Angola is in support of the deadline extension for oil production cuts set by the Organisation of Petroleum Exporting Countries (OPEC) and non-member countries by another nine months.
In December, major oil producers reached a deal to cut oil production and boost the market amid an oversupply of the commodity knocking down prices. The December deal has been extended to regain profitability in the volatile sector.
The aim of the cuts, whose extension is effective immediately until March 2020, is to take off 1.2 million barrels per day (bpd) off the market for the just-ended half of the year.
“Nine months (extension) is better,” Minister of Mineral Resources and Oil, Diamantino de Azevedo, told reporters at the 15th Meeting of the Joint Ministerial Monitoring Committee (JMMC) of OPEC in Vienna, Austria.
The extension is a face-saver for Angola.
It is projected that the sector will contract 2.6 per cent this year, which adds to the 9.2 per cent falls last year and 5.2 per cent in 2016 and 2017.
“Lower prices since mid-2014 have made expensive exploration in the country’s ultra-deep waters less attractive, leading international companies to reduce their operations and seek easier deals elsewhere,” the forecasting and advisory services stated.
Eight years have passed since Angola opened bids for new oil exploration, and it takes eight to ten years for new wells to go into production
Among other ramifications, have been the Kwanza currency losing its worth in record levels and inflation, projected at 15 per cent, peaking.
The Kwanza has been trading at 341.9 to the dollar and 389.5 to the Euro, representing declines of over 50 per cent since early 2018.
The introduction of a discordant value added tax (VAT) by President Joao Lourenco’s government, represents a desperate attempt to rid the country from an economic nightmare it has endured since his pledge of an economic miracle upon assuming power in 2017.
Initially set to kick-in at the beginning of July, the scheme has been shelved to October following outcry by businesses and economic experts wary of the system exacerbating the economy and piling on to the misery of the impoverished majority.
Oil is the economy’s mainstay with oil production and supporting activities contributing about 50 per cent of gross domestic product (GDP) and over 70 per cent of government revenue. It contributed to 90 per cent of Angola exports.
Ahead of the VAT coming into force, companies are already counting the financial impact following a series of requirements by the request of the General Tax Administration to suppliers to have their software certified and validated.
To comply with the new tax regime, companies must own or represent the marketed software.