James Harris, an Associate in our Business Intelligence & Investigations Africa practice, provides an overview of the key issues surrounding the Angolan elections, with insight from his recent visit to Luanda.
The theatre of democracy in Angola has suffered a misstep. Voting polls leaked to investigative news site Maka Angola this month ahead of the general election on August 23 suggest that the hold over the electorate by the ruling party, Movimento Popular de Libertação de Angola (MPLA), is slipping. The poll, commissioned by the Angolan presidency and conducted by Brazilian firm Sensus, predicts that 38 percent of the vote will go to the MPLA – which has held power since the country’s 1975 independence – while the opposition party União Nacional para a Independência Total de Angola (UNITA) will take 32 percent and its rival CASA-CE 26 percent. The Angolan constitution allows for a minority government in the general elections, so it is by no means a given (under the constitution) that the party with the most votes will automatically form a government. That is a shock for a party that won with 82 percent of the vote in 2008 and 72 percent in 2012. The poll is an indicator of unrest. But the regime controls the electoral process, and the result is a formality. On a trip to Luanda in May I met an Angolan journalist who showed me photos of hundreds of fake identity cards that were found on an MPLA representative in preparation for the elections.
During my time in Luanda, I found businessmen, investors and political commentators equally cynical and sanguine about the likely outcome. There will be stability… at the expense of democracy. President José Eduardo dos Santos will step down, and his chosen successor, the cautious loyalist João Lourenço, will take over. Revealingly, most people that I spoke to said they would stay in the country during the elections, unlike 2008 and 2012, when anyone who could chose to stay away, and oil executives had emergency ships at the ready for evacuation.
Assuming this is the case, Lourenço will take over a country that has been in the economic doldrums since the oil price crashed in 2014. The most acute challenge that the economy faces is the lack of foreign currency, an absolute necessity in an economy like Angola’s that relies so heavily on imports. The supply of foreign currency is strictly controlled by the Angolan central bank, Banco Nacional de Angola (BNA). Allocations to the market have collapsed owing to the drying up of petrodollars, and Angola’s isolation from the international banking system. Here, economics collides with the brutal logic of Angolan patronage. Elites get priority access to dollar allocations from the BNA, which they then sell on to corporates at a significant mark-up. Those lacking access face endless waiting periods to convert kwanzas, and a vanishing hope of repatriating dividends or paying suppliers.
Unsurprisingly in this environment, there are signs of distress in the commercial banking market. A major publicly-owned bank, Banco de Poupanca e Credito (BPC) is being restructured, amid reports of decades of mismanagement and a loanbook dominated by politically connected entities. Moreover, non-performing loans (NPLs) are on the rise. If you take out Banco de Fomento Angola (BFA), the average percentage of NPLs across the Angolan banking sector is 20 percent, compared with between 6 and 8 percent before the crisis.
At a business conference in Luanda this month, a journalist drew a worrying parallel between Angola and Venezuela. BNA governor Walter Felipe responded that to avoid that fate, Angola’s only solution was to rely on its international reserves. A significant decrease in those reserves would mean that Angola would no longer be able to import medicine, food, or raw materials, he said. Which is particularly worrying given recent trends. In the four months to June, international reserves fell from $20 billion to $16.7 billion. And that money wasn’t allocated to the market by the BNA; how it was distributed is anyone’s guess.