48th anniversary of Angolan independence: Towards economic development (1975 - 2023)

President of the Republic of Angola Joao Manuel Goncalves Lourenco / Courtesy of Embassy of Angola in Seoul

Angola's independence was proclaimed on Nov. 11, 1975 by then-President of Angola Antonio Agostinho Neto. After independence, Angola was devastated by a civil war that lasted until 2002, destroying the country's main infrastructure, particularly the breadbasket of agribusiness. These factors inhibited productivity throughout the country.

In 1987, the transition from a centralized socialist economy to a market capitalist economy began, with the adoption of the Economic and Financial Sanitation Program (SEF).

As part of this program, the measure to Downsize the Public Business Sector (SEP) was taken in 1989. The measure was particularly aimed at adapting the state's business sector and, consequently, privatizing companies that could not justify remaining in the public domain.

On the other hand, the political transformations that took place on the international stage with the fall of global bipolarism (1990s), the adoption of the multi-party political system in 1992, the advent of peace and national reconciliation achieved in 2002, created favorable conditions for greater openness in the political system, which contributed significantly to the adoption of the new model of economic development in Angola, based on the principle of free enterprise, competition and contractual relations between commercial entities.

In the meantime, the adverse international climate that still prevailed was the focus of a speech (2008) by the then President of the Republic Jose Eduardo dos Santos: "We cannot structure the national economic system without the presence in the world of capital and labor of conscious and strong Angolan companies and economic groups, because they will be the guarantee of our independence."

It was from this moment on that the diversification of the economy, the opening up of the national market to the world, the liberalization of the exploitation of abundant natural resources, and the entry of foreign investment into Angola without discrimination were defined as priorities. This measure was adopted as a key element for the country's sustainable social development, making it the centerpiece of government action in Angola.

From this time onwards, the implementation of public-private economic partnerships and business partnerships began to play an important role in the Angolan economy. The Angolan Chamber of Commerce and Industry (CCIA) was created, as well as professional associations by sector of activity, joint chambers of commerce between those in Angola and other countries whose main mission, as partners of the government, was to support the development of private sector companies and represent their interests with the public authorities, trade unions and partners for Angola's economic growth and development.

Like other countries, the Angolan economy has also suffered in recent years from the global economic and financial cyclical effects that began in 2008 and continue to this day, which have had a direct impact on reducing its growth rate.

With the aim of attracting private investment (Angolan or foreign), providing favorable conditions for potential economic operators, the Angolan government has been adopting concrete public policies to encourage the emergence of production units of various kinds throughout the country. These include macroeconomic stability and regulation; tax and public finance reform; promoting economic growth; increasing and promoting employment; training and valuing national human resources; an integrated policy to promote entrepreneurship and the development of the national private sector; a policy to support exports; a policy for the equitable distribution of national income and social protection; and others.

It was within the scope of this strategic development vision that the government approved several Periodic Economic Development Plans (PDN) for the periods 2013-2017, 2018-2022, 2023-2027; Short Medium and Long Term Development Strategies for the period 2007-2025, and a Long Term Development Strategy until 2050. The PDNs are the essential tools for managing and promoting social development, wealth creation, increased investment, productivity and the standard of living of citizens, as the ultimate target of the government's economic and social policy.

As a result, the government created a robust regulatory framework, starting with the revision of the Constitution of the Republic (2010), a document that reinforced the foundations of the Angolan state, anchored in the principles of the democratic state and the rule of law.

The Magna Law reinforced the organization and regulation of economic activities based on the general guarantee of economic rights and freedoms in general, on valuing work, on the role of the state as the sole and exclusive regulator of the economy and coordinator of harmonious national economic development, on the right to free economic and business initiative, the market economy based on the principles and values of healthy competition, morality and ethics, respect and protection for private property and initiative, consumer protection, on the state's guarantee of the coexistence of the public, private and cooperative sectors, ensuring equal treatment and protection for all.

A night view of Luanda, Angola’s capital city / Courtesy of Embassy of Angola in Seoul

However, the major turning point in Angola's economic development started to happen in 2017, with the election and inauguration of the government of President Joao Manuel Goncalves Lourenco.

The elected government carried out deep and important reforms to improve the business environment in Angola and approved a set of laws regulating economic activity, with emphasis on the one that defines the general bases of private investment, such as the Private Investment Law, of petroleum-linked?activities, for the Prevention and Combating of Money Laundering, for Public Private Partnerships, Competitions, Privatizations, Exchange Law, Business Sector, Management of the Mining Sector and Diamond Trading.

Nonetheless, since 2017, the government led by the current President of the Republic has also carried out infrastructure projects related to?construction of roads, schools, hospitals and art, housing for the population throughout the country, as well as those relating to oil exploration and gas production in new fields carried out throughout the country.

In addition, the government has also created various development poles in the agricultural, industrial and mining sectors (diamonds, gold and other rare minerals), invested in the discovery of new oil and gas exploration fields onshore and offshore; and approved, with the support of the World Bank (WB), various development programs aimed to foster entrepreneurship, credit support, the creation of free?trade?zones, ?export diversification and import substitution?as well as the development of?the livestock, fisheries and mining sector.

It is important to emphasize that, following the reforms, the government has carried out important and far-reaching institutional reforms in the main sectors of the economy, with the aim of reducing bureaucracy in the state's administrative machinery and making it easier for citizens to find the best solutions, as well as creating various development poles, including, for example, some in the mining, oil and gas sectors.

Despite this context, the prolonged decline in the international price of crude oil since mid-2014 and the emergence of the COVID-19 pandemic have had an immediate and significant impact on the Angolan economy as a whole, leading to its contraction and the erosion of its fiscal and external buffers.

Economic diversification is clearly the major challenge facing the Angolan economy. A simplified legal framework of tax incentives aims to attract foreign capital for this ambition.

In this regard, the government has sought to address economic challenges in recent years through various reform programs and strategies that seek to maintain macroeconomic stability and deal with pockets of the population living in poverty without access to basic services through restrictive monetary policies and an inclusive development program.

As an effect of the crisis, public debt increased by almost 30 percentage points between 2014 (41 percent of GDP) and 2018 (estimated 73 percent), already exceeding 100 percent.

Despite the constant structural imbalances in its economy, the country continues to face persistent development and challenges, which include, among others, reducing its dependence on oil and diversifying the economy; rebuilding its infrastructure; improving institutional capacity, governance, public finance management systems, human development indicators and the living conditions of the population.

The notable results of the reforms carried out by the government included, among other things, Angola's entry into the Eurobond market with an initial value of $3 billion, the IMF's approval of the revisions to the Extended Fund Facility (EFF), which has been underway since 2018, and the provision of a new tranche of financing in the amount of $1 billion (2020), which brought the total funds already made available to $2.48 billion.

In addition, in an attempt to meet the new challenges faced by Angola caused by the COVID-19 pandemic and preserve the implementation of the structural reforms necessary to comply with the agreement, the IMF increased the value of the program by $765 million until the end of its implementation.

IMF data indicates that, despite the global crisis, the Angolan economy is, as of 2018, the third largest behind Nigeria and South Africa in sub-Saharan Africa, and is largely driven by oil, which accounts for a third of its GDP and 95 percent of its exports. Faced with the persistent social crisis, and as a measure of relief, the government has been adopting some important economic measures, namely fiscal and monetary ones.

The logo of Angola's 48th anniversary of independence / Courtesy of Embassy of Angola in Seoul

It is important to note that the Angolan government's resilient stance and its strategic position as the guarantor of political stability in the Great Lakes Region has enabled it to gain the trust of international partners to carry out development projects. Angola therefore maintains strategic economic partnership relations with the United States, China, France, Portugal, Spain, Japan, Italy, Brazil, India, the United Arab Emirates and Turkey, countries that have a significant business presence in Angola and operate in a wide range of economic sectors, including oil and gas, construction and public works, port infrastructure, roads, railways, energy, telecommunications, mining, banking, health, agriculture, real estate and services.

Besides the projects carried out, as described above, we would also?like?to?emphasize the construction of the New International Airport Dr. Antonio Agostinho Neto in Luanda, the construction and?improvement of?the?national rail network, notably, Luanda Railway, the modernization of the Luanda Oil Refinery, the construction of the Lobito Port Oil Refinery, in the province of Benguela, Cabinda's and Soyo's refineries, Barra do?Dande Oceanic Terminal, Industrial Hub of Viana, of the first Gold refinery and so on.

Another segment of Angola's development is energy security. In this sector, Angola is becoming a major producer of hydropower. According to the World Commission on Dams (WCD) Hydropower Status Report (2020), Angola is well placed in the world ranking of countries that have contributed most to generating energy from dams, as a result of the investments made in recent years in the energy sector, with the construction and improvement of large hydropower complexes.

The following dams have been improved and built: Lauca Dam; Capanda Dam; Biopio Dam; Matala Dam; Caculo Cabaca Dam; Calueque Dam, Cambambe Dam; Chiumbe-dala Dam and the expansion of the Luachimo power station.

In short, during the 48 years of national independence, and despite the constraints resulting from the national and international situation, the Angolan government has continued to make huge efforts towards economic and social development and the well-being of vulnerable populations.

To this end, the measures to stimulate the national economy, namely the diversification of the economy, financial support for the business sector to increase national production, particularly in the manufacturing industry, simplification and tax relief to improve the business environment, attract foreign investment, increase national production and the flow of products from the countryside to the major housing areas, the adoption of a favorable fiscal and tax policy, the granting of loans at affordable interest rates, appear to be essential conditions for this.