|The Relatorio Economico
|CEIC, Catholic University (Luanda)
Acknowledgements: FANRPAN acknowledges the Catholic University of Angola as the source of this document
- This is the seventh edition of the Annual Report on the Angolan economy published by the Catholic University of Angola, through its Centre for Scientific Studies and Research (CEIC). As usual, we may not share the comments and analysis contained in this document, but the fact that it is the most complete, rigorous and thoroughly researched document on the Angolan economy is hardly denied.
The report is basically focused in three levels of analysis. The world context, particularly the world financial and economic crisis; The African implication with stress on the SADC region; and, naturally, the essential object of the report: The Angolan economy.
- In regard to the existing crisis, we must admit that it has become for the first time a world issue, taking systematically and in a more or less intense form the world economies in general in double sense: By the manner it has been spreading and by the different kinds of impact. Therefore, this is neither just one more crisis, nor is it the last crisis and the beginning of the end of capitalism and of the market economy, as is still expected (and dreamt?) by some. This is a global systemic crisis. The fall of the Soviet economy in the early 1990’s triggered a systemic crisis as well in the system of central economic direction. The determinants were different and its effects tenuous on the world economy. However, there was at this level a very important effect: The argument that the failure of this kind of model brought about by reasons beyond the simple economic dimension, marked the great victory of capitalism, the market economy and the free initiative. The socio-liberal and ultra-liberal economic thoughts (particularly from the Bush Administration era (which we avoid to classify) start a dominion over the public and private policy making, and over the behaviour of companies and institutions and even the individual attitudes. It was the great “drunkenness” of free initiative and self interest. The State was relegated to limited supplementary functions. The logic that the market should regulate and self-regulate everything became untouchable and very quickly and opportunistically taken and propagated by the international institutions, from the IMF to OCED, and going though the national and the international banking systems, all inspired by what was happening in the USA. The consequences were not far to be felt, all mechanisms of regulation were weakened ( including, and very seriously the auditing and rating companies, which are now left totally overlooking, irresponsibly as if nothing had to do with them); huge speculative “cracks” created in the financial systems and supported by an amazing credit expansion in consumption and real estate provided with a lot more flexibility compared to those given to companies for investment, and with less immediate results, as is the case of research and development.
- Subjacent to this uncontrolled evolution of the free initiative and self interest is also the marginalization or extinction of values that should support the behaviour of individuals and societies. Mutual respect, truth, ethics, rigour, solidarity, and social and individual accountability were considered as lower values. On the contrary, deceit and corruption were adopted as reference values by individuals, families, companies and institutional powers; “the ends justify the means” was transformed into a wild lust based on the motto “consumption now” and the disregard for the religious practices and values.
In the USA for example, but not only there, were already uncovered huge and unthinkable situations of fraud and economic crimes in this century, covering all levels of the financial and economic system: From the ENRON bankruptcy (a giant in the electrical sector), the Arthur Andersen case (auditing) and the Lehman Brothers (banking), to frauds committed by a lawyer who used to sell false bonds by imitating voices on the telephone (276 million Euros), and the manager who created a false financial pyramid scheme (36 billion Euros), a banker (187 billions), and still a corrector who manipulated confidential information (5 billions Euros). These are only few illustrations of what has also happened in other countries and continents.
- The systemic impact was fast and generalized, because the globalization articulated the national and regional financial systems in a very closed way. The scope and effect in the real economy is still to be determined. There are contradicting forecasts emerging every week about the scope and duration of the global systemic crisis.
For instance, the most recent prevision of the OCED for 2009 indicate a break of the GDP of 6.8% in Japan (6.6% previously), of 4.8% in the Euro zone (4.1% previously), and 2.8% in the USA (4.0% before). For China, it is expected an even higher and positive growth of (7.7%) well above the previously expected (6.6%).
The impact has not yet been permanently and totally felt, so all forecasts must be deeply pondered and carefully considered.
However, it seems that the recovery will have 2 trains: China and the USA. Europe is expected to be the last great bloc to recover and only in the 2nd semester of 2010.
If this forecast is materialized, we will see that although the repercussion of the financial and economic crisis is systemic and global, it will not reach the feared catastrophic expression (in 1929, the crisis in the USA provoked a break of 25% in the GDP and rose the unemployment rate to 30%).
Nevertheless, the economy will register good changes of structure, fundamentally in the industrial sector, through new technological and more amicable solutions of the environment and less intensive in energy and in the same time, the capitalist concentration process will be accelerated. On the other hand, the real economy starts to feel the effects of a more selective and expensive credit policy. Unfortunately the massive cash that is been injected have only helped the banks to cover their own big holes and not to support the recovery of the economy.
Let us wait for the systemic effects, but of different nature this time. In the meantime, unless new and considerable injection of capital is made, the recovery of the real economy may be hampered. There is only a sign of concern: the reduction or elimination of the supplier’s credit to clients, and the majority of payments being now made in cash.
- Although positive, the recovering process already in course will not make us forget the causes of the current situation, and there are already rising voices against the excessive regulation that is been implemented. This aspect should not be forgotten. It is therefore essential to:
2008 has already had a considerable impact of the crises in Africa and also in Angola.
- Redefine the paradigm of economy and development, and of the values, principles and rules that should support them;
- Have in mind that the developing countries, particularly the African countries, will not continue to be the usual sacrificed, specifically if public aid for development and access to international credit is limited;
- Establish new regulation systems of a systemic nature and not only specific to the financial system;
- Define and apply more severe penalties for economic frauds and crimes and greater social responsibilities for managers.
The CEIC report is extensive in its characterization, as well as in the short term perspectives and therefore, reading it is the fundamental issue.
However, we are unable to resist to some highlights and considerations.
- In regard to Africa, it is important to stress the following:
These last years have generated considerable hopes and expectations in Africa. A possible break to this movement, and above all caused by outside forces, might generate new blockage and hindrances that would take decades to overcome.
- Africa has retaken and undergone a very promising and interesting traject of growth (5.5% as the GDP growth rate). This traject has now been stopped for exogenous reasons. The impact of this growth was being fruitful in the reduction of poverty, even considering the fact that it was bellow the expected desirable results in improving the living conditions of the population. Once more, the African Continent will be the most injustly penalized and with great repercussions at the human levels.
- The spread of peace in the Continent and particularly in Angola, and the tendency to consolidate the democratic systems shadowed by some exceptions (that had previously been the rule) of legitimate usurpation of power.
- The Dissemination of good practices in the public and business management.
- The progressive conciliation of political and economical positions both in the African Union and in the sub-regions, as well as the relative advancement of the movements of economic integration.
- Finally, the persisting imbalance in the international economic relations, characterized by the leit-motif of access to the strategic natural resources of the continent by many of the investors.
- Angola is a concrete expression of this hope, particularly after the re-establishment of peace in 2002. The Angolan economy in the subsequent period (2002-2008) has effectively grown in an annual average growth rate never experimented by the country before: 15.5%, almost 8 times the growth registered in the period of 1980 and 2002 (2.1%).
This rhythm enabled Angola in 2007 to become the 7th African economy, the 3rd in Southern Africa, the 2nd of SADC and the 1st in CEEAC.
This evolution was greatly determined by the mineral production (oil and diamonds). But this is not all. Between 2002 and 2008, the average annual growth of the non-oil products (7.1%) was not far behind the average registered in the oil production (7.6%). We stress the fact that the Index of Transformation of the Industry Structure grew considerably in the last years. This is good news for the Angolan economy, and it demands a more attentive reading of item 5.3 of this report “The priority sectors for product diversification”.
Other good news from the recent past years:
- The pacific and almost exemplar organization of legislative elections;
- The macro-economical, monetary and cambial stabilization;
- The quick (and exaggerated?) development of the banking system:
- Growth of the international cash reserve (over USD 20 billions in November 2008) reaching almost one year of import goods and services.
- The growing economic dynamic of the recent past years started to be refrained at the end of 2008, with the year 2009 registering already signs of sudden breaking. The main reason is the fall of the exported quantity and the oil and diamonds prices.
The prices of these minerals fell in about 75% between June 2008 and the beginning of 2009.
The impact of this evolution has been sensitive. On the other hand, in Angola, the rapid growth of the economy was strongly slowed down by external factors. This is due to a vulnerability that need to be quickly overcome: The dependence on oil. But there are still other vulnerabilities that must be addressed as quickly as possible, in order to protect more the economy from the external blows, such as:
On the other hand, the recent economic growth calls for a clear reconsideration of the objectives of the economic policy being implemented, particularly in regard to the monetary and cambial issues. Therefore, it would be a mistake already made by many, to choose the stability of prices, including the exchange rate as a determinant variable of the macro-economic policy. The competitiveness of the economy would be hindered and the so called “Dutch disease” would be spread as a virus. The monetary stability and control are precious goods that should not be looted. But there are also other additional determinants of the future that should not be ignored. An adequate environment for investment and a moderation of consumption are handles of progress.
- The weakness of the structural factors of competitiveness (qualification, research and development, quality,...) and business development (see the reasons for the bad positioning of Angola in the “Doing Business ranking 2009 – item 2.2 of the report) and which is greatly due to the deficient public service delivery in different areas.
- Continuing high levels of poverty and inequalities, which still hinder social cohesion and the creation and enlargement of the internal market, despite the visible progress in recent years.
- Weak internal savings, and the consequent severe conditioning of investment and growth, which is only possible with the growing resort to external funding and debt.
- Transport infrastructure and logistics does not work, and is a heavy economic burden due to lack of efficiency and patience, with serious repercussion in the inflation.
Angola has a path to follow, and this is set up in its long term strategy to 2025. So, it has to finish its vulnerability to the storms, because “every wind is against those who sail without direction”.