Angola

Angola, officially the Republic of Angola, is a country in South-Central Africa bordered by Namibia to the south, Zambia to the east, the Democratic Republic of the Congo to the north, and the Atlantic Ocean to the west. Angola is made up of 18 provinces, with Luanda as its capital. Portuguese is the official language of Angola, and the official currency is the kwanza (AOA).

Angola is run by a multiparty regime, with its President as the chief of state. Its legal system is based on Portuguese civil law and customary law, modified to accommodate political pluralism and increased use of free markets. 

Angola’s climate characteristics, the quality and richness of its soils, its young and growing population, and its high potential for diversification and growth of the economy that is not dependent on oil position it as one of the main countries in Africa and the world in which to invest. Angola is country that can, in fact, respond to some of the global difficulties the world is going through, with the potential to become a leader in some products and sectors of activity.

Since 2018, under President João Lourenço, Angola has been actively pursuing economic reforms aimed at diversifying its economy and reducing dependence on oil. Key initiatives include selling state stakes in various companies to attract foreign investment and boost economic efficiency (privatisations), efforts to simplify bureaucracy and enhance transparency, including adherence to the Extractive Industries Transparency Initiative (EITI), and promotion of sectors such as agriculture, mining, and tourism through infrastructure investments and fiscal incentives.

Despite an international climate of high prices for raw materials and food products, Angola has shown signs of economic recovery in 2023 and 2024. In the first quarter of 2024, Angola recorded a 4.1% increase in gross domestic product (GDP) compared to the same period in 2023, mainly driven by activities such as agriculture (4.0%), oil extraction and refining (4.6%), electricity and water (8.7%), trade (4.9%), transport and storage (15.0%), and the extraction of diamonds and metallic minerals (33.3%). Foreign direct investment (FDI) also saw an increase in investment in sectors such as agriculture, mining, and telecommunications, contributing to economic diversification. Fiscal stability has also helped the Angolan economy to overcome challenges. Improvements in inflation control, tax reforms, and the reduction of public debt reinforced macroeconomic stability.

The conduct of Angola's monetary policy in 2024 has taken place in a challenging macroeconomic context, with irregularities in the supply of goods, the gradual removal of fuel subsidies, price adjustments in communication, transportation, and education, as well as the ongoing rise in healthcare costs, leading to the estimate that inflation at the end of the year will be around 27%.

Angola is the second-largest oil producer in sub-Saharan Africa. As of 2024, Angola’s oil production averages approximately 1.1 to 1.3 million barrels per day (bpd). This represents a decline from peak levels of over 1.8 million bpd in the late 2000s, attributed to maturing fields and underinvestment in new projects. Oil production plays a crucial economic role in Angola, contributing significantly to national revenues. The volume of crude oil exported in the third quarter of 2024 amounted to approximately 777.82 million United States dollars (USD), resulting in an increase of 5.42% compared to the second quarter of the current year and a 2.01% increase compared to the same quarter in 2023. The natural gas exports during this period also recorded a rise of 24.28% compared to the previous quarter. Similar to the previous quarter, China was the main destination for exports, accounting for 46.22%, followed by Indonesia with 6.74%, India with 6.60%, Brazil with 5.67%, Spain with 4.87%, and France with 4.71%. Liquified natural gas (LNG) was primarily exported to India, representing about 74.8% of the product. The sector is also vital for government revenue, despite ongoing efforts to diversify the economy. Additionally, oil production is fundamental for employment and local content development. Although direct employment in the oil sector is limited, there is increasing emphasis on local content policies to boost Angolan participation and employment in the industry.

However, the oil sector presents several challenges and opportunities. Many of Angola’s key oil fields are reaching maturity, leading to natural production declines. This necessitates enhanced recovery techniques and increased investment in new field development and exploration. Also, the ageing infrastructure and the need for maintenance and upgrades pose challenges to sustaining and increasing production levels.

In 2023, Angola made the announcement that it was leaving the Organization of Petroleum Exporting Countries (OPEC) effective 1 January 2024, severing a 16-year-long relationship. When the African oil exporter joined the producers’ group in 2007, it was the first country to do so since 1975. The relationship between Angola and OPEC changed drastically over that period.

Angola’s oil production continues to play a pivotal role in the country’s economy, but challenges such as maturing fields and the need for diversification present ongoing issues. With strategic investments and reforms, Angola aims to stabilise and potentially increase its oil production while fostering broader economic development. The focus on local content and sustainable practices is expected to shape the future of Angola’s oil industry.

Angola is the fourth largest producer of diamonds in the world and the second in Africa. Angolan diamonds are mainly mined in the province of Lunda Norte and represent about 20% of the world’s diamond production. The global demand for diamonds is increasing, especially in China and Japan. China is currently the largest market for Angolan diamonds. Angola’s diamond industry is well positioned to benefit from these growing markets. Looking ahead, Angola's mining sector will continue to be dominated by diamond exploration and production, which accounts for around 90% of total mining revenues. 

With demand for strategic minerals, non-ferrous metals, and rare earths increasing dramatically due to the global energy transition and the use of strategic minerals in lithium-ion batteries, the sector is expected to significantly increase its contribution to the country's GDP growth. Angola is ambitiously aiming to boost its diamond output by 50% in 2024, targeting 14.6 million carats, up from 9.7 million in 2023. This surge is expected to generate USD 2.5 billion, significantly up from USD 1.51 billion in 2023. The Luele mine is central to these aspirations, potentially producing 20 million carats annually. Despite current market challenges, the proactive strategies and the rich potential of new mining projects offer a glimmer of hope for Angola’s diamond sector.

These efforts are not only crucial for the country’s economic health but also for maintaining its stature in the global diamond industry. 

PwC in Angola 

PwC Angola is organised around industries, including oil and gas, financial services, industrial manufacturing, energy, utilities, and mining, to share the latest research and points of view on industry trends, develop industry-specific expertise, and share different methodologies and approaches in each area.

PwC Angola offers a range of tax services to assist taxpayers with tax structuring, tax compliance, oil and gas taxation, mergers and acquisitions, indirect taxation, financial services taxation, individual taxation, tax litigation, etc.