Category: Economics 18th January 2019
The Republic of Angola is located in South West Africa on the coast of the Atlantic Ocean. Angola is one of the largest African countries, taking the seventh place on the area of Africa. Nature of Angola is typically African with characteristic hot climate, savannas with baobabs, papyrus and palm tree thickets along the rivers on the northern coast, the tropical impassable jungle and the desert Namib in the south of the coastal lowland. Nearly 40% of the territory of Angola is occupied with the woods and light forests. Angola is the sparsely populated country. In Angola live 10,8 million people, and there are 110 nationalities and tribes, the largest of which are Oribunda – 37% (in the central regions), Kimbundu – 25% (in the basin of the Cuanza River, including Luanda), Bacongo (or Congo) – 13% and Lund-chokve – 8% (Soares de Oliveira, 2011).
Angola is the second-largest source of oil in Africa. The government of Angola plans to increase the production of oil and natural gas for the next decade. Offshore formations of Angola and building of natural installations on gas processing are considered as potentially profitable sources of future income.
The economy of Angola is based on oil production and its export – 85% of gross domestic product (Figure 2). National economy is the most fast-growing among the African states to the south of Sahara due to oil component. Thus, in 2008, GDP growth of Angola was 15%, while the countries of Africa showed only 5% growth as a whole. Gross domestic product per capita is $4940 (in Nigeria – $1260, in Zimbabwe – $110), which is a considerable achievement for this region (Pushak & Foster, 2011).
In recent years, opening of new deposits of oil and gas significantly increased economic capacities of Angola. Apparently, 63,6% of electric power is developed on hydroelectric power station and 36,4% is extracted from the thermal power plants using oil products as fuel. In 2003, the construction of the first stage of a hydro complex of Kapand was completed; earlier it was interrupted because of military operations in 1990. Nowadays the country is engaged in the restoration of the damaged power plants (Soto-Viruet, 2011).
The Ministry of Energy and Water Resources directs the activity of the energy sector of Angola which has as the basis the National Power Enterprise ENE, engaged in the production and delivery of electric power to consumers as well as the EDEL enterprise, distributing electric power in Luanda.
About 95% of electric power made in the country fall to the share of ENE. There are also high voltage lines and raising substations in enterprise structure. Apparently, 2700 people work in ENE. Today ENE delivers over 60% of the made electric power to the clients (Sarkodie, 2012).
The power network of Angola is divided into three power supply systems, namely “North”, “Center” and “South”. The largest hydroelectric power stations are on the Cuanza Rivers, Cunene, Katumbela, and Dande. Rated capacity of all power plants of Angola exceeds 430 MW. Electricity generation is about 1700 million kW/hour. Moreover, over 70% of all electricity generation is the share of hydroelectric power stations. The country is able to claim only 65% of available capacities from the existing possibility of water resources use. In combined heat and power plant, this mark does not exceed 53%. From all high voltage lines, there are no more than 39% in working order. Furthermore, the most part of raising substations is either destroyed or involved partially (Shaxson, 2009).
In 1996, programs meaning the use of big capital investments at the power supply system development were developed. According to the programs, investments in the amount of $400 million for restoration of manufacturing enterprises and the high voltage line were required for the five-year period from 1997 to 2002. What is more, $200 million was necessary for the system of distribution of electric power for the same period. According to Merklein and Shuster (2010), “The government allocated rather small funds from the state budget, relying on the international help. A few foreign companies agreed to invest an enormous sum of money into development of energy resources of Angola” (p. 16).
The country approves the involvement of foreign investors in crediting and providing contracts to the firms interacting with funds and the organizations, responsible for distribution of the capitals to implementation of specific projects. These tactics of financial support of the Republic of Angola were chosen by foreign creditors after refusal to help Angola. Apparently, inappropriate expenses and corruption at all levels of executive power became the reason for that (Mearns, 2012).
Crude oil of Angola is easy to refine and sweet that makes it ideal for export to the main world markets such as China and the USA. Export continues to increase, but internal demand, unfortunately, does not alter. In 2011, Angola increased gross domestic product more than on $104 billion owing to oil export. In 2011, gross domestic product of Angola per capita was about $5,900 according to the International Monetary Fund (Peixe, 2013).
Presidential election in August 2012 forced the international market to start talking about the energy sector of Angola again. It happened due to the fact that it became very difficult to operate profit on export of crude oil. For the last decade, Angola took a step forward to the correct distribution of profit through oil investment fund. The policy of “Angolanization” intends to help the population of Angola integrate more into the energy sector of the country and receive a big share of profit from export of oil. At present, such programs have not brought a great success yet, but Angolans believe in success and hope that the government will be able to develop their country and improve a standard of living of people in the near future (Figure 1).
Currently Angola offers for sale the right for development and production on 10 continental fields. State company the Sonangol reported that oil stocks are estimated at 7 billion barrels, meaning 700 million barrels on each block. Severino Cardozo, the unit manager of the company on development of fields, clarified that these figures can be specified after additional investigation (Clough, 2007). The question is about seven parts in Cuanza river basin and three at the Congo River. Their development has to begin in 2015. Thus, presentations of projects in Luanda, London and Houston will increase the capital of the country. Sonangol notes that some foreign companies already became interested in the fields.
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Angola has the stocks in 12,6 billion barrels and is the second largest producer of oil in Africa after Nigeria. The country makes about 1,7 million barrels a day almost completely on offshore fields. According to estimates of the World Bank, oil makes 96% of Angola export and its share in gross domestic product of the country reaches 46%. Last year, economic growth in the country was 5,6%. The current year, the International Monetary Fund predicts the growth of GDP of Angola to 6,3% (Neto, 2013).
It is worth mentioning that today the African power market turns into one of the most dynamic and attractive markets of a planet. As it was already noted, the economy of Angola almost completely depends on oil production because export of oil was about 98 percent of income in 2011 according to the International Monetary Fund. In recent years, about three quarters of the cumulative governmental income of Angola came from the energy sector. Thus, Angola is a rich country with big potential that has to be developed in order to improve energy resource management and make life of people much better.