Abnormally high rainfall in Luanda negatively affects food markets and trade

• The El Niño event has driven rainfall deficits in the southeast, while rainfall totals are broadly average to above average in the rest of the country. However, abnormally heavy rains in Luanda in December have disrupted traders’ access to foodstuff from warehouses, and the reduced access to this supply is negatively affecting the amount of food available in markets not only in the capital but also in rural areas supplied from the capital. However, it is expected that traders will be able to recover in the medium term.
• National monthly food price inflation continued to rise significantly, reaching 2.6 percent in November. The economy is likely to cool even further as the central bank continues to raise interest rates to combat persistent inflation. Significant further cuts to fuel subsidies are also planned, and – subsequently – fuel prices are expected to continue rising. However, Angola’s sudden departure from OPEC may allow scope for increased oil production, potentially boosting government revenue and overall economic growth.
• As the lean season persists, most poor households are running out of food stocks given that most did not produce enough during the nacas season. Many poor households in the south are expected to be in Crisis (IPC Phase 3) through April. Starting in May, outcomes are broadly expected to improve to Stressed (IPC Phase 2) in both rural and urban areas with the harvest and seasonally reduced food prices, though some poor households will remain in Crisis (IPC Phase 3).

Between December and May, most poor rural households meet their basic food and non-food needs through a combination of market purchases (until March, at least) and some own crop production (primarily in areas with year-round cassava). Especially in the south, poor rural households are reliant on maize, sorghum, millet, and livestock products, but access to these food sources are lower than normal as they have been negatively affected by late rains, limited inputs, and rising food prices. Currently, food access and availability are at their seasonal lowest, amid the lean season, and this will remain the case until green harvests start in late January/early February and the main harvests starts in March. Meanwhile, poor urban households are relying on income from a range of informal activities to make market food purchases. Urban households are facing inflation that is exacerbating the usual holiday season price increases, as well as rainy season health expenditures, and cost of educational materials. 

Recent abnormally heavy rains have disrupted the Luanda logistic centers of the food trade value chain. From November 10 to December 20, Luanda Province received around 168 mm of rainfall, 100 mm of which was concentrated in a few sporadic days. The total of 168 mm was roughly 55 percent more than the long-term average and twice the amount received over the same period last year. News outlets reported dozens of people dying due to heavy flooding, with over 10,000 people affected across most neighborhoods, particularly Viana, the outlying industrial and warehouse zone. The heavy rains inundated roads and warehouses located in the peri-urban areas, making it difficult for traders to reach them. Most traders acquire foodstuff in bulk from warehouses in Luanda to retail in center and the southern provinces. The reduced access to this supply is negatively affecting the amount of food available in markets not only in the capital but also in rural areas supplied from Luanda, which comes at a time when there is seasonally high demand for market purchase. This comes on top of already increasing transport costs, which are occurring both due to typical access constraints during the rainy season and amid overall inflation. Consequently some wider national effects on prices of basic food stuffs are expected. However, flooding appears to have been more disruptive than destructive, so after some short-term effects, it is expected that traders will be able to recover over the medium and long term, unless there is further significant flooding.

In addition, urban and rural poor households relying on food purchases during the lean season are also affected by the continued increase in the monthly food price inflation, particularly in Luanda where it reached 3.5 percent in November. The other provinces registered between 1.5 percent and 2.1 percent monthly food price inflation in November. Officially, the exchange rate has remained stable for the last three months, at around 828 AOA/USD, but the spread between the official and unofficial exchange rate has been increasing; the unofficial exchange rate was around 1,000 AOA/USD as of mid-December. The increasing unofficial exchange rate is one of the reasons traders face difficulty obtaining forex for imports, which – alongside the government’s import substitution policy – is contributing to higher food prices. Headline inflation has increased from 16.58 percent in October to 18.19 in November, and by the end of the year, it is expected by several independent economic analysts to reach 20 percent. However, unofficial estimates suggest that headline inflation is already over 30 percent and climbing.

Over the projection period, urban informal livelihood opportunities that poor households rely on for income are expected to remain limited or decline slightly. This is because the government is expected to continue using tight fiscal policy to control the unexpectedly high inflation, particularly given its commitment to multilateral lenders to remove remaining fuel subsidies by 2025. Cuts in spending on fuel subsidies are tied to increased spending on the kwenda cash-transfer program in order to mitigate the impacts of the fuel subsidy removal on poor households. There may be some scope for increased government revenue (including spending on social protection) and national economic growth due to Angola officially resolving on December 21 to leave OPEC, effective January 1, 2024. According to the state newspaper, the government prefers to be able to produce more oil (1.18 mbd) than the limit of 1.11 mbd set by OPEC. The 2024 state budget is, however, based on a more conservative estimate of 1.06 mbd, while at the same time increasing spending on safety net programs. The Kwenda cash-transfer program planned target has been increased from 1.6 to 2.3 million beneficiaries.

Heavy late rains in the southwest helped make up for early-season shortfalls, improving vegetation, but the effects of late planting and limited inputs will likely still negatively affect the green and main harvest. In rural areas where maize, millet, sorghum, cassava, and livestock are the main components of livelihoods, many poor households did not plant due to lack of sufficient inputs. Among those who did, the abnormally distributed rainfall is negatively affecting progress of the season. Delayed rains arrived heavy in late November and early December improved pasture and some cropping conditions in the southwest. Should the rains continue normally, as is currently forecast for the southwest, relatively positive outcomes for crops and pasture are expected.

However, cumulative rainfall and associated vegetation still remain below average in the southeastern province of Cuando Cubango, with a total of 148 mm as of December 20, 75 percent of the mean. Cuando Cubango province spans three livelihood zones reliant on maize, millet, sorghum, and livestock, as well as some cassava in the more sparsely populated far eastern sandy areas. The municipalities of Menongue, Calai, Cuchi, Cuito Cuanavale have rainfall below the 18-year mean, while several other municipalities are also below the low rainfall levels of last year (Mavinga, Rivungo, Dirico). Forecast suggest continued dryness in the southeast during the projection period, not allowing for replanting and ultimately driving low crop production, as well as negatively affecting livestock conditions through limited pasture regeneration.  

Overall, as the lean season persists, many poor households are running out of food stocks given that most did not produce enough during the nacas season to help them both smooth consumption during this period and have seeds to plant for the main season. The slow start of the rainy season coupled with the low availability of seeds restricted most poor households from planting at normal levels for the upcoming season as well. It’s expected there has been a reduction of the area planted for the 2023/24 main season in the south, and this has affected negatively the demand for casual farm labor, which is a key income source for poor households during this period. Prior to the recent rains, there were declines in grazing pastures, livestock health, and cattle prices. Based on the forecast for average rainfall in the southwest, crop production is likely to improve improving households access to staple through August. Improvements in pasture conditions and water sources will also likely improve livestock conditions and prices. Projected poor rainfall in the southeastern parts of the country will result in low crop production and most poor households will not be able to meet their food needs even during the harvesting period. During the projection period that covers the lean season through April, many poor households in the south are expected to be in Crisis (IPC Phase 3). Starting in May, outcomes are expected to improve to Stressed (IPC Phase 2) in rural areas, though some households in are still expected to be in Crisis (IPC Phase 3), with highest concern for the southeast. Crisis (IPC Phase 3) outcomes are also expected in urban areas among many poor households, as food prices are high and continuously rising. Outcomes will similarly improve in urban areas in May, when the main season harvest across the country drives seasonally lower food prices.