“We first put Angola on a positive outlook way back in May 2012. This was at a time here the budget was in surplus, enabling the government to add to deposits. The current account was also in surplus, enabling the authorities to add to the reserves, and the prospects for Angola’s oil sector appeared very bright,” Carmen Altenkirch, director of the sovereign group ratings at Fitch, told CNBC Africa.
“What has changed over the past two years is firstly, the outlook for the oil sector appears slightly less bright now than what it did in 2012. It simply reflects the technical challenges facing your oil sector in Angola, the cost and the difficulty particularly in extracting oil.”
Global ratings agency Fitch Ratings recently revised the outlook on Angola’s long-term foreign and local currency issuer default rating to stable from positive.
Altenkirch added that the ratings change was further spurred on by Angola’s budget, which slipped from a surplus it held since 2010, and recorded a deficit in 2013 of 1.9 per cent.
The deficit, according to Altenkirch, was largely as a result of falling oil revenue, which makes up roughly 75 per cent of Angola’s total government revenue.
“The third factor is that we didn’t see as much progress on reforming the business sector as perhaps we at Fitch would have liked to have been,” Altenkirch explained.
Angola’s government has however taken to investing in infrastructure as a means of improving investor prospects as well as local development.
“It’s always a difficult challenge that perhaps we face when rating countries, and in the case of Angola, while you have seen an increase in fixed investment spending, the main reason why public finances have slipped into a deficit is because of declining oil revenue, rather than due to a significant increase in capital expenditure,” said Altenkirch.
Angola also slipped from 172nd place in 2013 to 179 on the World Bank’s ease of doing business report in 2014, but the country’s growth prospects still remain strong.
“In terms of the World Bank’s doing business survey, interestingly Angola even ranks below countries like Zimbabwe. That being said, the government of Angola is in the process of addressing some of the concerns relating to their business environment,” said Altenkirch.
“[This is through] a programme which looks at making it easier for small businesses to gain access to credit, it’s cutting the time it takes to register a business as well as the amount of paper than needs to be filed. Hopefully over the coming years we will start to see an improvement in Angola’s doing business score.”