Angola’s Economy Suffers in Low-Priced Energy Market

The Angolan government faces a financial crisis as lower oil prices shrink revenue streams, according to AFP. The Southern African country’s currency, the kwanza, receded 35% in value in 2015 against the dollar, and the central bank devalued the kwanza by 15% this year to bolster exports. Angola holds some of the most precious natural resources on the planet, but its citizens suffer from high infant mortality rates and severe poverty.

The Angolan government faces a financial crisis as lower oil prices shrink revenue streams, according to AFP. The Southern African country’s currency, the kwanza, receded 35% in value in 2015 against the dollar, and the central bank devalued the kwanza by 15% this year to bolster exports. Angola holds some of the most precious natural resources on the planet, but its citizens suffer from high infant mortality rates and severe poverty.

The Angolan economy is being hit from multiple angles, from a staggering youth unemployment rate of 26% to widespread corruption hampering economic progress. In the past few years, Portuguese migrants have flocked to Angola in droves for better opportunities, but they may have to look elsewhere as the former Portuguese colony sustains drastic hurdles.

Like many commodity-driven countries, Angola’s economy is not diversified enough to withstand oil price shocks, and only an elite few can ride out the economic instability with ease. Experts note that more people may die in the coming months due to malnutrition, skyrocketing costs, and food scarcity. A growing number of citizens cannot find enough goods to sell in markets, and many consumers are unable to purchase items because prices have skyrocketed fivefold.

In addition, Angolans have lost faith in their native currency and have flocked to the dollar to protect what little savings they have. The problem is that banks do not have the means to conduct rising foreign exchange transactions, forcing many to turn to the black market.

Steel Resolve

The business community is slowly abandoning Angola, and other emerging markets, such as Vietnam, appear more attractive from the viewpoint of many investors. However, Angola’s steel industry may be a useful asset as the country’s first primary steel mill opened last month, which could repair damaged infrastructure that has gone unattended for years.

Angola has plenty of leftover scrap metal from a 27-year civil war that ended in the early 2000s. The nation has since made vast progress, growing at around 12% in 2012 alone, but the African country could not escape low oil prices and China’s sluggish growth. With that, the government has a long way to go in improving the steel industry, as it only comprises 6.0% of GDP. The steel industry alone could enhance exchange rates and yield greater revenue, but Angolans could face future barriers in the form of commodity price dips and the Chinese slowdown.

Angola’s Trajectory

Currently, oil revenue comprises roughly half of GDP in Angola, and policymakers cannot diversify the economy in enough time to secure short-term growth, notes International Business Times. Moreover, financial reform is a crucial step in ensuring diversification, including infrastructure and foreign investment. While some companies remain interested in Angola, the nation’s lack of roads and sound infrastructure remain a turnoff to many investors.