Cement Law Benefits a Few at Angolas Expense
There is a question so puzzling that is leaving many with open mouths. Why would a country rapidly trying to construct its infrastructure (which needs cement) suddenly ban the importation of the same material? The same country is not able to manufacture the product in the necessary quantities.
This is a question that has been prompted by the recent investigation by Rafael Marques de Morais
about the wheeling and dealing in the setting up of the cement manufacturer FCKS (Fábrica de Cimento do Kwanza Sul).
A recent investigation by Rafael Marques de Morais, about the wheeling and dealing in the setting up the cement manufacturer FCKS (Fábrica de Cimento do Kwanza Sul), has prompted the abovementioned question.
Every year, Angola needs about 7 million tonnes of cement, but the local production does not meet half of this amount. Therefore, many wondered about the rationale behind the Executive Decree no 15/14, which expressly bans the import of cement, save in special cases with the consent of the authorities.
The decree has three obvious effects. First, it will hold back economic development because it will reduce the supply of cement on the market. Second, it will enrich those in Angola who will retain the monopoly for the production of cement. Third, it will increase the usual conflict of interests and corruption in the granting of import licenses.
If the situation is so dire, why did the authorities decide to take such a measure?
There is only one answer: increasing the wealth of the oligarchs and allowing them to control yet another strategic sector of the economy.
The cement industry is a key one, which, due to the cost of material and factories, puts serious limits on who can enter it. Only very wealthy investors are able to get into this sector. If these investors have to compete with foreign producers, then the product will have to be sold according to the proper market value. On the other hand, if these investors do not have any competition, then they will charge whatever will suit them – inevitably, a higher price than the world market prices. This, in turn, leads to inefficient companies since the cartel will shield them from any competition.
A restricted market for cement in Angola will only benefit the local oligarchs who have invested in cement factories in the country. We are dealing with an economic crime since the individuals in question will be asking for higher prices while running inefficient factories.
It could be argued that we are dealing with a political initiative to promote the “Angolanization” of strategic industries in the country. Yet this move would have brought benefits only if these oligarchs had the business savvy and social conscience to allow them to distribute the returns to the rest of society. This kind of socially-minded culture does not yet exist in Angola.
The profits the wealthy and powerful make are have so far been invested abroad. This is a waste for a country with so many opportunities like Angola, and would only have made economic sense if the return on the investments were higher than in Angola, which is not the case.
In this setup, any investment abroad by Angolan entities is simply a flight of capital.
In all, this story about the dealings around cement in Angola is a serious crime. An initiative aimed at benefiting a handful of friends is undermining the whole national economy.