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Capital Markets

Is Angola ready for PPPs?

The international community has lauded Angola for its quick-thinking and tough decision-making following the sharp fall in the oil price. In February, Angola cut AKz1.8 trillion ($14.3 billion) from its AKz7.2 trillion budget – months before Nigeria, the region’s largest economy and oil producer, made any changes to its own economic outlook.

The revised budget takes into account a lower, much more conservative oil price of $41 a barrel, compared with $80 previously, but the change may affect real GDP growth for the country: according to the IMF, GDP growth is estimated to reach 8.8% in 2015, but this is based on oil at $98 a barrel.

Before 2014, the Angolan government was spending around $15 billion on infrastructure annually, much more than many resource-rich African countries, but now, with limited revenue, this level will be difficult to maintain. Quick and realistic changes to the budget have come at a cost to economic development. In many cases, infrastructure developments may slow down, some may come to a halt, and others will not even get off the ground. 

Public private partnerships (PPPs) could be the answer to Angola’s infrastructure problem. Although these types of projects have yet to gain much traction,

One project under way could set a precedent. Porto de Caio is the company responsible for the planning, development and management of a deepwater port of the same name in the northern province of Cabinda. The company, which started construction this year, was given the concession by the government in 2012 and is heralded as the first ever PPP to come out of Angola, say developers. 

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