Angola is one of the biggest African economies.
The population is almost 31 million of people and the GDP per capita is $ 6,800.
Just a few words about geography, because we think it is surprisingly interesting.
Angola is a large country (around the double of France, or Texas if you prefer) and most of its territory is covered by forest and plants. That is why it looks so green from Google maps.
Angola is also full of hills and mountains and the average height is more than 1,000 meters.
However, we have to consider that the eastern part of the county is almost uninhabited.
Angola borders three countries: Namibia, Democratic Republic of the Congo, and Zambia.
BUSINESS OPPORTUNITIES
First opportunity: one of the most important African economies
Angola is the seventh-largest economy of Africa (there are more than 50 countries in Africa).
The population is not so large, but the GDP per capita (6.800$) is above the African average.
In absolute term is not high. It is the same level as Vietnam, just to give you an example in Asia and 1/8 compared to the United States of America.
However, the size of the market is interesting and should be considered for international exporters that are interested in export in Africa.
Moreover, Angola is included in the list of Least Developed Countries and is a beneficiary of the “Everything But Arms” program, promoted by the European Union (no duties and no quota in the export in the EU).
Second opportunity: demographic
The average age in Angola is 15 years old.
Every woman has 6 children on average and the population is growing fast. It is one of the fastest-growing population on the planet.
It is forecasted that in 30 years from now (2050), the population of Angola will be double than now (60 million people).
From a business perspective, it should be considered that the market size of Angola is expanding and those who want to invest in Angola have to think about what will be Angola in 10-20 years from now.
Third opportunity: Portuguese
Angola was a colony of Portugal until 1975, it was one of the last African countries to become independent.
Portuguese is the official language of Angola and around 70% of the people can speak it fluently.
This is an opportunity for people that are fluent in Portuguese, it will be easier to find local business partners.
Four opportunity: investment in energy infrastructures
Like we wrote previously that the average height is more than 1.000 meters and the country is humid and rich in water with rivers.
Due to that Angola is the perfect country for hydropower. Actually, 64% of the electric energy is produced thanks to hydroelectric plants.
However, only a small part of the hydroelectric capacity has been exploited. Large investments in this sector are planned and the hydropower capacity might increase by 8 times in the next 10 years.
Fifth opportunity: oil-driven economy
Angola is well known by all the people that work in the oil & gas sector, in fact, it is one of the largest exporters of oil in the world.
How important is the oil & gas sector for the Angola economy?
We just give you 2 numbers:
- 50% of GDP of Angola comes from the oil & gas
- > 90% of the export comes from oil & gas
The oil is Angola’s main export and it is crucial for its gross domestic product.
It is practically the only relevant export of the country, that allows receiving valuable currency from outside. It is also the main sector in which Angola receives foreign direct investments.
BUSINESS RISKS
First risk: oil-driven economy
Having an economy such as dependence on oil is also a risk. A big risk.
The GDP of Angola skyrocket in the past years when the oil price was above $ 70/barrel. On the other side, the country’s economy suffers considerably when the oil price is below $ 50/barrel.
We put together the two factors in the graphic below. The correlation between the two variables is evident.
This is because the civil war ended (2002) and heavy foreign investments flowed into the oil sector
The point is that a large part of the investments in the country are possible thanks to “oil money” (e.g. we wrote about the investment in hydropower plants), if the profits from the oil sector decrease also other compart of the economy will suffer considerably.
The question is: how will be the price of oil in the next years?
Nobody knows, but if the price of oil will decrease below $ 50/barrel, the Angola economy will face serious problems.
Second risk: bad infrastructures
Angola was a Portuguese colony and gained independence only in 1975.
What happened after independence? There was a long bloody civil war of 27 years, that ended only in 2002.
It is forecasted that around 1.5 million people lost their lives during the conflict.
The signs of the war are still present. First of all, some areas of Angola are still covered by landmines. Second, the infrastructures were damaged are in bad conditions even today (by the way, they were poor even before the conflict, however, the country lost the opportunity to improve them during the years of the conflict).
Just to give you one significative data. According to CIA, the electrification rate is only 30%. It means that 70% of the people do not electricity in their house.
Third risk: corruption
According to Transparency International, Angola is one of the most corrupted countries on the planet.
The implications of it are reflected in the economy of the country.
Why so many companies decided to invest in Angola, but they limit their investment in oil & gas?
Why almost all the goods have to be imported from outside and only a few things are produced locally?
Corruption is one of the elements that limit foreign investments in Angola.
Four risk: social inequality
Despite the large export of oil and a GDP per capita that is low, but a bit higher than the African average. A too high percentage of people do not have access to electricity and water in their houses.
It indicates that the income is not equally distributed among the inhabitants. This scenario is not exclusive of Angola, in many countries that are larger exporter of oil, the benefits are the preserve of a small number of people.
From a business perspective, we have to consider that the average income does not represent accurately the reality of the country. And a large part of the population cannot buy even cheap mass products.
Fifth risk: currency instability
The currency of Angola is called Kwanza. It is extremely unstable because the value of the currency is moving following the price of the oil. A decrease in the oil price, have an impact on the local currency.
It is hard to forecast the value of Kwanza in the next 6 months or 1 year. Much will depend on oil price, and consequently from the choices of the central bank of Angola (called National Bank of Angola) and the government of Angola.
So, you must be very careful about the terms of payment, since the inflation level is quite unpredictable.
CONCLUSIONS
Angola will be one of the protagonists of the future development of Africa.
In the medium-long term, the country will be way bigger in terms of population and consequently in terms of the whole size of the economy.
However, it is not easy to imagine what kind of market will be Angola in 20-30 years.
Will we see a larger middle class (with the opportunity to sell more B2C products)? Or will it evolve like a country with strong inequalities? Is there any chance to have a large
Unfortunately, it is impossible to answer now to those questions.
One key point is the oil price, which is the main Angola export. If it will be high in the next decades, Angola will have the chance to finance its economy, pushing for diversification. However, economic history is telling us that it is not enough to have natural resources to be a wealthy country.
What about doing business in Angola today?
Angola is not producing almost anything, and the market is widely not explored (even by some large corporations). You should evaluate carefully the market potential for your sector, but in many business areas, there are opportunities to sell B2B and B2B products.
However, it is not an easy market to access and from this perspective having a strong and reliable local partner is the key factor to have success in Angola.
Other info about the Angola economy: Angola Business Report
Link to data source: The World Factbook (CIA)
Globartis Research
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