Angola’s oil windfall fuels diversification push, Citi says

Detailed summary

The International Monetary Fund sees the country’s economy growing 4.4% this year, buoyed by higher oil prices and cooling inflationary pressure.

Angola’s drive to diversify its economy away from oil is picking up steam as the government uses a surge in crude revenue to finance structural reforms and investment in energy, transport and other industries, Citigroup said.

While crude accounts for about 90% of export revenue, the government is seeking to use this year’s oil windfall to shift the economy away from an extraction-led model, said Grant Carson, who oversees markets where Citi does not have a physical presence, including Angola, Ethiopia, Rwanda and Guinea.

“We’re definitely seeing a lot of activity and it has the benefit of longer-term political stability, economic stability, which is making it more attractive for foreign direct investment, infrastructure projects, and other longer-term investment,” he said in an interview on the sidelines of the African Financial Industry Summit in Luanda, Angola’s capital, last week.

He highlighted deals from banking, agriculture and tourism sectors as the diversification plans accelerates.

South African lender Absa Group is setting up a new representative office in the nation, while its peer, Standard Bank Group, increased its shareholding in its local unit to 75%.

Kenya’s Equity Group Holdings Plc also plans to grow its footprint to include Angola by 2030, as it eyes a slice of the trade routes moving rare earth and critical metals across the continent.

The country is also relying on investments along the Lobito Corridor, a US-backed, 1 100-mile railway that is getting an $866 million upgrade to ease shipments of minerals such as copper and cobalt from Zambia and the Democratic Republic of Congo to US ports.

An additional 500-mile rail connection to Zambia would directly link that nation’s Copperbelt to the Lobito line, bypassing Congo.

Angola is targeting around $2 billion of investment in non-diamond mining and rare-earth projects by next year to shift away from its historic diamond dependency and raise mining’s overall share of gross domestic product.

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