Index trend
Previous Quarterly Editions
Expropriation Risk: 64 64 63 63 ►Political Violence Risk:51 49 49 48 ►Terrorism Risk:23 21 21 21 ►Exchange Transfer and Trade Sanction Risk: 64 64 64 64 ►Sovereign Default Risk:83 83 83 83 ►
Overall Risk Temperature: 64 (Significant) TREND ►
Special topic: Relationship with the 'global rules-based order'
The ruling People’s Movement for the Liberation of Angola (MPLA) is a latter-day supporter of rules-based international order, despite its nominal status as a Marxist-Leninist party (a hangover from the Cold War era when the national liberation movement was supported by Cuba and the former Soviet Union). It sees the international order as key to attracting the capital needed to diversify the economy away from its over-dependence on hydrocarbons.
Angola actively seeks to promote the rules-based order. It negotiated the European Union (EU)-Angolan Sustainable Investment Agreement in 2022 to help dilute Angola’s dependence on oil and gas exports. The agreement also provided greater legal certainty for investors while ensuring protection for labor and the environment. This did not come at the expense of maintaining close economic ties with China. Luanda also signed a long-term investment agreement with Beijing.
Angola abstained in the March 2022 United Nations (U.N.) General Assembly vote to condemn Russia’s invasion of Ukraine. Out of 54 African countries, 28 voted in favor (51%); 25 abstained; and only one, Eritrea, voted against. Angola’s abstention was interpreted at the time as a sign of deference to its former Cold War ally rather than a seal of approval of Russia’s violation of the U.N. Charter.
Nevertheless, like most other African countries, Angola supports the African Union’s call to reform the U.N. Security Council to give Africa a seat on the world body. Nonetheless, Africa has yet to agree on a process for how to choose the new permanent member. Luanda also supports wider African reforms to support more lending to help the development of African economies.
Angola’s political elites are unlikely to abandon their support of the rules-based order in the foreseeable future. Its erosion or unlikely outright collapse would potentially impede the trade and investment flows upon which the country’s current development model depends.
TREND ►
The signing of the EU-Angola Sustainable Investment Agreement in 2022 — ratified earlier this year by the European Council — represents one of the most effective protections against arbitrary expropriation offered to foreign investors by the government to date.
It is the EU’s first sustainable investment agreement and is primarily aimed at attracting new investment into Angola’s non-oil economy, which currently accounts for some 50% of GDP (the rest is made up of oil and gas production).
Angola has continued to rise up the ranks of Transparency International’s Corruption Perceptions Index, receiving a score of 33 on a scale from 0 (highly corrupt) to 100 (very clean), a marked improvement over recent years: Its score was 19 in 2014. Nonetheless, it ranked 121 out of 180 countries in terms of the least corrupt public sector, indicating that corruption is still a significant risk in the business climate although the picture is improving.
Angola suffers from extreme poverty, high fertility rates, vast income disparities and a government with the lowest electoral mandate since independence from Portugal in 1975. The MPLA is under pressure to reach out to disenchanted and impoverished sectors of society to spread the benefits of economic growth more broadly among the country’s 33 million people.
The state security apparatus is unlikely to be threatened by popular uprisings. The authorities often use lethal force against the general population. Nonetheless, the hardship endured by most Angolans increases the risk of street demonstrations. With two-thirds of the population under the age of 24, few remember the devastation caused by the 1975 – 2002 civil war.
The next round of presidential and legislative elections is due in a little over three years. The MPLA will need to win the hearts and minds of a huge swathe of the electorate to have any chance of defeating the opposition National Union for the Total Independence of Angola.
Angola, a predominantly Christian country, has been largely free of the domestic terror threats that have afflicted many states in the West African region arising out of mounting insecurity in the Sahal.
A domestic terror group, the separatist Front for the Liberation of the Enclave of Cabinda, has not been active since 2010; however, fears persist that political stability could be undermined by decades of under-development and elite theft of the state's natural resources.
Angola took the markets by surprise in March after the central bank increased its benchmark by 100 basis points to 19%. It was the highest level in 15 months and the second increase in three months. The moves were a bid to rein in runaway inflation, which rose to 24% in February, up from 20% in December and 18.2% in November. Finance Minister Vera Daves De Sousa has pledged further rate increases if necessary.
The economy is nonetheless expected to grow by around 3% of GDP in 2024, slightly more than the growth rate recorded in 2023. This is significantly better than the 1.1% contraction recorded in the first quarter of 2022 — the first contraction since Angola emerged from a six-year recession in 2021, which wiped an estimated 10% off the value of the country’s total GDP.
The International Monetary Fund forecasts around a 3% increase in economic performance and a return to fiscal consolidation as growth surpasses 2023 levels. Yet risks remain elevated because of continued oil price volatility and the difficulty faced by emerging markets in tapping the international debt markets.
Angola took the world by surprise in January by leaving the OPEC+ oil cartel, after a decision by the cartel in November 2023 to further cut output in 2024 to support prices. Angola produces 1.1 million barrels per day and refused to accept the loss of earnings entailed by further cuts.
Angola came perilously close to a sovereign default in 2020 when the country’s debt-to-GDP ratio rose more than 130%. The picture has improved significantly since then as a result of Western and Chinese debt moratoriums and the spike in oil prices triggered by Russia’s invasion of Ukraine.
Current government stocks of public debt have officially been put at 52 trillion kwanza (roughly $62.9 billion), made up of 14 trillion kwanza of domestic debt and 38 trillion kwanza of external debt — roughly $21 billion of which is owed to Chinese lenders.
Angola’s current debt-to-GDP ratio stands at some 85%, up markedly over the 2022 figure due to the recent depreciation of the kwanza; however, the government forecasts that the debt ratio will fall to 69% of GDP by the end of 2024.
Planned initial public offerings of state assets, including the telecoms company Unitel and the country’s second-largest lender Banco de Fomento Angola — now delayed to 2024 — could raise fresh capital to help further reduce Angola’s debt burden if they finally take place.
