Angola economy in crisis as oil price sinks currency

The drop in the price of crude oil has plunged the economy of Africa's second largest crude producer into a crisis.

Wednesday February 3 2016

This file photo taken on January 26, 2010 shows a woman carrying a bucket of fruits on her head in downtown Luanda. PHOTO | FILE | AFP

This file photo taken on January 26, 2010 shows a woman carrying a bucket of fruits on her head in downtown Luanda. PHOTO | FILE | AFP 

By AFP
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LUANDA, ANGOLA

Sitting under an umbrella in the heat of Angola's capital Luanda, a vendor holds a makeshift currency exchange board on which is scribbled "335 kwanzas: $1" — more than double the official rate of 155 kwanzas.

The drop in the price of crude oil to its lowest level in more than a decade has not only pushed Angola's currency to record lows, it has plunged the economy of Africa's second largest crude producer into a crisis.

Despite the country's oil and diamond resources, Angola suffers endemic poverty, with more than a third of the population of around 24 million living below the poverty line, according to the United Nations.

Fallout from the oil price crunch is inflicting even more pain on the already struggling poor, and risks threatening the stability of the country.

The kwanza currency lost 35 per cent of its value against the dollar last year and Angolans are rushing to turn their local savings into more stable units, yet banks are low on foreign exchange.

The black market is their only hope for now.

"There is a strong demand for the dollar," said a young black marketeer on condition of anonymity.

The rate "can't continue to go up like this, otherwise it becomes dangerous, people are fed up", he said.

In December, central bank governor Jose Pedro de Morais tried to calm nerves, saying there was "no dollar crisis in the country".

"There is a balance of payment deficit and there are fewer foreign resources, but the 2016 national budget will try to address this temporary difficulty," he said.

Shortly after his remarks, the bank devalued the currency by 15 per cent against the dollar.

The devaluation did not come as a surprise "given the price of oil, the pressure on the foreign exchange reserves and government revenue below government's budget," said an internal note from a regional bank.

"A weaker currency is needed to slow imports demand and help exports."

PRICES UP FIVEFOLD

Tino Mario Salomao is a businessman who imports mobile phone handsets and other telecommunication products for retail sale in his shop in Luanda.

"We have reached a stage where we cannot travel anymore. At the rate it is going, we will soon run out of stock," said the 41-year old, who imports from China, India and Dubai.

On January 19, Altantico bank and South African Standard Bank imposed limits on foreign purchases by Angolans.

"Prices of some goods have multiplied four or fivefold," said Salomao.

"A year ago you could still find a phone for $50 or 5,000 kwanza.

"Now the same phone costs between 15,000 and 17,000 kwanza — a price too high for the majority.

"Many large companies have pulled down their shutters. How can one even pay salaries for 10 or 20 workers?" said Salomao.

"For us who have three workers, we will survive... just for now."

At Africampos food market, hawker Isabel Paiva, 36, says she is struggling to sell her wares and to scrape together enough to feed her family of four children.

Despite its mineral wealth, Angola has one of the world's highest infant mortality rates at 167 deaths per 1,000 births, according to the latest UN report.

In 60 per cent of these cases, the deaths are caused by malnutrition, an alarming statistic that may worsen in coming months given the stress on Angola's economy.

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