Building a new Angola from steel

Angola, located in the southern central part of Africa, is Africa’s third largest oil producer. In 2007, the country became the 12th member of the Organization of Petroleum Exporting Countries. From the country’s GDP of US $ 112.8 Billion, 40% is provided by the Oil Industry.

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Image courtesy of David Stanley at Flickr.com

Despite the country being entirely driven by oil production, it has other significant industries which contribute to the national economy.

By having a varied climate, both tropical and semitropical crops can be grown. Angola’s most fruitful crops include coffee, bananas, timber, tobacco and sunflowers. This sector accounts for about 8.8% of the GDP and receives less than 1% of public expenditures.

1650 kms account for Angola’s coastline which is considered one of the richest fishing grounds in the continent. The annual catch is usually around 30,000 tons of fish a year. The country has set up the Angolan Support Fund for Fisheries Development for the development of the industry with the help of the World Bank.

Large and powerful rivers run through Angola, providing it with a huge hydroelectric potential. Currently, there is a project to build a 520 MW Capanda Hydroelectric dam on the Kwanza River which will double the country’s generating capacity and provide enough power to meet the country’s need for the next 4 decades. If successful, Angola could become a regional exporter of hydroelectric energy when it generates more electricity than it requires.

Regarding the manufacturing sector, heavy industry cement and steel tubes take the lead with 15% of the total manufacturing output. However, there are great amounts of capital being injected into technology and training in the food processing industry in the hopes to bring back the production of sugar, wheat flour, cooking oil, textiles, soaps, paint, plastic and glues.

There is great potential for the exploitation of base metals and gold for the Mining sector (oil not included). The sector contributes to 12% of the country’s GDP of which also includes diamonds as responsible for over 98% of the earnings made by the government. Angola is considered an extremely attractive target for the discovery and development of world class ore deposits.

However, despite its many industries, Angola has decided to bet on the steel industry for the following years. The bet was sealed last year when the largest steel mill in West and Central Africa was officially opened. Luanda–based K2L Capital launched the ADA Steel Factory in the forgotten town of Barra De Dande in the Bengo province. Angola expects that the $300m investment will help its economic and infrastructure development.

 

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Image courtesy of Michal Janček at Flickr.com

The company, set up in a vacant area, has already brought water and electricity infrastructure to the city and not to mention the creation of 600 jobs, which in turn require the construction of health facilities and training centers.

It is also estimated that a further 3,000 indirect jobs will be created as a result of this communal expansion, which will have an immense impact on the local community. Thus bringing development to Barra de Dande and breathing life into Bengo.

What’s more interesting is that the company plans to use war scrap from armament to turn into rebar steel. Thirteen years after the peace pact, this practice is mainly intended as a symbol of the country’s long-term peace.

“We must use the resources to create value-added products and be able to export. The main focus is to be able to supply (Angola’s) own market. This mill has come at the right time,” says Georges Choucair, chairman and chief executive of K2L Capital, owner of ADA Steel.

There is another Angolan steel company that will open soon to produce pig iron. Companhia Siderúrgica do Cuchi (CSC) will open in Kuando Kubango province in May, 2016.  Already, much of the equipment has arrived at the port of Lobito and will be taken to the city of Cuchi, 90 kilometers south of Menongue. The factory is set to transform iron ore and produce 96,000 tons of pig iron a year.

The plant is almost completely built and the construction of workshops, a health center, cafeteria, dormitories and residential area is in progress.

The governor of the province said that “The iron will be transported by the Moçâmedes Railroad to the port of Namibe, from where it will be exported to different parts of the world.” He also added that “the second phase of the Cuchi steel project provides for the installation of two large furnaces that will triple annual production to 420,000 tons of pig iron, installing larger crushing plants and a magnetic concentration plant to make better use of the ore.”

Diversifying the country’s oil-dependent economy will need serious structural changes and support to the growth of the agriculture, fish and manufacturing industry over a long period of time. Yet, increasing Angola’s steel production capacity could support the country while it recovers from war and help support its construction projects; it might also reduce the need for imports, thus reducing the pressure on government finance and control the kwanza exchange rate.

In turn, Angola will have to wait and gain more experience before playing with the big boys of the steel industry in the foreign market such as Egypt and South Africa. The country’s success in steel will also depend on the volatility and saturation of the global market, as prices of scrap metal have plunged in the last year according to analysts.

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