* Tariff hikes are aimed at boosting local industry, farming
* Critics fear will fuel inflation, widen rich-poor divide
* Luanda offers contrasts of conspicuous wealth and poverty
* Economists say climate for business still needs to improve
By Shrikesh Laxmidas
LUANDA, April 23 In Luanda's Jumbo supermarket,
a half-litre tub of imported vanilla ice-cream used to cost $25,
testament to the Angolan capital's rank as one of the world's
most expensive cities.
With new import tariffs imposed last month, that price has
jumped to $31, enough to make even wealthy locals and
expatriates pause and putting it even further beyond the reach
of millions of poor Angolans struggling to feed their families.
Luanda already ranks as the world's most expensive city for
expats, with the presence of thousands of foreign workers, many
involved in the oil industry, helping to drive up prices.
Sub-Saharan Africa's second largest oil producer, still
rebuilding after emerged in 2002 from a 27-year civil war,
imports three quarters of the goods it consumes.
The government of President Jose Eduardo dos Santos, who has
ruled since 1979, imposed higher import tariffs last month on
hundreds of items, from garlic to cars. The stated aim is to try
to diversify the heavily oil-dependent economy and nurture
farming and industry, sectors which have remained weak.
But this is expected to hike prices for consumers, hitting
the less privileged sectors of society especially hard. The
Angolan president, one of Africa's longest-ruling leaders, has
been accused by critics of widening a dangerous gap between the
rich and the poor that risks causing social unrest.
"Things were already hard and this will make it even
tougher," said Jessy Andrade, 32, a mother of four shopping at
Jumbo. She pointed to the meagre contents of her bag before
going back to her occupation as a street-corner currency trader.
Some staples - flour, beans, rice, palm oil, sugar, powdered
milk and soap - will be exempt from the tariffs.
But not other vegetables and fruit, imported from Europe or
neighbours such as Namibia, which will carry a new top rate of
50 percent duty. The government believes these can be produced
at home and the tariff barrier is designed to encourage this.
Oil output has soared since 2002, but the southwest African
nation's agriculture and industry are relatively undeveloped.
They make up 17 percent of gross domestic product, compared to
oil's 41 percent, and the government wants to insulate them from
"The tariff increases will create inflation, at least in the
short term, and affect consumption, especially for those with
low incomes," said Salim Valimamade, an economist at Luanda's
Angolan officials, however, play down the inflation risk.
"We can think about the possibility of a rise in prices of
the products for which duties were increased, but generalised
inflation, which affects the essential goods which are exempt,
we cannot see," said Garcia Afonso, head of trade and commerce
at Angola's Customs Service.
Inflation has fallen over the last decade from 70 percent to
7.7 percent at the end of last year. Official data showed
month-on-month inflation rose only slightly in March, but
shopkeepers say the import tariff hikes have forced them to push
up prices by up to 20 percent.
CUCA BEER AND CUTTLEFISH
Dos Santos estimated last year that 36 percent of Angola's
18 million people live in poverty, but dismissed the risk of
income inequalities causing social upheaval, saying most people
supported the government's policies.
U.N. High Commissioner for Human Rights Navi Pillay had a
different view, urging Dos Santos to reduce the inequality gap
and warning about the high cost of living.
Nowhere is that gap more visible than in Luanda's Ilha do
Cabo, a peninsula that separates Luanda Bay from the Atlantic.
Ritzy beach bars and luxury condominiums that cater for
expats and rich Angolans are mixed in humbler eateries where
poorer Luandans can enjoy a cold Cuca beer and grilled fish.
Sandra Oliveira is one of a dozen women grilling cuttlefish
on small barbecues in a lot they have occupied for decades.
Their clients sit on shabby plastic chairs placed directly on
the dusty ground.
"I can sell a beer for $1 and a plate of cuttlefish for $10,
but the margins are tight, and pushing our costs up will end up
pushing us out of here and take away our livelihoods," she said.
"Which business do you think the higher price will hit, my
little barbecue or the expensive places?"
On the Atlantic side of the peninsula, upmarket restaurants
with names like Caribe, Coconuts and Chill Out attract a
wealthier clientele. Here, a Cuca can easily cost $4 and a meal
for less than $50 is deemed a bargain.
"This is already a madly expensive city for everyone. A
weekly trip to the supermarket for two already takes $500," said
a British oil worker outside one of the Ilha restaurants.
STREET HAWKERS AND SUPERSTORES
While authorities in Luanda have cracked down on informal
traders, an oil-driven construction bonanza in the city has seen
modern European-style superstores, like Jumbo and the Kero
chain, springing up along suburban roads.
"I only come to these shops when I cannot find basic items
at the informal markets," money changer Andrade said, adding she
earns about $15 on "good days" which she says are becoming rare.
When the government knocked down the historic Kinaxixi
market in 2008 and then two years later did the same to Roque
Santeiro, Africa's biggest open-air market, this put thousands
of vendors onto the streets.
Since then it has tried to corral them up into newly built
markets, often using rough tactics and confiscation of goods,
but most say the new locations are too far away for customers.
Meanwhile, the new supermarkets, with their huge cooled
areas, spacious car parks and conspicuous security guards, are
drawing expatriates and Angolans lucky enough to work in oil,
banking or construction.
The average national salary in 2010, the latest year for
which official data is available, was around $260 per month. In
the finance sector the average was 10 times higher and in the
oil business over 20 times higher, or around $5400.
"Portuguese, Chinese, South Africans, they shop here but
more and more Angolans too," said a worker at a Kero shop,
asking not to be named. "You can see from their cars and clothes
that they are the ones doing well."
At the other end of the scale, the Pombinha market in the
Sambizanga slum near central Luanda is a maze of muddy alleys
crammed with women selling goods. Most products here are also
imported, the only local ones visible are baskets and bananas.
"Prices are only just lower here than in the supermarkets,
sometimes even higher since we buy from middlemen while the big
shops buy in bulk from abroad," said vendor Esperanca Gil.
"But people come here as they don't have money to shop
monthly or weekly, so they have to buy day-by-day."
INCENTIVE OR PROTECTION?
Customs officer Garcia Afonso said the new tariff table
actually increased the number of goods with zero or low duties
from the one in place since 2007.
He said the tariffs should not be seen as protectionism, but
as an incentive for local firms to be able to compete when
Angola joins the Southern African Development Community's free
trade area in 2017, an accession that has already been delayed.
But economist Valimamade said many challenges remain for
Angola to deliver on its farming and industrial potential.
"The business environment has to improve... It is being done
but the government itself says efficiency on big projects isn't
Critics say a small group of business owners with ties to
the government may benefit most from the tariff hikes
"The protection must have a set timeframe, or we aren't
protecting those who need it, only creating rents to line the
pockets of a minority of so-called entrepreneurs at the cost of
the majority," economist Carlos Rosado de Carvalho said in an
editorial in business paper Expansao.
(Reporting by Shrikesh Laxmidas; Editing by Pascal Fletcher and