An industrialization project for Angola
I-Introduction. The revival of interest in industrialization
The industrialization of Angola has become one of the objectives of the current government under the leadership of the President of the Republic João Lourenço. In fact, either at the International Summit on Sustainable Development “The Future of Africa” held in Abu Dhabi in 2019, or at the third edition of the Global Summit on Manufacturing and Industrialization, promoted by the United Nations Industrial Development Organization (UNIDO) in 2020, Lourenço always emphasized that industrialization was a pressing need with a view to creating wealth and well-being for citizens and employment as the main source for all opportunities.
In fact, since Angola does not have staff and skills with sufficient critical mass in terms of services, and having recently seen the strategic weaknesses of economies that are too much based on services, it is normal for any economic start-up in the country to be also based on industry.
The industrialization of Angola must be thought based on three assumptions.
The first is that it will be based on strong agriculture. It is not a question of replacing agriculture with industry, but simultaneously developing agriculture and livestock as the basis for a renewed industrial start-up.
The second assumption is that what is called industrialization today will be different from what was considered at the beginning of the 20th century when such a movement was linked to the so-called heavy industries: steel, cement, etc. Furthermore, industrialization is not just manufacturing, but a set of transformative processes.
Finally, the vectors of industrialization in Angola will have to be linked to specific factors that bring added value to the economy or where it has competitive advantages. Therefore, it is not a matter of making mere copies of industrial models, but of realizing where Angola has benefits in industrializing.
II- Industry in the Angolan economy
As Nuno Valério and Maria Paula Fontoura write “in 1975, [when] Angola became an independent state, (…) the economy was prosperous, whether due to the existence of considerable exports of agricultural products (coffee, cotton, sugar, sisal) and others from plantations; corn from traditional farms) and minerals (diamonds, iron and oil) and even services (particularly through transit to Shaba, formerly Catanga, via the Benguela railway), either due to the beginning of an industrialization process.“
The Angolan industrial start-up began in the 1960s, still under colonial rule. In fact, from that time, framed in the general liberalization and pro-European measures that Portugal took, in the creation of a Portuguese free trade zone and in the expansion of the internal market through the troops and families displaced with the overseas war “between 1960 and 1970, the gross value of manufacturing industry production grew at an average annual rate of 17.8% and GDP 10% in nominal terms. “
In fact, on the eve of independence (1973) the Angolan industry (excluding civil construction) represented 41% of GDP. The important industries were the food industry, with 36% of the gross value of production in the manufacturing sector; followed by the textile industry, with 32%, beverages, with 11%, chemistry, non-metallic mineral products and tobacco, with 5%, petroleum derivatives and metallic products, with 4%, pulp, paper and derivatives, with 3%.
Fig. 1- The main industries in Angola in 1973 (% gross value of production in the manufacturing sector):
|Chemistry, non-metallic mineral products and tobacco||5%|
|Petroleum products and metal products||4%|
|Pulp, paper and derivatives||3%|
Source: Nuno Valério and Maria Paula Fontoura, op.cit.
It should be noted, however, that by this time, the “evil” of the Angolan economy was already present, i.e., the excessive dependence on raw materials for export. In reality, the manufacturing industry only contributed to around 20% of Angolan exports, with the main products exported in 1973 being: oil (30%), coffee (27%), diamonds (10%).
This liberalizing start-up in the Angolan industry was subject to some criticism, and in the 1970s, the government of Lisbon began to impose a protectionist perspective on Angolan industrial development. This did not affect the healthy growth of the industry. In fact, as noted by Nuno Valério and Maria Paula Fontoura: “the manufacturing industry’s VBP grew at an average annual rate of 21% between 1970 and 1973.”
It is known that the situation of prosperity was interrupted by the civil war and it was only after 2002 that there was a strong revival of the economy. However, this restart was based on crude oil exploration and not on any sustained industrialization process. Even when it comes to oil, there was no concern about integrating it into an industrialization process and making Angola a country that bet on the transformation of its raw material instead of exporting it raw. This meant investing in refining, in petrochemicals, in the production of fertilizers, which did not happen.
Arriving in the second decade of the 21st century, the situation of the economy becomes worrying when oil exploration is no longer satisfactory due to the drop in its price. In this context, we start talking about the diversification of the economy and looking at the industry, but the scenario is not encouraging in terms of the strength of the industry within the scope of the Angolan Gross Domestic Product (GDP), so it is essential to mix and actively promote a project to launch industrial activity.
The most recent data referring to the weight of the manufacturing industry (except crude oil refining), dated from the second quarter of 2020, point to a 4.8% contribution to GDP. This contribution was 3.69% in 2002, and 4% in 2017 and 2018. On the same date, the year-on-year change in the manufacturing industry had been negative by 4%. The Gross Added Value was also negligible.
Fig. 2 – Weight of the manufacturing industry in Angola (2nd quarter of 2020)
|Contribution to GDP (%)||4,8|
|Year-on-year change (%)||-4|
Source:Banco Nacional de Angola. Contas Nacionais (bna.ao)
III. Industry relaunch project in Angola
Any project to relaunch the industry should start by having the right context. This context is a free economy with a social climate conducive to investment. The social climate is based on six necessary assumptions:
i) Absence of massive corruption. Corruption distorts the rules of economic competition and prevents free access to markets, fundamental conditions for industrial development;
ii) No barriers to accessing markets. Entrepreneurs should be free to obtain their production factors and settle in to produce;
iii) Functional Justice System. The justice system should not be seen as corrupt, slow and incompetent, but as applying the rules, punishing those who do not fulfill contracts and having legal and normal forms of debt collection;
iv) Reasonable taxes. Taxes should tend to be moderate and not stifle productive activity;
v) Less red tape. Public administration should be pro-business and not create administrative bureaucratic obstacles to the installation and operation of companies.
vi) Pro-business state. The State should have a fomenting and proactive role in industrialization, pointing and framing paths, building infrastructures, qualifying the workforce and establishing partnerships.
Fig. No. 3- Context for the industrial relaunch
In view of the necessary context, the important thing is to point out the axes through which the efforts of industrial growth should be channeled.
We see four axes of industrialization in Angola. These axes are chosen taking into account the economic history of Angola, its wealth and potential, the experiences of global industrialization and the possible trends of the markets in the coming decades.
Thus, we propose an industrial development according to the following points that can be interconnected or complementary:
2-Basic needs industries;
3-Industries of development of natural wealth;
4-Future: renewable energies and digitalization.
Fig. N. º4 – Axes of the Industrial Relaunch Project
The agricultural industry represents the natural development of the Angolan potential already in operation and which was the subject of our previous report.
This a small example to gauge the potential. Recently, it was reported that Angola has been the main banana producer in Africa for six consecutive years. According to the Food and Agriculture Organization of the United Nations (FAO) Angola is the largest African banana producer and the seventh in the world with an offer of 4.4 million tons.
It will be elementary that it will be easy and possible to create an industrial line based on bananas: fruit juices (beverage industry), medicinal exploitation of banana / potassium (chemical / pharmaceutical industry), etc., are some of the possibilities in the refrigeration or pharmaceutical industry regarding banana.
The same type of reasoning can be applied to products and natural resources that Angola has or exploits in abundance. By internally transforming its natural resources and products, the country adds value to them, ceasing to be dependent on the mere evolution of the world price of raw materials.
2-Basic needs industries
Basic needs are understood as food, clothing and housing. This industrial axis represents an industry in which no specific sophistication is required and it is possible to make an import substitution without special losses of competitiveness, in addition to making it possible to create export markets in similar countries. In addition, Angola has already had a powerful industry in the area of food, beverages and textiles. With a market of 30 million people that can easily be extended to many millions more with the developments of the Southern African Community (SADC) and the African Free Trade Area, Angola has enough potential demand for essential products: clothing , shoes, houses (obviously), basic food products from yoghurts to beers. There is no reason not to create its own industry with its own brands, in many cases imitating what has been done successfully in countries in these areas such as Bangladesh and Vietnam.
3-Natural wealth development industries
Another industrial axis, which basically replicates in a more comprehensive way what was mentioned in the first axis, focuses on national wealth, now not agricultural, but the rest. It has all the logic and economic rationality to use and transform what exists in Angola, adding value to it instead of exporting in gross terms, allowing capital gains to be appropriated by others. Here we have the most obvious example, oil. What makes sense is to develop the industry downstream from oil: refining, petrochemicals, plastics, fertilizers, etc. As the United Nations expert Carlos Lopes said, “The question is clear: it is not turning your back on wealth, such as oil, but integrating it in the transformation and making Angola a country that invests in the transformation of its raw material. instead of exporting it gross. This means investing, in addition to refining, petrochemicals, fertilizer production, etc. “
4-Future: renewable and digital energies
The final axis is connected to renewable energies and the digital transition. Today, it is common ground that there is a demand for the replacement of oil by clean and renewable energies. In the United Kingdom, the goal was announced in 10 years to end the circulation of gasoline or diesel cars. Electricity generated by renewable energies seems to be the future. Large oil companies like BP or Aramco are transforming or embracing these areas. Now Angola has excellent natural conditions for this investment in renewable energies. Solar energy from the start. An industrial niche around solar energy and electricity production would be a bet to consider very seriously.
From the point of view of the digital transition, Angola will be able to make an important qualitative leap using digital techniques for the development of applications for the massification of basic and secondary education, for basic health and in the financial area. Here we have an industry of digital applications for teaching, health and banking that could be developed in Angola by Angolans, immediately combining a synergy between betting on health and education alongside digital industrialization.
IV-Coordination of the industrial relaunch project
On the part of the State, there must be a commitment to this project that will essentially be up to the private sector.
However, the State must create the legal and institutional framework, prepare financial and fiscal incentives, build infrastructure, promote the training of agents capable of change and establish partnerships.
For the task of coordinating the activities of the State with a view to industrial relaunch, there should be a coordinator directly dependent on the President of the Republic: a Czar of the Industrial Project.
Fig. No. 5 – State’s role in relaunching the industry
 Nuno Valério e Maria Paula Fontoura, A evolução económica de Angola durante o segundo período colonial — uma tentativa de síntese, Análise Social, Quarta Série, Vol. 29, No. 129 (1994), pp. 1193-1208, p.1193.
 idem, p.1203
  Op.cit. p.1207.
 Carlos Lopes, Petróleo deve ser utilizado na industrialização de Angola in https://www.dn.pt/lusa/petroleo-deve-ser-utilizado-na-industrializacao-de-angola—economista-carlos-lopes–10905179.html
 Dados do Banco Nacional de Angola in https://www.bna.ao/Conteudos/Temas/lista_temas.aspx?idc=841&idsc=15907&idl=1
 Carlos Lopes, see note 5