Angola is unbelievably expensive, and it will get more expensive before it gets cheaper. Here is why.
Angola’s new President Joao Lourenco has vowed to revive the economy, attract investment and combat the endemic corruption, and he is acting fast. Growth should reach 5 percent in the medium-term.
The demand for expatriate goods and services in Angola has exceeded supply since the dawn of peace after many years of economic stagnation despite immense oil wealth due to the post-independence civil war. By expatriate goods and services, I refer to international premium brands (food, clothing, and other consumables), international schools, excellent healthcare, and safe quality accommodation. While there has been a great deal of improvement since my first trip to Angola in 1997, when Luanda looked to me like a city in a time-warp set permanently in war-torn 1975. I recall the run down art-deco buildings with visible bullet holes; streets with huge pot-holes; limited sanitation; no shopping malls; massive poverty; children dressed in rags; so many adults with missing limbs. The limited number of international companies (mostly oil, gas and mining) operating there were mostly hidden away behind extreme security and no external branding, seemingly doing their best not to attract attention. I tried to go for a run along the once lovely bay, but had to turn back due to the stench. In terms of a hardship location, Angola ranked right at the extreme hardship end of the scale.
Twenty years on and the bullet damaged buildings are being repaired, millions of landmines have yet to be deactivated, Luanda is filled with poverty and is still too dangerous to wander around alone. However, things are starting to improve. There are skyscrapers going up alongside crumbling, rundown buildings; slums are being removed to make room for new developments; roads are being paved. There are pockets of luxury such as the Belas Shopping Mall, which was the first mall to open, and is the place to go shopping in Luanda. While it has stringent security (not just anyone can enter) and it is one of the few places you can walk around relatively safely, everything is very expensive, stock is somewhat limited and power outages are common.
Now in 2018, Angola looks to a brighter future. The new President, Joao Lourenco, has vowed to revive the economy, attract investment and combat the endemic corruption, and he is acting fast. In January 2018 the Kwanza peg to the US Dollar, ended, immediately devaluing the currency. Rather than being pegged to the US Dollar the Kwanza is now a “managed float”. The result is that while shortages may be somewhat alleviated, the price of imported goods for expatriates in Angola has risen on the back of already very high prices which can be seen in the inflation rate of over 20% per year.
However, the medium-term outlook for Angola is for a recovery in economic activity. Growth should reach 5 percent in the medium-term according to Ricardo Velloso, IMF division chief for Africa. This will likely further increase the demand for premium skills, goods and services, which are already in short supply. To meet the demand for high-level skills there will be an increase in the number of expatriates deployed in Angola in the coming years to help build infrastructure and expand oil production and related industries and services. In the short-term, we expect higher demand for expatriate premium goods and services in Angola to lead to higher prices on top of the already high prices for imported goods and services. Do not expect Angola to drop out of the most expensive places list anytime soon. The good news is that over the long-term, as the infrastructure improves and the reliance on imports reduces, the availability of quality goods and services will improve which will contribute to Angola becoming more affordable in global terms.
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