Industry Trend Analysis - Positive Long-Term Growth Despite Bleak Short-Term Outlook - JUNE 2017

BMI VIEW: Angola's mining industry will remain underdeveloped over 2017-2021 due to continued dependency on oil as prices rise and the country's fiscal deficit narrows. However, we believe that further diversification into minerals is likely in a 5-10 year timeframe as a decline in domestic oil production and therefore revenues deepens by 2021 and beyond, speeding up government plans to invest in mining projects as an alternative source of funding.

The Angolan government's plan to expand the country's mining sector in a bid to reshape the structure of the local economy will not come to fruition over 2017-2021. The government has earmarked the development of the mining sector beyond the current focus on diamond production, as a central pillar of its vision to reduce dependency on oil and change the domestic economic base within 15 years. As part of this vision the ruling MPLA party has drafted a Strategic Plan for the Mining Sector in which 23 new diamond, gold, phosphate, iron ore, copper and natural stone exploration projects are due to be developed in the coming years. However, rising oil prices and an improving fiscal position expected during our forecast period over 2017-2021 will discourage the government's political will to achieve these short-term goals. That said we believe that a weakening oil project pipeline will weigh on domestic production and revenues beyond 2021, leading to an eventual fulfilment of mining investment commitments that will tap into the country's vast deposits of iron ore, gold, copper and natural stones in the long-term. We forecast Angola's mining industry to post positive average growth of 6.7% over 2017-2021 as the country's diamond production levels are boosted by new projects and rising global demand.

Improving Budget To Discourage Diversification

Faster Growth Ahead
Angola - Mining Industry Value and Growth
e/f = BMI estimate/forecast. Source: National Sources/BMI

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