Angola is the world's eighth largest producer of rough diamonds and has significant untapped potential of copper, iron ore, gold, phosphates and uranium. The mining sector accounts for around 12% of GDP and new investment projects are under way, particularly in the diamond and iron-ore subsectors. Historically strong (Angola used to be the 4th largest coffee producer in the world) but seriously damaged by the civil war, agriculture currently generates around 10% of GDP (e.g. sugar cane and corn). It is recording modest growth thanks to increased investment, government reforms and removal of landmines. Angola's economic growth will remain capital-intensive and import-dependent, mostly linked to government-dominated sectors such as construction and finance. The continuing rise in imports in the coming years (worth USD 50 bn in 2012, see Chart) will reflect increased investment and domestic demand. The main origins of imports are currently Portugal (20% of total imports), China (18%), the US (10%) and Brazil (7%).

Diversification central to policy agenda
The USD 5 bn sovereign wealth fund launched in October 2012 should help insulate the economy from volatile oil prices. It is expected to grow quickly, on fast increasing oil revenues, and will provide, if well-run, a solid foundation for future growth diversification – through investments in infrastructure, agriculture and services. A persistently high level of poverty (55% of Angolans live below the poverty line of USD 1.25/day), high unemployment (at about 25%), rising discontent and street protests have prompted the government to increase investments in the non-oil sector. Currently at around USD 6,000, GDP per capita has increased sevenfold since the war ended in 2002 – the fastest increase in SSA – but income disparity is very high in Angola: the richest 10% of the population hold 45% of national income whereas the poorest 10% account for 0.6%. A significant increase in public spending is budgeted for 2013 – aimed at improving access to higher education, healthcare, sanitation, drinking water and adequate housing and setting Angola on a more inclusive growth path.

Eoin Treacy's view Governance can only be considered on a relative basis. Logically, when one considers what is to be expected from a country that is beginning to embark on a development path to one with a long history of economic, social and developmental success different standards need to be applied.

There is often a temptation to assume that because a country has not succeeded that it never will. However there are a number of countries that have broken their past trends of underperformance so this would be an incorrect conclusion. This is why we focus on the trajectory of governance. Can we answer the simply question: are standards of governance regressing or improving? If they are improving, albeit from a very low base, such as following a civil war, the outlook is likely to be positive.

Angola is one of a number of African and Asian countries that are emerging from civil wars, where commodity exports are helping to rebuild sovereign balance sheets and where nascent consumer sectors are emerging. Provided standards of governance remain on a progressive trajectory, the potential for growth to pick up and capital markets to develop is likely to remain optimistic.