Angola Looks to Diversify from Crude with Windfall Oil Revenues

Detailed summary

Angola has accelerated efforts to diversify its economy away from heavy dependence on oil by using this year’s windfall oil revenues to fund reforms and investments in transport…

Angola has accelerated efforts to diversify its economy away from heavy dependence on oil by using this year’s windfall oil revenues to fund reforms and investments in transport corridors, minerals, banking, and tourism industries, according to Citigroup.

“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,” Citi’s Grant Carson, who oversees several African markets including Angola, told Bloomberg in an interview published on Thursday.

Angola’s government is working to diversify the economy away from the extraction-led model of the past decades, the Citi executive told Bloomberg on the sidelines of the African Financial Industry Summit in Angola’s capital city of Luanda.

The African country, which relies on crude oil for about 90% of its export revenues, has seen in recent months deals in the banking, tourism, and agriculture sectors as the diversification drive is gaining momentum, Carson said.

Angola is also relying on expanded transport links, such as the U.S.-backed Lobito Corridor, a railway network to link the minerals-producing regions in the Democratic Republic of Congo (DRC) and Zambia with Angola’s Port of Lobito on the Atlantic Ocean.

Angola’s state oil firm, Sonangol, is also seeking stakes and footprints in the development of critical minerals domestically.

Yet, Angola remains vulnerable to global oil prices, Fitch Ratings said last week as it affirmed its Long-Term Issuer Default Ratings (IDRs) on the country at 'B-‌' with a Stable Outlook.

Angola’s oil production is set to remain broadly stable at around 1 million barrels per day (bpd) over the next year, while new and incremental projects should subsequently offset natural decline and support stabilization of production, the ratings agency said.

“But with oil accounting for close to 60% of fiscal revenues and 95% of…

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