Angola’s sovereign wealth fund (SWF) has launched $1.6bn African infrastructure and hotel funds to help diversify its portfolio as the slide in crude prices threatens the country’s oil-dependent economy.
The $5bn SWF, which was set up two years ago but only began to deploy its cash this year, is allocating $1.1bn to a fund that will invest in energy, transport and other infrastructure projects across sub-Saharan Africa.
A further $500m will go to a fund that will acquire hotels and backs greenfield developments. This fund will seek international groups to manage and operate its hotels.
Jose Filomeno Dos Santos, chairman of the SWF and the son of Angola’s president, José Eduardo dos Santos, told the Financial Times that the slide in oil prices was not a “reason to panic.”
But he said it reiterated Angola’s need to reduce its dependence on oil.
“We want to really diversify the portfolio, especially because of what is happening with the oil price,” he said. “Typically we will be looking at public private partnerships, concessions by states and also industrial investments, such as factories or assembly plants and so forth (with the infrastructure fund).”
Angola’s decision to set up the SWF was part of a trend of African oil producers establishing funds to preserve petrodollars and help diversify their economies as they enjoyed a period when crude was well over $100 a barrel.
But the 40 percent fall in oil prices since June threatens to hit African crude exporters hard.
Angola is the continent’s second-largest oil producer behind Nigeria and petrodollars account for about 95 percent of the southern African nation’s export revenues and 75 percent of government revenues.
In recent years, Angola has been one of the continent’s fastest growing economies with the government investing heavily in infrastructure as it has sought to recover from a brutal civil war that ended in 2002.
But Capital Economics warned in a note this week that weak oil prices threatened to push the country into a recession next year. It estimated that Angola would require an oil price of about $120pb to balance its budget.
Dos Santos said the government would change its strategy in reaction to oil prices but he said the country had alternative sources of funding and could look to tap capital markets.
“We don’t think this oil reduction is a reason to panic,” he said. “We see it more as a reinforcement of the need to invest in sectors others than oil and a reinforcement of the strategy of the fund.”
The SWF began deploying in fixed income assets earlier this year and has gradually diversified into listed equities, primarily in the US and Europe. About 62 percent of its assets are in fixed income, with 12 per cent in “variable income,” including equities.
Quantum Global, a Swiss-based investment management group, is the fund’s sole adviser. But dos Santos said the SWF would look at other advisers in the future.
Source: Andrew England at ft.com