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Angola’s stock phrase

November 1, 2010

Amid the flurry of changes in African economies and markets over the last 10 years, one of the most enduring constants has been the six-monthly assurance from Angola’s secrecy-obsessed leaders that a stock market will open next year.
 

The mantra received an alternative twist on Monday when oil minister Jose Botelho de Vasconcelos told an energy conference in New Delhi that Africa’s most tantalising bourse would now have to wait until inflation hit single digits.

The pronouncement caused more than the usual head-scratching among investors who have seen frustration turn to despair as what should be one of the continent’s most exciting propositions has failed repeatedly to get on to the grid, let alone over the starting line.

To be fair to the minister, he may simply be reproducing the stock ‘open next year’-phrase with a bit of macroeconomic jargon on top — Angola’s latest budget talked about annual inflation easing to 9 percent in 2011 from 13.99 percent in August.

But the remark does seem to make a causal link between inflation and stock market operations that has so far passed most economists by, and casts doubt on the thinking inside the policy cabal that sits around President Jose Eduardo dos Santos, now well into his fourth decade in office.

 ”How long is a piece of string?” said one economist who covers frontier African markets. “I can’t think of a single country in the world where single-digit inflation was one of the precursors to a viable stock exchange.”

Nor would this be the first time Luanda has failed to live up to its own hype, or muffed its lines when delivering an important message to the external investment community. A year ago, the government was crowing about a $4 billion eurobond that would be issued before the end of the year. Twelve months down the line and the bond is no closer to coming to market, even in a watered down form.

And when Dos Santos, known as “the boss” to Angola’s 16 million people, fessed up to $6.8 billion in arrears to foreign building firms in July, he had to be corrected the next day by the finance ministry, which said the sum was in fact $9 billion. All of which has left investors wondering whether the hype about the potential of the continent’s second-biggest oil producer is all it’s cracked up to be.

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