AS Angola marked its 40th birthday this month, it would have had reason to celebrate. More than half of that time had been spent in civil war, but the southern African country had for the last two decades determinedly roused itself, rebuilding doggedly to become one of the continent’s fastest growing economies.
The bulk of that growth was achieved on the back of oil—the country is Africa’s second-biggest oil producer. But oil has not been itself lately, and Angola, which relies on crude exports for two-thirds of tax revenue, and 95% of its foreign currency receipts, has taken an almighty punch to the gut.
For a long time oil was the magic pill, to the detriment of everything else in the economy. But president Jose Eduardo dos Santos during independence celebrations warned the country’s 26 million people to curb unnecessary spending and seek to diversify the economy in search of more predictable growth, only reiterating what everyone has known all along—that the giddy times have passed.
In an economy where the elite are cushioned, it is the locals that are feeling the pinch most as the dollars have dried up. The sense of tight finances is everywhere—the streets, markets, schools.
This week, Bank of America, which supplies most of the dollar notes that local banks dole out, said it was halting their supply. The intermediary Rand Merchant Bank had on November 13 said it would cease supplying client banks with greenbacks at the end of the month.
Government workers are among those particularly feeling the heat of the financial crunch that has driven Africa’s third largest economy into the hands of international lenders and seen it devalue its currency twice this year.
“Civil servants do not get paid on time. We are now finishing November and the October wage hasn’t been paid yet,” Manuel Lelo, 47, a secondary school teacher said, lamenting it has not been easy to pay for his son’s schooling.
Not even spared are Angolan students abroad, who are battling difficulties with their relatives unable to transfer money to them, according to the state-owned Jornal de Angola, quoting the country’s general consul in Johannesburg on Sunday.
According to the diplomat, the situation has been developing over recent months, and many students with international cards cannot withdraw money from automated teller machines.
“I have two sons in university in Brazil. It has been difficult to deal with their needs due to new internal bank regulations in”, Joao Felizardo said.
“I am not sure whether they’ll finish their studies or not”.
Apart from students and residents, businesspeople and even visitors are finding it increasingly difficult to withdraw cash from their bank accounts after the Angolan government said it would restrict foreign currency transactions.
“Visibly there is a shortage of foreign exchange in the market and it is making it difficult my business” Patricia Rosalina, who has sells clothes from her shop in Maianga in the capital Luanda said.
She says she has had to cancel her trips to Namibia, Congo Brazzaville and other destinations in Europe to restock because of currency market restrictions.
Patricia says that it is sad that even sending money to people to help her purchase what she needs has become impossible.
Children in Luanda, the capital.
Money transfer agents like Western Union and Money Gram are now only used to receive money, and even then recipients can only get the local kwanza currency.
Early this month, the Angolan Association of Banks (ABANC) said that it would limit withdrawals from foreign currency accounts, and scale back the delivery of banknotes in foreign currency to travellers.
ABANC said it was imposing the restrictions to align itself with global financial and anti-money laundering regulations.
But a lawyer, Salvador Freire, told reporters in Luanda that this decision contravenes consumer laws and is unfairly penalising people such as those who receive payments from firms abroad in international currencies.
The decision was illegal, he held, and would further deepen the Angolan economic and financial crisis, Freire predicted.
The kwanza, the Angolan currency, has weakened by about 25% to the dollar this year.
Last week, the Angolan Reserve Bank confirmed in a statement that due to the evolution of monetary and cambial (derivatives) market, the injection of foreign exchange has dropped 60% over the last eight weeks.
But the forex crunch is also seen as spurred by American banks dumping partnerships seen as risky after major banks have in recent years been fined billions of dollars for undesirable practices.
To make things worse, the American Federal Reserve (FED) two weeks ago suspended the sales of dollars to Angolan commercial banks. Five years ago, Bank of America was criticized in a US Senate report for not raising enough questions about how an Angolan arms dealer moved millions of dollars to the US, Bloomberg reported.
There have been claims Angola systematically violates laws regulating the sector and allegedly finances terrorism. Money laundering is also a concern, media reports say.
An estimated $6 billion is imported from the US every year.
Early this month, the International Monetary Fund said Angola’s macroeconomic environment is challenging.
The oil price shock has significantly reduced fiscal revenue and exports, highlighting the need to more forcefully address vulnerabilities and diversify the economy, and better manage oil revenue volatility, the lender said.
Recently, the Angolan Reserve Bank (BNA) governor, José Pedro Morais, denied that the US has restricted the sales of its currency to the African nation.
Angola has normal relations with the USA and their financial institutions have no kind of restriction or sanctions to Angola, he said, saying what was happening were some reforms to the international banking system that the country had already complied with.
The BNA’s objective is to make the Angolan financial system comparable with others in the world, he said, terming the economy as stable despite some challenges.
He also sought to explain the domestic situation. “We have regulations which discourage citizens to draw physical notes of kwanza or dollar unless for specific needs formally explained and justified”.
“Commercial banks are currently encouraged to reduce the handling to physical money and the country still has dollars”.
The bank was also implementing policies aimed at fighting the dollarisation of the Angolan economy, Morais said. But the country relies heavily on imports and business in Angola is conducted either in Kwanzas or the US dollar.
The current official rate of exchange is one dollar for 136 Kwanzas—in the black market one needs at least 270 kwanza.
And with the outlook increasingly bleak and signs of recovery hard to come by, ordinary Angolans have no options than to devise ways of beating the drop, failure to which many will sink.
“Prices are going up every day, we really have to decide whether to keep going on or not with our business,” clothes trader Patricia Rosalina said.