Oil Crash Forcing Angola To Reform Private Investment, Public Services

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Written by Dana Sanchez

Falling oil prices have stimulated the Angolan government to move ahead on reforms in private investment and public services that were in the works, but it was slow to implement, according to reports in IRINnews and AngolaPress.

Oil-dependent Angola in 2015 cut spending by about 50 percent as oil revenue fell, IRINnews reported.

Oil prices, around $100 per barrel in 2014, are now at $31 a barrel. The local currency, the kwanza, is devalued, and more than 1.25 million Angolans are watching their livestock and crops die in the drought.

It’s a stark contrast to the oil boom years when Angola — Africa’s No. 2 oil exporter after Nigeria — splurged on infrastructure projects and military build up after more than 25 years of civil war.

State funds were “squandered in pointless projects or hoarded by the few, and most Angolans were left with nothing,” according to Ricardo Soares de Oliveira, an Angola specialist. He describes the spending as a lost opportunity of “monumental proportions.”

Writing in the journal Foreign Affairs in 2015, de Oliveira said, “As those citizens awake from their dreams of petro-prosperity to leaner times, the key question is where their dissatisfaction will lead, especially now that the state’s resources to buy off rising constituencies are dwindling.”

The government has been quick to crack down on dissent, de Oliveira said.

Another perspective is that Angola is now in a period of opportunity.

In addition to building its military, Angola was building universities, said Allan Cain, director of the Luanda-based NGO Development Workshop.

“In the past, Angola had sufficient funds to be inefficient, but the country can no longer afford to be inefficient and must find ways of recovering the costs of these services,” Cain, said in an IRIN interview. “There are demands from the public for basic services. Aspirations are strong, particularly from the youth graduating from the new universities. There are 21 to 25 (Angolan universities) compared to just two at the end of the war.”

Spending cuts are forcing reforms in Angola’s subsidy system — a system that mainly benefited the middle class — Cain said. Reduced fuel and water subsidies have resulted in sharp cost-of-living increases. Garbage collection is backlogged in the capital, Luanda. Civil servants receive salaries only intermittently, IRIN reports.

Luanda streets are gridlocked — testament to the cheap fuel in cars only the rich can afford. Shanty residents don’t have access to piped-in water, relying instead on buying theirs from expensive private tankers, IRIN reported.

Angola has began legal and institutional reforms linked to private investment, according to Angolan Trade Minister Rosa Pacavira, AngolaPress reported.

You no longer need a minimum $1 million US dollars to invest in Angola. That requirment slowed down investment in the country. Micro, small and medium companies are encouraged.

Entrepreneurs will have greater protection and guarantees. Doing business in Angola will be faster. Ministries are authorized to approve investments up to $10 million.

Entrepreneur who generate jobs, add value and help diversify the economy will get tax and customs incentives and benefits on a selective basis, according to the AngolaPress report.

High-priority sectors for Angola include the food industry, textiles (clothing, footwear), construction, recycling, plastics, and metallurgy, Pacavira said.