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AFRICAN DEVELOPMENT BANK

ANGOLA

COUNTRY STRATEGY PAPER 2017-2021

RDGS/COAO

April 2017

This report is based on the results and conclusions of the combined 20172021 Country
Strategy Paper and Country Portfolio Performance Review mission conducted in Angola from
26 October to 5 November 2015.
TABLE OF CONTENTS

ACRONYMS AND ABBREVIATIONS ................................................................................... i


MAP OF ANGOLA ..................................................................................................................iii
EXECUTIVE SUMMARY ...................................................................................................... iv
1. INTRODUCTION ............................................................................................................. 1
2. COUNTRY CONTEXT..................................................................................................... 1
2.1 Political trends ............................................................................................................. 1
2.2 Economic Trends......................................................................................................... 2
2.3 Social Trends ............................................................................................................... 5
3. STRATEGIC OPTIONS .................................................................................................... 7
3.1 Country Strategic Framework ..................................................................................... 7
3.2 Aid coordination, Alignment and Harmonization ..................................................... 10
3.3 Strengths and Opportunities/Challenges and Weaknesses ........................................ 10
3.4 Bank Portfolio Performance Review......................................................................... 11
3.5 Lessons learnt ............................................................................................................ 12
4. BANK GROUP STRATEGY FOR 2017-2021 ............................................................... 13
4.1 Rationale and Strategic Selectivity ........................................................................... 13
4.2 Banks strategic alignment ........................................................................................ 14
4.3 CSP Objective and Strategic Pillars .......................................................................... 15
4.4 The business program................................................................................................ 18
4.5 Bank group resources ................................................................................................ 18
4.6 Country dialogue ....................................................................................................... 19
4.7 Implementation arrangements and risks .................................................................... 19
4.8 Risks and mitigation measures .................................................................................. 20
4.9 Monitoring and evaluation ........................................................................................ 20
5. CONCLUSIONS AND RECOMENDATIONS .............................................................. 20
5.1 Conclusion................................................................................................................. 20
5.2 Recommendations ..................................................................................................... 20

Annex 1: Indicative results framework matrix for the CSP 2017-2021 I


Annex 2: Current macroeconomic assessment and outlook .................................................... III
Annex 3: Key macroeconomic indicators ................................................................................. X
Annex 4: Progress monitoring on the sustainable development goals in Angola.................... XI
Annex 5: Comparative socio-economic indicators ............................................................... XIII
Annex 6: Division of labor between development partners in Angola ................................. XIV
Annex 7: Angola Development partners aid volumes and main areas of focus ................ XV
Annex 8: Angola - Portfolio of approved and ongoing operations as at 1st February 2017 . XVI
Annex 9: Revised 2016 Country portfolio improvement plan (CPIP) ................................XVII
Annex 10: Angola CSP 2017-2021 selectivity criteria ...................................................... XXI
Annex 11: Angola CSP 2017-2021 sectoral linkages and the High 5s........................... XXIV
Annex 12: Angola CSP 2017-2021 indicative lending program ..................................... XXV
Annex 13: Angola CSP 2017-2021 indicative lending pipeline ..................................... XXVI
Annex 14: Angola CSP 2017-2021 indicative non-lending program ............................ XXVII
Annex 15: Angola assessment of the public financial management systems .............. XXVIII
Annex 16: Angola assessment of the countrys procurement systems ............................ XXX
Annex 17: Main analytical studies consulted ................................................................. XXXIV
LIST OF FIGURES
Figure 1: Country Policy and Institutional Assessment (CPIA) performance ........................... 2
Figure 2: Angola - Macroeconomic Performance ..................................................................... 3
Figure 3: Portfolio distribution by sector as at 1st February 2017 ........................................... 11

LIST OF TABLES
Table 1: Country Assessment of Fragility Drivers .................................................................... 4
Table 2: Doing Business Rankings (2016-2017) ....................................................................... 5

LIST OF BOXES
Box 1: Gender Inequalities in Angola ....................................................................................... 6
Box 2: Key measures adopted to mitigate the oil crisis ............................................................. 7
Box 3: Agriculture and the National Strategy in Angola ........................................................... 8
Box 4: Key Developments in the Angolas Sovereign Wealth Fund portfolio ......................... 9
Box 5: The Relevance of the Banks Country Office .............................................................. 12
Box 6: Gender Mainstreaming ................................................................................................. 15
Box 7: Power Sector Reform Support Program ....................................................................... 17
ACRONYMS AND ABBREVIATIONS
AfDB African Development Bank
AFD French Agency for Development
AML/CFT Anti-Money Laundering and Terrorism Financing
COAO Angola Country Office
ALSF African Legal Support Facility
ECNR African National Resource Center
BNA National Bank of Angola
CPIP Country Portfolio Improvement Plan
CPIA Country Performance and Institutional Assessment
CPISU Central Project Implementation Support Unit
CPPR Country Portfolio Performance Review
COP Conference of the Parties on Climate Change
ECCAS Economic Community of Central African States
EDCSP Economic Diversification and Competitiveness Support Program
EIB European Investment Bank
ENSAN National Food Security and Nutrition Strategy
FATF Financial Action Task Force
FDI Foreign Direct Investment
FDSEA Sovereign Wealth Fund of Angola
GDP Gross Domestic Product
IBEP National Household and Well-Being Survey
ICBPIP Institutional Capacity Building for Public Investment Program
INE National Institute of Statistics
LoCs Lines of Credit
MDGs Millennium Development Goals
MPLA Peoples Movement for the Liberation of Angola
NDP National Development Plan
PDMPSA National Medium Term Development Plan for Agricultural Sector
PEMFSR Public Expenditure Management and Fiduciary Systems Review
PIP Public Investment Program
PFM Public Financial Management
PMU Project Management Unit
PPP Public-Private Partnership
PSRSP Power Sector Reform Support Program
RDGS Southern Africa Regional Development and Business Delivery Office
SDGs Sustainable Development Goals
SMEs Small and Medium Enterprises
TYS Ten Year Strategy
UNDP United Nations Development Program

i
CURRENCY EQUIVALENTS

(February 2017)

Currency unit = Angola kwanza (AOA)


1 UA = AOA 225.44
1 UA = USD 1.36
1 UA = EUR 1.26
1 USD = AOA 165.91

FISCAL YEAR

1 January 31 December

WEIGHTS AND MEASURES

1 metric tonne = 2.204 pounds


1 kilogram (kg) = 2.204 pounds
1 metre (m) = 3.28 feet
1 millimetre (mm) = 0.03937 inch
1 kilometre (km) = 0.62 mile
1 hectare (ha) = 2.471 acres

ii
MAP OF ANGOLA

Disclaimer: This political and administrative map of Angola is for illustrative purposes and is without prejudice
to the status of or sovereignity over any territory covered by this map.

iii
EXECUTIVE SUMMARY

1. The Country Strategy Paper (CSP) for Angola for the period 20172021 was
prepared against a backdrop of an economy that has slowed down since 2014 due to lower
international crude oil prices. The CSP 2017-2021 follows the endorsement by CODE in
November 7th, 2016, of its proposed strategic pillars, including the results of the previous CSP
2011-2015 and Country Portfolio Performance Review (CPPR). While the process of
preparation of the new CSP started by end-2015, it faced significant slippages due to delays in
the adoption of a new annotated format of the Banks CSPs. In order to preserve the operational
consistency of the new operations, CODE members recommended during the meeting held in
November 7th, 2016, to shift the CSP timeframe from 2016-2020 to 2017-2021. The new CSP
is based on the Banks 2013-2022 Ten Year Strategy (TYS) and its High 5s priorities. The new
strategy adopts a broader context of policy continuity by anchoring on the longer Vision 2025
of the country, as the current governments National Development Plan (NDP 2013-2017) ends
in 2017, and the new NDP 2018-2022 that is under preparation is only due for approval after
the general elections in August 2017. The strategic thrust of the proposed Banks support was
guided by sectoral strategic documents of key areas (e.g. agriculture, energy and transport) that
the government is promoting to diversify the economys dependence on oil. Following the
country dialogue with government, it was concluded that these areas may not necessarily be
affected by the outcome of the forthcoming elections.

2. Angolas post-independence economic growth model focused on exploration and


export of oil has affected the sectoral contributions to growth. Structural transformation
remains low, since the economy is dominated by oil and gas sectors with 30.8 percent of Gross
Domestic Product (GDP) in 2015, followed by services (27.8 percent of GDP), industry
(20 percent of GDP, with construction being a dominant sub-sector with 11.1 percent), public
administration and financial services account for 8.3 percent of GDP. Agriculture and fisheries
are predominant economic activities in rural areas, accounting for 12.9 percent of GDP and
employing 70 percent of the economically active population. According to the 2014 National
Population Census, Angola has an estimated 25.8 million people living sparsely in a total land
area of 1,246,700 square kilometers (km2), with more than 40 percent of the population in urban
areas. Larger concentrations are along the coastal areas that are prone to natural disasters while
the internal highlands are prime agricultural land.

3. Economic growth rate in Angola averaged 4.7 percent for 2011-2015 as against 12.6
percent over the 2006-2010 period. The economic slowdown was mostly driven by a decline
in oil export revenues on account of falling international oil prices which led to sharp reduction
in public infrastructure spending. In addition, agriculture underperformed its potential due to
weak productivity and weather shocks. Meanwhile, Angola made significant progress in
reducing poverty from 68 percent in 2000 to 36.6 percent in 2008-09, according to the National
Household Well-Being Survey (IBEP, 2008-09). Despite this progress, more efforts still need
to be done to achieve the Sustainable Development Goals (SDGs), since income inequality and
unemployment remain relatively high.

4. The African Development Bank has been instrumental in facilitating the


governments achievement of its development objectives. The CSP 2011-2015 focused on
infrastructure development and promotion of economic competitiveness. The Bank took a
leadership role among the Development Partners (DPs) in the infrastructure sector (energy).
The implementation of the Public Expenditure Management and Fiduciary Systems Review
(PEMFSR) helped to design an Action Plan for the improvement of the country systems and
the enabling environment to enhance competitiveness. In terms of project disbursements,
the Bank was the top donor owing to the successful disbursement of the USD 1 billion

iv
Power Sector Reform Support Program (PSRSP). Overall, the implementation of the CSP
2011-2015 helped deliver significant outputs and outcomes in the areas of agriculture, fisheries,
energy, water and capacity building programs.

5. Despite the progress made, there are persisting challenges that hinder inclusive
growth in the country, notably: low agricultural production and productivity; lack of skills;
weak trade facilitation and export support systems; weak quality and inequitable distribution
of infrastructure; and challenging business environment. In addition, gender disparities in
health, education and employment have persisted over time. On the other hand, Angola has
favourable economic opportunities and prospects. The country has a high agricultural potential;
natural resources; strategic geographical location that facilitates regional integration and intra-
regional trade; and potential labour force which, if effectively harnessed with adequate skills
and technology, could support labour intensive manufacturing.

6. The negative impact of the oil crisis has provided even greater urgency to accelerate
the governments economic diversification agenda. One priority will be to invest in
agricultural transformation and value chains to diversify exports and national revenue sources.
The expansion of electricity access, water and sanitation supply, and skills development is
critical to improve the business environment and private sector should have a larger role in the
economy, including in the development of infrastructure through public-private partnerships
and concessions. The other area vital to growth is regional integration in order to unlock the
potential of local manufacturing and boost trade. Therefore, the Banks strategy will focus on
two complementary pillars, namely: (i) inclusive growth through agricultural
transformation, and (ii) support to sustainable infrastructure development, in particular,
in energy and transport. The interventions under the pillar I (inclusive growth through
agricultural transformation) are aligned with the Banks High 5s priorities of Feed Africa and
Industrialize Africa, while the infrastructure development interventions under pillar II will help
achieve the following High 5s: Light-up and power Africa, Integrate Africa and Industrialize
Africa.

7. The CSP 2017-2021 will reinforce the Banks position as a strategic partner of choice
of the government and other stakeholders on demand-driven policy advice. To strengthen
policy dialogue, the Bank will continue its partnership with the IMF and the World Bank in
helping government to improve the quality of public investments by strengthening the
processes of evaluation, selection and monitoring of projects. The Bank will scale up efforts to
conduct high quality analytical work to underpin its investments, and leverage funds, including
through Public-Private Partnerships (PPPs) to help advance the countrys economic
transformation agenda. Overall, the main areas of country dialogue will include: PFM;
portfolio management and ownership; institutional capacity building in the areas of natural
resources management (e.g. creation of local content in oil, gas, and fisheries sectors, and water
and land management) with support of the African Natural Resources Center (ECNR);
strengthening of governance, operational efficiency of public utilities and improved legal
framework for PPP with technical support of the African Legal Support Facility (ALSF).
Private sector development and job creation will also be at the core of Banks country dialogue
with the government as part of the implementation of the Banks Strategy for Jobs for Youth in
Africa 2016-2025.

8. The Board of Directors are hereby requested to consider and approve the Angolas
CSP 2017 2021.

v
1. INTRODUCTION

1.1 This paper presents a new Country Strategy Paper (CSP) for the Republic of Angola
for the period 2017-2021. The previous CSP for the period 2011-2015 was aligned to the
countrys national development priorities as set forth in the National Development Plan (NDP)
2013-2017. Under that strategy, the Banks partnership with Angola was based on two pillars:
Pillar I Stimulus to the competitiveness of the economy; and Pillar II Support to economic
infrastructure development. The design of the new CSP was built on the lessons learnt from the
ending CSP and takes into account the new country context characterized by the worsening of
macroeconomic and social conditions on account of a protracted oil crisis.
1.2 The Banks new strategy in Angola seeks to assist the country to accelerate economic
diversification and broaden the inclusive and sustainable growth base. Achieving this
objective requires rapid agricultural transformation and value chains promotion for export
diversification and job creation. Furthermore, there is a need to reduce the high logistical costs in
the non-oil sector, improve skills while investing in technological innovation. In face of these
challenges, the Bank is proposing a new strategy based on two complementary pillars (i) inclusive
growth through agricultural transformation, and (ii) support to sustainable infrastructure
development. The strategic goal is focused on the Angolas Vision 2025 objective of generating
employment opportunities and further reduce poverty in line with the Banks High 5s.

1.3 The new CSP 2017-2021 has drawn significant lessons from the implementation of
the previous CSP 2011-2015, especially, the need for the Bank to invest in large projects that
are aligned with the countrys economic transformation agenda to ensure sustainability and
greater impact amid the spectrum of limited financial resources. After this introduction, the
rest of the report is structured as follows: Section 2 presents the country context from the political,
economic, social and environmental standpoints. Section 3 presents the strategic options. Section
4 presents the Banks intervention strategy for Angola over the 2017-2021 period. Section 5
presents the conclusions and recommendation submitted to the Board.

2. COUNTRY CONTEXT
2.1 Political trends

2.1.1 Angolas political environment remains challenging due to the deterioration of the
macroeconomic and social conditions on account of the oil crisis and weak governance.
President Jos Eduardo dos Santos who has ruled since 1979, was re-elected in August 2016 to
lead the ruling Peoples Movement for the Liberation of Angola (MPLA). The MPLA has been
challenged by the opposition and civil society organisations over issues of economic freedom
(e.g. Angola ranks low at 156th of 178 countries surveyed in the 2016 Index of Economic Freedom
by the Heritage Foundation); protection of human rights; governance and transparency; and rising
youth unemployment. Despite the ongoing low-level insurgency led by the Front for the
Liberation of the Enclave of Cabinda, the country remains politically stable. The uncertainty over
the political succession in the MPLA was brought to an end on 3rd February 2017 with the
appointment of the Defence Minister Joo Loureno as head of the partys list and candidate for
president in the next general elections scheduled for August 2017. Although the likelihood for
political instability remains low, this could not be sustainable in the medium to long term if
measures are not taken to enhance inclusiveness, hence becoming a potential source of fragility.

1
2.1.2 Despite the Figure 1: Country Policy and Institutional Assessment (CPIA)
improvements in governance performance
6,0
and accountability, corruption

CPIA scores
still remains a challenge.
Following Angolas graduation 4,0

to Middle Income Country


(MIC) in 2013 its governance 2,0
indicators improved modestly.
The 2016 Mo Ibrahim Index of 0,0
African Governance improved 2011 2012 2013 2014 2015
CPIA Economic Management
by 5 points to reach 39.2/100 Structural Policies Policies for Social Inclusion and Equity
points from 2006 to 2015; the Governance Infrastructure and Regional Integration
Banks overall Country Source: African Development Bank, CPIA Database
Performance and Institutional
Assessment (CPIA)1 score improved from 3.20 in 2011 to 3.5 in 2015 (see Figure 1); and the
World Banks (WB) Worldwide Governance Indicators improved in three out of six dimensions
of governance between 2006 and 2014, especially in political stability, voice and accountability.
Nonetheless, pervasive corruption (e.g. Angola ranks low at ranks 164th out of 176 countries
surveyed in 2016 in the Corruption Perception Index from Transparency International) and lack
of capable institutions undermine the successful implementation of structural reforms.

2.2 Economic Trends

2.2.1 The economy has been affected by lower international oil prices. Economic growth
declined to 4.7 percent for 2011-2015 (see Figure 2) as against 12.6 percent over the period 2006-
2010. The economic slowdown was driven by a very sharp decline in public investment spending
and cuts in private consumption on account of lower international oil prices. Growth is expected
to pick up to 3 percent between 2018-2020, due to increased public spending, the vast natural
resources potential and growing consumer base. A comprehensive macroeconomic assessment
and outlook and key indicators are provided in Annex 2 and 3, respectively.

2.2.2 The inflation rate, which was at 14.3 percent in 2015, reached 42 percent in
December 2016. This reflects the impact of strong exchange rate depreciation, higher domestic
fuel prices due to the phasing out of fuel subsidies, and loose monetary policy conditions. In
response, the National Bank of Angola (BNA) has tightened monetary policy. Since mid-2015,
BNAs policy interest rate was raised by 625 basis points to the current 16 percent. As a result,
commercial banks lending interest rates increased from 9.6 percent at end-2014 to the current
21.9 percent, making access to credit more costly and shifting lending to short-term maturities.

2.2.3 The banking sector continues to face a challenging operating environment due to
liquidity constraints. The non-performing loans ratio increased to 15.1 percent in October 2016
up from 11.6 percent in December 2015, according to BNA data. The banking systems capital
adequacy ratio deteriorated from 19.8 percent to 18.3 percent during the same period, reflecting
the need for recapitalization of some Banks2. Meanwhile, a regulatory framework for secondary-
market trading of government bonds was developed in 2015 and corporate bonds may follow in
2017. Anti-Money Laundering and Terrorism Financing (AML/CFT) regulations improved and

1
The 2015 CPIA shows that Angola has made significant strides in improving the quality of budgetary and financial
management, which increased to 3.8 points in 2015 from 2.5 in 2009.
2
According to the IMF, two state-owned banks (BDA and BCI) were recapitalized in January 2016 at a total fiscal
cost estimated at about 0.25 percent of GDP.

2
Angola was removed from the Financial Action Task Force (FATF) list in February 2016, but
foreign exchange channels with the international correspondent banks in the United States of
America remain closed due to lack of compliance with governance issues.
Figure 2: Angola - Macroeconomic Performance
GDP growth has declined due to lower international Fiscal policy was tightened to align with
oil prices and slowdown in non-oil activity. Inflation is declining oil revenues and overall fiscal balance
trending high reflecting a weaker exchange rate deficit is set to remain at 6 percent of GDP

GDP Growth (percentage change) 60 Fiscal balance and external debt


Percent

40

Percent
35
30 40
25
20
20
15
10
5 0
0
2016(e)
2010

2011

2012

2013

2014

2015

-5 -20
-10 2010 2011 2012 2013 2014 2015 2016(e)
Oil GDP Non-oil GDP Total Revenues Total Expenditures
Real GDP Angola Sub-saharan Africa
Overall fiscal balance External Debt
Annual inflation

However, the decline in international reserves


Lower international oil prices have reduced total oil
has been contained to preserve a minimum imports
exports and FDI inflows thus widening the external
coverage of 7 months
current account deficit
120 External sector trends 15 Net international reserves
110 35 10
Percent of GDP

months of import cover


USD billion

100
The Metical depreciated recently, due to decreasing
10
90 30
8
FDI
80 flows and lower exports due to international
25
70 5
commodities
60
prices, which can assist competitiveness. 6
20
50 0
40 15
30 4
20 -5 10
10 2
0 -10 5
2010 2011 2012 2013 2014 2015 2016(e) 0 0
Imports (USD billion)
Exports (USD billion) 2010 2011 2012 2013 2014 2015 2016(e)
Trade balance (USD billion)
FDI (USD billion) Net international reserves (USD)
Oil price (USD/barrel)
Months of import coverage
Current Account (right scale)

Limited availability of foreign exchange, driven by The BNA has tightened monetary policy in
lower international oil prices and weaker oil exports response to rising inflation and this has led to a
has prompted significant imbalances in the market sharp increase in the average market interest rates

Official and Parallel nominal exchange rate Market interest rates
580 250
(AKz/USD)
Percent

29,0
510 220
440 190 23,0
160
370
130 17,0
300
100
230 11,0
70
160 40 5,0
janv.-15
mars-15

nov.-15
janv.-16

nov.-16
janv.-17
juil.-15
sept.-15

mars-16

juil.-16
sept.-16
mai-15

mai-16

90 10
juin-14

juin-15

juin-16
aot-14
oct.-14

aot-15
oct.-15

aot-16
oct.-16

fvr.-17
fvr.-14

fvr.-15

fvr.-16
avr.-14

avr.-15

avr.-16
dc.-14

dc.-15

dc.-16

1-year average lending rates


Differential (%) (right axis) AKz/USD official (left axis) BNA policy interest rate
AKz/USD parallel (left axis) Standing lending facility

Source: National Bank of Angola, National Institute of Statistics and International Monetary Fund. Values expressed in percentage of GDP unless
specified otherwise. Note: (e) the 2016 figures are estimates

3
2.2.4 High public expenditure financed by oil revenues has sustained Angolas economic
growth over the past decade. Fiscal policy was tightened in 2016 with total expenditures
reducing from 30.6 percent of GDP in 2015 to 23.6 percent of GDP in 2016 to align with the
sharp decline in total revenues from 27.3 percent of GDP to 19.5 percent during the same period.
In August 2016, the government revised the 2016 state budget reference oil price from USD
45/barrel to USD 40.9/barrel and the fiscal deficit is set to rise from 3.3 percent of GDP in 2015
to 6.7 percent of GDP in 2017, according to the IMFs Article IV staff report of December 2016.

2.2.5 The external current account deficit reduced to 4.3 percent of GDP in 2016 compared
to 10 percent of GDP in 2015. The devaluation of the exchange rate by more than 40 percent
since September 2014, helped to preserve export competitiveness. Nonetheless, balance of
payment pressures persist due to the shortage of foreign currency, but the parallel-official
exchange rate spread has declined from 244 percent in June 2016 to about 135 percent in February
2017 as the BNA increased its sales of foreign currency to mitigate foreign exchange market
imbalances. As a result, gross international reserves fell from USD 24.4 billion in 2015 to USD
22.4 billion 2016, but still sufficient to cover about 8.1 months of imports. Following the trend in
other oil producing countries, Foreign Direct Investment (FDI) in Angola declined by 3 percent
to USD 8.6 billion on account of deferred investments in the oil sector due to lower profit margins.

2.2.6 The countrys total public debt increased significantly raising concerns about debt
sustainability. According to the Ministry of Finance, in 2016, Angola has raised USD 11.46
billion on new loans, of which USD 8 billion are from China. Public and publicly guaranteed debt
climbed over 65.4 percent of GDP in 2015 up from 32.9 percent in 2013 and is estimated to have
reached 71.6 percent of GDP by end-2016 following the depreciation of the exchange rate and
the fiscal deficit. The relatively large proportion of foreign currency denominated debt exposes
the debt burden to the exchange rate depreciation raising concerns about debt sustainability3.

2.2.7 The international oil price shock also exposed the countrys economic and social
fragilities. Angolas economic base remains narrrow with oil accounting for over 95 percent of
total export revenue, 52 percent of government revenues and 30 percent of GDP. As a result of
the currency depreciation, GDP per capita is expected to fall to USD 3,514 in 2016, the lowest
level in a decade, thus aggravating the countrys economic fragility. Angolas political, social and
environmental fragilities (Table 1) also were evidenced by the outbreak of malaria, yellow fever
epidemics, and cyclical droughts and floods in Southern Angola which left more than 400,000
people in need of food assistance, according to the Food and Agriculture Organization.

Table 1: Country Assessment of Fragility Drivers


Social Environmental Political Economic

Low quality of High population Political patronage and Poor infrastructure


primary education, density and poor nepotism High dependence on
low access to infrastructure in urban Politicisation of state natural resources, in
secondary and TVET centers institutions particular, oil
Income inequality, Deforestation and Weak capacity of state High economic
youth unemployment desertification institutions inequality
and poverty Cyclical floods and High economic
Skills and jobs droughts informality and
mismatch burdensome business
Inadequate social environment
protection programs Weak PFM systems

3
Angolas sovereign credit ratings currently stand as follows: Standard & Poors (B), with a Negative Outlook.
Moodys (B1) with negative outlook, and Fitch (B), with a Negative Outlook.

4
2.2.8 Business environment and private sector development: Angola was ranked low at
182nd out of 189 economies surveyed in the Table 2: Doing Business Rankings (2016-2017)
World Bank (WB) report Doing Business 2016 2017
2017, falling one position relative to its 2016 Ease of doing business 181 182 -1
ranking (see Table 2). Critical bottlenecks for Starting a business 139 144 -5
doing business include the relatively high Dealing with 107 111 -4
number of procedures required to create a construction permits
167 171 -4
business, limited access to credit and Getting electricity
Registering property 168 170 -2
inadequate infrastructure and skills. Private
Getting credit 181 181 No change
sector activities have been constrained by
Protecting Minority
scarcity of foreign currency and this has investors 78 81 -3
delayed the implementation of key project Paying taxes 161 157
activities in agri-business and manufacturing. Enforcing contracts 186 186 No change
The government of Angola approved an Resolving insolvency 169 169 No change
SMEs development strategy in 2012 which Trading across borders 183 183 No change
focus on reducing costs and time for starting Source: World Bank, 2017 Doing Business Reports
business; access to credit through a government-led subsidised credit program (Angola
Investe); entrepreneurship promotion through business incubators (e.g. so far 3 incubators were
established by the Ministry of Economys Private Sector Development Institute INAPEM);
skills development; professional training; and provision of consultancy services to SMEs. Since
its inception in 2012, the Angola Investe programme approved 497 loans corresponding to USD
810 million. The SMEs programme coordinated by INAPEM certified 11,000 firms and created
650,000 jobs. Despite this progress, private sector investment to non-oil GDP remains low at 3
percent, and only 2 percent of the 50,000 identified enterprises are exporters, contributing to 5
percent of total industrial tax revenue.

2.2.9 Regional Integration: Angolas geographical location offers a potential to provide


road and railway transportation and logistical platform services for the landlocked
countries. The Lobito Corridor is central to Angolas transportation infrastructure as it crosses 4
provinces and concerns 40 percent of the Angolan population; provides the shortest route to the
seas for Zambias North Western Province, the Copperbelt, and the Democratic Republic of
Congo (DRC)s Katanga province with a population of 16 million working for a vibrant mining
activity. Despite the huge investments made in the rehabilitation of the infrastructure, utilisation
remains low at 25 percent. Potential for intra-trade is huge and Angola is already investing in a
special economic zone at Lobito and an oil refinery. Intra-trade in agricultural products is also set
to grow.

2.3 Social Trends

2.3.1 Poverty: Angola has achieved impressive growth in the past decade and has been able
to reduce poverty from 68 percent in 2000 to the current 36.6 percent. According to Poverty
and Household Wellbeing Survey (IBEP, 2008-09), poverty incidence in Angola was last
estimated at 58 percent for rural areas and 19 percent for urban areas, but with no significant
gender differences (e.g. 37.7 percent for males against 35.6 percent for females). The lack of
sustainable employment opportunities; low household income; and regional disparities in access
to economic and social infrastructure are among the key determinants of poverty. The incidence
of poverty is much higher in the Southern and Eastern regions (e.g. 40 percent to 70 percent),
while the coastal areas and highlands with vast presence of natural resources and high agricultural
potential have relatively lower poverty rates around 8 percent to 34 percent.

5
2.3.2 Despite the progress made in recent years, more efforts need to be done to improve
human and social development. Unemployment remains high at 26 percent, particularly among
the youth. The country still ranks low at 149th out of 187 countries surveyed in the United Nations
2015 Human Development Index. Income inequality in Angola, measured by the Gini coefficient,
was last estimated at 0.427, one of the highest in the region. In response, the government has been
implementing a Social Support Fund which benefited nearly 6.7 million people and generated
more than 41,000 direct jobs over the past 20 years. A new social protection programme was
launched in 2015 with the assistance of the European Union and UNICEF to strengthen social
protection of the most vulnerable groups. An update of the IBEP is also underway to track
progress on poverty. Angola actively started working on the mainstreaming of the Sustainable
Development Goals (SDGs) in the National Development Policies and National Budget with
support of the UN agencies and with positive progress as illustrated in the Annex 4.

2.3.3 Gender: Angola has made progress on promoting gender equality but significant
challenges remain. Since 2013, the government adopted several policy reforms to enhance
gender equity and equality, such as: the introduction of gender budgeting frameworks in public
programs, the National Gender Policy and Action Plan, the National Domestic Violence Policy
and Action Plan, and the National Campaign for Support of Rural Women. Positive trends are
seen in the increase of womens representation in the parliament which went up from 34.5 percent
of parliamentary seats in 2012 to 36.8 percent in 2015. Nevertheless, gender inequalities persist
in access to education, health services and employment opportunities (Box 1).

2.3.4 Education: Angola is undergoing Box 1: Gender Inequalities in Angola


an intensive process of recovery and Cultural norms that favour early marriage and childbearing
reform of its education sector. Public are significant barriers to retention of girls in schools. Data
resources allocated to the sector increased from the National Institute of Statistics (INE) shows that
women are less literate (60.7 percent) than men (82
from USD 1 billion in 2005 to USD 4.7 percent). Lack of access to higher education prevent
billion in 2016, but public spending in women from acquiring the skills and training necessary for
education, as a percentage of total productive employment and they remain trapped in
government expenditure (7 percent), agriculture and other types of low-wage employment. It is
remains below the Sub-Saharan average of estimated that 95.8 percent of women employed in the labor
force in Angola are unskilled as compared to 84.7 percent
18.7 percent. Total enrolments in the system of men(1). The ratio of female to male participation in the
increased sharply from 2.2 million students labour force is 82.3 percent, but only one-quarter of those
in 2004 to 10 million by 2016, but gender involved in non-agricultural employment are women. The
disparity is evident in school enrollment. UNDP 2015 Human Development Report indicates that
Despite the improvement in the school the expected years of schooling for women is 8.7 years as
compared to 14 years for men. Income inequality across
enrollment, efforts still have to be made to gender remains high with the estimated gross national
develop skills and technological innovation income per-capita for women (USD 5,497) being
to enhance socio-economic transformation. significantly lower than that for men (USD 8,169).
(1)
An Overview of Womens Work and Employment in Angola:
Decisions for Life MDG3 Project. Country Report No. 2. Amsterdam
2.3.5 Health: Angola has made Institute for Advanced Labour Studies. Amsterdam, Netherlands, July
improvements in health but significant 2009
gaps in quality and access to services
remain. The Maternal Mortality Ratio (Annex 5) has dropped from 1,400 per 100,000 in 1990 to
477 in 2015 but high rates of fertility among women (e.g. average of 6 children per women) increase
the risk of maternal mortality and prevent them from entering the labour force, with higher risk
among young women. Meanwhile, infant mortality rate reduced by 28.1 percent in the period 1990-
2015, currently standing at 96 per 1,000 births. The proportion of institutional deliveries increased
from 15.7 in 1996 to 49.9 percent in 2010-2015 owing to better provision of obstetric and neonatal
emergency care services. Nevertheless, efforts are still needed to reduce malaria, tuberculosis and
HIV incidence and improve the life expectancy at birth (53.1 years in 2016) which falls short of
the regional average of 61.5 years. Angolas per capita expenditure on health services (USD 212)

6
is higher than the sub-Saharan regions average (USD 95), but relatively higher spending has not
translated into better health outcomes indicating gaps in the quality and access to health care.
2.3.6 Environment and climate change: Angola has made progress ensuring environmental
sustainability. Total forests protected area increased by 95 percent, between 2012 and 2013,
though marine protected areas remain small (less than 1 percent). The Ministry of Environment
is leading the development of new legislation on environmental conservation zones and water
quality but needs to strengthen national technical capacity in evaluating environmental impacts
(e.g. infrastructure, extractive and industrial sectors) as well as quality management systems for
air, land and water. The AfDB support on the development of pilot centers for environmental
biodiversity is expected to mitigate these constraints. Angola is also engaging with the Clean
Development Mechanism and already submitted important climate mitigation/adaptation projects
within the framework of the Intended Nationally Determined Contribution, published during the
Conference of the Parties (COP21) on climate change in Paris and COP22 in Marrakech.

2.3.7 Water and sanitation: A Sustainable water supply and sanitation services is a driver for
economic growth, a means for ensuring gender equality and promotion of green growth through
adoption of sound environmental management practices. In 2015, urban water coverage in Angola
was at 75 percent against 28 percent for rural; while urban sanitation was at 89 percent as against
only 22 percent in rural areas. Closing this service coverage gap requires huge upgrading and
expansion. In this endeavour, the Banks ongoing USD 123.7 million Institutional Support and
Sustainability for Urban Water Supply and Sanitation Development project will be vital for
promoting green growth through harnessing of resources for removing the burden to women and
children since women are responsible for household drudgery activities and hence victims of poor
sanitation systems.

3. STRATEGIC OPTIONS

3.1 Country Strategic Framework

3.1.1 National Priorities: The Box 2: Key measures adopted to mitigate the oil crisis
Angola Long Term Plan, dubbed Total fiscal expenditure reduced by 21.2 percent as fiscal 2016
Vision 2025 articulates the oil price was adjusted from USD 45/barrel to USD 41;
countrys conceptual view to Fuel subsidies were completely phased out in January 2016;
achieve sustainable development Rationalization of debt service from USD 3.32 billion in 2016
to USD 2.91 billion by 2017;
and seeks to extricate the country
Sustained capital spending (USD 6 billion) on agriculture,
from poverty by promoting energy, construction and roads to stimulate aggregate demand
economic growth, macroeconomic and prevent a recession;
stability and employment. It is Import substitution and promotion of local content, value
based on five main dimensions: (i) chains for exports of selected products such as tea, coffee,
macroeconomic stability, (ii) human horticultures, timber, iron ore;
Use of the remaining balances of the bilateral public lines of
development and employment credits estimated at USD 5.47 billion to finance private sector
creation, (iii) private sector investment projects;
development, (iv) economic Maintenance of foreign reserves at USD 24 billion (equivalent
competitiveness and structural to 8 months of imports cover), adoption of a flexible exchange
transformation, (v) infrastructure rate to reduce market imbalances, and restore the relationships
with U.S. dollar correspondent banks to enable access to cross-
development and regional
border finance and payments for both exports and imports.
integration. The Vision 2025 was
designed to be developed in a period of 25 years, in three stages, with concrete objectives and
targets and which may be adapted in light of the adjustments that may prove necessary and timely,
in particular: 2000-2005 (Peace, national reconstruction and Economic Growth start up); 2005-
2015 (consolidation of National Reconstruction, Modernization and Development); 2015-2025
(sustainability and growth). The governments National Development Plan (NDP) 2013-2017

7
underscored aspects of the Vision 2025 by stressing the need to: (i) diversify the economy, (ii)
invest in infrastructure (in particular, transport, energy and water and sanitation), (iii) enhance
better management of natural resources, and (iv) expand employment opportunities to reduce
poverty. Angola has been facing the paradox of high economic growth but with prevailing
challenges in terms of poverty and income inequality, coupled with rising public debt needed to
cover the fiscal deficit arising from the sharp decline in international oil prices. The government
is adjusting its policies to facilitate the needed economic transition as international oil prices are
not expected to recover in a near term. Two key policies were adopted, namely: (i) the Accelerated
Program for Economic Diversification in February 2015, and (ii) the Strategy for Mitigation of
the Oil Crisis adopted in January 2016 (Box 2).

3.1.2 Angolas development priorities center on the promotion of economic diversification


and its acceleration. Before the first discovery of commercial crude oil in 1955, agriculture was
the most important sector in Angola and accounted for 30 percent of export earnings4. At the time,
Angola was the worlds fourth largest exporter of coffee (e.g. about 100,000 tonnes/year) and
diamonds (e.g. about 2 million carats/year). Nonetheless, with the advent of the civil war, the
countrys infrastructure was dilapidated, quality of public service delivery deteriorated, and the
economy became dependent on oil. This generated the so called dutch disease effect, in which
high-value commodity exports led to the appreciation of the real exchange rate diminishing the
competitiveness of producers and exporters in the non-resource sectors, in particular, in
agriculture and manufacturing, while imports became cheaper in the domestic market.

3.1.3 Agriculture. Over the years, Box 3: Agriculture and the National Strategy in Angola
Angola has initiated several strategies to
boost the agricultural sector (Box 3). With The Government has defined several agricultural sector strategies
the abundant water supply, and a over the years which include: the 2003 Poverty Reduction
Strategy; the National Food Security and Nutrition Strategy
favourable climate, the government is (ENSAN, 2009); the National Medium-term Development Plan for
committed to use the agricultural sector as the Agricultural Sector 2013-2017 (PDMPSA). The main priorities
a key driver of economic diversification for agriculture in the aforementioned strategies are as follows: (i)
increase the production and commercialization of cereals,
away from oil. However, inadequate rural horticultural, roots and tubers crops, coffee, artisanal/continental
agricultural infrastructure (e.g. feeder fisheries products; (ii) livestock breeding; (iii) promotion of
roads, irrigation systems, and unreliable sustainable natural resources management; (iv) promotion of
research activities needed to support and promote productive
electricity supply), low use of yield activities such as micro-finance, rural extension, small irrigation
enhancing inputs and technologies, lack of schemes, milk production, apiculture and poultry.
skills, limited access to credit, weak
research and extension services for support to farmers and inefficient land management systems
drive low agricultural productivity (e.g. Angolas cereal yields increased from 662 kg/hectare (ha)
in 2001 to 815 kg/ha by 2015 but remain below the Sub-Saharan average of 1,433 kg/ha) 5. In
addition, only 5.7 percent of the arable land (e.g. about 575,900 km2) is under cultivation. The
government has defined agricultural production targets in the NDP 2013-2013 and these include
the increased of annual cereal production from 1.4 million tons in 2012 to 3.5 million tons by
2017, and livestock production from 10,000 units to 266,809 in the same period. However, for
agriculture to reach its true potential, funding, capacity building, infrastructure, research,
technology development, private sector-led initiatives and empowering agricultural environment
are key enablers. Meanwhile, government reactivated, in October 2016, the Agrarian
Development Fund to support the agricultural policy, under the Ministry of Finance. The Bank is

4
Angola: Country Economic Memorandum Oil, Broad-Based Growth, and Equity, The World Bank, October,
2006.
5
World Bank, 2015 data. Cereal yield, is measured as kilograms per hectare of harvested land, includes wheat, rice,
maize, barley, oats, rye, millet, sorghum, buckwheat, and mixed grains.

8
also assessing options for lines of credit (LoCs) to local commercial banks (e.g. including the
Development Bank of Angola BDA) to support SMEs but the weak quality of the balance
sheets, currency mismatch between the projects cash flows (e.g. in local currency) and the loans
(e.g. in foreign currency), and lack of compliance with the Banks environmental and social
safeguards still constrain these deals. The Bank is currently assessing options to expand business
advisory services to mitigate these challenge as well as provide flexible financing options such as
trade finance LoCs.

3.1.4 Since 2008 the Angolan government has addressed the impact of oil price volatility
by creating a savings vehicle. A Sovereign
Wealth Fund (FSDEA)6 was established in Box 4: Key Developments in the Angolas Sovereign
Wealth Fund portfolio
2012 with an initial USD 5 billion The Government of Angola launched its Sovereign Wealth
endowment (Box 4). Mechanisms for Fund, known as the Fundo Soberano de Angola (FSDEA), with
climate change management were also put an initial endowment of USD 5 billion. However, according to
FSDEA financial reports (www.fundosoberano.ao), the Fund is
in place. A National Adaptation Program of yet to make any profit. This is mostly due to the type of
Action was approved in 2011, although the investments, as well as the challenges that the FSDEA is facing
country still lacks a Nationally Appropriate regarding its operational costs. The FSDEA has been investing
in: (i) domestic projects that contribute to growth and economic
Mitigation Action Plan. Angola is still at its diversification over the medium term and (ii) financial assets
early stages of development of its green abroad to generate savings for future generations. Based on an
growth agenda. A National Strategy for April 2016 press release, the FSDEAs investment portfolio was
USD 4.7 billion, internationally diversified with allocations to
Renewable Energy was approved in 2014. A venture capital funds (58 percent planned by 2020), fixed
policy on renewable energy feed-in tariffs income assets (23 percent), variable income assets (19 percent),
(REFIT) has been prepared with technical and currencies. Some 19 percent of its USD 1.1 billion
Infrastructure Fund is in projects in Angola and Kenya, and 23
support of the Bank under its USD 1 billion percent is in hotel projects in Angola and Zambia. In addition,
Power Sector Reform Support Program 10 percent of the USD 220 million Forestry Fund represents a
(PSRSP). The implementation of the REFIT large-scale eucalyptus project in Angola. The Fund plans to
apply International Financial Reporting Standards (IFRS) by
policy will help enhance economic 2017.
competitiveness and job creation through
private sector investments.

3.1.5 Energy. Angola has a hydropower generation potential of about 18,267 Megawatts (MW)
but is considered to be exploiting less than 20 percent, according to Ministry of Energy and Water
(MINEA). According to the WB data, access to electricity is currently estimated at 37 percent
(less than 9 percent in rural areas) and falls short of SADCs average electricity access rate
estimated at 38.2 percent. The current power generation capacity of Angola places the country on
the 6th place in the region7. Total generation capacity in SADC is estimated at 55,081 MW with
the region still impaired with an electrical supply deficit of approximately 6,000 MW8. Angolas
electricity network is not connected with the Southern Africa Power Pool but the government has
put in place several projects to accelerate access to electricity from 30 percent in 2014 to 43
percent by 2017 and 60 percent by 2025. The main power generation projects are the hydroelectric
stations of Laca (2,067 MW), Cambambe II (960 MW), and the combined cycle power plant of
Soyo I and II (750 MW), all due for completion by 2017. Other projects include the rural
electrification of 82 municipalities and 531 districts, through small distribution and power
generation plants, including mini-hydro power generation. The countrys renewable energy
strategy aims to attain the goal of 800 MW by 2025 from renewables, representing 7.5 percent of

6
The key objectives of the FSDEA are capital preservation, return maximization, and promotion of social and
economic development in Angola.
7
Mwale, S., and Davidson, I.: Security Analysis of Electric Power Supply in SADC Region. May, 25, 2015.
8
I. Esterhuizen, Public, private investment needed to tackle SADC power deficit, Engineering News, 11 September
2012

9
the energy generated by the country. The complete phasing out of fuel subsidies will make viable
some rural electrification projects as the cost of fossil fuels will compete less with renewables.

3.1.6 Transport. Angola has a road network of about 76,000 km of which only 18,000 km are
paved. The government is committed to rehabilitate and expand trunk roads including regional
corridors connecting to DRC, Zambia and Namibia, so far about 13,000 km of roads were
rehabilitated and upgraded. The country has a railway network of 2,950 km out of which 2,725
km were rehabilitated with the investment of more than USD 3 billion and made operational from
2012 to 2014, but the countrys railway network lacks interconnection. Angola has four important
ports of trade, namely: Luanda, Cabinda, Lobito and Namibe making the country a regional
transport hub for neighbouring landlocked countries. The government has plans to build a new
commercial port north of Luanda at Barra do Dande to reduce traffic at the port of Luanda and
the capacity of the port of Lobito has been expanded. Plans are underway to build 44 logistical
platforms to connect to railway line and trunk roads. Total investment is estimated at USD 3.9
billion. Five platforms have already registered some progress in the civil works, namely: Lombe,
Luau, Menongue, Soyo and Caala.

3.2 Aid coordination, Alignment and Harmonization

3.2.1 Angolas development cooperation landscape comprises various multilateral and


bilateral development partners (DPs), but the structure for dialogue is yet to be well
established. The UN and the Ministry of Planning are preparing a formal aid framework
mechanism. Angola became eligible for MIC graduation based on the UNs GDP per capita
criteria (e.g. USD 4,518 in 2015 as compared to the threshold of USD 1,242). The graduation
process will only be completed by February 2021, as the country addresses its economic and
environmental vulnerabilities. Official Development Assistance to Angola increased from
1 percent of GDP in 2011 to 2.3 percent of GDP by 2015. Donor activity has shifted significantly
over the past five years to an increased presence in areas including energy, water and sanitation,
governance and social protection (Annex 6 and Annex 7). The Banks USD 1 billion Power Sector
Reform Support Program (PSRSP) helped leverage USD 200 million from the Japanese
International Cooperation Agency (JICA) and a USD 450 million loan plus USD 200 million
sovereign guarantee from the WB. The PSRSP facilitated the preparation of several reports such
as the environmental licensing guidelines for energy projects, feed-in tariff for renewable energy,
and revenue protection manuals for the power utilities. Drawing from the experience of the
PSRSP, government requested the Bank to take a leadership role in financing a new power sector
mega project which will comprise the construction of a 400 kV central-south transmission line,
the reduction of technical and non-technical power distribution losses, and development of
renewable energy programmes (e.g. solar). In addition, the Bank has been working closely with
the IMF and the World Bank in assisting the government in building a Medium-Term Expenditure
Framework, a Medium-Term Debt Management Strategy, as well as improving the quality of
public investment by strengthening its evaluation, selection and monitoring processes.

3.3 Strengths and Opportunities/Challenges and Weaknesses

3.3.1 Angola has favourable economic strengths and prospects, which if well harnessed, can
promote inclusive and broad based economic growth. In addition to the existing opportunities in
the dominant hydrocarbons sector, the country also has vast potential in the mineral sector, in
particular, diamonds and ornamental rocks. Among the major strengths and opportunities are:
(i) Agricultural potential: Investments in agro poles and agro industries through provision
of lines of credit to private sector can help boost local food production and exports;
(ii) Natural resources: The sustainable exploration of natural resources, such as, arable land
and water to sustain agribusiness, and promotion of local content in mining and fisheries

10
can help Angola create value addition to its resources, generate jobs and reduce poverty;
(iii) Regional integration: Angola can take advantage of its ports as well as the untapped
regional market to boost intra-regional trade, in particular along the Lobito Corridor.
3.3.2 Despite the countrys economic potential, there are persistent structural challenges that
hinder inclusive growth, notably: weak institutions; weak agricultural productivity; inadequate
infrastructure; limited qualified human resources (in particular in business management, science
and technology, construction, and manufacturing sectors); weak trade facilitation and export
support systems; poor governance and challenging business environment.

3.4 Bank Portfolio Performance Review

3.4.1 The Bank Group portfolio reflects the strategic alignment with the Banks CSP, the
TYS and the High 5s, with a strong focus on infrastructure and finance. The Banks active
portfolio in Angola comprises ten (10) operations (Annex 8) for a net total commitment of UA
458 million up from five (5) projects worth UA 52 million in 2011. The portfolio comprises nine
(09) public operations worth UA 224 million (49 percent), and one (1) private sector project worth
UA 234 million (51 percent). The portfolio sector breakdown shows the predominance of finance
(52 percent), followed by water and sanitation (20 percent), social (15 percent), multi-sector (5
percent), agriculture (4 percent), environment (3 percent), and the transport sector with 1 percent.

3.4.2 The COAO) and RDGS have taken proactive measures to restructure the portfolio
as well as advance with ESWs to inform the design of new operations. A total of four ageing
projects with final disbursement deadline set for 31 December 2016 were successfully completed
with an average disbursement rate of 96 percent. These included the 11 years old Bom Jesus
Agriculture Project. The Bank also completed several ESWs in the areas of private sector country
profile which informed the design of the new Ministry of Economy; the oil and gas downstream
concept note that guided country dialogue on natural resource management, the economic
diversification study that informed the preparation of the new CSP 2017-2021.
Figure 3: Portfolio distribution by sector as at 1st February 2017
3.4.3 Portfolio performance: Over Transport
Multi-Sector
the 2011-2015 CSP period the Bank 5% 1% Water
(Box 5) and the government intensified Social Sup/Sanit
15% 20%
the monitoring of the portfolio
implementation which resulted in an
improvement of the disbursement rate Finance
52% Agriculture
from 17.2 percent in 2011 to 4%
37.5 percent in 2015. The
commitments-at-risk also declined Environment
3%
significantly from 50 percent to 4.9
percent during the same period, while the proportion of ageing projects reduced from 40 percent
to 28 percent owing to the approval of 10 new projects since October 2013 to December 2015.
The Banks overall portfolio performance in Angola is deemed unsatisfactory with an average
score of 1.9 out of 4, and based on the most recent reports on implementation progress and results
(IPR). The low cumulative disbursement rate of the ongoing portfolio (7 percent by December
2016) stems primarily from the fact that the restructured portfolio is fairly young, comprising six
projects approved between 2014 and 2015. This generally unsatisfactory performance calls for
the need to maintain continuous monitoring, in order to raise the disbursement level for recently
approved projects.

11
3.4.4 The main problems identified in the 2016 Country Portfolio Improvement Plan
(CPIP) include: (i) lack of ownership and leadership of the sector ministries in implementing the
projects, (ii) lack of qualified PIUs staff, (iii) inefficiency in public administration which delays
processing of conditions for entry into force and first disbursement, (iv) weak financial
management systems; and (v) delays in providing counterpart funding. The Bank made progress
with the translation into Portuguese of the Rules and Procedures for Procurement of Goods,
Services and Works, but the absence of the Portuguese version of Standard Bidding Documents
(SBDs) still constrain local firms to bid on Banks tenders. The Bank will use Trust Funds to
ensure a comprehensive translation of the Banks SBDs in Portuguese. The weak capacity of PIUs
is being addressed with the implementation of a Central Project Implementation Support Unit
(CPISU) in the Ministry of Finance and including the enforcement of performance based contracts
for all Project Management Unit (PMU) staff. The preparation of the CPIP took into consideration
the PD 02/2015, in particular, the need to strengthen projects procurement, financial
management, and disbursement procedures. Key measures were adopted in order to raise the
disbursement levels for recently approved projects, and these include: the setting up of quarterly
disbursement targets for each project; adoption of disbursement checklist manual; and
governments commitment to streamline the process of approval of disbursement requests within
five working days. The CPIP action plan was prepared with the government and clearly outlines
the accountability mechanisms for the delivery of the actions (Annex 9).

Box 5: The Relevance of the Banks Country Office


The presence of the Angola Country Office (COAO) contributed to the exceptional growth of the portfolio (from
five projects in 2011 to fourteen by 2015). The office also coordinated 44 project supervision missions and 29
country dialogue missions of a total of 182 missions that took place during the period 20122015, despite the
absence of sector Task Managers. Some activities that gave greater visibility to the Bank would have not been
possible without the presence of the country office. These include:
Banks leadership role, among DPs in Angola, on infrastructure support and financing through the successful
implementation of the USD 1 billion PSRSP;
Enhanced country dialogue in the areas of energy, public procurement, economic diversification, private
sector development and the mainstreaming of environment and social safeguards;
Technical assistance to the government in the unbundling of the power sector utilities, revision of the general
electricity law, revision of the procurement law, and preparation of feasibility studies on fixed asset registry and
technical losses reduction to inform new energy sector mega-project;
Bank support in the field of governance has enabled the government to prepare the PEMFRS, and improve
Public Investment Programming (PIP);
Close monitoring of the portfolio and business development, particularly, in agriculture, fisheries and
infrastructure (energy, transports and information and communication technology) and in the private sector (lines
of credit for local commercial banks).

3.5 Lessons learnt


3.5.1 The implementation of the CSP 2011-2015 has helped identify some key lessons which
will inform the main areas of Banks intervention for the period 2017-2021, and taking into
account the current country challenges and specificities characterized by the sharp decline in oil
revenues and the urgent need to accelerate economic diversification. More specifically, it was
found that:
(i) The alignment of Banks assistance programme with the governments economic
transformation agenda (e.g. in energy) increased visibility and fast-tracked implementation.
In this context, consideration of key infrastructure projects (e.g. transport and energy)
registered in the public investment programme ensured strategic alignment and
governments ownership;
(ii) The enhanced policy dialogue and timely responsiveness to requests for financing (e.g. the
USD 1 billion PSRSP) helped to build trust with government and facilitate implementation
of projects;

12
(iii) Project preparation should take into account the countrys absorptive capacity and
complementarity with the activities of other development partners active in the country.
Quality-at-entry should therefore be improved and should include preparation of detailed
ESWs, adoption of realistic conditions for effectiveness and first disbursement and
assessment of implementation capacity of the PMUs;
(iv) The Bank should also focus on big projects, combining lending with policy advice and
technical assistance, in order to reduce high transaction costs in Angola and influence critical
reforms.
3.5.2 The prevailing challenges in the implementation of Banks portfolio in Angola also helped
identify some critical lessons in order to improve portfolio performance and delivery in line with
the new Presidential Directive (PD 02/2015). Overall it was recommended that:
(i) Capacity building of project implementation units and relevant government departments
should be enhanced and mainstreamed in Bank operations;
(ii) Design of results framework should be improved, particularly elaborating on the results
chain, to ensure a credible CSP monitoring framework.
(iii) Availability of Portuguese speaking Task Managers, including Portuguese version of the
Banks procurement and financial management rules, is critical for speedy implementation
of projects; and,
(iv) Budget for Monitoring and Evaluation (M&E) systems at project level should be provided to
ensure regular supervision to timely address implementation challenges.
3.5.3 The previous CSP, 2011-2015, was designed during a period in which the Country
Office was not yet operational. An ambitious pipeline of projects was identified in various
sectors, but none of these strategic projects received requests for Banks financing by the
Government by the time of the CSP Mid-Term Review in 2013. This was mostly due to: (i)
lack of political commitment to engage with the Bank during the CSP preparation phase (e.g.
despite several negotiation missions, government declined Bank financing for key infrastructure
projects in the energy and transport sectors as it had secured financing from other facilities), and
(ii) Governments easy access to bilateral lines of credit such as those from China (e.g. about
USD 10 billion financing for the Lobito-DRC corridor) that largely exceeded the Banks initial
financing envelope (e.g. USD 84 million in 2011). However, with the opening of the Country
Office in 2011, and the increased policy dialogue thereafter, the Bank started getting
visibility and requests for financing large-scale infrastructure projects. As a result, the
Banks portfolio in Angola increased from UA 52.27 million (USD 74 million) in 2011 to UA
1.2 billion (USD 1.7 billion) in 2015. The Bank has also drawn significant lessons from the
implementation of the previous CSP 2011-2015, especially, the need to invest in large projects
that are aligned with the countrys economic transformation agenda in order to ensure
sustainability and greater impact amid the spectrum of limited financial resources.

4. BANK GROUP STRATEGY FOR 2017-2021

4.1 Rationale and Strategic Selectivity

4.1.1 The dialogue between the Bank and the government led to a consensual recognition
of the need for the Bank to continue investing in infrastructure given its comparative
advantage. This was further highlighted in the consultations with other DPs, where the need for
the country to reduce dependence on oil was stressed. Therefore, the urge to find alternatives to
promote economic diversification through agricultural transformation and value chains for job
creation. The governments strategy is to boost potential GDP growth by improving input factors,
with infrastructure (e.g. energy, transport, and water and sanitation) playing a key role. The

13
dialogue also indicated an increased focus on private sector led investments in the revitalisation
of the rural-urban commercialization circuits, and skills development, in particular for the youth
and women, and contribute to the countrys efforts for the achievement of the SDGs 1, 5 and 8,
on reducing poverty, gender inequality, and creation of good jobs and economic growth. Annex
10 provides a comprehensive selectivity criteria for the CSP.

4.1.2 The main economic challenge for Angola remains the need to reduce the dependence
on oil by enhancing economic diversification and its export base. Now with the recent fall in
commodity prices, it will be challenging for the public investment to continue leading economic
growth. The limited availability of foreign exchange and its negative impact on the economy
should be an opportunity to accelerate the economic transformation agenda with emphasis on the
local production and its value chains. In this context, there is a need to gradually channel private
sector investments towards productive sectors, in addition or replacement of public funds, with
high potential to generate jobs and incomes. Based on the countrys natural endowments,
agriculture is well positioned to transform the country, promote economic diversification and
boost exports and generate foreign exchange. The Bank can play a catalytic role by providing
lines of credit as well as leveraging PPP transactions to ease access to finance for private sector
and SMEs, to transform agriculture as a business, reduce local food prices, enhance food security
and improve the countrys economic competitiveness. By supporting the agro poles development
and the agro industries, the Bank will contribute to achieve one of the High 5s target of
Industrialise Africa.

4.1.3 In order to be competitive in agriculture as well as in the industrialisation process,


Angola also needs to address structural bottlenecks on economic infrastructure. More
specifically, investments in energy and transport are critical to reduce the current high logistical
costs and unlock the full potential of the economic development zones and promote structural
transformation. In view of Angolas current financial challenges, the Bank has initiated dialogue
with private sector entities in Angola for implementation of innovative financing instruments such
as Special Purpose Vehicles to finance non-sovereign infrastructure investments (e.g. Port
Amboim rehabilitation, and Luanda Benguela Highway) that can contribute to interconnect the
economic development poles, improve export competitiveness and generate foreign exchange.

4.1.4 Since the emergence of the oil sector crisis, Angola is at a turning point of its
development trajectory, with high expectations for an inclusive growth and income
generation. The Banks financing is expected to use innovative instruments such as PPPs, partial
credit guarantees combined with sovereign loans to invest in integrated infrastructure projects
supporting agricultural transformation and industrialization through gradual import substitution
programs to generate jobs and fill in the gap between the demand and the local supply of food. In
fact, recent data from the Ministry of Finance shows that total imports of basic food basket needs
declined sharply from by 27 percent (e.g. from USD 465 million in 2014 to less than USD 338
million by 2015), mostly due to lack of foreign exchange. This has led to sharp food price
increases with negative impact on the welfare of the vulnerable population. In light of the above,
it is proposed that the Banks strategy for the period 2017-2021 should be built around two
complementary pillars of: (i) Pillar I: Inclusive growth through agricultural transformation, and
(ii) Pillar II: Support to sustainable infrastructure development.

4.2 Banks strategic alignment

4.2.1 The Banks proposed strategy is designed to address the specific identified challenges
that the country has been facing, notably: (i) the weak agricultural productivity, (ii) the lack of
adequate skills, (iii) the existence of weak trade facilitation and export support systems, (iv) the
inadequate infrastructure and, (v) the challenging business environment. The new CSP is aligned

14
to the Banks Feed Africa Strategy
for Agricultural Transformation in Box 6: Gender Mainstreaming
In a cross-cutting-manner, the Bank will prioritize gender
Africa 2016-2025, the Bank Group mainstreaming to increase womens participation in productive
Industrialisation Strategy for Africa employment through its operations. New operations will include
2016-2025, the Banks Private Sector gender as a cross-cutting area in project strategies to empower
Development Strategy 2013-2017, the women with skills, resources and opportunities to overcome
Bank Group Strategy for the New gender barriers and participate effectively in the labour force.
Community-based strategies based on womens groups and peer
Deal on Energy for Africa 2016-2025, networks will be adopted to help overcome cultural and social
the Bank Group Strategy for Jobs for barriers to womens participation in productive employment.
Youth in Africa 2016-2025, the The CSP will emphasize collection and tracking of data on
Banks Regional Integration Policy gender indicators through operations to be able to report impact
and Strategy 2014-2023, and the Bank on gender outcomes and reduction of gender gaps at completion.
Group Gender Strategy 2014-2018
(Box 6). Lastly, the CSP is fully aligned to the achievement of Angolas SDGs, in particular, the
SDG 1 (No poverty), SDG 2 (No Hunger), SDG 5 (Gender equality), SDG 6 (Clean water
and sanitation), SDG 7 (Clean energy), SDG 8 (Good jobs and economic growth), SDG 9
(Innovation and infrastructure), SDG 10 (Reduced inequalities), and SDG 13 (Protect the
planet).

4.2.2 The CSP pillars are aligned to the Angolas Vision 2025 Pillars of Rehabilitation and
development of infrastructure to support economic development, and Promotion of economic
diversification and competitiveness. The strategic interventions also draw from the countrys
agricultural sector plan - the National Medium Term Development Plan for the Agricultural
Sector (2013-2017), the Angola Energy 2025 Vision, the National Strategy for Renewable Energy
and the Transport Sector Development Strategy (2013-2017). Overall, the interventions under
Pillar I of the CSP will help achieve the strategic goals of the Banks High 5s of Feed Africa and
Industrialize Africa while Pillar II interventions will assist in the achievement of the strategic
results of the High 5s of Light up and Power Africa, Integrate Africa and Industrialize Africa.
The CSP sectoral strategic linkages with the High 5s are illustrated in Annex 11.

4.3 CSP Objective and Strategic Pillars

4.3.1 The strategic goal of the CSP 2017-2021 is to assist Angola in accelerating economic
diversification and reduce the dependence from oil through integrated investments in
agricultural transformation towards sustainable job creation and poverty reduction. The
Banks interventions will contribute to address the main constraints to structural transformation,
namely: (i) the need to enhance productivity in agriculture through provision of yield enhancing
inputs; (ii) promote gradual industrialization by bringing basic services to the rural areas, in
particular, energy and transport to foster agribusiness and value chains for transformation of local
goods; and (iii) improve the enabling business environment to attract private sector investments
and PPPs.

4.3.2 Pillar I: Inclusive growth through agricultural transformation. The interventions


under this pillar are aligned with the Angola Vision 2025 goal of enhancing economic
competitiveness, and the NDP objective of accelerating economic diversification. Since many of
the poor population in Angola still live in the rural areas (e.g. 59 percent, according to the IBEP,
2008-09 survey) and are dependent on agriculture, then the strategic objective of this pillar is to
assist the country in enhancing agricultural productivity gains to quickly reduce its dependence
on food imports (e.g. currently estimated at 70 percent) which draws on foreign exchange
earnings. This approach falls within the objectives of the AfDBs Strategy for Agricultural
Transformation in Africa 2016-2025.

15
4.3.3 Angolas efforts to reduce food imports and ensure improvements in foreign
exchange earnings from agriculture will require an engagement of private sector operators.
The Bank will close the gaps, specifically in the provision of integrated agricultural supporting
infrastructure along the Lobito Corridor, a region with a relatively high poverty rate of 69.4
percent but with high potential for cereal and livestock production. These investments will include
the provision of all-weather and feeder roads (e.g. the 170 km Munhango-Luena and the Lumege-
Luacano-Luau 186.5 km), extension of electricity distribution to rural areas, ICT infrastructure
for delivery of agricultural market information across value chains, logistics and trading of
agricultural inputs.

4.3.4 Lack of skills in science, business, agriculture and technology areas needed for
enhancing food production may impact negatively on the countrys economic
competitiveness. The Bank will establish partnerships with the private sector, and build on the
experience of its ongoing Science and Technology and Private Sector Development projects, to
design integrated technical training programs to equip smallholders (e.g. youth and women) on
agricultural techniques and entrepreneurship skills in agri-business in line with the Banks
Strategy for Jobs for Youth in Africa 2016-2025. This will include support to access agricultural
land and financing to allow women farmers to transition from subsistence to commercial
production. According to the WB, the use of fertilisers in Angola is estimated at 8.8g/ha and falls
short of the worlds average of 119.9g/ha. The Bank will assist the country in boosting the use of
yield enhancing inputs by initially subsidizing the use of fertilizers, in the first two years, like in
the case of Liberia and Malawi. Thereafter, a risk sharing facility and input supply system with
the private sector will take over. For instance in Liberia the total cost per farmer was USD 112
but farmers are paying USD 10. There will also be an e-registration exercise for farmers in the
areas of interest taking advantage of the ICT infrastructure investments in place.

4.3.5 The Bank will enhance its focus on integrated rural agricultural development programs,
in particular, at the Cabinda province, given its high poverty rates (e.g. 42.2 percent) and non-
existent transportation infrastructure; lack of access to resources which impacts negatively on the
productivity potential of both agriculture and off-farm sectors. Key interventions will include
large investments in agricultural infrastructure in order to connect the major production zones to
urban markets; water infrastructure (e.g. increase of irrigation capacity from 12,000 ha to 17,000
ha); construction of processing and storage facilities to add value as well as increase shelf life of
agricultural commodities. These will substantially reduce post-harvest losses (which have greatly
contributed to food shortages as well nutrition deficiency), bring smallholder farmers nearer to
markets, increase value of their produce, boost agricultural exports from the region from 10,000
metric tonnes (mt)/year to 50,000 mt/year by 2021. Advisory services will be sought from the
ECNR on land and water management for sustainable agricultural, fisheries and livestock
production. The Bank will also pay special attention to mitigate the negative impacts of climate
change resulting from the El Nino Southern Oscillation phenomenon, which has either caused
floods or repeated droughts, especially in the Southern rural areas of Namibe, Cunene and Huila
provinces where poverty incidence remains high (e.g. about 47.9 percent).

4.3.6 Pillar II: Support to sustainable infrastructure development. The interventions under
this pillar are aligned with the Angola Vision 2025, and the NDP objective of promoting
infrastructure development. The support will primarily focus on two main sectors, Energy and
Transport. The objective is to assist Angola in addressing its electricity deficit and improve the
transport infrastructure connectivity to further reduce the costs of doing business, open local and
regional markets, attract FDI, and strengthen downstream linkages of economic development
poles that can foster SMEs growth and job creation. Following the lessons learnt from the power
sector reform support program, the Bank will also consider using Budget Support Instrument to
during the CSP 2017-2021 cycle to enhance catalytic impact of its infrastructure interventions.

16
4.3.7 Energy. The prevalence of high electricity technical losses (about 15 percent of the power
produced compared to a benchmark of 10 percent) and inadequate power transmission
infrastructure still constrains the expansion of electricity access in Angola. The Bank will build
on the implementation of its support to the sector, through the PSRSP (Box 7), and focus on
leveraging funding with key development partners (e.g. AFD, EIB, JICA) to scale up Angolas
ongoing efforts to expand access to electricity from 30 percent in 2014 to 43 percent by 2017 and
60 percent by 2025. Key interventions will include: the connection of 400 kV Central-South
electricity transmission line, upgrading the electricity distribution and installation of systems to
improve revenue collection (e.g. roll-out of 50,000 pre-paid electricity meters in Luanda city) to
reduce technical and non-technical losses. The Bank will also explore opportunities for PPPs
development of green Mini-Grids in rural areas (e.g. 10 MW solar energy generation in Tombwa
and biomass power involving local communities). The Bank is also mobilising Trust Fund
resources from the Sustainable Energy for All (SEFA) to finance capacity building programmes
in renewable energy and foster the countrys green growth agenda. There is also potential for co-
financing private sector projects with Independent Power Producers (IPP) of renewable energy
through the Facility for Energy Inclusion. All these interventions are aligned with the Bank Group
Strategy for the New Deal on Energy for Africa 2016-2025 aimed at enhancing universal access
to electricity by 2025.

Box 7: Power Sector Reform Support Program


In May 2014 the Bank approved a USD 1 billion budget support programme for Angola. The main objectives of
the programme included: (i) completion of unbundling of power utility companies through creation of new
companies for generation, transmission and distribution; (ii) improved operational efficiency; and (iii)
strengthened governance and value for money in the power sector. The programme has succeeded in the
unbundling of the three power utility companies. The PSRSP resources (about USD 400 million) have
contributed to the financing of the construction of the 2,060 MW Laca hydropower dam, which is expected to
double the countrys generation capacity to 5,000 MW by 2017. The programme also delivered various legal
reforms in the sector, notably, the new General Electricity Law approved in 2015, a water and power sector
regulator and a renewable energy strategy. Overall, revenue collection improved by 50 percent against 2014
levels; percentage of on-grid customers who are metered more than tripled, from 20 percent to 70.5 percent;
distribution system availability improved from 60 percent to 86.3 percent; and gender representation at board
level improved from 23 percent in 2014 to 25 percent by 2015.

4.3.8 Women are disproportionately affected by energy poverty as they carry a heavy
burden of domestic chores such as collecting cooking fuels, cooking and processing food
which increases their vulnerabilities to health risks. The Bank will address these concerns in
the design of new energy projects and make clean energy affordable and accessible to women
users through the introduction of innovations such as clean cooking stoves.

4.3.9 Transport. Angola made significant strides to rehabilitate its infrastructure but a lot
remains to be done to support the diversification of the economy. The main issues facing the
transport sector include: (i) high logistical costs due to inadequate infrastructure which hampers
productivity and trade; (ii) weak infrastructure maintenance; (iii) weak procurement management;
and (iv) domestic contraction of the industry due to high construction costs and lower oil
revenues. The Bank support in the preparation of a Transport Master Plan will guide the
infrastructure development reforms in Angola and ensure its sustainability. Moreover,
interventions aimed at supporting the construction of the 350 km rail link joining the Lobito
Railway corridor to Zambia; upgrading trunk roads to paved standards; and including the
rehabilitation of feeder roads to connect to agro industrial poles, logistic platforms to railway lines
and trunk roads would contribute to stimulate intra-regional trade as well as support agricultural

17
production along the Lobito Corridor. Given the magnitude of the financing requirements for
infrastructure development and the limited Banks financial headroom for Angola, the Bank will
co-finance with the Africa Growing Together Fund (AGTF) to crowd in private investments.
4.3.10 The sustainability of Angolas infrastructure has been challenged by climate change
and lack of maintenance and management skills. The Bank will support the broad
dissemination of best practices on climate resilience standards in all of its power and transport
interventions. Training programs on operational efficiency and maintenance of power
infrastructure will be conducted targeting more than 1,500 power utility operational staff (with
30 percent women). In addition, about 2,000 people living along the Lobito corridor will benefit
from training on infrastructure maintenance, road safety and HIV/AIDS, in an effort to enhance
sustainable livelihoods, reduce income inequality and ensure health safety in local communities.
This training programme will be undertaken in partnership with the Angolan Roads Institute.

4.4 The business program

4.4.1 The downgrade of Angolas sovereign credit rating will impact on the available
headroom for financing CSP operations for the period 2017-2021. Therefore, Bank
investments will focus on critical projects support the governments economic diversification
programme, while identifying potential opportunities for co-financing with private sector and
development partners. The Annex 12 presents the Banks indicative lending programme for
Angola for the CSP 2017-2021. All these projects have received governments interest for
financing and are at an advanced stage in terms of readiness. The Bank has already secured UA
2 million from the Fund for African Private Sector Assistance (FAPA) to finance capacity
building programmes on trade and agricultural value chains along the Lobito Corridor. An
agreement was also reached with key DPs (e.g. AFD, EIB, JICA, USAID) to co-finance the mega
energy sector program estimated at USD 3.2 billion. Efforts are also ongoing to leverage financing
with the new World Banks USD 230 million Commercial Agricultural Development Project that
is under preparation.

4.4.2 The indicative pipeline and non-lending program. The Bank has identified other key
projects (Annex 13) which are aligned to the CSP pillars, although not yet ready for
implementation. These projects are part of a rolling pipeline program that will be updated on an
annual basis and some projects may transit into the main CSPs Indicative Lending Program as
soon as their quality-at-entry conditions get satisfied. Moreover, as the portfolio is expanding and
one of the lessons learnt from the previous CSP 2011-2015 is the need to improve quality-at-entry
by enhancing project preparation (see section 3.5). Therefore, the new CSP 2017-2021 has
adopted an innovative approach by using the balances of previous ADF projects and technical
assistance grants to prepare ESWs (Annex 14) to fill the analytical knowledge gap, in particular,
in agriculture, energy and transport sectors. The Bank will strengthen policy dialogue and
improve governance systems in the agriculture and natural resource sectors with technical support
from the ECNR. Key areas of focus include: (i) provision of demand-driven capacity building on
land reforms in light of the revised Land Law, and (ii) creation of local content in oil and gas and
fisheries industries. The Bank, and in collaboration with the ALSF and the Fiduciary and
Financial Management and Procurement Policy Department (SNFI) will assist in improving
governance systems through provision of advisory work on contract negotiations, PPP design,
mechanisms for revenue improvement and efficiency in public utilities, and PFM and
procurement reforms.

4.5 Bank group resources

4.5.1 The Banks indicative financial headroom will mostly depend on the combination of a
decline in Angolas Operational Country Limit due to the deteriorating creditworthiness and the

18
Banks Total Potential Exposure to Angola. This will require a selective approach in the use of
the resources to support the countrys economic diversification agenda. at two levels in alignment
to the High 5s of Feed Africa and Industrialise Africa through Pillar I: inclusive growth through
agricultural transformation, and Light up and Power Africa, Integrate Africa, and Industrialize
Africa- through Pillar II support to sustainable infrastructure development.
4.6 Country dialogue

4.6.1 The CSP 2017-2021 country dialogue between the Bank, government, development
partners and civil society was carried out in November 2015 and led to the consensual
identification of the proposed CSP areas of intervention. The Bank will build upon the work
already carried out during the CSP consultations to deepen dialogue in the following key issues:
(i) Public Financial Management (PFM) and Use of Country Systems: The Bank will
continue working with other DPs (e.g. IMF and WB) to implement the recommendations of the
PEMFSR action plan as well as the Banks Country Fiduciary Risk Assessment (CFRA) in order
to reduce the fiduciary risks and contribute to the Banks gradual use of country systems;
(ii) Portfolio management and ownership: Given the challenges faced in portfolio
management and taking into account the recommendations arising from the CPPR workshop, the
Bank will continue its dialogue with the government for the operationalization of the CPSIU in
the Ministry of Finance, streamline disbursement procedures, and enforce results-based culture
and accountability through the implementation of performance based contracts for all PMU staff;
(iii) Legal and institutional support: Due to the sharp decline in international oil prices and
revenues, there is an urgent need to assist the government in the design of efficient systems for
management of its natural resource wealth as well as search for sustainable sources of funding to
advance its economic diversification agenda. In this context, the Bank, and through the ALSF and
ECNR will undertake regular dialogue with government to assess demand-driven needs for
capacity building and including design and management of PPP and Partial Risk Guarantees;
(iv) Private sector development and job creation: The Public sector dominance in the
economy in Angola as a result of a long history of a centrally-planned state has led to the
emergence of Politically Exposed Persons in the private sector, which poses governance and
transparency challenges. Looking ahead it will challenging for the public sector to continue
leading growth due to the sharp decline in fiscal resources on account of lower oil prices. The
Bank, and based on strict due diligence criteria, will assist in mobilizing lines of credit for local
commercial banks to finance SMEs, in particular, in agribusiness. The Bank also started dialogue
for the implementation of the youth apprenticeship initiative in Banks financed projects in the
areas of private sector, water and sanitation, science and technology, environment and fisheries
as part of the Banks Strategy for Jobs for Youth in Africa 2016-2025.

4.7 Implementation arrangements and risks

4.7.1 Angola country fiduciary risk assessment


4.7.1.1 The Bank conducted a Country Fiduciary Risk Assessment (CFRA) in 2016 as part of the
appraisal mission of the EDCSP, a Policy Based Operation. The CFRA focuses on four main
pillars, namely: (i) Budgeting, (ii) Reporting and Audit, (iii) Procurement, and (iv) Corruption.
The assessment noted substantial governments commitment to improve the PFM systems over
the past years, notably the adoption of the General Inspectorate of Finance (IGF) regulations, the
new Procurement law and regulations (2016), and the frequent reporting of budget execution
using the governments Integrated Government Finance Management System (SIGFE). These
developments indicate that Angola is exhibiting a positive trajectory of change in the overall
country PFM systems. Nevertheless, the CFRA highlighted significant challenges on capacity
development including the accounting profession in Angola, general oversight, enforcement of
procurement contract management norms, procurement complaints review mechanisms,

19
existence of independent structures within the public administration to perform a prior review of
procurement processes. The summary of the assessment of the countrys PFM systems is provided
in Annex 15 while the summary on the fiduciary risk in procurement is in Annex 16.
4.8 Risks and mitigation measures

Risks Mitigation measures


Political Risk - Low probability risk: Mitigation measure: Given the downside risks and ahead of the general
Social unrest arising from political elections in 2017, the Bank and other DPs will continue with policy
uncertainty and deteriorating living dialogue with the government to improve efficiency in public
conditions expenditure and enhance broad-based inclusive growth.
Macroeconomic risks - High Mitigation measure: The Bank will intensify the dialogue with the
probability: slow economic growth government to adopt supportive macroeconomic policies to rationalise
and deterioration of the countrys fiscal expenditure, introduce exchange rate flexibility, strengthen the
creditworthiness due to persistent oil banking system to prevent systemic crisis, and implement structural
crisis reforms for economic diversification.
Fiduciary and technical capacity Mitigation measure: The Bank will assist the country to improve
risks - High probability risk: governance and the business environment through regulatory reforms
Fiduciary risk and weak for enhanced efficiency of public utilities, management of PPP contracts
entrepreneurship capacity in private in infrastructure with support of the ALSF; full implementation of the
sector new procurement law as well as the PEMFSR action plan, and dialogue
on the land tenure reforms. Entrepreneurship skills will be deepened
with capacity building programs in partnership with the ECAD.
Climate change risks - Average Mitigation measure: Since the problem of climate change is cross-
probability: Agriculture and cutting, the Bank will collaborate with a diversity of stakeholders that
infrastructure investments are have operations to curb the negative effects of climate change on
vulnerable and cyclical floods and infrastructure and build resilience in Angola. The Bank will also support
droughts in Angola. land and water management for sustainable agriculture.

4.9 Monitoring and evaluation


4.9.1 The CSP 2017-2021 Indicative Results Framework is anchored on the national M&E
system. The proposed indicators will serve as basis for monitoring the CSP implementation and
progress towards achievement of sector-related SDGs while contributing to the achievement of
the Angola Vision 2025 objectives. The proposed M&E framework consists of specific and
gender disaggregated output and outcome indicators and respective Banks proposed operations
that will be implemented to achieve the expected results. The baseline values were drawn from
the NDP 2013-2017, and the results framework of Banks new projects in the areas of agriculture,
energy, transport, science and technology and water and sanitation. The Bank will use the results
of the planned Household Well-being and Poverty Survey scheduled for 2017 to track progress
and undertake the CSP MTR in 2019.
5. CONCLUSIONS AND RECOMENDATIONS
5.1 Conclusion
5.1.1 The Bank has significantly scaled up its interventions in a difficult context, albeit
dynamic and growing, large African economy. The CSP 2017-2021 argues for Banks
continued support in infrastructure (e.g. transport, energy) to enhance efficiency and
sustainability of private sector investments. Also a selective approach should be adopted to
address issues of inclusive growth and poverty reduction through agricultural transformation and
promotion of light and labour intensive industrialization to assist in reducing the countrys
dependence on oil and enhance sustainable job creation.
5.2 Recommendations
5.2.1 The Banks Board of Directors is invited to consider and approve the Angola 2017-2021
Country Strategy Paper with the following strategic pillars (i) Inclusive growth through
agricultural transformation, and (ii) Support to sustainable infrastructure development.

20
Annex 1: Indicative results framework matrix for the CSP 2017-2021
Angolas Key Expected outcomes at Expected outputs at Expected outcomes at Expected outputs at mid- ADB Interventions:
development Constraints/Issues the end of the CSP the end of the CSP mid-tem (2019) term (2019) Ongoing and new
goals (Vision Impeding period (2021) period (2021) operations to be
2025) Achievement of implemented during the
Goals CSP period
Pillar I: Inclusive growth through agricultural transformation
Agriculture Lobito corridor and Lobito corridor and Lobito corridor and Lobito corridor and Lending
Goal: To Cabinda agro-poles Cabinda agro-poles Cabinda agro-poles Cabinda agro-poles Ongoing:
promote Low agricultural Food security improved Cereal output Improved food 5,000 ha of cereal crops
agricultural Bom Jesus Agriculture
productivity increase from 10,000 production and diversity rehabilitation completed
project
transformation Agricultural mt (2017) to 50,000 mt for Cabinda
and rural Science and Technology
infrastructure (2021)
development (irrigation/storage Artisanal fisheries
Improved livelihoods Dry fish production Improved access to 4 fish landing sites
based on /marketing/access New:
from fisheries due to increased from 0.7 diverse and quality fishery constructed and in use by
family roads) is poor Integrated Cabinda
increased incomes tons/year (2017) to 1.5 products at least 40 vessels to land
farming, Post-harvest tons/year (2021) their catch agricultural rural
cooperatives losses are high development
Improved knowledge of 500 smallholders Improved productivity for 250 smallholders trained
and public- Low use of yield modern agrarian trained on agrarian farmers as a result of new on agrarian extension Lobito Corridor private
private enhancing inputs sector agri-business and
partnerships techniques and better extension services (of technologies and practices techniques
and technology natural resource which 30 percent trade facilitation
and weak management women) Line of Credit for SME
agricultural and
Improved productivity Fertilisers use Increased access to Fertiliser supply Non-Lending
entrepreneurship
through increased use of increased from 8.8g/ha fertilisers and organic increases from 5,000 mt to New:
sector skills
yield enhancing inputs (2017) to 15g/ha (2021) farming inputs 10,000 mt ESW: Cabinda
Access to credit
Improved access to Irrigation capacity Increased availability of 2 irrigation systems Integrated Rural
for agricultural
irrigation systems increased from 12,000 water and efficiency of rehabilitated Development
inputs finance is
ha (2017) to 17,000 ha water use for agricultural Commercial agricultural
limited, especially
(2021) production and processing development study for
for women
Improved value 2 pilot agro-industries Improved access to One line of credit for Northern Angola
addition by processing constructed and 700 finance to SMEs (of which SMEs and agri-business Private sector agri-
and increased non-farm jobs created: of which 10 percent women financing approved (5 business study for
employment 30 percent women percent benefits women) Lobito Corridor
Increased access by Number of new land Percentage of legally Revised land law enacted Agricultural livestock
agricultural households to titles increase from recognised rights to land by Parliament granting and infrastructure study
legally recognised rights 1,000 (2017) to 5,000 improved from 1 percent increased rights for for Southern Angola
to land (2021) of which 30 (2017) to 2.5 percent (2019) womens associations
percent women needs

I
Angolas Key Expected outcomes Expected outputs at Expected outcomes at mid- Expected outputs at ADB Interventions: Ongoing
development Constraints/Issues at the end of the CSP the end of the CSP tem (2019) mid-term (2019) and new operations to be
goals Impeding period (2021) period (2021) implemented during the CSP
(Vision Achievement of period
2025)
Pillar II: Support to sustainable infrastructure development
Goal: To Transport Logistics 350 km of cross- Improved transportation Draft National Lending
improve Low road density performance index border railway systems and linkages for the Transport Master Plan Ongoing:
access and Insufficient improved from 2.24 constructed communities along Lobito Completed National Transport Sector
quality of financial resources (2017) to 2.56 (2021) Corridor Master Plan
infrastructure for infrastructure Lending
services to Travel time to reach A total of 386 km of Reduced freight tariffs (by 5 Construction of 74 km New:
expansion
nearest roads reduced paved roads constructed percent) for transport of of paved roads connecting
enhance High transport and Munhango-Luena 170 km road
to 0.9 hours (2021) agricultural output agricultural production
efficiency of trade transaction Lumege-Luacano-Luau 186.5
private sector from 1.5 hours (2017) areas to markets
costs Km
Air quality Total of 500,000 Improved quality of air About 100,000 trees
investments Limited Angola-Zambia Railway Link
and improved along the trees planted with through reduced CO2 emissions planted along Lobito
institutional
accelerate Lobito Transport involvement of women (1.4 kg/ USD GDP in 2017 to Corridor railway line
capacity for
economic Corridor and youth 1.2 kg/ USD GDP by 2019)
management and
diversificatio maintenance of Living standards for Contract out to local Road and health safety About 2,000 people
n and job infrastructure 1.5 million rural communities at least improved and community trained on infrastructure
creation Weak transport and residents improved USD 6 million invested capacity to manage unclassified maintenance, road safety
logistics services in works network roads enhanced and HIV/AIDS of which
30 percent women
Energy Population with 400 kV power Access to electricity Procurement documents Lending
Low access to access to electricity transmission line increased from 37 percent for the 400 kV power Completed:
electricity increase from 37 constructed (2017) to 39 percent (2019) transmission line
PSRSP
Low power percent (2017) to 43 launched
generation capacity percent (2021) New:
High dependence on Power losses 50,000 additional pre- Increased revenue collection Number of customers Electricity system distribution
fuels reduced to 10 percent paid meters installed by 30 percent (2019) up from metered in Luanda RE mini-grid (IPP/PPP)
High technical and (2021) from 15 15 percent (2017) increase by 10 percent to 400 kV Central-South power
non-technical losses percent (2017) 487,275 transmission line
Insufficient financial Staffs Operational 1,500 power utilities Staff productivity improved 700 power utilities staff Non-Lending
resources and management skills staff trained of which to 250 customers per employee trained of which 30 New:
improved 30 percent women percent women Fixed-asset registry
Increased access to 10MW IPP solar Increased private sector New feed-in tariff for Technical and non-technical
clean energy in rural project launched participation in RE generation renewable energy (RE) losses
areas approved

II
Annex 2: Current macroeconomic assessment and outlook

1. Overview

1.1. The Angolan economy is gradually moving away from the lowest point reached in
2016Q1 when crude prices dropped to USD 34.4 per-barrel, prompting sharp devaluations to the
Kwanza. The economy will, however, continue to experience slow growth over 2016 and 2017
as high logistical costs in the non-oil sector, inadequate infrastructure, human capital bottlenecks,
liquidity constraints and high borrowing costs prevent businesses from growing. The authorities
have taken steps to mitigate the impact of the decline in oil prices, including a significant
improvement in the non-oil primary fiscal balance and devaluation of the kwanza vis-a-vis the
U.S. dollar to improve export competiveness. While the non-oil sector is projected to recover in
2017 due to a planned increase in public spending and improved terms-of-trade, a quick recovery
may not be in the books as high inflation and weakening levels of investment are likely to cap
growth below the historic trend (e.g. average growth between 2006-2010 was 12.6 percent, and
with a further decline to 4.7 percent during the 2011-2015 CSP period). The latest figures suggest
that oil production slid by 13 percent between September and October 2016. The recovery of
global oil prices in October will have blunted the effect of lower volumes on Angolas oil
revenue. Nevertheless, Angolas oil production is expected to remain stable at 1.8 million
barrels/day over 2017-2020. The Bank estimates real GDP growth at 0.1 percent in 2016, before
climbing slightly to 3 percent in 2017 (the IMF projects 1.3 percent growth in 2017).

2. Inflation and foreign exchange liquidity constraints

2.1. Inflation rose to 42 percent in December 2016, year-on-year, but is projected to decline
to 20 percent in 2017, with tighter monetary policy conditions and a stable kwanza supporting
disinflation. Signs of easing price pressures seem to have prompted the Central Bank of Angola
(BNA) to keep the policy rate stable at 16 percent in December 2016. However, foreign exchange
shortages and official/parallel-market exchange rate mismatches might keep price pressures
elevated in 2017. Official foreign exchange reserves fell from USD 24.4 billion in January 2016
to USD 22.4 billion in December 2016, the lowest level in the past five years. Exports contracted
by 4.9 percent to USD 5.3 billion in 2016 Q1. However, oil prices have trended higher since
then, which is likely to have lifted export earnings in the following quarters. Angola is expected
to run current-account deficits throughout 2016-17. With oil prices remaining depressed
compared to declines in recent years, total export earnings are set to have declined by more than
34 percent in 2016. Similarly, imports in 2016 are also likely to have contract due to shortages
of foreign currency. Meanwhile, BNA has stepped up its forex sales to the market and as result
the parallel-official exchange rate spread has since declined from 244 percent in June 2016 to
less than 153 percent by December 2016.

3. Fiscal Policy Measures & Outlook

3.1. Constraints on government revenue arising from the low oil price environment will
continue in the short term. In an attempt to counter this, the government is seeking to boost non-
oil tax income by increasing formalisation in the sector. Indeed, rebalancing the economy
requires finding the appropriate policy mix while restoring macroeconomic stability and building
reserves. The general belief, however, is that the government will have to proceed cautiously,
since raising tax bills during wider economic slowdown could stifle non-oil growth and weaken
efforts to foster the development of medium-sized enterprises that can generate employment and
growth.

III
3.2. In view of Angolas current financial situation, domestic resource mobilisation will be
key to mitigate the negative impact of lower fiscal revenues due to the oil crisis. A complete
overhaul of Angolas tax regime was initiated in 2010, delivering much-needed modernisation
to an antiquated system that was created in 1969, during Portugals colonial rule. One of the
drivers behind the reform effort was the increased awareness after the 2008/9 drop in oil prices
of the need to accelerate domestic resource mobilisation and diversify fiscal revenue sources.
When the Executive Program for Tax Reform (PERT) was launched in 2010, three quarters of
total government revenue came from the oil sector. Related objectives were to broaden the tax
base, rationalise incentives, increase control with voluntary tax payments and fight tax evasion.
The reform delivered some quick wins, but its impact has softened as oil prices recovered
strongly in 2010 and there was less urgency. However, in July 2014, several new tax codes were
approved by the National Assembly aimed at reducing the income tax rate from 35 percent to
30 percent, broadening the tax base and closing loopholes for tax evasion. At the same time, the
countrys tax and customs departments were merged leading to the creation of the General Tax
Administration (AGT). A return to lower oil prices has renewed urgency for domestic resource
mobilisation to boost non-oil fiscal revenues and the government is stepping up its efforts to
crackdown on tax avoidance. After 5 years of implementation, PERTs mandate has come to an
end and AGT now plans to introduce a second generation of modern reforms in the Angolan tax
system in order to enhance domestic resource mobilisation by doubling the share of non-oil tax
to GDP by 2020 and from the current 8 percent of GDP. Such reforms will include:

(i) The gradual introduction of Value Added Tax (VAT) in replacement of the current
consumption tax on goods and services by 2018 or earlier 2019;
(ii) The introduction of an integrated registration system for tax and customs IT systems also
called Asycuda;
(iii) Enhance training and professionalization of tax authority staff;
(iv) Further simplification of the tax code to broaden the tax base and bring in the informal
sector taxpayers to help raise non-oil tax revenues.

4. Macroeconomic impact of the current oil crisis in the various sectors of the economy

4.1. The protracted decline in international oil prices created significant structural imbalances
in the Angolan economy. As illustrated in the Figure 1, below, the international oil price shock
affected the economy through three main channels: (i) total exports, (ii) fiscal account and, (iii)
the exchange rate. First, the oil price shock that started in mid-2014 has substantially reduced
fiscal revenue and exports. Growth was estimated to come to a halt in 2016, with the non-oil
sector contracting by 0.5 percent dragged down by the industrial, construction, and services
sectors. The external current account deficit reached 10 percent of GDP in 2015, compared to 3
percent of GDP in 2014, as oil exports dropped by 32 percent (about USD 22.2 billion) and were
partially offset by lower imports (about USD 20.9 billion in 2015). Secondly, the reduced fiscal
oil revenues prompted the government to curb public consumption and postpone non-critical
public investment. Thirdly, lack of foreign exchange has adversely affected non-oil sectors, most
of which are reliant on credit to access imports. In fact, the industrial sector was the most affected
sectors and it is estimated to have lost more than 60,000 workers due to the closing down of
some manufacturing industries, according to reports from the Angolan Industrial Association
(AIA). Despite its potential for import substitution, the industrial sector was constrained by
shortages of imported inputs due to limited availability of foreign exchange.

IV
Figure 1: Transmission mechanism of the international oil price shock in the Angolan economy
Oil price shock

Direct channel Indirect channels

Fiscal channel Monetary and exchange rate channels


External
Public financing
consumption
Oil
Domestic revenues
Public financing
investment Credit

Non-oil Banking
revenues sector/ Informal
Exchange FX Market
Access expectation
bureau market
to FX

Private
Public consumption
debt
Exchange
Net exports Inflation
Private Inflation rate
investment target

External
solvency/imports
Monetary and coverage
Gross Domestic International
exchange rate
Product (GDP) reserves
policy

Source: Adapted from the 2016 Revised State Budget Proposal in Angola, Ministry of Finance

5. Painful austerity measures to facilitate fiscal recovery

5.1. Angola's fiscal deficit narrowed over 2016, particularly given the government's efforts to
curtail spending in the wake of the oil price collapse. The BNA allowed the kwanza to weaken
by 40 percent since September 2014, to accommodate for weaker demand for the local currency
following the collapse in oil prices. After episodes of repeated devaluation, the authorities have
kept the Kwanza pegged at AKz 166/USD since April 2016. The kwanza could continue to
depreciate in 2017 if the central bank eases forex liquidity conditions in response to weakening
inflationary pressure. While the devaluations have had the effect of increasing inflation, they
have also increased the government's local currency revenues from the oil sector. Oil has
traditionally accounted for a large proportion of total government revenue, and given that the
majority of the sector's taxes and royalties are paid in US dollars, these revenues have increased
in local currency terms and will continue to do so as oil price recovers.

6. Public Debt Outlook

6.1. Angola now records some of the highest levels of public debt in the region. Much of this
debt has been accumulated in the past two years, with total public and publicly guaranteed debt
climbing over 65.4 percent of GDP in 2015 up from 32.9 percent in 2013. Public debt is projected
to have exceeded 71.6 percent of GDP by end-2016 following the depreciation of the exchange
rate and the fiscal deficit. The rise in Angola's sovereign debt follows from borrowing to stem
widening fiscal revenue amid a collapse in the price of oil since 2014. Oil revenue has come to
play an important part in the government's budget, averaging 76.8 percent of total government
income between 2003 and 2013, before dropping to 52 percent in 2015. The drop in the price of
crude from an average of USD 99.5/bbl. in 2014, to a projected USD 46.5/bbl. in 2016, has had
a serious impact on the government's fiscal health. Total revenue as a percentage of GDP

V
declined from 40.2 percent in 2013 to 20.6 percent in 2016 and may not return to pre-collapse
levels in the foreseeable future.

6.2. In addition to a high public debt to GDP ratio, the government's external debt servicing
costs are some of the highest in the region, estimated to account for 25.5 percent of export
revenue and 50.1 percent of total government revenue in 2016. These figures are well above
levels classified as risky for countries like Angola, meaning debt servicing could quickly become
problematic. Furthermore, the potential for additional exchange rate devaluations in 2017 may
raise the countrys debt service burden, given the relatively large proportion of foreign currency
denominated debt (about 42 percent at end-2015). The government, moreover, expects to finance
nearly 44 percent of the 2017 state budget through new domestic and external borrowing, in total
making up 16.3 percent of GDP. The envisaged fiscal deficit in the 2017 budget is likely to leave
the economy vulnerable to shocks including contraction in oil prices and keen concerns about
public debt sustainability. Overall fiscal deficit is projected to average 5.8 percent of GDP in
2017 consistent with a moderate improvement in the non-oil primary fiscal balance and
continued gradual adjustment over the medium term to contain public debt.

7. Economic Diversification a priority

7.1. Stemming the susceptibility of the economy to global oil price, or domestic production
shocks through diversification is singularly the most important public policy conundrum facing
the country. Angolan agriculture remains largely untapped partly due to vast tracts of land that
are rendered unproductive due to lack of adequate agricultural infrastructure (e.g. irrigation
systems, feeder roads, power), and low use of yield enhancing inputs. The sector only contributes
an estimated 12.9 percent of GDP though it employs nearly 70 percent of the economically active
population in rural areas. The extractive industries (in particular, oil) account for 30.8 percent of
GDP. The services sector has been growing rapidly in recent years and represents 27.8 percent
of GDP. Despite the huge hydropower generation potential (e.g. about 18,267 MW), Angola is
only generating less than 20 percent of its potential, hence the limited contribution of the energy
sector to GDP (0.2 percent). The industrial sector accounts for 20 percent of GDP and is
dominated by the construction sub-sector (11.1 percent). Industrial production continues to be
impacted negatively by power and water shortages and lack of skills. The remaining sectors of
the economy, including public administration and financial services, account for 8.3 percent of
GDP.

7.2. In view of cascading economic difficulties, the main thrust of fiscal policy should be
maintaining public expenditure control measures including keeping domestic fuel prices
unchanged in order to accumulate buffers in the stabilization fund, strengthening efforts to
enlarge the tax base, and introducing budget ceilings. Angola's tax ratio is currently well below
the country's actual tax potential, suggesting revenues could be improved over the medium- to
long-term. Overall, these measures will introduce efficiency in fiscal management and lay the
foundation for removing structural challenges facing the economy. However, the long-term
challenge is how to anchor the economy on a more diversified and competitive non-oil sector.
This requires the removal of binding constraints to growth of the non-oil sector, including private
sector policy reforms and steady improvement in infrastructure provision (particularly electricity
and efficient transport systems) to reduce production costs. The latter especially requires the
expansion of public investment in infrastructure over the medium to long-term in order to
maintain and improve investor confidence and augment long-term private investment.

Meanwhile, there is a potential to boost exports and reduce the dependence on oil in the non-oil
sector. Indeed, Angola is already exporting some products but under-investment, poor
infrastructure, unfavourable price policies and weak commercialization systems have

VI
constrained exports. Nevertheless, Angolas non-oil exports, in fisheries, agriculture, geology
and mining totalled USD 8.2 billion, over the past three years as illustrated in the Table 1 below.

Table 1: Angolas non-oil sector exports, 2013-2015


Exports 2013 Exports 2014 Exports 2015
Item Product productive sector
Value (in USD)
Fisheries
1 Fish 65,352,420.00 79,573,320.00 87,840,000.00
2 Seafood 13,950,000.00 16,042,500.00 18,769,725.00
3 Crustaceans 1,140,000.00 1,311,000.00 1,533,870.00
4 Fishs flour 270,000.00 235,980,000.00 276,096,600.00
Total Fisheries 80,712,420.00 332,906,820.00 384,240,195.00
5 Coffee 91,200,000.00 30,816,000.00 9,707,040.00
6 Honey 1,600.00 1,600.00 1,600.00
7 Soy 963,410.00 1,546.273.05 487,076.01
8 Maize 101,212,140.00 81,222,742.35 25,585,163.84
9 Beans 8,000,000.00 103,105,200.00 32,478,138.00
10 Rice 4,376,808.00 6,108,501.60 1,924,178.00
11 Wood 28,000,000.00 23,112,000.00 7,280,280.00
12 Natural fertilizers 0.0 0.0 0.0
13 Reindeer potato 9,000,000.00 96,993,552.60 30,552,969.07
14 Legumes and oilseeds 30,048,480.00 64,303,747.20 20,255,680.37
15 Horticultures 676,342,735.60 542,765,045.32 170,970,989.28
16 Banana 210,000.00 4,200,000.00 1,764,000.00
17 Roots and tubers 412,536,420.00 662,120,954.10 208,568,100.54
Total Agriculture 1,361,891,593.60 1,616,295,616.22 509,575,215.11
18 Cement and other construction materials 48,000,000.00 94,500,000.00 108,000,000.00
19 Beverages 206,258,183.64 825,032,734.56 1,265,050,192.99
20 Glass 7,072,056.00 28,288,224.00 45,261,158.40
Total Industry 261,330,239.64 947,820,958.66 1,418,311,351.39
21 Diamonds 1.150,577,759.98 1,335,412,753.36 1,076,404,696.74
22 Ornamental rocks 8,149,113.95 8,661,405.67 8,521,517.32
Total Geology and Mining 1,158,726,873.93 1,344,074,159.03 1,084,926,214.06
Grand Total 2,862,661,127.17 4,241,097,673.81 3,397,052,975.56
Source: MINCO, (BNA (Direco de Estatstica e Mercado de activos), AGT, CNC, CEEIA, Associao da Indstria Cimenteira
de Angola, Ministrio das Pescas, Ministrio da Geologia e Minas e Ministrio da Agricultura.

7.3. Despite the huge potential for economic diversification, import dependency is also
growing. Angolas imports of food basket goods increased from USD 2 billion in 2013 to USD
3.8 billion in 2015 (Table 2 below), with obvious consequences in terms of the pressure on
foreign exchange and vulnerability to global prices. In this context, developing the agricultural
sector and agribusiness to enhance transformation of local products along the food supply chain
and boost both domestic sales and exports, is central to economic diversification. Unlocking
Angolas agricultural potential requires governments commitment and investments, closing the
infrastructure gap, facilitating trade and improving financing as well as skills and technology.

VII
Table 2: Angolas food basket imports, 2013-2015
Goods 2013 2014 2015*
Dry meat 31.87 62.17 59.83
Powdered Milk 16.03 32.05 32.04
Beans 107.84 208.21 204.85
Rice 352.39 689.80 658.18
Wheat flour 421.22 810.92 787.61
Maize flour 159.47 307.52 295.32
Cooking oil 201.87 392.14 381.03
Palm oil 364.40 705.23 684.47
Sugar 237.32 464.31 454.12
Pasta 121.36 233.42 226.78
Salt 8.47 15.58 15.09
Soap 31.92 61.49 59.32
Grand Total 2,054.16 3,982.86 3,858.65
Source : AGT/BNA *Latest data up to November 2015

7.4. Recent evidence points for a strong correlation between the fluctuations in international
oil prices, and non-oil sector activity which has been historically financed through fiscal oil
revenues (see Figure 1 below). The persistent decline in the international oil prices and
consequent reduction in oil revenues led to a very sharp slowdown in non-oil activity as the
industrial, construction, and services sectors adjusted to cuts in private consumption and public
investment amid more limited availability of foreign exchange. These developments clearly
show that Angolas public capital expenditure led growth model will no longer be sufficient to
drive economic diversification in the non-oil, thus the need for implementation of structural
reforms to boost growth and reduce poverty. It is in this context that, the proposed Banks support
to agricultural transformation should aim to assist the country in generating foreign exchange
savings, create value chains and jobs locally. In addition, the infrastructure support program will
contribute in improving the competitiveness of the economy while enhancing the efficiency and
profitability of private sector investments towards the diversification of the economy.

Figure 2: Relationship between international oil prices and economic growth in Angola
15 110
International oil prices (USD)
Oil and Non-Oil GDP growth rates

90
10

70
(%)

50

0
2008

2009

2010

2011

2012

2013

2014

2015

2016

30

-5
10
Real GDP growth Oil GDP growth
Non-oil GDP growth International oil prices
-10 -10
Source: Authors computation using data from Ministry of Planning of Angola and OPEC

VIII
8. Assessment of the countrys strengths, weaknesses, opportunities and threats
8.1. Angola has favourable economic opportunities and prospects which, if well harnessed,
can promote inclusive and broad based economic growth. The Box 1, below, summarises the
major countrys strengths, weaknesses, opportunities and threats.

Box 1: SWOT Analysis


Strengths
Extensive endowment of natural resources
Political stability
Tremendous agricultural potential
Enormous hydropower potential

Weaknesses
Weak governance and public financial management systems
Low levels of human capital and skills development
Weak agricultural productivity
Heavy reliance on oil and high vulnerability to external shocks

Opportunities
Privileged geographical positioning for regional integration
Potential for development of light industries
Abundant young population that can support labour intensive manufacturing
Opportunities for development of local content in the oil, gas and minerals sectors

Challenges
Weak trade facilitation and export support systems
Challenging business environment, poor infrastructure, and bureaucracy

IX
Annex 3: Key macroeconomic indicators
Actual Estimate Projections
Indicators Unit
2013 2014 2015 2016 2017 2018 2019 2020

Real GDP Growth Rate Percent 6.8 4.8 3.0 0.1 3.0 3.5 2.8 2.5
Oil Percent -1.1 -2.6 6.3 0.8 6.4 6.8 4.8 3.7
Non-oil Percent 10.9 8.2 1.5 -0.4 1.1 2.1 2.3 1.6
Inflation (Consumer Price Index) (annual average) Percent 7.7 7.5 14.3 42.0 20.0 19.7 9.5 8.3
Exchange Rate (end of period) AKz/USD 97.6 102.9 135.6 166.1 208.5 228.4 240.5 257.4
Total revenue and grants percent of gross domestic product (GDP) 40.2 35.3 23.7 19.5 18.9 22.1 27.3 26.1
Total expenditure percent of GDP 40.5 41.9 30.6 23.6 25.6 24.5 30.9 30.5
Overall deficit (-)/surplus (+) percent of GDP -0.3 -6.6 -3.3 -4.1 -6.7 -2.3 -3.6 -4.4
Current account balance percent of GDP 6.7 -3.0 -10.0 -4.3 -6.1 -5.1 -6.6 -7.1
Gross reserves months of imports 7.2 8.8 11.0 8.1 6.8 6.9 6.7 6.4
Total public debt percent of GDP 32.9 40.7 65.4 71.6 62.8 60.2 59.7 57.2
External debt percent of GDP 23.8 28.6 40.5 43.1 37.6 38.9 43.3 42.0
Domestic debt Percent of GDP 9.0 12.0 25.0 28.5 25.3 21.3 16.4 15.2
Social Indicator
Indicators Unit 19901 20002 20163
Population Million 10.3 13.9 25.8
Employment to population ratio 15+, percent of total 66.6 65.4 68.3
Poverty headcount ratio at $1.90 a day,
percent of population 54.3 30.1
2008-2013 (purchasing power parity)
Maternal mortality ratio modelled estimate, per 100,000 live births 1,200 890 477
Total enrolment, primary percent net 85.7
Proportion of seats held by women in parliaments percent 14.5 15.0 36.8
Prevalence of HIV, total percent pop (1549) 1.7 2.4
Environment and Climate Change Indicators
Indicators Unit 19901 20002 20153
CO2 emissions kg per purchasing power parity USD of GDP 2.3 1.5 1.4
Improved sanitation facilities percent of population with access 22.0 48.3 52.0
Improved water source percent of population with access 46.0 48.1 49.0
Source: Ministry of Finance, Angola, BNA, IMF, AfDB Statistics Department, AfDB Statistics Department Databases; World Bank: World
Development Indicators; UNAIDS; UNSD; WHO, UNICEF, WRI, United Nations Development Programme; Country Reports, and
Economist Intelligence Units projections country forecasts (2017-2020).
Notes: Data Not Available
1
Latest year available in the period 19901995; 2 Latest year available in the period 20002004; 3 Latest year available in the period 2013
2016. Last update September 2016. Joint WHO/UNICEF Joint Monitoring Report 2015 - Progress on Sanitation and Drinking Water.

X
Annex 4: Progress monitoring on the sustainable development goals in Angola
Progress Progress
monitoring monitoring
Goal 1: End poverty in all its forms everywhere Goal 6: Ensure availability and sustainable management of water and sanitation
for all
Population below the international poverty line of USD 1.90 per 30.13% Proportion of population using improved drinking water 48.96%
day (2008-2013) Proportion of rural population using improved drinking water 28.17%
Proportion of urban population using improved drinking water 75.37%
Proportion of population using improved sanitation 51.59%
Proportion of rural population using improved sanitation 22.45%
Proportion of urban population using improved sanitation 88.61%
25.76
Official flows for water supply and sanitation (USD millions)
Goal 2: End hunger, achieve food security and improved nutrition, and promote Goal 7: Ensure access to affordable, reliable, sustainable and modern energy for
sustainable agriculture all
Prevalence of undernourishment (2016) 14.2% Proportion of population with access to electricity (2012) 37%
Proportion of population with primary reliance on clean fuels 0.48%
Renewable energy share in total final energy consumption 57.18%
Energy intensity level of primary energy (megajoules per USD in constant 2011 3.97
prices in 2012)
Goal 3: Ensure healthy life and promote well-being for all at all ages Goal 8: Promote sustained, inclusive and sustainable economic growth, full and
productive employment and decent work for all
Maternal mortality ratio per 100,000 live births (2015) 477 Growth rate of real GDP per capita 1.43%
Infant mortality ratio per 1,000 live births (2015) Growth rate of real GDP per capita employed person 0.96%
Under-five mortality rate per 1,000 births (2015) 96 Domestic material consumption per capita (Tons per capita) 2.77
Total official flows for medical research and basic 156.9 Domestic material consumption per unit of GDP (kilograms per unit of GDP in 0.94
health sectors (USD millions in 2014) 47.03 2010)
Malaria incidence per 1,000 population in 2013
Tuberculosis deaths per 100,000 population in 2014 145.72
52
Goal 4: Ensure inclusive and equitable quality education for all and promote lifelong Goal 9: Build resilient infrastructure, promote inclusive and sustainable
learning opportunities for all industrialization and foster innovation
Total official flows for scholarships (USD millions) (2014) 2.11 Freight colume transported by air transport (Tons in 2014) 16,643.32
Passengers transported by air transport in 2014 1,335,850.4
Manufacturing value added share in GDP in 2015 6.77%
Manufacturing value added per capita (USD per capita in 2015) 302.23
Emissions of carbon dioxide per unit of GDP (PPP) (Kilogram equivalent per 0.14
USD of GDPat constant 2005 PPP in 2013)
Proportion of the population covered by a 2G mobile network 95%
Goal 5: Achieve gender equality and empower all women and girls Goal 10: Reduce inequality within and among countries
Share of seats held by women in national parliament (2016) 36.82% Total assistance for development (USD millions) (2014) 5,160.89

Progress Progress

XI
Goal 11: Make cities and human settlements inclusive, safe, resilient and sustainable monitoring Goal 15: Protect, restore and promote sustainable use of terrestrial ecosystems, monitoring
sustainably manage forests, combat desertification, and halt and reverse land
degradation and halt biodiversity loss
Proportion of urban population living in slums (% in 2014) 55.5% Forest area (percent of total land area in 2015) 46.41%
Urban population living in slums (persons in 2014) Proportion of important sites for terrestial biodiversity that are covered by 26.09%
5,316.71 protected areas (% in 2016)
Proportion of important sites for freshwater biodiversity that are covered 33.33%
by protected areas (% in 2015)
Red list index (in 2016) 0.94
Total official development assistance for biodiversity (USD millions in 3.83
2014)
Goal 12: Ensure sustainable consumption and production patterns Goal 16: Promote peaceful societies for sustainable development, provide access
to justice for all and build effective, accountable and inclusive institutions at all
levels
Material footprint per capita (Tons per capita in 2010) 3.18 Proportion of young women and men aged 18-29 years who experienced n.a
sexual violence by age 18 (%)
Material footprint per unit of GDP (Kilograms per unit of GDP in 3.18 Proportion of children aged 1-14 years who experienced any physical n.a
2010) punishment and/or psychological aggression by caregivers in the past
month (%)
Victims of international homicide per 100,000 population (in 2012) 10.72
Goal 13: Take urgent action to combat climate change and its impacts Goal 17: Strengthen the means of implementation and revitalize Global
Partnership for Sustainable Development
No country data available Debt service as a proportion of exports of goods and services (% of exports 6.92%
of goods and services in 2013)
Fixed internet broadband subscriptions (per 100 inhabitants in 2015) 0.67
Proportion of individuals using internet (% in 2015)
12.4%

Goal 14: Conserve and sustainability use the oceans, seas and marine resources for
sustainable development
Protected marine areas coverage (% in 2016) 0.2%

Source: African Development Bank, Statistics Department, 2016 Monitoring Sustainable Development Goals. Note: n.a. - not available

XII
Annex 5: Comparative socio-economic indicators
Develo- Develo-
Year Angola Africa ping ped
Countries Countries
Basic Indicators
GNI Per Capita US $
Area ( '000 Km) 2016 1,247 30,067 94,638 36,907
Total Population (millions) 2016 25.8 1,214.4 3,010.9 1,407.8 6000

Urban Population (% of Total) 2016 40.8 40.1 41.6 80.6 5000

Population Density (per Km) 2016 20.7 41.3 67.7 25.6 4000

GNI per Capita (US $) 2014 4 850 2 045 4 226 38 317 3000

Labor Force Participation *- Total (%) 2016 68.3 65.6 63.9 60.3 2000
Labor Force Participation **- Female (%) 2016 59.8 55.6 49.9 52.1 1000
Gender -Related Dev elopment Index Value 2007-2013 ... 0.801 0.506 0.792 0
2014 149 ... ... ...

2000
2005
2008
2009
2010
2011
2012
2013
2014
Human Dev elop. Index (Rank among 187 countries)
Popul. Liv ing Below $ 1.90 a Day (% of Population) 2008-2013 30.1 42.7 14.9 ...
Ang ol a Africa

Demographic Indicators
Population Grow th Rate - Total (%) 2016 3.2 2.5 1.9 0.4
Population Grow th Rate - Urban (%) 2016 4.9 3.6 2.9 0.8
Population Growth Rate (%)
Population < 15 y ears (%) 2016 47.5 40.9 28.0 17.2
Population >= 65 y ears (%) 2016 2.3 3.5 6.6 16.6 4.0
Dependency Ratio (%) 2016 99.5 79.9 52.9 51.2 3.5
Sex Ratio (per 100 female) 2016 98.5 100.2 103.0 97.6 3.0
Female Population 15-49 y ears (% of total population) 2016 22.3 24.0 25.7 22.8 2.5
Life Ex pectancy at Birth - Total (y ears) 2016 53.1 61.5 66.2 79.4 2.0

Life Ex pectancy at Birth - Female (y ears) 2016 54.6 63.0 68.0 82.4 1.5
1.0
Crude Birth Rate (per 1,000) 2016 44.5 34.4 27.0 11.6 0.5
Crude Death Rate (per 1,000) 2016 13.1 9.1 7.9 9.1 0.0
Infant Mortality Rate (per 1,000) 2015 96.0 52.2 35.2 5.8

2000
2005
2009
2010
2011
2012
2013
2014
2015
Child Mortality Rate (per 1,000) 2015 156.9 75.5 47.3 6.8
Total Fertility Rate (per w oman) 2016 5.9 4.5 3.5 1.8 Ang ola Afri ca

Maternal Mortality Rate (per 100,000) 2015 477.0 495.0 238.0 10.0
Women Using Contraception (%) 2016 19.4 31.0 ... ...

Health & Nutrition Indicators


Phy sicians (per 100,000 people) 2004-2013 16.6 47.9 123.8 292.3 Life Expectancy at Birth
Nurses and midw iv es (per 100,000 people) 2004-2013 166.0 135.4 220.0 859.8 (years)
Births attended by Trained Health Personnel (%) 2010-2015 49.9 53.2 68.5 ... 80
Access to Safe Water (% of Population) 2015 49.0 71.6 89.3 99.5 70
60
Healthy life ex pectancy at birth (y ears) 2013 45.9 54.0 57 68.0 50
Access to Sanitation (% of Population) 2015 51.6 39.4 61.2 99.4 40
30
Percent. of Adults (aged 15-49) Liv ing w ith HIV/AIDS 2014 2.4 3.8 ... ... 20
Incidence of Tuberculosis (per 100,000) 2014 370.0 245.9 160.0 21.0 10
0
Child Immunization Against Tuberculosis (%) 2014 81.0 84.1 90.0 ...
2000
2005
2009
2010
2011
2012
2013
2014
2015
Child Immunization Against Measles (%) 2014 85.0 76.0 83.5 93.7
Underw eight Children (% of children under 5 y ears) 2010-2014 15.6 18.1 16.2 1.1 Ang ol a Africa

Daily Calorie Supply per Capita 2011 2 473 2 621 2 335 3 503
Public Ex penditure on Health (as % of GDP) 2013 2.1 2.6 3.0 7.7

Education Indicators
Gross Enrolment Ratio (%)
Primary School - Total 2010-2015 128.7 100.5 104.7 102.4
Primary School - Female 2010-2015 100.4 97.1 102.9 102.2 Infant Mortality Rate
( Per 1000 )
Secondary School - Total 2010-2015 28.9 50.9 57.8 105.3
Secondary School - Female 2010-2015 22.7 48.5 55.7 105.3 140
Primary School Female Teaching Staff (% of Total) 2010-2015 36.8 47.6 50.6 82.2 120

Adult literacy Rate - Total (%) 2010-2015 71.2 66.8 70.5 98.6 100

Adult literacy Rate - Male (%) 2010-2015 82.0 74.3 77.3 98.9 80

Adult literacy Rate - Female (%) 2010-2015 60.7 59.4 64.0 98.4 60

Percentage of GDP Spent on Education 2010-2014 3.4 5.0 4.2 4.8 40


20
0
Environmental Indicators
2000
2005
2009
2010
2011
2012
2013
2014
2015

Land Use (Arable Land as % of Total Land Area) 2013 3.9 8.6 11.9 9.4
Agricultural Land (as % of land area) 2013 47.5 43.2 43.4 30.0
Forest (As % of Land Area) 2013 46.6 23.3 28.0 34.5 Ang ol a Africa

Per Capita CO2 Emissions (metric tons) 2012 1.4 1.1 3.0 11.6

Sources : AfDB Statistics Department Databases; World Bank: World Development Indicators; last update : August 2016
UNAIDS; UNSD; WHO, UNICEF, UNDP; Country Reports.
Note : n.a. : Not Applicable ; : Data Not Available. * Labor force participation rate, total (% of total population ages 15+)
** Labor force participation rate, female (% of female population ages 15+)

XIII
Annex 6: Division of labor between development partners in Angola
Partners Sector/Thematic Area

Infrastructure/Transport

Judicial & Legal Reform

Capacity/Inst. Building

(incl. refugees, human


Agriculture & Rural

Security & Stability


Water & Sanitation
Environment (incl.
Education/Higher

Social Protection
Financial Sector

Macroeconomic
Public Sector &
climate change)

Other (Specify)
Other (specify)
Private Sector

Development

Governance

(incl. M&E)

Framework
Education

Demining

Fisheries

Gender
Energy
Health
Trade

rights
AfDB X X X X X X X X X X X X X
Denmark X X
European X X X X X X X X X X X X
Commission
France X
Japan X X X X X X X X X X X X X X
Netherlands X X X X X
Norway X X X X X X X
USAID X X X X X X X X
United X X X X
Kingdom
United Nations X X X X X X X X X X X X
Development
Programme
UNFPA X X X X X
UNICEF X X X X
X X
UNHCR X X
WFP Currently negotiating an agreement with GoA of food security and Nutrition
WHO X X X
IOM X X X
UNHABITAT Policy on Housing
UNEP X
World Bank X X X X X X X X X

XIV
Annex 7: Angola Development partners aid volumes and main areas of focus

Total ODA volume (2015) - approved and ongoing projects (Million USD) ODA Sectoral Distribution, Approved and Ongoing projects (2015)
1 500

ODA volumes (Million USD)


AfDB 1 400
1 252,89 1 300
Power; 5; 1 244,93
World Bank 876,05 1 200
1 100
Japan 268,61 1 000
Trade & Regional Multi-sector and
900
European Union 251,61 800 Social, Integration; 2; Governance, 5,
2, 68,53 554,35 Capacity Building
USAID 40,35 700 13,77
& Institutional
600
Water & Development; 8;
UNDP 12,28 500
400 Sanitation ; 5; 10,38
Netherlands 5,15 Fisheries; 3; 326,11
300 Environment ; 11;
200 29,97
Norway 3,70 28,50
100
United Kingdom 1,28 0
Multinational
0 2 4 Education6
Higher 8 10 12 14
France 0,66 projects; 3; 9,71 Justice; and Vocational Other Health ; 8; 148,79
Training, 5, 83,36 Infrastructure;
0 200 400 600 800 1 000 1 200 X- axis: Number of projects Agriculture ,
Note: Bubble size - represents ODA volumes (Million USD)

Angola: Top Sectors Financed by Development Partners in 2008 Angola: Top Sectors Financed by Development Partners in 2015

Agriculture; 2%
Social Protection;
Demining; 7% 3%

Water and Education; 3%


Sanitation; 8%
Health; 21%
Health; 5%
Power; 46%
Water and
Education; 12% Governance; 20%
Sanitation; 12%
Rural development; 14%

Source: African Development Bank and World Bank development partners surveys, 2008 and 2015

XV
Annex 8: Angola - Portfolio of approved and ongoing operations as at 1st February 2017
Planned Amount Amount Age IP DO
Status of Approval Entry into Effective 1st completion App. Dis. Disb. Rate (years
AfDB Group Financed Projects Sector Name PFI STATUS
Project date force disb date (Million (million (%) )
UA) UA)
Fisheries sector support project Ongoing Fisheries NON PP/ PPP 15/05/2013 29/10/2014 26/08/2015 30/06/2019 20.00 1.31 6.6% 3.2 1 1
Cabinda Province Agriculture
Ongoing Agriculture - 22/12/2014 25/03/2015 28/12/2015 30/06/2017 0.42 0.19 46.1% 1.9 n.a n.a
Development Program
Sub-total Agriculture 20.42 1.51 7.4% 2.52 1 1
Environmental Sector Support NON PP/
Ongoing Environment NON PPP
11/03/2009 17/12/2009 14/01/2010 31/12/2017 12.00 6.96 58.0% 7.6 2.29 2.25
Project
Sub-total Environment 12.00 6.96 58.8% 7.6 2.29 2.25
Financial Support
Ongoing Multi-sector NON PP/ PPP 14/11/2007 04/09/2008 22/12/2010 30/06/2017 5.90 2.53 43.0% 9.1 2.21 2
Management Project
Institutional Capacity Building Ongoing Multi-sector NON PP/
for Private Sector NON PPP 17/09/2014 14/04/2015 14/04/2015 31/12/2019 18.32 0.34 1.8% 2.1 2 2
Development
Sub-total Financial Governance 24.22 2.87 11.9% 6.7 2.11 2
Institutional and Sustainability Water NON PP/
Approved NON PPP
04/01/2015 31/08/2015 18/03/2016 31/12/2020 91.23 0.28 0.3% 1.6 2 2
Water Supply Project supply
Sub-total Water and Sanitation 91.23 0.28 0.3% 1.61 2 2
Higher Education Study NON PP/
Ongoing Social NON PPP
14/02/2014 25/03/2015 25/03/2015 30/06/2017 0.40 0.06 15.1% 1.9 2 2
Science and Technology NON PP/
Approved Social NON PPP
21/10/2015 16/06/2016 16/06/2016 31/12/2019 66.34 0.00 0.0% 0.9 2 2
Sector Project
Sub-total Social 66.73 0.06 0.1% 1.37 2 2
National Transport Sector
Ongoing Transport NON PP/ PP 17/09/2013 20/05/2015 01/06/2015 31/12/2018 2.90 0.00 0.0% 3.0 1 2
Master Plan
Sub-total Transports 2.90 0.00 0.0% 3 1 2
Line of Credit for a Financial
Approved - 21/10/2015 - - 30/06/2024 239.55 0.00 0.0% 0.1 n.a n.a
Commercial Bank BPC sector
Sub-total Financial Sector 240 0.00 0.0% 0.1 n.a n.a
Grand Total 457.05 11.68 3.1 1.8 1.9
Notes: n.a. ratings not available in the the most recent reports on implementation progress and results (IPR).
IP Implementation progress, and DO Development operations. The IPR rating scale ranges from 1-4.

XVI
Annex 9: Revised 2016 Country portfolio improvement plan (CPIP)
Issues Recommendations Expected Results Responsible Timetable
A. Quality at Entry
Elapsed time from a) Identify prior actions for the fulfillment of the conditions for the Projects submitted to Board Approval have clearly ADB Concerned
Banks Board first disbursement, before the approval of the project by the identified the prior actions for the fulfillment of the Sector Department
project approval to Board. conditions for the first disbursement.
first disbursement b) Ensure the active involvement of the Executing Agency in the Staff from Executing Agency is appointed to participate in Executing Agency
is long. More than design of the project, in the assessment of the institutional project design and definition of implementation Ministry of
17 Months in capacity for project implementation and definition of the nature arrangements. Finance
average to meet and type of PIU arrangement necessary to improve the likelihood ADB concerned
conditions for first of success. sector Department
disbursement c)Identify qualified project staff in advance and ensure that they are Qualified project staff is identified before project approval Executing Agency
sensitized for the priority actions to be undertaken once the by the Board. Not being possible, it should be guaranteed Ministry of
project is approved. Guarantee that the Project Management Unit that the staff is appointed before the signature of the Loan Finance
Staff had an early contact with the project and was involved at Agreement and that proper debriefing on project details is
the design stage. ensured.
d) Immediately after the Loan Agreement Signature by the parties, Startup training provided for new projects; Ministry of Immediate
Ensure the provision of a startup training, led by the Ministry of Overall project results to be achieved in each year and Finance for all new
Finance and ADB, specially targeted to address the initial general implementation calendar; ADB projects
procurement programming and potential challenges. Initial Procurement Plan, Disbursement Plan and Work PIU
Program are timely submitted for ADB NO, no later than
2 weeks after the conclusion of the training.
Counterpart funds included in the State budget and made Executing Agency
e) Ensure the early insertion of the project in the PIP in order to available at the time of project start up and Ministry of
secure the counterpart fund availability at the time of the project implementation. Planning
start up and implementation. Ministry of
Finance
f) Define and establish a mechanism to speed up the working permit Mobilization of international TA, after contract signature, Executing Agency
issuing process for long term technical assistances. Difficulties in takes less than one month. Ministry of
obtaining visas has been having negative repercussions on the Finance
execution of the project and should be, therefore, subject of
reflection by the Ministry of Finance and Sectoral Ministries.

XVII
Issues Recommendations Expected Results Responsible Timetable
B. Management of Procurement Processes
Weak capacity a) Appoint experienced and trained staff for the All new projects have experienced and trained staff in Executing Agency Continuously
contributing to long procurement expert position for all new projects. procurement area. Ministry of Finance
delays and quality of b) Provide continuous training and support to PIU Specific training on procurement is provided at least once a Executing Agency Continuously
procurement processes procurement staff, targeting the specific issues year. Ministry of Finance
and operational challenges that are posed to the ADB/ COAO
efficiency and quality of the procurement
processes and outputs.
Lack of planning and a) Ensure the timeline elaboration of the annual All PIUs submit for NO objection the Annual Procurement PIU Jan/2017
accountability Procurement Plan (PP), the quarterly reporting on Plan for 2017 before the end of January 2017; Executing Agency
preventing the efficient the implementation of the procurement activities All PIUs submit, on a quarterly basis, no later than 45 days April/July/
management of and subsequent update of the PP. after the end of the quarter, the updated PP, including October 2017
procurement processes effective implementation, initial and revised planning;
Procurement monitoring mechanism in place by all PIUs: i) April/July/
nr. of bidding processes, by category and stage, whether in October 2017
preparation or implemented compared to that foreseen in
the beginning of the year; as well as ii) the average of time
needed to complete a procurement process in each category
and different methods.
Weak capacity in a) Ensure a proper contract management and All PIU adopt a contractor performance evaluation PIU Immediate for all
contract management evaluation of contractor performance certifying mechanisms. Executing Agency projects
leading to delays in that the precedent conditions to each payment is
project implementation fulfilled and respected based on the terms of the
contract.
Language issues a) Use of Portuguese language for Shopping and All PIU make use of the possibility of using the Portuguese PIU Immediate for all
affecting fair shortlisting; publication of requests for language for Shopping and shortlisting; publication of projects
competition in expression of interest and respective evaluation requests for EoI and respective evaluation reports.
procurement processes reports. The CPISU should encourage and assist
and limiting the the PIUs to use fairly the flexibility provided by
participation of national Banks rules.
bidders

XVIII
Issues Recommendations Expected Results Responsible Timetable
C. Financial Management
Weak capacity a) Appoint experienced and trained staff for the financial All new projects have experienced and trained staff in Executing Agency Continuously
and management position for all new projects. financial management area Ministry of Finance
understanding of b) Provide regular training (classroom and on-the-job training) to Specific training on financial management is provided at Executing Agency Continuously
project financial PIU financial management staff, targeting the specific issues least once a year Ministry of Finance
management and operational challenges that are posed to the efficiency and ADB/ COAO
rules and quality of the financial management processes and outputs.
processes
Lack of a) Ensure that proper financial management mechanisms are in All PIUs have proper financial management mechanisms/ PIU Established by
compliance with place. systems in place the Other
Bank financial Condition of
reporting and the LA
auditing b) Ensure the early preparation of annual budget and disbursement All PIUs submit, by January 2017, the annual budget and PIU Jan/2017
requirements plan disbursement plan
(fiduciary issues) c) Ensure the timely quarterly submission of financial reporting All PIUs submit for NO objection the Annual Budget and PIU Jan/2017
on the resources mobilized, by the Bank and by the Disbursement Plan for 2017 before the end of January 2017
Government, against the initial disbursement planning; All PIUs submit, on a quarterly basis, no later than 45 days
after the end of the quarter, the financial report (ADB and April/July/
Counterpart Funds) October 2017
d) Ensure proper audit planning and management: timely All projects submit the audit planning sheet for 2017 by PIU Dec 2016
submission of the reports and quality of reports and supervision December 2016
of the implementation of recommendations. All audit reports are submitted to the Bank for NO, no later
than 6 months after the end of fiscal year June/2017
100% of audit reports are in compliance with the Bank
rules and are accepted
D. Disbursement
Slow and low a) Encourage the cooperation and exchange of knowledge and PIU capacity to address operational, day-to-day challenges, Executing Agency Continuously
disbursement practices on procurement, financial management and is improved Ministry of Finance
disbursement between PIUs; ADB/ COAO
b) Provide continuous support and training to PIU staff on ADB Specific training on disbursement rules and procedures is Executing Agency Continuously
disbursement rules and procedures. provided at least once a year Ministry of Finance
Reduction of the number of Disbursement Requests ADB/ COAO
returned by the Bank
c) Improve and speed up the ADB disbursement processes Average number of days to complete a payment is reduced ADB Continuously

XIX
Issues Recommendations Expected Results Responsible Timetable
E. Project implementation, counterpart responsibilities and ownership
Lack of a a) Ensure the operationalization of CPISU, under the CPISU set up with proper follow up mechanisms in place and ready to Ministry of Finance Immediate
structured and authority of the Ministry of Finance: urgently provide support to the PIU
coordinated define the operating rules and Statute and provide 90% of project issues are proactively solved. Lapse of Time for
approach, from the necessary budget allocation and human Procurement (Goods, Works and Services) reduced from 9-10 moths
the GoA, to resources to ensure the efficient functioning of the is average to 6 months. The PIUs received support from the CPISU
address the slow CPISU without delays and their capacity is reinforced; 95% of projects are
project timely implemented. Fiduciary activities implementation delays are
implementation reduced by 70%. Number of people trained on project implement
increased annually by 10%. Reduce substantially the delays for
procurement and awards of contracts
Lack of proper a) Reinforce project coordinators and M&E staff Specific training on project management, to project coordinators and ADB 2017
results-oriented capacity on results-oriented project management; M&E staff provided at least once a year
planning, b) Ensure the implementation of a results-oriented Annual M&E framework defined for all projects, and monitored and PIU April/July/
monitoring and approach in all PIUs: timely definition of the results revised on a quarterly and annual basis, taking into the account the Executing Agency October 2017
evaluation of to be achieved each year, the necessary technical initial planning.
project and financial means for the accomplishment of the
implementation foreseen results; and elaboration of an M&E Plan
c) Executing Agencies (EA) put in place a follow up EA conduct a close follow up of the project: Focal points are involved PIU Immediate
mechanism of project technical and financial and project coordinators participate in the Ministry periodic work Executing Agency
execution meetings (Conselho Directivo)
Steering Committees are in place, meeting at least once every six
months and ensuring the necessary guidance for project
implementation
Weak a) Reinforce the accountability through the adoption All project coordinators, procurement and financial management PIU Dec /2016
accountability of of a results-oriented contracting method of PIU experts from all projects signed the Performance Based Contract Executing Agency
Executing appointed staff (coordinator, procurement expert, before the end of 2016 Ministry of Finance
Agencies (EA)/ financial management expert). Performance of PIU staff assessed quarterly and improved April/July/
Sectoral October 2017
Ministries
Lack of timely a) During the last quarter of 2016 it should be All projects are registered in the PIP and the allocated amount is PIU Continuously
release of confirmed by the PIUs that the respective projects foreseen in the State General Budget; Executing Agency
counterpart funds are registered in PIP for the fiscal year of 2017 as 100% of the foreseen amount disbursed and timely disbursement of Ministry of
well as the amount approved in the State's General counterpart funds for implementation of foreseen activities. Planning
Budget. In 2017, early efforts are necessary to Ministry of Finance
ensure the registry of projects in PIP for the 2018
Budget. . The insertion of projects in PIP should be
based on the prior preparation of annual budget,
procurement, disbursement and work plan.

XX
Annex 10: Angola CSP 2017-2021 selectivity criteria

1. Dialogue between the Bank, the government, development partners, private sector
and civil society led to consensual identification of six (6) selectivity criteria for new
strategic and operational options of the CSP. These are: (i) need to help the country benefit
from its advantages and opportunities while addressing its developmental challenges and
fragilities; (ii) Bank strategies and their alignment on Angola Vision 2025; (iii) consultations
with the stakeholders; (iv) comparative advantage of the Bank; (v) resource constraints and
need to establish complementarity with other development partners; and (vi) lessons learned
from implementation of the previous CSP.

2. The first method of selecting Bank operations is guided by the need to benefit from
the countrys advantages and opportunities, while addressing its challenges of
vulnerability to internal and external shocks and inadequate infrastructure. Internal
vulnerability is mainly due to poverty, inequality, and climatic hazards. Exogenous shocks stem
from Angolas dependence on oil exports whose prices and production are highly volatile. The
CSP and the second of the High 5s priorities (Feed Africa) underscore the strong causality
effect between rural poverty and the dependence of small farmers on agricultural incomes.
Agriculture holds the key to broad-based economic growth, poverty reduction and food security
in Angola but the sector is not productive and mechanized. Inadequate rural agricultural
infrastructure (e.g. lack of feeder roads, irrigation systems, and unreliable electricity supply),
low use of yield enhancing inputs and technologies, lack of skills, limited access to credit, weak
research and extension services for support to farmers and inefficient land management
systems drive low agricultural productivity. In addition, changes in hydro-climatic conditions
have strongly reduced the fisheries potential, which is now estimated to be about 360,000
tons/year. Most of the agricultural production is predominantly generated by smallholders, and
is estimated that only 5.7 percent of the arable land (e.g. about 575,900 km2) is under cultivation
and with significant post-harvest losses (Table 1 below). The countrys trade balance for
agricultural and agro-industry products is still in deficit. In 2015, Angola imported food basket
products for approximately USD 3.8 billion, as against agricultural exports of USD 509
million. In this context, there is much leeway for transforming Angolas agriculture and
boosting the various links of the value chains. All analytical studies agree on the need to also
focus on power infrastructure for agro-processing , as well as road infrastructure, which
facilitates the evacuation of agricultural and agro-industry products at national and sub-regional
levels.

Table 1: Angolas agricultural production, productivity and consumption needs for key products (2013)
Description Total production (Tons) Utilization (Tons) Productivity (kg/ha)
Smallholders Commercial Domestic Harvest Angola Sub-Saharan
producers consumption losses Africa
Maize 1,223,636 325,114 2,160,843 232,313 983 3,973.7
Rice 18,302 19,306 302,261 3,761 1,274 2,644.3
Beans 272,907 39,080 468,382 31,199 398 987.7
Cassava 15,347,613 1,064,060 8,799,976 164,1167 14,052 10,800
Potatoes 323,128 347,008 915,852 67,014 14,566 31,267
Coffee(1) 12,550 1,800 n.a 308 408.65
Source: Ministry of Agriculture of Angola and FAOSTAT. Note: (1) In Angola, 97 percent of producers are
smallholders and 3 percent are estates and Angola stands at 43 rd place in the world coffee production rankings.

3. The second selectivity criterion is alignment of the new CSP on Angolas Vision
2025 and the Banks Ten-Year Strategy 2013-2022, particularly the five institutional
priorities (High 5s). The new CSP is aligned on the Banks Feed Africa Strategy for
Agricultural Transformation in Africa 2016-2025, the Bank Group Industrialization Strategy

XXI
for Africa 2016-2025, the Banks Private Sector Development Strategy 2013-2017, the Bank
Group Strategy for the New Deal on Energy for Africa 2016-2025, the Bank Group Strategy
for Jobs for Youth in Africa 2016-2025, the Banks Regional Integration Policy and Strategy
2014-2023, and the Bank Group Gender Strategy 2014-2018. Lastly, the new CSP is fully
aligned on the achievement of Angolas Sustainable Development Goals (SDGs), in particular,
the SDG 1 (No poverty), SDG 2 (No Hunger), SDG 5 (Gender equality), SDG 6 (Clean
water and sanitation), SDG 7 (Clean energy), SDG 8 (Good jobs and economic growth),
SDG 9 (Innovation and infrastructure), SDG 10 (Reduced inequalities), and SDG 13
(Protect the planet).

4. The third selectivity criterion was guided by the dialogue held at COAO with the
Government, development partners, private sector and civil society which led to the
selection of agricultural investments and economic infrastructure development, with
focus in rural areas, since this strategy is aimed at accelerating economic diversification,
create jobs and reduce poverty. Policy dialogue has also recognized that rural development
will be effective only when it is accompanied by integrated infrastructure systems (e.g. reliable
electricity and water supply systems and sustainable transportation infrastructure) for
promotion of agropoles and agribusiness for job creation, and including climate and gender
sensitive interventions as women are disproportionately affected by poverty. In fact, the
National Household Well-Being Survey (IBEP, 2008-09), indicated that rural areas in Angola
were still plagued by widespread poverty, with an incidence that was three times higher in rural
areas (58 percent) than in the urban areas (19 percent). With regard to the development of
agropoles in Angola, two priority regions were identified based on the following criteria: (i)
potential of the areas concerned; (ii) production levels; and (iii) public or private investments
underway or scheduled. These criteria guided the identification of the potential areas, namely
Cabinda and Lobito Corridor, which are currently subject to integrated rural development, trade
facilitation and agricultural value chain studies to inform the design of the new CSP operations.

5. The selection of energy and transport infrastructure is justified by the Banks


comparative advantage (4th selectivity criterion) with respect to the High 5s priorities of
Light up and power Africa and Integrate Africa. The other major infrastructure projects are
supported by other donors. Increased access to electricity has proven to be the catalyst for the
planned agricultural transformation and development industries, in particular, in rural areas.
Access to electricity will be accelerated by focusing on the implementation of a mega-project
expansion of the countrys electricity transmission line network (e.g. Central-South 400 kV
line), upgrading of the electric power distribution systems, improved operational efficiency and
revenue collection in the power utilities and promotion of green growth through investments
in renewable energy projects in off-grid areas with private sector participation. These
interventions will draw from the experience of the implementation of the USD 1 billion Power
Sector Reform Support Program (PSRSP) that was completed in June 2016. The new power
mega-project will be piloted through the New Deal for Energy in Africa, whose objective is to
achieve universal access to energy by 2025 - with access rates of 100 percent in urban areas
and 95 percent in rural areas. The selection of transport infrastructure (e.g. roads, railways,
ports, and logistical platforms) is based on the comparative advantages in terms of planning
and preparation of feasibility studies, in particular, the ongoing National Transport Sector
Master Plan and Feasibility Study for the railway link between Angola and Zambia. Once
completed, the Transport Master Plan will open the possibility of rapid implementation of
agropole activities along the Lobito Corridor and boost trade with the hinterland countries in
Southern Africa Development Community, in particular, the Democratic Republic of Congo
and Zambia.

XXII
6. The fifth selectivity criterion took into account the impact of the scarcity of
resources on the implementation of the initially proposed Bank operations. The
deterioration of the key macroeconomic indicators due to lower international oil prices pose
significant concerns about the countrys debt sustainability. The potential downgrade of the
countrys sovereign credit rating will imply significant reduction of the Banks financial
exposure and interventions in Angola. This will require a rationalization of interventions, in
particular, in the primary areas that were considered for agropole development (e.g. the
northern province of Cabinda and the central region along the Lobito Corridor). This choice is
also dictated by the need to complement the other partners. In fact, the World Bank is preparing
a USD 230 million commercial agriculture development program in the central-south regions
of Kibala, Huambo, Lubango and Bi. The project will focus on revitalizing commercial
agriculture development for coffee and cereals production. The selection of Cabinda and Lobito
Corridor regions are also based on their comparative advantages in terms of the possibility for
rapid implementation of agropole activities, as well as the availability of studies that were
completed in 2016, using some of the ADF resource balances from the Bom Jesus Agricultural
Development Project. Meanwhile, the industrial and agricultural sectors still play a limited role
in reducing poverty in the region. Agriculture and livestock production has been sustained
mainly by small farmers producing to face family consumption and not supplying to the market.
According to INEs 2015 enterprise survey, it is estimated that only 4.3 percent of agribusiness
units have been established in Angola but with limited capacity in terms of food processing. In
this context, the Banks interventions in these agropoles could help develop several value
chains, including the processing of cassava, cocoa, coffee, fish, maize, poultry and livestock.
These value chains are also targeted by the Bank's strategy for the transformation of agriculture
in Africa (2016-2025), in particular, cassava which is widely consumed in northern Angola and
interests some investors on account of its export potential.

7. The lessons learned from implementation of the previous CSP and led to the
adoption of a new strategic approach, namely, the investment in large projects that are
aligned with the countrys economic transformation agenda in order to ensure
sustainability and greater impact amid the spectrum of limited financial resources. The
use of Budget Support instrument for infrastructure financing is considered critical to enhance
catalytic impact of Banks interventions drawing from the successful implementation of the
USD 1 billion PSRSP. Other key innovations in the new CSP include: (i) intense focus on
inclusiveness by investing on agricultural transformation and infrastructure development in
poorest regions and communities, particularly targeting youth and women, while protecting
their natural environment; (ii) green growth through pilot investments on renewable energy in
off-grid areas to accelerate rural electrification and industrialization. The new CSP 2017-2021
for Angola mainly recommends integrated infrastructure (energy, transport and water
infrastructure) that supports value chains in agriculture and agro-industry to generate
sustainable jobs and reduce poverty.

XXIII
Annex 11: Angola CSP 2017-2021 sectoral linkages and the High 5s

Improved skills and Provision of sustainable


Impact Increased agricultural
employment
production and productivity
creation
economic infrastructure

Increase Linkages Open regional


PPPs and Reduce
Outcomes domestic food and value markets to
FDI transaction
production chains increase
enhanced costs
and services enhanced exports & FX

Alignment
with High 5s Feed Africa/Industrialize Africa | Light-up and Power Africa | Integrate Africa

Access power Transport Access to ICT


Food Extension
processing services
Transmission Roads/Ports Technology
transfer
Interventions Private sector Seeds/fertilizer Logistical
Utilities
Agri-business efficiency platforms
Agricultural
Research/ markets
Irrigation/ smallholders Renewable Railway link
communication
Storage support energy Lobito/Zambia

CSP 2017- Pillar I: Inclusive growth through Pillar II: Support to sustainable infrastructure
2021 Pillars agricultural transformation development

Alignment to the Pillar 4: Promotion of economic Pillar 3: Rehabilitation and development of


Angola Vision diversification and infrastructure to support economic development
2025 Pillars competitiveness (agriculture, (energy, transport, water and sanitation)
rural development, livestock)
Cross-cutting
issues Gender | Climate Change | Economic fragility (infrastructure and natural resource management)

Weak Lack of adequate Weak trade Inadequate Challenging


Challenges agricultural facilitation and business
skills infrastructure
productivity export support environment

Strategic Accelerate economic diversification and reduce the dependence from oil through integrated
objective investments in agricultural transformation towards sustainable job creation and poverty reduction

Source: Author, based on the sectoral analytical thematic notes prepared as part of the Angola CSP 2017-2021.

XXIV
Annex 12: Angola CSP 2017-2021 indicative lending program
ADB Total Total Preparation status
Indicative Lending Program(1) Alignment Reg. Reg. ADB Co-
Year Sector Scope Instrument Non- ADB ADB
Details High 5s Loan Grant Sov. Financing
Sov. Group Project
PILLAR I INCLUSIVE GROWTH THROUGH AGRICULTURAL TRANSFORMATION: The implementation of integrated investments in agricultural infrastructure in rural and semi-urban areas (e.g. through
Public-Private Partnerships) will be critical to increase the countrys agricultural productivity and domestic food production, boost exports, generate incomes and enhance food security and poverty reduction.

Strategic outcomes: (i) Increased domestic food production; (ii) Linkages and value chains enhanced; and (iii) increased agricultural exports and foreign exchange earnings
ESW underway, preparation
Cabinda integrated agricultural
2017 Agriculture Nat. Investment Feed Africa - - 100 - 100 10(a) 100 mission undertaken in
project
November 2016
Lobito agricultural trade facilitation Agriculture/ Feed Africa ESW underway to be completed
2017 Reg. Investment - 2 - - 2 2(b) 4
and value chains project Regional Integrate Africa in May 2017
Due diligence done in August
Trade Finance LoC Banco BAI 2017 Financial Nat. LoC Industrialize Africa - - - 178.7 178.7 - 178.7
2016
ESW prepared, preparation
Private sector agri-business project Feed Africa
2018 Agriculture Nat. Investment - - - 200 200 230(c) 200 mission undertaken in
along Lobito Corridor Industrialize Africa
November 2016
PILLAR II SUPPORT TO SUSTAINABLE INFRASTRUCTURE DEVELOPMENT: Consolidate Banks infrastructure interventions under the previous CSPs in order to bridge the countrys infrastructure gap by
addressing its energy deficit, increase populations access to energy, in particular, in rural areas, and improve transportation systems to support agricultural production, ease access to markets and boosts exports

Strategic outcomes: (i) Reduce transaction costs; (ii) open regional markets to increase exports and foreign exchange earnings; (iii) enhance PPP and FDI for infrastructure
Electricity system upgrade, access ESW on fixed-asset registry and
2018 Energy Nat. Investment - - 300 - 300 30(d) 300
scale up and revenue protection technical losses underway to be
Renewable Energy Mini-grid Light up and Power completed in 2017. Co-financing
2018 Energy Nat. Investment - - - 30 30 10(e) 30
(PPP,IPP) Private Sector Africa of transmission line project with
Central south electricity transmission AFD EIB, JICA, and USAID
2019 Energy Nat. Investment - - 300 - 300 300(f) 300 under negotiation.
line phase 1 (411 km)
Munhango-Luena 170 Km Lobito National Transport Master Plan
2018 Transport Reg. Investment - - 182 - 182 18.2(g) 182
Corridor Road studies underway to inform
Lumege-Luacano-Luau 186.5 Km project components of the
2018 Transport Reg. Investment Integrate Africa - - 200 - 200 20(h) 200
Lobito Corridor Road railway link. MIC grant being
prepared to finance the Lobito
Angola-Zambia Railway Link 2019 Transport Reg. Investment - -
500 - 500 50(i) 500 Corridor road studies in 2017.
Notes:
(a) Project to secure 10 percent co-financing from the government of Angola.
(b) UA 2 million co-financing secured from FAPA.
(c) USD 230 million to be leveraged with the World Banks Commercial Agricultural Development Project that is under preparation.
(d) Resources agreed to be co-financed by AFD, JICA, EIB, and USAID
(e) Resources initially planned to be co-financed by SEFA and Facility for Energy Inclusion
(f) Resources agreed to be co-financed by AFD, JICA, EIB, and USAID
(g) Project to secure 10 percent co-financing from the government of Angola.
(h) Project to secure 10 percent co-financing from the government of Angola.
(i) Project to secure UA 50 million co-financing from the AGTF

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Annex 13: Angola CSP 2017-2021 indicative lending pipeline
ADB Total
Indicative Lending Pipeline* Alignment Reg. Reg. ADB Other Co-
Year Sector Dep. Scope Instrument Non- ADB Total
Details High 5s Loan Grant Sov. Finance Finance
Sov. Group
PILLAR I INCLUSIVE GROWTH THROUGH AGRICULTURAL TRANSFORMATION: The implementation of integrated investments in agricultural infrastructure in rural and semi-urban areas (e.g. through
Public-Private Partnerships) will be critical to increase the countrys agricultural productivity and domestic food production, boost exports, generate incomes and enhance food security and poverty reduction.
(i) Increased domestic food production; (ii) Linkages and value chains enhanced; and (iii) increased agricultural exports and foreign exchange
Strategic outcomes: earnings

Nova Agrolder Agribusiness Project 2017 Agriculture OPSD Nat Investment 100 100
Fazenda Girassol 2017 Agriculture OPSD Nat Investment 10 10
Trade Finance LoC Banco Keve 2017 Financial OFSD Nat. LoC - - - 14.3 - 14.3 - 14.3
Trade Finance LoC Banco Atlntico 2017 Financial OFSD Nat. LoC - - - 71.5 - 71.5 - 71.5
Industrialize
Commercial agricultural development project in
2018 Agriculture OSAN Nat. Investment Africa - - - 40 - 40 - 40
Northern Angola
Agricultural infrastructure and livestock
2019 Agriculture OSAN Nat. Investment - - 60 - - 60 - 60
production Southern Angola
PILLAR II SUPPORT TO SUSTAINABLE INFRASTRUCTURE DEVELOPMENT: Consolidate Banks infrastructure interventions under the previous CSPs in order to bridge the countrys infrastructure gap
by addressing its energy deficit, increase populations access to energy, in particular, in rural areas, and improve transportation systems to support agricultural production, ease access to markets
(i) Reduce transaction costs; (ii) open regional markets to increase exports and foreign exchange earnings; (iii) enhance PPP and FDI for
Strategic outcomes: infrastructure

Camama Technological Park 2018 Transport OITC Nat. Investment - - 50 - - 50 - 50


ICT & optical fiber for agricultural markets Integrate
2018 Transport OITC Nat. Investment - -
support Africa/ 20 - - 20 - 20
Luanda-Lobito Highway 2019 Transport OITC Nat. PPP Feed Africa - - - 700 - 700 70* 700
Porto Amboim Development Project 2019 Transport OITC Nat. PPP - - - 310 - 310 31* 310

*Note: The Indicative Lending Pipeline corresponds to a list of identified projects that are also aligned to the CSP pillars but not ready for implementation. They form part of a rolling
pipeline of projects that will be updated on an annual basis and they may transit to the category of Indicative Lending Program provided that all quality-at-entry conditions (e.g. ESWs,
financial headroom and official letters from Government requesting financing) are all met.

(a) The Bank has initiated dialogue with private sector entities in Angola for the implementation of innovative financing instruments such as Public-Private Partnership (PPP) to co-
finance these two non-sovereign infrastructure investments.

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Annex 14: Angola CSP 2017-2021 indicative non-lending program

ADB MIC Trust Other Total


Alignment ADF ADB
Indicative Non-Lending Program Sector Scope Year Non- Grant Fund Project Status
High 5s balances Sov
Sov cost
PILLAR I INCLUSIVE GROWTH THROUGH AGRICULTURAL TRANSFORMATION

Cabinda Integrated Agricultural Rural - 0.42 - -


Agriculture Nat. 2016 - - 0.42 ESW underway for completion in Q1 2017
Development Study
Commercial agriculture development study for - - - -
Agriculture Nat. 2016 0.6 - 0.6
Northern Angola ESW underway for completion in Q1 2017. Studies are
Feed Africa
Private Sector Agri-business study along the - - - - being funded with the remaining balances of the Bom
Agriculture Nat. 2016 0.4 - 0.4
Lobito Corridor Jesus Agriculture Development Project that was
Agricultural infrastructure and livestock study in - - - - completed in November 2016.
Agriculture Nat. 2016 0.5 - 0.5
Southern Angola
Trade Facilitation and Export Competitiveness Reg. - - 0.4 - Study underway and to be completed by May 2017.
Reg. 2016 Integrate Africa - - 0.4
Study Integration Study funded by the Korea Trust Fund.
Legal Support Facility (infrastructure contract - - 0.5 -
Capacity building program approved by ALSF and
negotiations and management, PPP contract Nat. 2017 - - 0.5
COAO and to be implemented in 2017
negotiations)
Natural Resource Management (Land tenure - - 0.5 - Capacity building and technical assistance program
reforms, local content in oil and gas, fisheries Nat. 2017 - - 0.5 approved by ECNR and COAO to be implemented in
mining, and water management) Governance/ 2017
Improve quality of life
Multi-sector
Capacity Building on Project-Cycle Management for the people of Africa - - 0.5 - Capacity building program approved by ECAD and
Nat. 2017 - - 0.5
and Entrepreneurship, PPP Training COAO to be implemented in 2017
- - 0.5 PEMFSR report and Action Plan was funded with
Public Expenditure Management and Fiduciary
PAGEF project resources and to be disseminated in
Systems Review (PEMFSR) Action Plan & Nat. 2017 - - 0.5
2017. Country Procurement Assessment Report to be
Country Procurement Assessment Report 2017
undertaken by SNFI in 2017
PILLAR II SUPPORT TO SUSTAINABLE ECONOMIC INFRASTRUCTURE

Power Sector Technical Assistance Studies on: - - -


Light up and Power Studies funded with technical assistance resources from
Technical and non-loss reduction in the Energy Nat. 2016 - 6 6
Africa the USD 1 billion PSRSP and to be completed in 2017
distribution system, and fixed-asset registry
Integrate Africa/ - - -
Transport Master Plan for Luanda Transport Nat. 2017 Improve quality of life - 5.5 5.5
for the people of Africa Request for grant financing being prepared by OITC for
approval in 2017
Preparation of studies for the logistics platforms - - -
Transport Reg. 2018 Integrate Africa - 12.5 12.5
along the Lobito Corridor
Wastewater management in the coastal towns - 1 -
Water&Sanit. Nat. 2017 - - 1 ToRs prepared and studies to be funded by a MIC grant
study
Improve quality of life - 0.8 - in 2017
Water Resources Management Study Water&Sanit. Nat. 2017 - - 0.8
for the people of Africa
20 - - Identification mission undertaken in November 2015.
Angola Environmental Services (AES) Environment Nat. 2017 - - 20
Project funding under negotiation.

XXVII
Annex 15: Angola assessment of the public financial management systems

I. Introduction

1.1. In line with the Bank guidelines, this Country Fiduciary Risk Assessment (CFRA) has been
carried out as part of preparation of the new Country Strategy for Angola (2017 - 2021) to highlight
the developments in PFM systems. The purpose of the assessment is to establish reliance on the
core PFM systems for the implementation of the Banks programs and to identify the scope for
capacity development for the weakness identified. The review is based on the latest available PFM
diagnostic work including the draft report of ongoing Public Expenditure Management and
Fiduciary Systems Review (PEMFSR) and discussions with key officials of Government
ministries, departments and other development partners.

II. Executive Summary


2.1 Over the years, the Government of Angola (GoA) has taken steps to improve the fiscal
frameworks and public financial management (PFM) systems. The commitment by the
Government to reform the countrys PFMs over the years is acknowledged, with recent progress
in a number of areas including the legal framework where recent developments include the
adoption of the revised Inspeco Geral das Finanas (IGF) Regulations, widened and more
frequent reporting on use of resources (both in year and end of year) through the use of the
Government wide IFMIS (SIGFE), a consultative budgeting process and increased availability of
fiscal information in the public domain. There is also progress in the audit of the national accounts
by the Tribunal de Contas (although not obligated by law). These developments indicate that
Angola is exhibiting a positive trajectory of change in the overall country PFM systems.

2.2 The ongoing reform efforts are however yet to address a number of areas in budget
execution, internal controls, capacity development and general oversight. Whilst a SIGFE inbuilt
commitment system exists, an analysis of the Annual State Accounts for the three years to 2014
reveals significant variances (actual budget vs outturn), possibly underscoring gaps in the
absorptive capacity in general to fully implement public investment programs as well as a
shortcoming in the effective use of the commitment system. The developments made by the
Inspector General of Finance in executing internal control function, have been hampered by
capacity constraints, resulting in a significant part of the national budget not being subjected to
reviews in a given year. In addition, the department responsible for Public Sector Accounting, i.e.
the Directorate of Public Accounts also typically faces capacity constraints, particularly in terms
of skills. The profession of accounting still has to reach maturity levels in Angola with the absence
of a national Professional Accountancy Association though efforts are underway to promote its
development. Corruption perceptions in Angola are significant but the situation is experiencing a
gradual though minimal improvement with the country ranking 164rd out of 176 countries in the
2016 edition of Transparency Internationals Corruption Perceptions Index (CPI) with an overall
score of 18 over 100.

2.3 Furthermore, a stronger link between the budget and the National Development Plan
through sector strategies is yet to be established. In this regard, the overall risk is substantial with
the need for the continued implementation of the PFM reforms aimed at further improving the
national systems and public investment management systems to improve quality of expenditure.
The PEMFSR currently underway will provide an in-depth analysis of Angolas PFM system.
Based on the findings, a medium-term PFM reform action plan will be developed that will include

XXVIII
capacity building and training programs for PFM and non-PFM experts to strengthen the capacity
of key government institutions and deepen PFM reforms in Angola. In this regard, there is a scope
for the Bank to maintain an approach based on a limited use of country procedures and systems,
while continuing the countrys efforts for the system's reform.

SUMMARY TABLE ON FIDUCIARY RISK ASSESSMENT


Initial Residual
Elements Mitigating Measures
Risk Risk
1. Budget
1.1 The Budget sub-system Substantial Develop plans and budgets based on a Moderate
capacity is adequate to plan broad Government Public Investment
(formulate) budgets for the Program (PIP) with a link to public
programs and projects investment.
1.2 The Budget sub-system
capacity is adequate to execute Enhance effectiveness of the SIGFE in
budgetary control of programs built commitment system intended to curb
or projects both unapproved expenditures and those
beyond approved limits

Improve payment verification process to


enable budget units to efficiently plan and
carry out delivery of public goods and
services
2. Treasury
2.1 The Treasury sub-system Substantial Improve overall debt management Moderate
capacity is adequate to manage
the inflow of resources and Program funds flow and use through
disbursements of aid funds. dedicated accounts with proper oversight
2.2 The Single Treasury Account is arrangements
an appropriate and reliable way
to administer aid funds

3. Accounting Recording and


Reporting Substantial Further automate ongoing key processes Moderate
3.1 The Financial Accounting sub- and integrate a number of other systems
system is sound and capacity is into SIGFE for the purposes of
adequate to record program streamlining fiscal and economic data
and/or project transactions and
account for their progress and Enhance user training and operational
financial status. support on SIFGE to improve the quality
3.2 Financial Management and integrity of system produced data and
information systems have information.
flexibility to accommodate
specific reporting requirements System generated reports should be fully
of programs and projects and inclusive of the state budget operations to
have procedures in place to enhance reliability of the information.
ensure timeliness and quality of

XXIX
information produced. Develop skills for staff in the Directorate
3.3 The Financial Accounting sub- of Public Accounts to address the capacity
system has an integrated Fixed constraints.
Assets module for the proper
recording and control of assets
purchased with program / The Action Plan from the PEMFSR
project funds. exercise will recommend a timed and cost
3.4 The Accounting sub-system action plan, for whose implementation is
maintains up to date records of expected to lead to improvements in PFM
the countrys borrowings. and in the use of resources.
3.5 The Accounting systems are
secure against deliberate
manipulation of data and/or
accidental loss of or corruption
of data.
4. Internal Control Substantial Moderate
4.1 The Internal Control sub- Increase number and provide training of
system capacity is adequate to staff to address the capacity constraints
control the financial operations that remains a significant challenge.
of programs and projects.
4.2 Competition, value for money Establish formal follow up mechanism on
and controls in procurement are implementation of the IGFs audit
adequate recommendations.
Adopt a formal Internal Audit work plan
to guide the operations of the IGF for
4.3 The Internal Audit function
planning and monitoring
capacity is adequate
5. External Scrutiny and Audit Specific arrangements for external audit to Moderate
5.1 The SAI has the level of Substantial be done for projects/programs.
independence needed to
enable it to effectively fulfil its Continue efforts towards increasing the
functions. capacity of the Tribunal de Contas to
5.2 The SAI has the capacity to enable them carry out their work
meet its audit mandate
Establish adequate and formal
mechanisms on following up
implementation of audit
recommendations.

Annex 16: Angola assessment of the countrys procurement systems

XXX
I. Bank Procurement Strategy

1.1. The Bank will continue to support reforms in the procurement system of Angola during the
CSP period, mainly through: (i) preparation and implementation of a PFM, including Procurement,
Action Plan as part of the PEMFSR exercise; (ii) policy measures as part of PBO/PBG operations;
(iii) implementation of the new Bank Procurement Policy for Bank Group Funded Operations
dated October 2015 for new projects, which provides for greater use of country procurement
system; (iv) support the preparation and implementation of the SNCP strategic plan; (v)
comprehensive training for SNCP staff and procurement training at provincial level; and (vi)
hands-on support and training to executing agencies of Bank-funded projects.

II. Legislative and Regulatory Framework


2.1. Angola has updated its legal and regulatory framework in 2016, with the aim of
modernizing its public procurement system. A new procurement law has been adopted and entered
into force on 16 September 2016 (Lei n 9/2016 dated 16 June). It has been complemented by
implementing regulations, already adopted (price of selling of bidding documents; procedures for
procurement of real estate; registration and certification of State suppliers; procedure for and
execution of framework contracts). The law is applicable to central and local governments, as well
as state owned enterprises (SOEs). The procurement methods are clearly outlined, although
competitive procurement is not the default method (one of the methods to be selected subject to
thresholds and to other material factors). A new set of standard bidding documents have also
been adopted, in order to support the proper implementation of the law.

III. Institutional Framework and Management Capacity


3.1. The public procurement system has the oversight of a dedicated body, Servio Nacional da
Contratao Pblica (SNCP). However, it is noted that SNCP is involved in procurement
transactions as a decree adopted in 2014 gives responsibility to SNCP to review all procurement
processes that are to be submitted for prior review to the Minister of Finance. The 2016
Procurement law opens the possibility for creation of specialized procurement units within the
contracting entities. A specialized unit has been created to manage all procurement above an
equivalent of USD 10 million, which are to be approved by the President of the Republic. Some
SOEs also have dedicated procurement units (i.e. ministry of energy and water). There is a
procurement Portal but it is not updated regularly. SNCP produces statistics on the system but the
information is not complete, as it relies on information provided by the contracting entities (not all
provide information). A contract management module, including information on the procurement
stage, is under preparation to be implemented in the PFM management system. This will support
the improvement of the compliance to procurement procedures and the collect of information
needed to produce accurate statistics.

IV. Procurement Operations and Market Practices


4.1. Capacity is a major constraint in the public procurement system. SNCP prepares an annual
training plan and delivers training to contracting entities, including at provincial level. However,
trainings depend on the demand and should also target other stakeholders of the system (i.e.
auditors, private sector). The 2016 Procurement Law provides for contract management in Works
and Goods/Services contracts and alternative dispute resolution mechanisms are foreseen. Their
implementation, as well as practical contract management mechanisms, still to be put in place.

V. Integrity and Transparency of the Public Procurement System

XXXI
5.1. Some weaknesses were identified in the internal and external controls, as follows: (i) SNCP
is involved in transactions, (ii) the Public Financial Management internal control entity (General
Inspectorate of Finance IGF) lacks of capacity in procurement and its reviews are usually ex-
post and not systematic, and (iii) there is not a dedicated and independent procurement entity in
charge of quality review of procurement processing. However, 2016 was the first year of
procurement Audits held by SNCP. Regarding the complaints mechanism, there is not an
independent administrative body for review of complaints, which may impact the confidence of
the private sector to the system. The procurement law calls for ethical behavior for public servants
intervening in procurement procedures and for the bidders, including sanctions for non-
compliance.

6. Assessment of the Fiduciary Risk in Procurement


8.2. Overall, the risk in the procurement system is high. The table below summarizes the main
risk factors as well as current and future reforms to address them:

N Risk Factors Initial Risk Reform Measures Residual Risk


(2017-2021)
1 There is no clear Substantial Prepare and implement a Moderate
strategy for the public Strategic and
procurement system Operational Plan for the
public procurement
oversight body (SNCP)
2 There is no integration Substantial Deploy the Contract Moderate
of Procurement with module for SIGFE,
the PFM system including training for
(SIGFE) users
3 Weaknesses in the High Create an internal Low
internal control system, control mechanism that
making the public would avoid the
procurement oversight implication of SNCP in
body (SNCP) transactions
intervening in
transactions

4 The Complaint High Set up an Independent Moderate


mechanism is Appeals Body as last
inefficient recourse in the
administrative system,
including representatives
of the public and private
sectors
5 The global capacity High Prepare and implement a Moderate
level in procurement is comprehensive capacity
weak building plan

XXXII
6 Bids are opened in the High Revise the Law, which Low
next business day of should include that bids
the submission date. If are open immediately
so justified, the after the deadline for
opening session can submission of bids
occur within 10 days of
the initial date
7 Information in the Moderate Update regularly Low
procurement Portal is information in the Portal
not updated (legal (centralize information
documents, statistics, of all tenders,
advertisements,) information on contract
awards, information on
complaints treated,)

XXXIII
Annex 17: Main analytical studies consulted

1. AfDB (2012). Angola 2012 Private Sector Country Profile.


2. AfDB (2012). Angola Transport Sector Brief.
3. AfDB (2013). Review of the AfDBs economic and sector work (20022010).
4. AfDB (2013). Financial Inclusion in Africa.
5. AfDB (2014). Angola Energy Sector Analytical Report.
6. AfDB (2016). Bank Group Strategy for Jobs for Youth in Africa, 2016-2025.
7. AfDB (2016). Feed Africa - Strategy for Agricultural Transformation in Africa 2016-2025.
8. AfDB (2016). The Bank Group New Deal on Energy for Africa 2016-2026
9. AfDB (2016). Gender Strategy 2014-2018
10. AfDB (2016). Feed Africa Strategy for Agricultural Transformation in Africa 2016-2025
11. AfDB (2016). Bank Group Industrialisation Strategy for Africa 2016-2025
12. Deloitte and Touch (2015). Angola 2015 Banking Review, October 2015.
13. Esterhuizen, I. Public, private investment needed to tackle SADC power deficit, Engineering News, 11
September 2012
14. Economist Intelligence Unit (2016). Country Report, Angola, June 2015.
15. Government of Angola (2003). Angola Poverty Reduction Strategy: Social Reinsertion, Reconstruction
and Economic Stabilisation. September 2003.
16. Government of Angola (2011). Light Rail Network Study for Luanda. Ministry of Transport.
17. Government of Angola (2011). The National Energy Security Strategy and Policy. Ministry of Energy
and Water.
18. Government of Angola (2012). National Development Plan 20132017.
19. Government of Angola (2013). National Strategy and Policy for the Development of the Transport
Sector, 20132017.
20. Government of Angola (2013). Energy and Water Sector Action Plan 20132017.
21. Government of Angola (2014). National Railway Rehabilitation, Expansion and Modernisation
Programme. Ministry of Transport.
22. Government of Angola (2014). Power Sector Transformation Project (PTSE). Ministry of Energy.
23. Government of Angola (2016). State Budget Report Relatrio de Fundamentao do Oramento do
Estado.
24. Government of Angola and Government of Norway (2012). Institutional Strengthening of the Energy
and Water Resource Sectors in Angola.
25. ILO (2014). Labour Organization: World Social Protection Report: Building Economic Recovery,
Inclusive Development and Social Justice, 20142015.
26. IMF (2015). Article IV Staff Report. November 2015.
27. IMF (2015). World Economic Outlook 2015.
28. INE (2013). Integrated Survey on the Welfare of the Population IBEP (Analytical Report Vol III
Poverty Profile).
29. Mwale, S., and Davidson, I.: Security Analysis of Electric Power Supply in SADC Region. May, 25,
2015.
30. OSISA (2013). Angolas Oil Industry Operations, Report prepared by Open Society Initiative for
Southern Africa.
31. Pushak, N, and Foster, V (2011). Angolas Infrastructure: A Continental Perspective. Africa
Infrastructure Country Diagnostic. The World Bank.
32. UN Development Programme (2014). Human Development Report 2014. Sustaining Human Progress:
Reducing Vulnerabilities and Building Resilience. New York, USA.
33. UNICEF (2013). Angola: Social Protection and its Perspectives. June 2013.
www.imf.org/external/country/AGO/rr/2013/060513ap.pdf
34. WEF (2014). Global Competitiveness Report, 20142015 by World Economic Forum.
35. World Bank (2006). Angola: Country Economic Memorandum Oil, Broad-Based Growth, and
Equity, The World Bank, October, 2006.
36. World Bank (2015). Doing Business 2016 Report.

XXXIV