BMI View: We forecast Angola's mining sector to grow to USD7.7bn in value in 2019 , expanding at an average rate of 6.1% a year over the 2015-2019 period. The mainstay of the industry will continue to be diamond mining with continued investment, both domestic and international, in this segment helping to support steady growth in output over our forecast period. While the Angolan government is increasingly turning its attention towards mining as it looks to diversify the economy away from oil, expansion will continue to be constrained by a lack of supportive infrastructure as well as high levels of bureaucracy.
Angola's mining landscape is relatively limited with total output of USD6.1bn forecast for 2015, comprising about 4.6% of GDP. That said, the country is established as one of the most prominent diamond producers in the Sub-Saharan African region, coming third to Botswana and DRC in terms of total output and clearly ahead of South Africa. We expect Angola to retain this position over the next few years as, after a period of stagnation in production levels, the diamond mining sector begins to attract growing levels of investment. State-owned miner Endiama will be the main driver of growth in diamond mining activity as the Angolan government begins an ambitious growth strategy aimed at boosting mining revenues in order to offset falling oil export revenues and support the gradual diversification of the Angolan economy away from hydrocarbons. Endiama has a number of development projects under way and is reported to be in the process of promoting 108 potential diamond mining concessions across the Lunda Norte, Lunda Sul, Malanje and Kwanza Sul provinces as well as the central plateau region.
|Mining Still A Minnow Next To Oil|
|Angola - Sectors By Value (USDbn)|
Alongside this, Luanda has become increasingly receptive to overseas entrants in diamond mining and other areas of minerals and metals production as it seeks to boost revenues. Australia-based Lucapa Diamond will become one of the main drivers of production growth going forward having begun operations at the Lulo alluvial concession in January 2015 in a joint venture partnership with Endiama. Besides diamond mining, there is also growing interest in exploiting the country's considerable base metals deposits, which include copper and iron ore. A number of overseas players have expressed interest in developing these sectors, though plans have stalled in recent months as commodities prices soften globally.
We expect the mining sector to expand at a steady pace through to 2019, reaching USD7.7bn in terms of overall output in 2019. Nevertheless, mining will remain far from a core industry sector in terms of the wider Angolan economy, barely contributing 4.0% of GDP and less than 10% of the country's oil revenues in 2019. For the medium term at least, the expansion of the industry will find itself constrained by a number of factors, ranging from a lack of supportive infrastructure and a challenging investment climate typified by high levels of corruption and red tape. As such, it is likely to be some time before the country begins to attract some of the larger global diamond miners, including De Beers, a company which, tellingly, already operates in neighbouring Botswana, Namibia and South Africa.