world's fourth largest coffee producer, with an annual output of 200,000 tonnes. A modest recovery in the coffee sector is underway and production was projected to reach 120,000 tonnes in the 1998/1999 season. The government has submitted a plan to the International Coffee Organisation to overhaul the sector over a two-year period. Under the privatisation programme, the government plans to liquidate all 33 state-owned coffee companies and to invite international investors to bid for the largest plantations.

The fishing fleet is being rebuilt through donor assistance. Refrigeration facilities at the southern ports of Tombwe and Namibe have been overhauled and a new production line at the Tombwe canning factory has been installed with EU assistance. Fish prices have been deregulated to encourage development and the government, with the assistance from the World Bank, has set up the Angolan Support Fund for Fisheries Development.

Valuable tree species, including rosewood, ebony, and African sandalwood, as well as mahogany, tola and mulberry, are found in the northern forests which have been untapped since independence.

 Agricultural Production ('000 tonnes)

1996  

1997  

1998  

 Cassava

2,500  

2,326  

3,211  

 Fisheries

73  

94  

72  

All data are official estimates. Source: UN Food and Agriculture Organisation.

The industrial sector in Angola is being restructured to meet international standards. There are large gaps for investors in many areas of activity.

This sector has also been devastated by the departure of the Portuguese and the civil war. Existing industries include manufacture of consumer goods, the processing of local agricultural raw materials, oil refining, metal working, cement production, textiles and pharmaceutical production.

There is potential to significantly expand food processing and light industry with an infusion of capital, technology and training and the government plans to privatise some of the state-run enterprises.

Industrial development projects include the construction of three pharmaceutical plants in Luanda, Benguela and Dondo; the rehabilitation of the Somar fishing processing factory in Namibe, and the installation of a television assembly line.

There are also plans to expand the Luanda steel complex, construction of a shipyard and seaport in Cabinda province, the installation of a local assembly line for military trucks, and the construction of a brewery.

On October 1996, the Government of Angola created the Angolan Institute for Standardization and Quality (IANORQ) within the Ministry of Industry. The IANORQ objective is to set up, manage and develop the Angolan System for Quality (SAQ) legal institutional framework for improving the quality of products and services.

Angola has excellent potential to develop a thriving tourism industry with its tropical climate, beaches, rivers, mountains, wildlife and cultural attractions. The development of this sector has not yet begun in earnest. Visas are still difficult to obtain and it is unsafe to travel by road at present.

Although the wildlife resources have been severely depleted, there are still many species of animals roaming free in Angola from elephants to the rare giant palanca. The geographical variety, from tropical beaches to inland mountains and lakes, is sure to be a major draw card.

Angola has a long tradition of crafts made from ivory, wood, ceramics and metal, quite different to styles found elsewhere in Africa. Other aspects of Angolan culture such as dance, music and night life add to the Angolan attraction. In terms of culinary experiences, Angola has much to offer. Fish, shellfish and meat cooked with strong spices are some of the country’s specialities.

The hotel industry is run down and demand far exceeds supply. Restructuring of existing hotels is underway and there are plenty of opportunities for construction of new ones.

Angola has come to depend overwhelmingly on oil for its export earnings, with the United States of America being the main market for Angola’s oil.

Until recently, Angola has had few trade ties with other Southern African countries. However, now that there has been a change in the political climate, opportunities for trade with other countries in the region have opened up.

All imports and all exports, except those of foreign oil companies, must be licensed by the Ministry of Commerce. An import licence fee of 0.1 percent of the value of imports is levied, and import licences are only granted to enterprises of proven capacity. Exports of certain goods is restricted.

Angola’s oil exports account for 90 percent of all exports. The other main products include diamonds, gas, coffee, sisal and fish products. Its main exporting partners are the United States of America, the Benelux countries, China and Taiwan.

Imports include electrical equipment and machinery, vehicles and spare parts, medicines, food and textiles. Goods are sourced from South Africa, Portugal, South Korea, the United States of America and France.

Membership of International Organisations
Angola is a member of the Southern African Development Community (SADC) and Common Market for Eastern and Southern Africa (COMESA).

 Exports

1998  

 Value (US$ m; fob)

 Crude oil

4,854  

4,651  

3,091  

 Refined petroleum products

104  

101  

62  

 LPG

25  

          22  

11  

 Diamonds

267  

348  

432  

 Coffee

4  

5  

3  

 Total including others

5,096  

5,024  

3,543  

 Volume

 Crude oil (m barrels)

228  

243  

251  

 Refined oil products ('000 tonnes)

784  

833  

665  

 LPG ('000 barrels)

1,632  

1,542  

1,093  

 Diamonds ('000 carats)

917  

1,212  

2,765  

 Coffee ('000 tonnes)

2,895  

3,001  

1,994  

Source: BNA.  

 Main Trading Partners (US$ m)

1997  

1998

 Exports (fob) to:

 United States of America

3,180  

2,227  

 China

645  

140  

 France

190  

102  

 Portugal

510  

451  

Figures derived from partners' trade statistics and therefore subject to a wide margin of error. Source: IMF, Direction of Trade Statistics.

Following independence in 1975, the Angolan government nationalised foreign banks and had a very limited banking system which provided little in the way of services. Until 1991 there were only two banks: the Banco Naçional de Angola (BNA) which was both the central bank and a commercial bank and the Banco Popular de Angola (BPA), a government-owned commercial bank.

The Banco Naçional de Angola now acts solely as a central bank. It is responsible for foreign exchange and formulation and control of financial and monetary policy. It has the powers of supervision and inspection, but the power to authorise the establishment of financial institutions belongs to the Ministry of Finance. There are five commercial banks: the State-owned Banco de Poupança e Credito and Banco de Comércio e Industria; and the Portuguese private banks Banco de Fomento e Exterior, Banco Totta e Açores, and Banco Português do Atlàntico.

Government has set up several specialised funds in a bid to provide finance to the private sector for the rehabilitation or creation of business activities. Most funds are still small and are in the early stages of development.

Companies established in Angola under the foreign investment law are, in theory, able to apply for domestic loans. However, the availability of credit is presently subject to quantitative restrictions imposed by the central bank. Loans from foreign sources are subject to licensing and authorisation from the Ministry of Finance and the central bank. Although direct capital investment is still considered the most suitable way of financing projects, no repatriation of an investment can be made for six years.

Money and capital markets have not been developed; consequently, the informal money markets are used extensively. The first steps have been taken to open up the insurance sector which was dominated by the State-owned Empresa Naçional de Seguros e Resseguros de Angola.

Exchange Controls
Exchange control legislation in Angola is maintained for the purpose of macro-economic stability. The major exchange control regulations are as follows:
•    No restrictions exist on the amount of foreign currency brought into Angola, but the exportation of domestic currency is prohibited;
•    There are specific dealers in Angola who are authorised to buy and sell foreign exchange;
•    Travel allowances, allowances for medical treatment abroad, and allowances for dependants overseas, are all granted at fixed monthly rates;
•    Dividends earned by foreign investors may be taken out of Angola if the investment in the resident company exceeds US$250,000;
•    Transfers of personal capital are reviewed on a case-by-case basis; and
•    Foreign currency accounts are permitted, into which foreign currency (in cash, travellers cheques or foreign payment orders) may be deposited.

Government Finances (Kz m; State Budget 2000)

Sources: Ministry of Finance, budget document; Angop.