London investment firm Gemcorp Capital LLP is providing finance to import food, medicines and other necessities to Angola, as Africa’s biggest oil producing country feels the wrath of falling oil prices.
Goldman Sachs Group Inc. is arranging a syndicate loan worth up to $1 billion, which is partly guaranteed by the World Bank, whilst Gemcorp separately provides dollar financing to the country. Gemcorp could reach hundreds of millions in size depending on the governments need to import specific goods.
A year ago the World Bank made a commitment to support Angola in reforming and expanding its economy with a $450 million loan and $200 million guarantee. Goldman Sachs will structure the syndicate loan around this commitment, encompassing the $200 million guarantee for a loan of roughly $500-600 million.
Angola’s government has seen revenues and economic growth drop by 50%, following a two year oil slump; nearly all exports earnings and 80% of government revenue comes from crude sales.
As crude prices halved the government enforced spending cuts and a dollar shortage in the country. One U.S dollar on the black market costs 600 Angolan kwanza, compared to the official rate of 166. The government needs to adjust its currency and contain an inflation rate of 29%, an International Monetary Fund (IMF) official said last week.
President José Eduardo dos Santos created a close relationship with Beijing, trading nearly a million barrels of crude per day in exchange for Chinese built railroads, apartments and highways across Angola.
Borrowings from Chinese banks have doubled the government’s external debt between 2010 and 2014 to $19.5 billion, according Angola’s first Eurobond last year, reported The Wall Street Journal.
European banks and private lenders, including Gemcorp who directly lend to emerging markets and companies, have also provided loans to the country.
Whilst Angola awaits a potential $4.5billion from the IMF, the fresh funds represent a renewed confidence amongst investors, that Angola can overcome the fall in oil prices and the effect that they have had on the country.