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Angola is turning a page in its history and is now on a clear path towards affirming itself not only as a regional economic powerhouse but has the ambition of putting itself at the same level of important European, American and Asian powers.
The big secret of Angola’s economic boom has been a close connection between foreign and national investors
Ministry of Foreign Affairs
ANGOLA
Swiftly bouncing back from the financial crisis Never had Angola witnessed in such a short period of time the visit of such significant actors and policymakers of the world stage. 2009 saw the arrival in Luanda of President Dmitry Medvedev in June (the first visit from a Russian head of state) as well as of the United States’ Secretary of State Hillary Clinton and more recently, in February, the French President Nicolas Sarkozy. Angola hosted the 155th Meeting of the Opec Conference, the Organization of the Petroleum Exporting Countries, in December 2009. These high profile visits go a long way to show the atmosphere and excitement surrounding the prospects of this Southern African economic powerhouse. At the political and social level the country has boasted marked stability since 2002 as well as an increasingly noticeable concern by the government towards setting up the foundation of a sustainable economy.
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A remarkable post-war boom Angola gained its independence on the 11th of November 1975. Soon after its independence the civil war broke out between the MPLA and UNITA. In September 1979, Agostinho Neto, “the father of the independence”, passed away and José Eduardo dos Santos succeeded him at the helm of the presidency. It was only in 1992 that the first multiparty elections won by the MPLA took place. After the elections however the civil war re-started by initiative of UNITA which contested the elections. Another failed attempt to negotiate for peace took place in 1994 with the Lusaka accords, the civil war re-ignited in 1998. It was only in 2002, with the death of the head of UNITA, Jonas Savimbi, that UNITA and the government signed on the 4th of April a peace deal which put the civil war to an end. Today the economic and social context is different.
Local business has been consistently protected by government while its economic setting remains highly attractive for foreign investors. Rui Pinto de Andrade, MPLA’s director for information and propaganda, recently described how Angola, in six years of peace, built 2400 km of roads, 230 bridges, 223 health institutions, 30 000 schoolrooms and trained at least 90000 teachers. Improvements at the economic level are fruit of an effort towards greater competitiveness, transparency and opening of the Angolan economy, Foreign Direct Investment and efforts towards the diversification of the economy beyond the oil sector, budgetary discipline when controlling government expenses and finally, overall improvements in general productivity across economic sectors.
In 2007 Angola saw its GDP growth rate reach the staggering figure of 20,9% A value well above the average of subSaharan Africa (7,6%). Almost fifty nine per cent of its GDP however remains dependent on its extractive industries, namely oil. The primary sector still only represents 9,8% of the GDP and manufacturing industry still only represents 5% of the GDP, with commerce at 13,7% according to the National Institute for Statistics of the Ministry of Planning. FDI has recently been slightly dropping but nevertheless, Angola remains as the second largest beneficiary of FDI in SADC, just behind South Africa.
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The angolan investment agency Companies interested to invest in Angola should do so through the ANIP, Angola’s investment agency. Once their project is approved, companies will have issued a Private Investment Registration Certificate which will provide them with full rights to invest in the country according to Angolan law. This document is essential for all investments in the country as well as related rights, obligations, benefits as well as related licenses, registration and legal rights in the case of dispute settlements. Angola’s private investment law does not allow for the nationalization of private assets so investors are assured to have their rights and properties protected. To be successful when exporting to Angola one must go take into account the following checklist (BPI 2006) have a knowledge of the market and its specific legislation; the support programs and possible incentives at the home country; the rules and specificities related to the product one seeks to export; a solid knowledge of the importer; the characteristics of the products and services available to secure a successful payment of the exports. The Angolan government holds a specific set of strategic guidelines when it comes to providing financial and fiscal incentives to investors, namely (BPI 2006): the production of first necessity goods for the internal market; the priority development of less favored regions; the rehabilitation,
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ANGOLA’S HIGH POTENTIAL, REGION BY REGION Namibe, Cunene, Cuando Cubango Agro-pastoral provinces with important trans-frontier synergies to explore as well as great tourist opportunities.
Luanda and Bengo There provinces are expected to become metropolitan regions, a global city highly connected to the world economy
Cuanza Sul, Huambo, Bié, Benguela, Huíla and Namibe Hold conditions for outwards looking development process, both with an urban and industrial potential.
Moxico A vast region with highly diversified potentialities and have the Cameia National Park
Zaire, Cuanza Sul and Cwanza Norte Their biggest challenge is to bet on a mercantile agriculture and develop the integration of these economies with the capital, becoming suppliers, hub for logistical support as well as for tourism.
Uíge and Malange Provinces set to integrate themselves in the development process led by the dynamics of the metropolitan area surrounding the capital. Cabinda, Zaire, Lunda norte, Lunda sul Their most prominent sectors are oil and gas in the area of Cabinda and the diamond sector in Lunda norte and sul
Development zones eligible for financial incentives: Zone A : Covers the province of Luanda and the provincial municipal seats of Benguela, Huíla, Cabinda and the town of Lobito.
Zone B : Remaining municipalities of the provinces of Benguela, Cabinda and Huíla and the provinces of North Kwanza, Bengo, Uíge, South Kwanza, North Lunda and South Lunda.
Zone C : The provinces of Huambo, Bié, Moxico, Cuando Cubango, Cunene, Namibe, Malange and Zaire.
implementation or modernization of infrastructure destined to the exploration of production or service provision activities; technological innovation at the level of the production of goods or in service provision and scientific development; increasing the incorporation of national primary goods and of value-added locally produced goods; increasing the entry of currency and
a subsequent improvement in the balance of payments. When considering entering the country, investors should closely analyze the Private Investment Base law which sets up the basic principles and rules for such activity. As a rule of thumb the minimum amount for foreign investment projects is of US$100,000.
Angolan tax incentives cover, among others (PLMJ & AVM 2009):
Mixed farming, transforming industries whose final project contains at least 25% raw materials and national materials or 30% of the added value, or whose production equipment and process require technology updates and modernisation of the industry in question, fishing and derivatives, civil
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Pedras Negras de Pungo A Ndongo, Malanje
construction, health and education, road, rail, port and airport facilities, telecommunications, energy and water and large passenger and freight carriers.
Circumstantial slowdown in 2009
World Champion of economic growth, it only takes one glance at its capital Luanda to realize just how Angola’s growth and modernization have been staggering. With the boom a wealthy middle class has emerged which is not afraid to consume only the best and higher-end products. Nevertheless, Angola still has two thirds of its population living under the threshold
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of poverty, with less than 2 dollars a day. While Angola and Luanda are growing, the Musseques, large poorer neighborhoods, are also expanding. The government is however aware of the phenomena and the significant economic and urban planning challenges it is facing.
The capital is buzzing with this new economic class Fighting corruption will still be one of the key pillars of the government and a natural evolution if the country is to
head towards the path of democratization and transparency. 2009 saw a temporary slowdown in Angola’s economy due to the global financial crisis, foreign exchange reserves in fact slumped by 30.5 percent to $12.1 billion in June 2009, against $17.499 billion in December 2008. The prices of crude oil that went from a 2008 high of $147 a barrel to around $60 in 2009 had a big impact on Angola’s finances. So, 2009 saw a slowdown in economic growth but growth is still set to remain above the 3% mark. It will be of crucial importance to continue with a strategy of economic diversification away from the dependency on the export of fossil fuels. Demographically, the country’s population has been growing at an average of 3% per year. The processes involving human resources remain however one of Angola’s Achilles’ heels, the country still has a greater demand than supply for qualified cadres, and lacks a culture of systematic well thought out recruiting processes.
In fact, construction has been a crucial sector for economic growth with large infrastructure projects witnessing a fast pace approval and development over the last few years. Particularly important has been the construction of roads and railways as well as the development of new residential areas, hotels and hospitals.
As a developing country Angola still reveals some deficiencies at the level of infrastructure. Through these failures, businesses and institutions can be exposed to flaws in energy supply, malfunctions in information technology services or other problems in communications and basic services.
Construction & infrastructure
It is a bit of a consensus that for a successful industrial development to happen a country must first bet on the creation of strategic, localized infrastructures promoting specific development poles. To this effect Angola has opted for 7 specific development poles, among them: the development Pole of Fútila, near Cabinda; the Industrial Pole of Viana/Luanda and the Industrial Development Pole of Catumbela.
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Oil & Energy
Angola’s promising oil sector boasts a string of big discoveries more than 100 miles (160 kilometers), from the coast, which have boosted the country’s production up tenfold since the mid-1970s. Angola’s entrance in OPEC is also a signal Angola wants to become more proactive and influent in decisions involving the international supply of oil and fossil fuels. Angola LGN launched in 2009 the construction project of a gas pipe transporting gas from the sea to the coast, aiming to produce liquefied gas. This gas pipe has more than 25 km of Virgílio Belo President Director extension and its BELO EMPREENDIMENTO construction will take 18 months. The Angola LNG project is of extreme importance for the national economy and should be concluded in 2011. Gas production in general has been swiftly increasing in the last few years which has allowed Angola to diversify its hydrocarbon sector away from oil. Angola has a high level of unemployment and criminality; the only way to solve that issue is to create job opportunities for the people. With projects such as the LNG project represent, in this very instance, about 4,000 direct jobs and other 6,000 among our suppliers. This is a long-term project that will bring immediate
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revenues to the government; so will the refinery, which will not only respond to the southern-African regional needs but also worldwide as it will have the capacity to refine 200.000 barrels per day. Selling the petrol refined instead of mere crude oil will bring extra revenues to the government.
Angola should reach an output of 2.6 million yearly barrels by 2011, the equivalent of Kuwait’s output Crude oil still accounts for almost the entirety of the exports from Angola, up to 96%, with the two main destination markets being China and the United States, the country is in fact currently China’s largest foreign source for oil imports. Chevron has recently announced the discovery of further significant reserves of oil and gas in the coast of Angola.
Manufacturing Sector
One of the flagship projects in the flourishing manufacturing sector of Angola is the Nissan car factory, whose annual production is expected to go from the current five thousand vehicles a year to thirty thousand. Cunene province for instance is set to witness the construction of a fur and horn transformation factory, evaluated in about
374 million kwanzas, within the framework of the 2009-2012 Executive Program for the Transformative Industry. There are also other 4 factories being built, two sugar factories in Kahama, 240 km west of Ondjiva, a tire repair facility and a graphic. The recent boom in the manufacturing sector owes much to the demands from the construction sector and the fast expansion in Angola of its infrastructure base. One of the key challenges is to train managers and technical cadres of the government and of private companies. The cheer importation of technology from abroad does not solve the country’s problems.
The Finance & Banking Sector
Between 2004 and 2007 Angola managed not only to stabilize its inflation rate from 44% to 11,8% but was also able to reduce its external debt from 33% of the GDP to 16%.
all to be able to successfully manage the risks related to a fast-paced process of transformation of its economic structures and sectors. Opening the way for a beneficial relationship to take shape when it comes to project to further finance the Angolan economy. In August 2009, the IMF manifested its intention to initiate conversations with Angola regarding the negotiation of a new loan to help Angola to face the ongoing economic slowdown and overcome the failure of previous similar negotiations in 2007. It witnessed a growth of 45% and 83% in deposits and credits conceded, respectively (KPMG 2008). There are currently 18 bank operators in the country. The cream of the crop of Angolan banks is now close to arrive at the ranking of the world’s largest 1000 banks. The Angolan banking sector stayed out of the credit crunch to a great extent thanks to it actually still not being very much exposed to the global markets.
The relationship of the country with the IMF is also seen as likely to improve in 2010
Angola’s largest bank according to the value of actives is BAI with a liquidity of around US$227 million, followed by BPC with US$184 million.
There are two key challenges for Angola’s financial sector in the near future: first of all to explore its booming economic growth to its full extent and make the most of the flourishing opportunities; second of
The resulting greater difficulties in accessing credit will however have their impact in Angola’s economic evolution with a likely slowdown in the volume and pace of FDI and the attraction of foreign capital and investment from abroad.
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to implement a system of internal control over its activities and accounting.
Agriculture Angola holds, outside China, when it comes to arable land without irrigation, the 4th largest area in the world. The agricultural sector has been markedly improving but is still subject to a few fragilities, among them difficulties for farmers to access credit as well as lack of clarity when it comes to legal proceedings around land titles and the land reform. In a very significant development, Sonangol, Odebrecht and Damer have come together to create a new company called Biocom which is involved in biofuel related activities. This project represents an initial US$200 million investment in a sugarcane plantation which will be able to fuel 140MW through an adequate power plant. Angola National Bank
There are several factors that will be critical to the success of Angola’s finance sector. First of all, a regulatory framework and a supervision system for the sector, this will ensure solidity and credibility for all financial actors, improving confidence. It will also be important that a market of capitals comes about that will put forward to agents a good range of financing sources and effective risk-covering instruments. This arrival will however also expose the Angolan market to the wider risks of global financial markets. In addition, a
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sophisticated insurance sector that works as an alternative risk-transfer mechanism as well as a widespread access to credit and an increasing range of finance products such as leasing and factoring. While there is still much to do regarding the legal framework of the financial sector in Angola, particularly when it comes to its execution and implementation, there have been important recent developments at this level, whereby Angolan rules have adopted characteristics of more sophisticated financial systems. Financial institutions for instance are now obliged
There has recently been put in place a program for the middle-term development of the Agrarian Sector, corresponding to the 2009-2013 period and involving US$2 billion. There has also been an agreement with the IMF regarding a line of credit of US$45 million for 200.000 farmers and a US$25 million support from the World Bank towards the development of Angolan productivity in agriculture. Coffee for instance is expected to assume in the medium-term a significant role in Angola’s exports. For this to occur the
Angolan government will necessarily need to assist in scientific investigation, commercialization, technical assistance and rural extension. In 2009 an expert from the Veterinary Research Institute has argued that Angolan cattle-farmers should privilege the production of local Angolan breeds. The reason being that some foreign breeds such as Barford and Herford, while they can potentially be more rentable from a commercial perspective, these can also be economically and technically very burdensome and complex to grow for local farmers.
The agro-alimentary sector is surely one of the most promising sectors in the country Local breeds entail less risk when it comes to adapting to local pastures and climatic specificities while importing foreign breeds has already proven disastrous in the past. announced the creation of a program called “Programme of Restructuring the Logistics and Distribution of Essential Products to the Population”. Through this initiative 10 000 retails sales outlets 163 municipal markets, 31 supermarkets and 8 distribution centres are being built, consequently reducing food prices, enlarging the market for locally produced food products and help create 200 000 jobs by 2012 (OCDE&AFDB 2008).
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At the end of the day agriculture represents 85% of the labour force but only 10% of the GDP. In the last decade of the colonial period, Angola was a major African food exporter but now imports almost all its food. Because of severe wartime conditions, including extensive planting of landmines throughout the countryside, agricultural activities are currently recovering.
Road building is essential to help the small farmers distribute the excess and create food markets Machinery such as tractors is the next step to modernize and turn into intensive agriculture country. The main agriculture products are: bananas, sugarcane, coffee, sisal, corn, cotton, manioc (tapioca), tobacco, vegetables, plantains; livestock; forest products; fish.
Angola & China China’s increasing engagement with Angola has been extremely significant in the past few years, particularly after 2004. It all started with a large loan of US$1,4 billion for the rehabilitation of infrastructure in the country in exchange for oil – China’s barter agreement strategy in Africa. A complex web of commercial relations has been
established for example between Chinese companies and Angola’s largest company, Sonangol. This relationship involves more than 48 companies working in the oil, diamond, construction and transportation sectors. China Sonangol International Holdings is one of the key entities heading this strategic relationship, a company that has mixed Chinese and Angolan capital. The injection of capital in Angola from China has given Angola a wider range of credit and financial options beyond western institutions such as the IMF and the World Bank. The relation is set to soon enter into a new phase that involves diversification and sectors beyond energy and infraestructure, namely comprising telecommunications, fishing and agriculture.
There are currently around fifty thousand Chinese expatriates in Angola and more than 100 companies Angola has largely welcomed the arrival of China in comparison to traditional partners as it enjoys how China has been willing to quickly and decidedly invests large sums of money into the economy even though it sometimes does so in the form of loans and not as direct investment. Since the entry of Chinese companies in 2004, these have managed to established a considerable foothold in the market.
This has been, to a great extent, thanks to the help of Chinese government and its effective and well-coordinated diplomatic team in the country which has extensively supported its private companies.
Angola & the Kwanza
The Bank of Angola deputy Director, Ricardo Viegas de Abreu, has expressed time and again that the temporary fall in oil prices during 2009 would not cause a serious devaluation of the local currency. Even though 90% of state revenues come from oil exports and that the Kwanza is still not a valid currency outside Angola the overall tendency is for local government and investors to remain confident in their currency. In 2007 the Kwanza appreciated vis-à-vis the dollar about 5% which contributed to a diminution in the cost of imports. Despite the high level of public expenses and a normal growth in domestic demand inflation actually slightly decreased in 2007 to 11,8%.
The diamond sector
Angola is the world’s 5th largest producer but if the sector is effectively developed can easily become one of the world’s three largest producers. A new strategy is set to be put into place, whereby companies in the diamond business will be benefiting from greater support from the state. Some companies have been struggling as of late. 2007 was a slower year due to unhelpful climate; nevertheless exports have doubles from US$790 million in 2004 to US$1.6 billion in 2007. The diamond-producing
state-owned company Endiama, is set to produce a diamond volume in the order of 17-19 million carats in 2010 and is also set to bet on the creation of a jewelry line and in this way participate on all the stages of the diamond business, from production to retail.
CAN
The country has hosted the African Cup of Nations 2010. It has capitalized on this event, diversifying its economy into the tourism sector. For instance, a series of luxury hotels has been built in the waterfront of Luanda. The Local Organising Committee of the African Football Championship (COCAN) declared this event allowed to improve infrastructures all over the country, creating thousands of jobs and showing the leadership of Angola to the world.
Growth trend for 2010
2010 will be seeing the beginning of the economic recovery of Angola. According to the Economist Intelligence Unit (EIU 2009) the country is expected to grow by 6.4%. Towards this figure the country will be relying on an improvement in the export of goods and services as well as a continued expansion in the agriculture, manufacturing and construction. In fact agriculture is expected to go beyond a 9,5% growth, industry 5% and services 9,5%.
DID YOU KNOW ? Angola is the 30th largest country in the World. The U.S. is one of the three main trading partners of Angola. Capoeira from Brazil has been imported by the slaves coming from Angola Angola is the second largest diamond and petrol producer in sub-Saharan Africa
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Producer: Pascal Belda Executive Directors: Jochen Schell, Valerie Janczewski Project Manager: Karina Córdova Business Journalist: Xabier Garagorri, Daniel Alvarenga Creative Director: Laure Barthelemy Assistant: Mercedes Alonso Special thanks to: ANIP & Mr. Rui Pinto de Andrade, MPLA’s director for information and propaganda.
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