Angola: ‘Money alone does not make for development’ – Mário Caetano João

By Estelle Maussion, Stéphane Ballong
Posted on Thursday, 13 October 2022 12:40

Mário Caetano João has been Angola's economy minister since September, 2021. ©mep.gov.ao

Growth, relations with China, agricultural boom... Angola’s economy minister highlights the effect of the reforms undertaken by President Lourenço, while recognising that more needs to be done.

Mário Caetano João, Angola’s Minister of Economy and Planning, answered our questions from Bali, Indonesia. Interviewed in early October, he was attending the third edition of the World Conference on Creative Economy (WCCE), an international meeting created in 2018 by the Southeast Asian country to promote the potential of sectors based on creativity and innovation, including the cultural industry, new technologies and tourism.

“Indonesia is one of the countries with which Angola has an interest in working more, given its experience in the creative economy and, more broadly, in development policies,” the Angolan minister told us. Educated in the Czech Republic and holder of a doctorate in economics, Caetano João spent almost a decade working at Angola’s finance ministry. After a stint at the World Bank, he returned to the country, running the stock exchange (Bodiva) for a while before being appointed secretary of state in his current ministry. In 2021, he became the fourth holder of the economy portfolio since João Lourenço came to power in 2017.

Confirmed to his post in September, after the president won a second term in office, the minister asserts that the executive has changed its matrix, having set in motion the diversification of the economy and the development of the private sector. While Angola emerged in 2021 from five consecutive years of recession, considerable challenges –  combining economic growth, improving living conditions, and increasing attractiveness for investors – remains.

The latest World Bank forecasts expect Angola’s gross domestic product (GDP) to grow by 3.1% this year, compared with 0.8% last year. What has contributed to this recovery?

Mário Caetano João: There are several factors, but the main one is political will. There has been a paradigm shift from the former president of the republic to our current chief executive. In the past, it was thought that the state should be present everywhere. Today, we know that it must disengage from the economy to make room for the private sector. This change involves many programmes.

Over the past five years, we have carried out profound macroeconomic reforms

I will mention two of them, the results of which are particularly visible. First of all, the efforts made to facilitate private sector financing have paid off: we have gone from about 30 projects financed in 2019 to some 400 projects completed in 2020. And the policy of import substitution through the development of national production has also worked. The import bill was halved from 2018 and 2021, from $2.8 billion to $1.4 billion, as local production – synonymous with increased revenue and easier management of foreign currency – has developed.

Isn’t this rebound also – or even mainly – driven by the rise in the price of a barrel of oil, of which Angola has been the leading producer in sub-Saharan Africa, ahead of Nigeria, since August?

The price of oil plays a role, but indirectly. It is true that we currently produce more black gold in terms of volume than the other sub-Saharan countries. And, in a context with high global prices, this has a positive impact on the budget through the increase in public revenue. That said since the budget and expenditures cannot increase indefinitely, the impact, however real, remains limited.

Won’t high oil prices slow down the diversification of the economy?

Over the past five years, we have carried out profound macroeconomic reforms. In 2021, with a barrel at $60 and despite the existing challenges, we managed to return to growth. And diversification, which was launched several years ago, has accelerated. While the oil sector accounted for 43% of GDP in 2011, its contribution fell to 28% in 2021, and the objective is to reach 20% in 2027. Since the beginning of the year, the price of oil has risen back above $100, which leaves two options: take advantage of the situation like in the old days, or continue the reforms in favour of diversification in sectors where Angola has a comparative advantage: notably agriculture, livestock and the processing of agricultural raw materials. We have clearly chosen the second path in our long-term development plan for 2050, which foresees an average growth of 4% over the next five years.

How do you respond to those who say that agricultural progress is too slow?

I am not satisfied with this either, because we still need to do better. But the movement is underway, particularly in processing, with a 3-5% growth in volumes observed each quarter at the level of the agricultural value chain. As far as production is concerned, the bean sector stands out, meeting local consumption and exporting to neighbouring countries, particularly to the Democratic Republic of Congo (DRC).

It would be a shame not to take advantage of China’s experience in the agricultural sector

For example, we do not import pineapples or bananas, and we are a major producer of cassava on the continent. In bananas and cassava, Angola is even in the world’s top 10. The way forward is clear: our import bill, which we want to reduce to $700 million a year, is based on three products, chicken, oil and rice. We must therefore give priority to helping our producers with these three commodities. This explains President Lourenço’s commitment to mobilise $300 million to boost livestock production over the next three years.

You recently said that China should play a key role in the development of Angolan agriculture. Why?

We believe that China, one of the world’s leading rice producers, can be an ally in implementing our national plan to increase the production of four cereals, including rice, at a cost of US$1 billion per year over five years.

We have learned that money alone, without the transfer of skills, does not make for development. It would be a shame not to take advantage of China’s experience in the agricultural sector, whether in rice or pork production, for example. More generally, the successful development policies of Asian countries, including China, Indonesia and others, are a source of inspiration.

So far, Beijing is a major partner in construction, oil and debt financing…

China does what it is made to do. We are changing our relationship and the way we cooperate with China. In the past, when Angola was destroyed because of the civil war, we needed to ensure reconstruction. Now that we have the infrastructure, we need to invest in human capital. This is true for agriculture as well as for other sectors, including health: after building a lot of hospitals over the last five years, we need to train medical staff. Here too, a paradigm shift is underway.

To come back to agriculture, one of the problems is the financing of projects, a stumbling block that also concerns other sectors. How can this barrier be removed?

We have taken this challenge head-on. To understand it, you have to see where we were starting from. Commercial banks, used to finance the government through bonds and treasury bills, were reluctant to lend to the private sector. In other words, there were difficulties within institutions in terms of analysing projects and assessing the risks.

To remedy this, we encouraged the training of bank officers to “de-risk” operations and free up the flow of credit, in addition to training entrepreneurs so that they are able to develop bankable projects. We also organised a tour of the country with the commercial banks and the Angolan development bank to identify agricultural units that were already operating and could benefit from funds to expand their activities, with good results.

We cannot accept that the norm [for small businesses] is informal and not formal

Another of your ministry’s projects concerns the conversion of informal [business] activities to the formal sector. Why is this crucial?

This is a reform that has been close to my heart since the beginning of my career at the finance ministry, simply because we cannot accept that the norm [for small businesses] is informal and not formal. Thanks to €15 million in financing from the European Union, we launched a programme which, by bringing everyone – public services and informal actors – around the same table, has made it possible to arrive at a simple way of switching to the formal sector via the allocation of an economic identification card.

This card obliges its holder to pay an annual contribution of a few dollars, but it also grants access to certain services such as an anti-Covid vaccine, securing a spot in child-care, and the allocation of a telephone equipped with mobile money. Even if the scheme still needs to be made permanent, it is clear that it works.

The executive is carrying out a vast privatisation programme involving the sale of 195 assets and entities, a process which notably affects the behemoths Sonangol, the oil company, and Endiama, the diamond company. Are the results up to expectations?

The process, which confirms the state’s determination to exit the economy, is proceeding. While some operations are relatively quick, others will take several years. However, there are already some achievements. The state has withdrawn from the capital of two banks, Banco Angolano de Investimentos (BAI), the main state-owned institution, and Banco Caixa Geral Angola (BCGA), while selling off another in its entirety, Banco de Comércio e Indústria (BCI).

The fight against corruption is part of President Lourenço’s DNA

A number of oil, mining, real estate, hotel and other assets have been sold, as well as farms that have found buyers without difficulty. To date, almost 50% of the entities to be privatised have been sold.

Have you had difficulty attracting foreign investors?

In the textile sector, for example, the three units sold were acquired by foreign entrepreneurs, two from Zimbabwe and one from Argentina and Europe. The process has confirmed the large appetite of investors for Angola, which has been considered an attractive country since the launch of reforms in 2017. The business environment has improved, notably thanks to the simplification of the legal framework for investment. The exchange rate policy conducted by the Central Bank – which has allowed for the stabilisation and then the revaluation of the national currency, the kwanza, against the dollar – has also borne fruit.

What about the fight against corruption – the banner of the beginning of President Lourenço’s mandate – which has also been the subject of criticism, particularly because of its selectivity?

The fight against corruption is part of the president’s DNA. He’s a workhorse and will remain that way. It is a battle being waged both within and outside the government, but in which the role of the executive is limited to ensuring that cases and people are brought before the courts. It is then up to the judiciary, which is independent, to give its verdict.

All that political power can do is give the justice system the means to work more quickly and transparently. This is why the executive intends to invest, for example, in digitalisation, with a view to bringing the justice ministry and the courts closer to citizens in order to grant the public access to cases of general interest.

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