It is quite clear that the tables of political and economic power are turning on some levels, as can be seen by the stronger influence of the BRICS as well as other emerging nations in the world.
The eurozone debt crisis has once again caused a stir amongst developed nations. While the crisis has an effect on emerging economies in Africa in terms of demand factors and a slow-down in foreign direct investment (FDI), the overall African growth story remains untainted.
According to the Financial Times, Portugal, which is struggling to comply with the terms of a EUR78 billion financial rescue package, is now looking to encourage its former colony Angola to invest in its debt-stricken economy. According to Pedro Passos Coelho, Portugal’s prime minister, the country is looking to attract Angolan investment in its EUR7 billion privatisation programme and other areas.
Angola gained independence from Portugal in 1975 but then plunged into a devastating 27-year civil war that ended in 2002. Its massive oil revenues – it is Sub-Saharan Africa’s biggest crude producer after Nigeria – have however allowed it to post rapid economic growth. Record high international oil prices and growing output from new oilfields have helped sustain average double digit GDP growth since 2004 – reaching 18.6% in 2006, 20.2% in 2007, and 14.8% in 2008. The oil windfall has also paved the way for increased fiscal expansion and a subsequent outward shift in domestic demand that is propelling the real sectors of the economy.
Growth is recovering on the back of rising production, a higher average oil export price, a recovery in the construction sector and ongoing expansion into agriculture, manufacturing and construction. GDP is projected to rise by some 6.5% in 2011, with oil sector growth amounting to 3.8% and non-oil sector activity set to rise by some 8.1%.
Within the European Union (EU), Portugal remains Angola’s dominant trade partner. It is worth noting that Portuguese investment into Angola, particularly in construction, had been accelerating in recent years. In fact, most Portuguese contractors continue to win new tenders. Companies such as Somague, Texeira Duarte, Mota-Engil, Edifer and Soares da Costa have billboards all over Luanda for new construction projects. The influence also extends to the banking sector, where Banco Espirito Santo de Angola, Banco BIC, Banco de Fomento de Angola, among others, all have Portuguese shareholding. In telecoms, Portugal Telecom owns a 25% stake in Unitel.
The eurozone crisis certainly represents an opportunity for Angola to consolidate its positions in Portuguese companies thereby strengthening the existing economic relationship between the two countries.
Overall, while the oil-rich economy has been booming for much of the past decade, it has largely remained impossible for portfolio investors to get exposure in the country. The opening up of a stock exchange has been on the cards for several years now, and the authorities have long invested in creating a strong foundation upon which the country’s capital markets will be built.
Imara is an investment banking and asset management group renowned for its knowledge of African markets.