ANGOLA’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE accelerated program of infrastructure reconstruction and hence is spending a massive $2.9 billion a year in that sector alone. As a result, Angola’s capital spending on infrastructure is heavily skewed toward transport, which accounts for some 70 percent of the total. In contrast to many of its peers, and reflecting buoyant petroleum revenues, Angola’s infrastructure investment is predominantly funded by domestic fiscal resources. China is by far the most significant source of external finance, with only modest private capital inflows and negligible overseas direct investment (ODA).

Remarkably, some $1.3 billion is being lost to inefficiencies of various kinds, equivalent to almost 5 percent of GDP. By far the largest culprit is the power sector, which hemorrhages $700 million annually, primarily as a result of massive underpricing ($475 million) as well as some other factors. The underexecution of capital budgets is also exceptionally high in Angola, at $573 million annually, and primarily reflects difficulties in the implementation of the country’s huge road investment program (accounting for $401 million of this total). By taking suitable policy measures, Angola could recapture these lost resources for investment in its infrastructure.

Given the urgent pressure to reconstruct Angola’s infrastructure platforms, there is some evidence that decisions have not always been optimal. For example, the expansion of generation capacity has not been matched by reinforcements in transmission and distribution that would allow the power to flow through to end users. And the scale of Angola’s road investment program seems to have outstripped the implementation capacity of the key sector institutions. There is also evidence that the water and sanitation sector may not yet have received as much attention as it deserves.

After taking sectoral allocations and inefficiencies into account, a modest funding gap of $115 million per year remains, almost entirely relating to the achievement of the Millennium Development Goals (MDGs) for the water and sanitation sector. Nevertheless, this funding gap could be largely eliminated by focusing service expansion on lower cost water and sanitation options. Furthermore, with such a high spending envelope overall, there looks to be some scope for the reallocation of resources toward water and sanitation.

While Angola’s infrastructure reconstruction needs are large in absolute terms, they look manageable relative to the size of the country’s fast-growing economy. Moreover, Angola has amply demonstrated its commitment to channeling significant volumes of petroleum rents toward infrastructure development. Consequently, Angola is one of a very few African countries that does not face a significant infrastructure funding gap, as long as the country is able to make headway in reducing its massive efficiency gap. In the medium term, Angola could potentially attract much more private finance for infrastructure than it has to date, thereby helping to liberate public funds for other pressing social needs.

# The continental perspective

The Africa Infrastructure Country Diagnostic (AICD) has gathered and analyzed extensive data on infrastructure in more than 40 Sub-Saharan countries, including Angola. The results have been presented in reports covering different areas of infrastructure—information and communication technology (ICT), irrigation, power, transport, water and sanitation—and different policy areas, including investment needs, fiscal costs, and sector performance.

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