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Angola Infrastructure Report Q4 2010
Business Monitor International, Oct 2010, Pages: 65
The Angola Infrastructure Report provides industry professionals and strategists, corporate analysts, infrastructure associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Angola's infrastructure industry.
Angola has seen its scores slump this quarter despite excellent potential based on its position as one of the largest oil producers in the continent. The country’s infrastructure sector, which should be a resounding success story, is instead languishing near the bottom of BMI’s Infrastructure Business Environment Ratings, due to lack of investment, confidence and even basic materials. BMI forecasts that the construction industry value will be just US$3.81bn for 2010. This is set to rise rapidly, however, reaching US$13.6bn by 2014 as foreign investment increases particularly with stronger ties to China.
Key factors contributing to forecasts include:
- Angola's infrastructure business environment continues to be threatened by outstanding bills owed to construction companies active in the country. The issue has been ongoing for some time, with the payment date pushed back several times from April 2010 to July 2010 and now September 2010 at the earliest. Figures, although with some considerable discrepancy, have finally been disclosed, coming in much higher than previously anticipated and therefore presenting major downside risks to our forecasts for industry value and the country's overall Infrastructure Business Environment Rating.
- Two of Brazil's largest construction companies – Odebrecht and Camargo Correa, which are both active in the country, have acted to reduce exposure to Angola. Odebrecht is reportedly halving its workforce and Camargo Correa is abandoning operations altogether, according to sources cited by Reuters.
- The news that Angolan President Jose Eduardo Dos Santos is to relaunch a US$50bn government-sponsored four-year housing project was welcomed, but serious doubts remain over the government's ability to honour this pledge
Angola presents medium- to long-term potential for construction companies, with a major drive to reconstruct infrastructure leading us to forecast average real growth in construction industry value of 19.6% between 2010 and 2014. The question is whether companies believe it is worth it to, or they are financially able to, stick around, hoping payment will eventually be forthcoming, in order to reap longerterm benefits. It appears that reaction to this trade off is very mixed.
Although the business environment and project finance rating have dropped this quarter the country remains in a strong position as rewards are always likely to outweigh risks, while the country sits on such large reserves of natural resources. The combination of falling rates of credit growth, reports of liquidity issues at banks, and monetary conditions that remain generally tight, has had a detrimental effect on overall GDP. In light of these factors, we have revised our 2010 growth forecast for Angola to 7.5% y-oy, down from 9.5% previously.
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