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Panel: Investing in Key Sectors
UK-Angola Investment Forum 2012
Aurelien Mali, Vice President – Senior Analyst, Sovereign Risk Group
May 2012
Strong growth prospect supports Angola’s Ba3 rating
» Angola Ba3 rating is supported by a moderate assessment of economic
resiliency:
– Wealth of economy measured as GDP per capita on a PPP basis is in between the
second and third quintiles according to Moody’s rated universe.
– However, at current prices, the strong underlying growth trends suggest the size of the
economy will be over US$150 billion in a few years’ time.
Nominal GDP (US$ bn, Average 2009-11)
Very Low
Low
Moderate
High
Timeline
250
200
150
100
June 3,
2011
Ba3 / Stable
Feb 28,
2011
B1 / Review for Possible
May 19,
2010
B1 / Positive
Outlook
50
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0
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10 years of peace: Laying the foundation for diversification
and broad-based growth
» Re-construction: Key driver of non-oil GDP
» Since 2009, non-oil GDP overtook the hydrocarbon sector contribution to GDP
» Concurrently, very positive progress in achieving macroeconomic stability
– Reduction of inflation / Foreign exchange stability
– Constitution of Foreign currency reserves - a large cushion in the making
– Positive reform momentum following the end of the IMF stand-by agreement
Real Growth Rate by Sector (% change,
25
Non - oil GDP yearly
nominal growth
and
Evolution of Nominal GDP
160
35
Other
20
30
Trade
120
25
15
10
Constructi
on
100
20
Energy
80
15
Manufactur
ing
10
Diamonds
5
0
Non-Oil GDP (US$ bn)
140
60
40
5
Fishing
0
Agricultur 20
e
-5
2007
2008
2009
2010
2011
Non-Oil
GDP
0
1999 2001 2003 2005 2007 2009 2011 2013
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However, Angola is to remain reliant on oil over the
medium term
» Oil = Main export sector
– Source of foreign currencies
» Oil Reserves – Continued exploration
of Angola’s oil potential
– Positive effect expected from
the new foreign exchange law for the oil
sector
Ultra-deep water
» Development of oil-related sector
– Services / Angolan fabricated content
Onshore
– Refinery projects
Namibe Basin
Source: Sonangol
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Angola benefits from a large pool of resources to
diversify its economy
Extractive Industry
- New mining law adopted
Agriculture
- Productive soil > 35mn ha
- National Plan of Geology
- Diamond, iron ore, copper,
phosphate, gold, uranium, bauxite,…
Fishing
of which only 10% is fully utilized
-Self-sufficient prior to independence
Manufacturing
- Food processing potential
-With 1,600km coastline, Angola benefits
from a rich fishing ground
- Fish reserves are comparable to the one
along the Senegalese coast
Construction
- Large construction requirement driven by civil
war legacy and high urbanisation rate (57.6%)
- Heavy industry already represents more
than 15% of manufacturing
- Cement and steel tube production
Financial Services
-Bank usage rate slightly above 10%
- Rapid organic growth of current banks
- Positive effect on liquidity expected from the new
foreign exchange law for the oil sector
Hydro-electricity
- Large and powerful rivers that cross the
country provide a large hydropower capacity
Trade & Services
-Wholesale and Retail trade = main contributor to a rapidly
expanding non-oil GDP
-Telecom = a growing sector with only two main players
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Structural constraints to growth remain present
» Infrastructure
» Education / Human Resources
– Roads/Ports: Capacity constraint linked to
war legacy
– Skill shortages
– Railways currently being rehabilitated
– MT National Plan underway to “equip
physical infrastructure” with qualified
teachers
– Energy suffers transmission and distribution
problems
– Young population to educate and train
– Raising infrastructure endowment could
boost annual growth by almost 3%
» Health
– Health infrastructure has been neglected
during the almost 30 years of civil war.
– Though improving, sanitation and water
management remain an issue, generating for
example cholera epidemic.
– Absenteeism is one of the often quoted
issues faced by Angolan enterprises.
Source: World Bank
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Structural constraints to growth remain present
» Institutions and governance
World Bank – Governance Indicators
– Angola ranks low in the World Bank
governance indices.
– However, Angola suffers a perception
issue
» Real improvement in WB governance
indicators
» Reforms and measures to improve
transparency
– Phasing out of Sonangol quasi-fiscal
operations
– Audited accounts of Sonangol and BNA
» Overall successful completion of IMF stand-
by agreement
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Structural constraints to growth remain present
» Business environment has room for
improvement
– Angola is amongst the lowest performers
in global rankings (WEF, WB Doing
business,…)
World Economic Forum
Survey,
The most problematic factors for doing
business
– Bureaucracy remains a constraining
factor
– Large interventionism of the state in the
economy
– Sonangol: from oil concessionaire to
Angolan 1st State conglomerate
– Low lending to private sector
Note: From a list of 15 factors, respondents were asked to select the five
most problematic for doing business in their country and to rank them
between 1 (most problematic) and 5. The bars in the figure show the
responses weighted according to their rankings.
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Conclusion
Angola is a booming economy that should continue to expand quickly but it will
remain a oil story for the years to come.
In Moody’s opinion, we have a positive view on Angola over the medium term as
the authorities have the necessary means to foster real development. Some
constraints, such as the lack of skilled labour, will however take decades to
overcome.
Key parameters to take into account and monitor:
 continuation of reform process despite the end of Stand By Agreement
 Sustained action to liberalise the economy and ease of doing business
 Public finance management in particular oil proceeds that will accumulate
strongly
 Concrete results concerning infrastructure development for example by looking at
social indicators like water and sanitation coverage
 Political risk should not be overestimated over the short term but growing social
demand will exert more and more pressure on the authorities
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Mali Aurelien
Vice President - Senior Analyst
Sovereign Risk Group
Moody's Investors Service Ltd.
Tel: +44 20 7772 5567
E-mail: [email protected]
Q&A
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