- Law hurting key crude industry bringing in foreign currency
- Kwanza has lost fifth of its value against dollar this year
Angola should lift restrictions on foreign-currency transactions to help ease the struggles of oil companies that have been hit by the sharp drop in crude prices, according to Alex Thomson-Payan, founder of investment company TGI Group.
A law from 2012 requires companies in Angola to pay suppliers and salaries in the local kwanza currency, while last year the central bank ordered businesses and citizens to cut foreign-exchange use by 50 percent amid a dollar shortage.
The oil-price slump has hammered Angola, Africa’s largest crude producer after Nigeria, which relies on the fuel to generate about 70 percent of revenue and 95 percent of export income. The kwanza has lost 19 percent against the dollar this year, while Standard & Poor’s cut the southern African nation’s credit rating by one notch to B, five levels below investment grade, in February.
When foreign-currency controls were announced, the government wanted “to boost the local market, making the kwanza more valuable, diversifying the economy,” Thomson-Payan said in an interview in the capital, Luanda. “But now there is an oil crisis and the law is hampering the only sector generating foreign currency.”
Economic growth in Angola will probably slow to 2.5 percent this year, from 3 percent in 2015, the International Monetary Fund says in its World Economic Outlook on Tuesday. The economy is forecast to expand 2.7 percent in 2017.
Growth in Angola and other crude exporters will slow “as the negative impact of lower oil prices is compounded by disruptions to private-sector activity through exchange-rate restrictions,” the IMF said.
Angola-based TGI Group’s investment portfolio includes oil, mining, telecommunications, real estate and financial services, and it helps international companies starting operations in the country. “If the law is changed, I think the level of investment will be incredible,” said Thomson-Payan.