Angola's Infrastructure Ambitions Through Booms and Busts - Policy, Governance and Reform

14 September 2018
analysis

It is critical that the Angolan authorities get a full picture of the efficiency shortcomings of past major investments, and that bold reforms are undertaken to make public investment more efficient.

Summary

In the past decade and a half, Angola has prioritized the repair, expansion and modernization of its infrastructure as a central element of post-civil war reconstruction and economic development. Investment was initially supported by an oil-led economic boom, with annual real GDP growth averaging 9.1 per cent in 2006-14. However, favourable macroeconomic conditions and abundant financing - supported by oil revenues and Chinese credit lines - were not matched by robust governance. The result was that Angola failed to use its post-war hydrocarbons windfall efficiently to rebuild its crumbling infrastructure.

Among key shortcomings, oversight of public investment was weak, targets were overambitious, and budget assumptions unrealistic. Planning did not adequately consider issues such as project feasibility, absorption capacity or corruption risks. Projects overemphasized transportation at the expense of other areas of infrastructure. Moreover, pro-cyclical financing resulted in the build-up of public debt and exacerbated a structural vulnerability to fluctuations in oil prices. The effects of such problems became more apparent once the economic cycle shifted.

Since mid-2014, Angola has faced a far more challenging economic context, with lower international oil prices in particular responsible for fiscal constraints that raise uncertainty over the next phase (2018-22) of the government's development programme. The authorities' failure, during the boom years, to establish adequately funded revenue-stabilization mechanisms in a timely manner subsequently made it harder for policymakers to respond effectively to the post-2014 economic crisis.

Efforts are now being made to strengthen control and oversight of infrastructure projects. Government ministries have been restructured and new bodies created. Responsibility for the Public Investment Programme (PIP) and the integrated public investment management system (SIPIP) has been shifted to the Ministry of Finance. In theory, this should make it easier to incorporate infrastructure spending projections into national budget planning, and to develop a more realistic and sustainable portfolio of infrastructure projects. The legal framework for procurement has also been updated. However, it remains to be seen if institutional changes will deliver meaningful improvements in practice.

The Angolan context requires particular emphasis on reforms that promote transparency and accountability. The new National Procurement Portal needs to become fully operational as soon as possible and list all ongoing tender processes. The government should also make public the registry of construction companies involved in public works projects.

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