World Report

Prudent financial policies have injected confidence into a renewed banking system

The Banco Nacional de Angola (BNA) has put in place the structures for macroeconomic stability.

ur goal is the enrichment of Angola. We have a population of which 65 percent is living below poverty levels, and we believe that the best way to fight this is not through financial handouts, but through improving living conditions. Poverty must be fought through sustainable development,” affirms Angola’s Vice-Minister of Finance Eduardo L. Severim de Morais. Certainly, throughout the past three years the Angolan government has struggled under intense international scrutiny to set in place the structures to support macroeconomic stability, including increasing transparency in government oil revenues, establishing proper legal frameworks to support private sector growth and attract investment, taming rampant inflation and stabilising a wildly oscillating exchange rate. Banking reform has also been part of the process, and prudent policies by the central bank, the Banco Nacional de Angola (BNA), have injected confidence in the banking system for the first time in decades.

“The financial sector has been greatly improved,” comments Assistant Minister to the Prime Minister Aguinaldo Jaime. He says liberalisation has created a new dynamism in the sector. “Until 1998 both the interest rate and the exchange rate were administratively set by the central bank, and there was no place for the financial sector to operate so, at that time, the formal financial sector was practically non-existent, and it was the active informal sector that better reflected market conditions.” Mr Jaime continues, “Of course, there was a need to take financial liberalisation measures because the gap between the informal financial system and the official one was huge, it was a purely speculative economy.” Although Angola's banking sector has since expanded to include 11 commercial banks, two of which are Portuguese-owned, Mr Jaime says the government is encouraging even greater growth and would like to see the entry of various international players in the sector.

Eduardo L. Severim de Morais Vice-Minister of Finance

“The best way to fight poverty is through improving living conditions”

Generoso Hermenegildo Gaspar de Almeida President of the BCI

“Angola’s banks will tend to specialise”

New legislation for the sector that is now awaiting approval will increase the scope of the banks’ financial activities and should considerably enhance the sector’s attraction for foreign investors. According to Vice-Minister de Morais, the law is aimed at promoting the emergence of new financial products on the market and creating a more competitive sector. “There is a need to increase competition between the banks so the sector widens,” he explains. “Most of the country’s banks are concentrated in the capital, Luanda, and the government would like to see them both expand their national reach, as well as increase their credit activities.” This is in line with the government’s intention to stimulate growth in the Angolan private sector through the financing of small- and medium-sized businesses, with a special emphasis on manufacturing. The drop in the country’s inflation rates (predicted to be 15 percent for 2005), and the corresponding effect this will have on interest rate decline, should increase the banking sector’s willingness to offer credit.

President of the Banco de Comércio e Indústria (BCI) Generoso Hermenegildo Gaspar de Almeida says that a likely scenario is the Angola’s banks will now gravitate towards different specialisations. He foresees the future of the sector as having a number of banks, each promoting distinct interests and evolving along with the diversification of the economy.

Angola’s capital markets will see a major boost in 2005. A Financial Markets Law has been passed, and the government has announced its intent to open the Angolan stock exchange, BVA, in the second half of this year. BVA, which the government is expecting to generate about £516 million in tax revenue per year and hoping will bring in new investment, will be located in Luanda and will open with an initial offering of ten companies and a capitalisation of £3.3 billion. Mr Castelhano Mauricio, from the BNA, says that the launch of the stock exchange forms part of the bank’s plan to create a comprehensive financial sector, and that it will work closely with BVA. He comments, “We are training people now for the stock exchange. Plus, we have already established the mechanisms of an open market to a certain extent. We already have a bond market since we have circulating papers that are regularly transacted in the market. The stock exchange just opens up the possibility of this type of activity continuing on a much larger scale.” Early this year, the BNA also began issuing central bank securities. These can be negotiated in the primary market with the participation of the issuing entity, banks and other financial institutions authorized by the BNA, and in the secondary market with the participation of financial institutions, corporations and individuals. Mr Castelhano Mauricio believes the new stock exchange will bring about what he sees as a necessary and healthy change in mentality for Angolan businesses, which are unused to the accountability and discipline required of publicly listed companies.