Issue No. 1, October-December, 2014
theworldfolio.com A DIFFERENT PERSPECTIVE
DIAMONDS: Angola’s diamonds rock
TELECOMS: Moving at high speed
OIL AND GAS: A stopand-start revolution in natural gas
CONSTRUCTION: Building boom responds to needs of new middle class
INVESTMENTS from Angola aid its former colonial master, Portugal
CHINA IN ANGOLA: Win-win partnership or marriage of convenience?
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AGRICULTURE: Biocom: Sweet energy from sugar cane
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ANGOLA
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AN INTRODUCTION
TO THE WORLDFOLIO Alexi Fernández Executive Director, The Worldfolio
MAGAZINE
Welcome to the first issue of The Worldfolio Magazine, published by The Worldfolio, a business news portal which is part of the AFA group of companies. The Worldfolio provides intelligence about economies with the highest growth potential, focusing on understanding them from within. In a world where these countries play an increasingly important role, and where no one has a monopoly on information, it’s essential that international investors and companies – and indeed, all readers with global interests – hear what the leaders of these high-potential economies have to say. Understanding their viewpoints is key, not only to being wellinformed, but to doing business in these countries. We can provide that information through our network of correspondents, which each year is present in an average of 80 cities around the globe in more than 50 countries, where they conduct an average of 3,000 oneon-one interviews with government officials and senior business executives. The Worldfolio Magazine is a quarterly publication that focuses on the economies we consider most interesting and remarkable in theworldfolio.com. We conduct in-depth analysis and present it in a fresh, contemporary magazine format that contains interesting stories. This first issue will be distributed to senior business executives, decision makers and opinion leaders in the areas of New York and Washington D.C. They were chosen through a careful selection process based on the sector they represent and the importance of their companies. We’ve chosen Angola as the subject of our first issue, due to its growing importance in the global economy, the wide array of opportunities it presents and because it’s one of the fastest-growing economies in the world. Africa’s second-largest oil producer, Angola also boasts a wide range of mineral riches, most notably diamonds. The U.S. is currently Angola’s second-largest trading partner; accumu-
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lated American investments in the country now total over $25 billion. TheWorldfolio.com has just been redesigned to structure the information in such a way that it adds value to the content we produce and makes it friendlier for our users and readers. The new platform organizes information by sector and by country, just as we did in our previous website. However, the new site also includes personal profiles and company profiles so our readers can know more about the different people and companies they want to contact or do business with in the countries of their interest. We have also redesigned our blog, TheWordlfolio.com/blog to make it a better source of information about the economies we analyze. In our blog you can find firsthand information about what to do, how to do business and about social projects we consider interesting in the countries where we are present.
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TABLE OF CONTENTS
4
issue
TABLE OF CONTENTS
08 INTRO: Using oil wealth to create lasting prosperity
30 INTERVIEW: Oil Minister José María Botelho de Vasconcelos
10 ANGOLA: The big picture, in facts and figures
32 BATTLE FOR AFRICA: The U.S.-China struggle for influence on the continent plays out in Angola
16 DIAMONDS: Angola’s diamonds rock
37 BANKING AND FINANCE: New players wrestle for their share of a growing market
21 ANGOLA/PORTUGAL: Role reversal: Affluent Angola lends a hand to impoverished Portugal
24 OIL AND GAS: A stop-and-start revolution in natural gas
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42 INTERVIEW: Teodoro de Jesus Xavier Poulson, Member of Investment Committee, FACRA
44 DOING BUSINESS: New rules seek to change old habits
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TABLE OF CONTENTS
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48 INTERVIEW: Trade Minister Rosa Escorcio Pacaviria de Matos
68 AGRICULTURE: Biocom: Sweet energy from sugar cane
50 CONSTRUCTION: Building boom struggles to repair war damage, satisfy the needs of a new middle class
74 CHINA IN ANGOLA: Win-win partnership or marriage of convenience?
56 TELECOMS: Moving at high speed
78 LAND MINES: The civil war’s lethal legacy
62 INTERVIEW: Antonio Nunes, CEO, Angola Cables
82 TOURISM: Undiscovered places for intrepid travelers
64 THE VIEW FROM HERE: Two economists based in Angola give their views on the country’s short- and medium-term prospects
92 LIFESTYLE: Traffic snarls, soaring prices and kizomba
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ABOUT THE AUTHORS ISSUE
1
Contributing writers to this issue of Worldfolio: Manuel José Alves da Rocha, who contributed an essay
STAFF
to The View From Here section, is an economist and the director of the CEIC (Centre for Studies and Scientific esearch at the Catholic University of Angola.
Nathalie Bourgeois, a freelance journalist based in the U , wrote our story on diamonds. A former reporter for Associated ress and lle magazine in aris, she writes for a variety of publications, in French and in nglish.
Aled Bryon, a staff writer for The Worldfolio magazine, reported on the oil industry in Angola, as he has for a number of special reports at Afapress. Aled also contributed the sidebar on food in our ifestyle section. Benjamin Jones is a veteran journalist and a former correspondent for the New York Times in adrid. In this issue, he tells how ortugal’s ailing economy has been aided by investments from Angola and also about the revolution in the country’s farm sector. Jonathan Meaney is a staff writer for The Worldfolio magazine. He has reported extensively on business and economics, with a focus on telecoms. In this issue, onathan also writes about Angola’s investment rules, its relations with the United States, and about music. ÁLVARO LLARYORA Chairman, The Worldfolio
ALEXI FERNÁNDEZ xecutive Director, The Worldfolio
EDWARD HOLLAND ditor, The Worldfolio magazine
KRISTIN KJELLGARD Head of ournalism Dept. Art Direction
graphic design
EDUARDO BERTONE, SHERGIO SERRANO, TAÍNA ALMODÓVAR hoto credits Cover Angola Image Bank. age 3 Ministry of Petroleum, Angola. age 32 Cruks (Via Creative Commons). age 35 U.S. Government. age 8 Voice of America. age 5 Estelle Maussion. ages 0Afa Press. ages 2Arianne Martin. age 3 Midan Studios
for Geraldo Fashions. Model: Christianne of Step Models. age Joke Schot. All other photos Thinkstock rinted y QUAD GRAPHICS Distribution GANNETT PUBLISHING SERVICES
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Robert Latona, who contributed the story on land mines in Angola, is a freelance journalist in adrid who writes about politics, current affairs and the arts for a number of print and online publications.
Estelle Maussion is correspondent for Agence France ress and adio France International in uanda. stelle’s story on ifestyle in Angola is based on her own experiences living and travelling extensively in the country.
Richard Middleton, author of the article on Angolan banking and finance, is a ondon-based freelance journalist who’s written across business topics including the global drinks industry and the international T market. He’s also worked for The Independent newspaper and C Sport nline.
Nicholas Staines, who contributed an essay to The View From Here section, is the resident director of the International onetary Fund in uanda.
Rob Train, another freelance journalist resident in Madrid, wrote the articles on the Angolan tourism and construction industries. ob is a former staff member of the nglish language edition of l a s, Spain’s leading daily newspaper.
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Angola INTRO
ANGOLA:
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Edward Holland, Editor, The Worldfolio.
USING OIL WEALTH TO CREATE LASTING PROSPERITY If Africa is a continent of contrasts, nowhere are they as stark as in Angola. Africa’s second-largest oil producer and one of the fastestgrowing economies in the world, Angola has a per capita income of more than $4,500 a year, qualifying it as an upper-middle income nation. Yet government officials admit that 3 of its people live below the poverty line The country holds vast tracts of arable land and an abundant water supply, but oil revenues and a robust currency have led it to import nearly all the food consumes. Still, agriculture - or rather subsistence farming - continues to be the largest employer, occupying more than two-thirds of the work force. The contrasts are not only in the numbers. A nighttime view of the skyline of Luanda, the world´s most expensive city, shows new hotels lining the Ilha, the fashionable beachfront area, while rows of illuminated construction cranes bear witness to the ongoing building boom; this could easily be Doha, the capital of Qatar, minus the minarets. Daytime reveals a city where the majority of the housing is substandard and power outages so frequent that even the most exclusive buildings have their own electricity generators. Angola’s story is not simply that of a petro-state which has come into enormous wealth in a short time and is suffering growing pains. Twenty-seven years of civil war which ended in 2002 shattered the country’s infrastructure and stunted its economic growth. The war years were followed by a decade of dizzying expansion based almost
exclusively on oil revenues, to the detriment of the rest of Angola´s considerable natural resources. The world financial crisis and the decline in crude oil prices provided a reality check, as GDP growth plummeted from 3.8 in 200 to 2. in 2008 Thanks in part to a standby program from the International Monetary Fund, the government of President José Eduardo dos Santos managed to put public sector finances in order, stabilize the exchange rate and bring in ation down to historically low levels. Today, Angola’s government has embarked on an ambitious plan to develop the non-oil sectors by investing petroleum revenues in a variety of sectors: infrastructure, mining, telecommunications, agriculture, tourism, all of it designed to create jobs and build a diversified, sustainable economy. In this premier issue of The Worldfolio magazine, we take a look at these and other sectors of Angola´s economy. We also tell about the risks and rewards of doing business in the country and what it´s like to live there on a day-to-day basis. More importantly, we provide a platform for experts within the country to give us their views on Angola´s near and medium-term future. In separate articles, two leading economists - Nicholas Staines, the IMF´s resident director in Angola, and Manuel José Alves da Rocha, professor of economics at the Catholic University of Angola -provide differing and stimulating viewpoints on what needs to be done to assure Angola´s ongoing economic and social stability.
ANGOLA’S GOVERNMENT HAS EMBARKED ON AN AMBITIOUS PLAN TO DEVELOP THE NON-OIL SECTORS BY INVESTING PETROLEUM REVENUES IN A VARIETY OF INDUSTRIES
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INTRO Angola
Our cover story explains how diamonds came to be “forever,” and describesAngola´s place in this worldwide industry, which has been benefitting from an increase in demand for luxury goods in India and China. The return of the diamond giant DeBeers to Angola in 2014 is just one indication of how important the country´s role is in this $ 2 billion annual business. Diamonds notwithstanding, oil and gas are today the lifeblood of Angola´s economy and will continue to be for years to come. During 2014, the industry has been vexed by technical problems that have lowered crude production and brought iquefied Natural Gas (LNG) exports to a halt. Still, as Aled Bryon explains in his article, Angola looks set to be a major power in the world oil industry over the coming decades as more and more new reserves are discovered each year. In an accompanying story, we examine the government´s sovereign wealth fund, which is meant to channel oil resources into other productive areas, in order to diversify the economy and create jobs. As Angola struggles to rebuild its war-damaged infrastructure and provide housing and social services for a growing population, the building trade is on a roll. Construction companies from Portugal, Brazil and most notably, China, have been getting the business, and it’s hard to compete with the latter, whose projects are financed by their own Export-Import Bank. In a separate article, we examine the overall role of Chinese companies in the Angolan economy, where they have come to occupy a unique if not always welcome position, based on China´s need for petroleum and Angola s requirements to finance the rebuilding of the country. While the Chinese have been making inroads in Angola and throughout Africa over the past decade, the United States has sought to recover its position across the continent with trade agreements and export financing for U.S. companies doing business in the region. Jonathan Meaney explains how Angola has become the focal point for this struggle for in uence between the world’s two largest economies. Even with the advantage of government financing, it s difficult to do business in Angola, due to a complicated set of regu-
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lations, frequent bureaucratic delays and ongoing concerns about transparency. Our article examines the recent Private Investment Law, laying out the rules, but also provides some caveats, telling what organizations such as the World Bank and Transparency International are saying about doing business in Angola.
THE NASCENT TOURISM SECTOR IS JUST BEGINNING TO ATTRACT TRAVELERS TO THE EXTRAORDINARY HIDDEN TREASURES IN ANGOLA´S VAST AND VARIED LANDSCAPE Setting up new companies requires credit and Angola s banking and finance sector has seen rapid expansion in the past seven years, with the number of banks nearly doubling. ven so, nearly 80 of the assets in the banking system remain in the hands of half a dozen major institutions. ur article describes the finance system as a whole and how recent reforms have made it more attractive for foreign investors. In an interview, Teodoro Poulson of the public venture capital fund FACRA ex-
plains how the government is exploring new ways of financing for companies. While companies from abroad have been seeking entry into resource-rich Angola, the country itself has been doing some foreign investing in its former colonial master, Portugal. We take a look at how Angolan investors, including the state oil producer Sonangol, have acquired major stakes in some of Portugal´s largest companies and the controversy these investments have sparked between the two governments. Among the other sectors we examine are agriculture, which is undergoing a renaissance thanks to public-private partnerships such as the Biocom project to extract ethanol from sugar cane and turn it into fuel; and the nascent tourism sector, which is just beginning to attract travelers to the extraordinary hidden treasures in Angola´s vast and varied landscape. Finally, in our Lifestyle article, we take a look at what it´s like to live in Angola on a daily basis, including the tribulations and satisfactions of life in the capital, Luanda. This first issue of The Worldfolio magazine is meant to provide an overview of the country, its economy and the rewards and pitfalls of living and doing business there. We hope you enjoy it and we welcome your comments at contact@theworldfolio.com
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ANGOLA
GEOGRAPHICAL LOCATION: Western Coast of Southern Africa
GENERAL DATA CONGO
INHABITANTS: 20.9 million (more than 5 million in Luanda.)
MAIN RELIGIONS: Catholic and Protestant
Cabinda
ZAIRE
REP.DEM. CONGO
UIGE
LANGUAGE: Portuguese - official; Plus various local dialects: Umbundu, Kimbundu, Kikon¬go, Fiote, Chokwé, etc
MAIN AIRPORT: 4 de Fevereiro in Luanda
CLIMATE: Tropical
LUANDA
CUANZA NORTE
MAIN BEACHES: Ilha do Cabo, Palmeirinhas and Mussulo (Luanda); Baía Azul, Caota and Caotinha (Ben¬guela); Restinga (Lobito); Miragens, Azul (Namibe)
MAIN HARBOURS: Luanda, Lobito and Namibe
GOVERNMENT: Democracy led by MPLA
BENGO LUNDA SUL
CUANZA SUL
Lobito Benguela
Namibe
LUNDA NORTE
MALANJE
HUAMBO
BIE
MOXICO
BENGUELA
Lubango
ZAMBIA HUILA
CURRENCY: Kwanza (Kz)
NAMIBE CUNENE AREA: 481,083 sq. miles; 1,025 miles maritime frontier; 3,005 miles land frontier
NAMIBIA
PRESIDENT: José Eduardo dos Santos
CUANDO CUBANGO
HIGHEST POINT: Moco Hill (2.620 meters, 9,251 ft.) in Huambo
MAIN RIVERS: Kwanza, Cunene and Cubango
AVERAGE TEMPERATURE: 30ºC (86ºF) maximum, 17ºC (63ºF) minimum
SOURCE: ANIP “How to Invest in Angola”, ANIP (Angola National Private Investment Agency), 2013
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ANNUAL GDP GROWTH (%)
CURRENT ACCOUNT BALANCE (%GDP)
8 7 6 5 4 3 2 1 0
12 10 8 6 4 2 0 -2 -4 -6 2012
2013
2014
ANGOLA
2015
NIGERIA
2016
2012
SUB-SAHARAN AFRICA
2013
2014
DEVELOPING COUNTRIES
2015
2016
SOUTH AFRICA
SCHOOL ENROLLMENT, PRIMARY (% GROSS) 150 140 130 120 110 100 90 2004
2005
2006
2007
ANGOLA
2008
2009
2010
SUB-SAHARAN AFRICA (DEVELOPING ONLY)
2011
2012
2013
UPPER MIDDLE INCOME COUNTRIES
CO2 EMISSIONS (METRIC TONS PER CAPITA) 6
CO2
5 4 3 2 1 0
2004
2005
2006
ANGOLA
2007
2008
2009
SUB-SAHARAN AFRICA (DEVELOPING ONLY)
2010
2011
2012
2013
UPPER MIDDLE INCOME COUNTRIES
Source: World Bank, World Development Indicators
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POVERTY HEADCOUNT RATIO AT NATIONAL POVERTY LINE
IMPROVED WATER SOURCE, RURAL
(% OF RURAL POPULATION WITH ACCESS) 40.0% 37.5%
36.6%
35.0%
2008
32.5%
OF POPULATION
30.0% 2004
2013
ANGOLA
LIFE EXPECTANCY AT BIRTH, TOTAL (YEARS) 80
70
60
50
2004
2005
2006
2007
ANGOLA
2008
2009
2010
SUB-SAHARAN AFRICA (DEVELOPING ONLY)
2011
2012
2013
UPPER MIDDLE INCOME COUNTRIES
GNI PER CAPITA, ATLAS METHOD (CURRENT US$) 8000
6000
4000
2000
2004
2005
2006
ANGOLA
2007
2008
2009
SUB-SAHARAN AFRICA (DEVELOPING ONLY)
2010
2011
2012
2013
UPPER MIDDLE INCOME COUNTRIES
Source: World Bank, World Development Indicators
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Angola DIAMONDS
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ANGOLA’S
DIAM NDS
ROCK
ALREADY THE WORLD’S FIFTH-LARGEST DIAMOND PRODUCER, ANGOLA IS SET TO BENEFIT FROM THE SURGE IN DEMAND FOR THE GEMS AMONG CONSUMERS IN RISING ECONOMIES SUCH AS CHINA AND INDIA.
By Nathalie Bourgeois
In 1948, a copywriter for the American advertising agency Ayer created a slogan for one of its major clients, the De Beers Group, the world’s largest diamond producer: “A Diamond is Forever.” This simple phrase helped to position diamonds in popular culture as a token of long-lasting, legitimate love and, for the men who buy them, a symbol of social status. It also helped the growth of the diamond business worldwide. According to the U.S, consulting firm ain
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Company, the share of American brides receiving diamond engagement rings grew from 10 percent in 1939 to 80 percent by the end of the twentieth century, while the share of Japanese brides grew from 6 percent in the 1960s to nearly 80 percent. Today, a new tide of brides is rising in China and India, two countries which are seeing the emergence of a huge middle class eager to adopt the Western way of life. China surpassed Japan in 2010 as the second-largest buyer of diamonds behind
the U.S., where demand rose 7 percent that year, compared with 25 percent in China and 31 percent in India. This surge in demand among the nouveaux riches in the Far East is today driving the market for diamonds, and one of the countries set to benefit is Angola. Already the world’s fifth largest producer by value, and seventh by volume, Angola’s diamond industry still has enormous, untapped resources that are already attracting renewed interest from foreign investors.
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DIAMONDS Angola
“A DIAMOND IS FOREVER.� This simple phrase helped to position diamonds in popular culture as a token of long-lasting, legitimate love and, for the men who buy them, a symbol of social status.
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Angola DIAMONDS
“Our potential is huge,” says Carlos Sumbula, CEO of the stateowned diamond mining company, Endiama. He explains that the government recently decided to update its National Geology Map (PLANAGEO), in order to get an overall picture of the country’s potential in diamonds and other precious gems. One of the companies already responding to this potential is De Beers itself. In April, the company successfully negotiated a new diamond exploration license with the Angolan government. De Beers had been in the country between 2005 and 2012 but had given up its license because of poor results. According to the World Diamond Council, an estimated $13 billion worth of rough diamonds are produced each year, of which approximately $8.5 billion (65 percent) are from Africa. The diamond industry employs some ten million people around the world. Global diamond jewelry sales have increased three-fold in the past 25 years, and are currently worth in excess of $72 billion annually. And the sector is buoyant: natural, rough diamond prices are expected to rise by 5 to 10 percent in 2014, due notably to higher sales in India, China and apan, according to euters. ain Company as the Antwerp World Diamond Centre (AWDC) say they will continue to soar at least until 2018. “So, you can understand why prices are going to increase and why this is a very, very good business to be in,” De Beers Group CEO Phillipe Mellier said recently. Mellier has said that he expects the demand for polished gems to grow by up to 4.5% in 2014. Angola’s diamond industry began a century ago under Portuguese colonial rule and is today emerging from a long period of difficulty as a result of the civil war and, more recently, the worldwide financial crisis. roduction has remained relatively stable at around eight million carats per year since 200 and, according to government figures, provided revenues of $1.17 billion in 2013. Geology and Mines Minister Francisco Quieroz said in June he expects diamond production to surpass 10 million carats this year. However, Angola is keen to avoid the curse that has plagued other countries blessed with a wealth of minerals by keeping control over its resources, This is why its diamond industry is run through the state company Endiama, under the supervision of the Ministry of Geology and Mines. Endiama is responsible for negotiating concessions and holds the largest stake in each of the joint ventures that operate Angola’s diamond mines. Among the private partners in these joint ventures are some of the largest companies in the world, Apart from DeBeers, these include Odebrecht (Brazil), BHP Billiton (an Anglo-Australian conglomerate headquartered in Australia), Alrosa (Russia), and Petra Diamonds, a diamond mining group headquartered in Jersey. Most of the joint ventures also grant minority participation to private Angolan companies, many of which lack high-level technical capabilities.
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The biggest diamond mining operation, Catoca, is owned by a consortium composed of Endiama, Alrosa, Odebrecht, and LLV of China. Founded in 1995, Catoca is the world’s fourth largest-diamond mine, accounting for about 75 percent of the country’s production, It is located in the northeastern corner of Angola, where most of the extracting is conducted and the greater part of the known reserves are located. What is particularly attractive for mining companies is that, according to government and independent experts, only 40 percent of the Angola´s diamond potential has been explored. Just recently, the Australian mining company Lucapa Diamond discovered a giant, 32.2 carat white diamond in its Lulo mine, northeastern Namibe province. Lucapa said in June that it expects the Lulo mine to outproduce Catoca within two years and that it may hold deposits of up to 500,000 carats. In 2012, another Australian company, Lonrho Mining, discovered an exceptional, 131.5 carat stone in the same area. This diamond was even bigger than the legendary 106-carat Koh-i-Noor (“Mountain of Light”) presented to Queen Victoria in 1850 and set in the crown made for the late Queen Elizabeth for the coronation of King George VI, in 1937.
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DIAMONDS Angola
Angola’s diamond industry still has enormous, untapped resources that are attracting renewed interest from foreign investors.
There are currently 10 mines in operation in Angola – three to explore primary deposits (kimberlites) – Catoca, in Lunda Sul province, Camutué and Luô, in Lunda Norte– and seven for secondary deposits (alluvial deposits) –Cuango, Chitotolo, Canvuri, Luminas, Chimbongo, Somiluana and Calonda, in Lunda Norte. Angola plans to increase production at an annual average rate of 5 percent and in order to do so, it hopes to attract more foreign investors. Sumbula of Endiama is keen to emphasize that, “the industry offers business opportunities for prospecting, mining, trading, cutting and polishing and jewelry. It also provides investors with economic, social and political stability, a good customs regime, attractive mining legislation, excellent diamond quality and important investments in infrastructures. These will contribute to cut costs and increase revenues.” Before a diamond reaches the pocket of a nervous young man about to
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propose to his fianc e, it goes through a lengthy and complicated process, which explains in part why it is so pricey. To begin with, diamond fields are extremely rare. There are only about 20 major diamond mines in the world, and 11 of them provide about 62 percent of the world’s production of diamonds by carat, according to Bain Company. The majority are in Africa, but there are also mines in Russia, Australia, and Canada. A great deal of drilling must be done in order to obtain just few of the gems: production varies by mine, but the world’s richest mine, Jwaneng in Botswana, has to move on average a ton of rock to get 1.4 carat of rough diamond. All this has a cost on the environment, and that’s another aspect that Angolan authorities are keen to control. Under the slogan “Mining is necessary, preserving is possible,” Catoca carries out a number of programs aimed at controlling the environmental impact of
mining (air, water and soil), the recovery of degraded areas - notably by planting trees - and the management of solid and liquid waste. Furthermore, Catoca is in the process of obtaining the ISO 00 quality certification for its nvironmental Management System. Once extracted, rough diamonds are sorted, then cut and polished. In the process, they lose about half of their original weight. Traditionally, most of the stones were cut and polished in only a few centers in the world, Antwerp (the Netherlands), Tel Aviv (Israel), New York, and Russia. Nowadays, the smaller stones are increasingly cut in India and China, where labor costs are cheaper. Once cut, the diamonds reach the manufacturers, of which it is estimated that there are some 10,000 worldwide. Most are anonymous, but some have become global brands that have contributed to the legend of diamonds: Blue Nile, Cartier, Tiffany, Bulgari andHarry Winston, to name a few.
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Angola DIAMONDS
20
Global diamond jewelry sales have increased three-fold in the past 25 years, and are currently worth in excess of $72 billion annually.
Now, if a diamond can (arguably) make a woman happy in the so-called first world, does it make a man happy in Africa What is the cost of diamond mining and trading for local people In the age of global and instantaneous information, that’s a question that an increasing number of customers worldwide ask themselves before making a purchase. Here it should be noted that the history of diamonds has been closely linked to cinema, from Mae West to Marilyn Monroe. One film alone contributed a great deal to raising awareness about a dark chapter of the diamonds saga. Blood Diamond (2006), starring Leonardo DiCaprio, showed how the illegal trade of diamonds fuelled bloody civil wars in Africa throughout the 1990s. Angola was no exception, as UNITA (União para a Independencia Total de Angola) rebels sought to control diamond-producing regions to finance their war against government forces. In order to sti e UNITA’s supply sources and to preserve its all-important diamond sector, Angola was one of the first countries to adhere to the idea of certifying the origin of diamonds. In 2002, it was one of the founders of the Kimberley Process, an initiative carried out jointly by governments, industry and civil society to stem the ow of con ict diamonds, following a 2000 resolution by the United Nations. As proof of Angola’s commitment to keeping the diamond industry transparent, it was recently elected Vice Chair of the Kimberley process for the year 2014, and Chair for 2015. “It is a proud moment for the Kimberly Process that a country which, once aficted by civil con ict, has now regained political and economic stability and, as a consequence, is able to assume a position of leadership in the very institution that helped set it on its way to recovery,” said the President of the World Diamond Council, Avi Paz. Diamonds are also a key factor in the current economic boom; they account for 5% of GDP, still a far second to oil at 45%, but nonetheless an important contributor to raising living standards. A recent Boston Consulting Group report notes that, “Angola’s progress continues to overcome the advances recorded by other countries rich in natural resources.” According to a 2013 study by the Boston Consulting Group and the Tony Blair Africa Governance initiative, Angola is among the countries whose well-being has improved most in the past five years in Africa not only has it enjoyed rapid growth in GDP per person (an average of 11.1 percent per year between 2001 and 2010), but it has also done well at translating that strong growth into improved well-being. But you don’t need to read a lengthy report to see that for yourself. In Luanda, Angola’s vibrant capital, nestled on a horse shoe-shaped bay, the skyline has dramatically changed over the past ten years, with dozens of skyscrapers now crowding the landscape. The white sand beaches are lined with elegant cafes, and there’s almost an air of dolce vita around, which is felt throughout the night as young clubbers dance to the mesmerizing beat of Angolan music. It would be a cliché to say that diamonds are Angolans’ best friends, but they are certainly part of the hope of a better future. After such a troubled and painful past, there’s no doubt that for Angolans, diamonds rock.
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ROLE REVERSAL Portugal
ROLE REVERSAL: ANGOLA’S INVESTMENTS AND EXPORT MARKETS PROVIDE RELIEF TO ITS FORMER COLONIAL MASTER, By Benjamin Jones
PORTUGAL
A traveler passing through Lisbon and Petroleum and gas provide 75% of In a historic role reversal, Angolan comits environs these days will notice the panies have been investing heavily in government revenue and 43% of GDP, stylishly-dressed Africans window shopPortugal since 2008, aiding the former or more than $40 billion per year to Anping in the upscale neighborhood of colonial power to survive the economic gola, one of the fastest-growing econoChiado, or taking their leisure at the crisis. This “strategic partnership” has mies in the world. beachside cafés of nearby Cascais, the Angolan investment in Portugal benot been without controversy, but is likely resort that was once a favorite watering gan to take off in 2008, when the Afrito continue as Portugal´s economy recovhole for European monarchs. can nation’s state-owned oil company, ers and Angola’s continues to grow apace. These visitors are almost certainly Sonangol, along with Banco Privado Atfrom Angola, and are here to buy up lantico, purchased a 47.3% stake in the real estate properties or look after their investments in a wide Angolan branch of Portugal’s biggest private bank, Millennium range of companies, both listed and private. They are the visBCP. (Sonangol is today the largest shareholder of the parent ible evidence of an historic role reversal in which the once Millenium BCP, with 15.08%.) impoverished colony that was ruled and exploited by Portugal That same year, cracks began to appear in the Portuguese for more than 00 years has become the financial savior of its economy and the country eventually followed many of its neighcash-strapped and debt-ridden former master. bors into the Euro zone debt crisis which led to devastated econAngola certainly has the deep pockets to help Portugal. omies, bankrupt businesses and millions of people out of work. Africa’s second-largest petroleum producer, with an average In 2011, the Portuguese government agreed to a 78 billion output of about 1.7 million barrels per day in 2013 and huge euro ($106 billion) bailout from the European Union and the reserves, the country also boasts sub-Saharan Africa’s thirdInternational Monetary Fund, which forced the country to enlargest economy. act stringent austerity measures and painful economic reforms.
THE ONCE IMPOVERISHED COLONY THAT WAS RULED AND EXPLOITED BY PORTUGAL FOR MORE THAN 400 YEARS HAS BECOME THE FINANCIAL SAVIOR OF ITS CASH-STRAPPED AND DEBT-RIDDEN FORMER MASTER.
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Portugal ROLE REVERSAL
Along with its extensive financial resources for investing in Portugal, Angola was also considered by the Portuguese as a growing market for their now-struggling companies, which were facing tough times as the domestic economy shrank along with their traditional export markets in neighboring countries. Making Angola even more attractive was the fact that Portugal and its former colony shared a common language, culture and legal framework, as well as financing structures. Portuguese banks had already been long established in Angola, led by Banco Espírito Santo, the country’s biggest bank by market capitalization and the second-largest private bank, and which set up operations there in 2001 as Banco Espiritu Santo Angola (BESA). The Banco Espiritu Santo story illustrates how the problems of Portuguese companies can spill over into their Angolan units. In August, after Portugal announced a $4.9 billion bailout of the ailing Banco Espiritu Santo, Angolan
authorities placed BESA under administration and revoked a $5.9 billion loan guarantee issued previously.
TODAY, ALMOST 40% OF THE FOREIGN COMPANIES OPERATING IN ANGOLA ARE OF PORTUGUESE ORIGIN. Portuguese companies involved in everything from construction to consumer goods and from electronics to health care ooded into Angola. They were aided by the government’s eagerness to enlist foreign companies in its development plans, aimed at turning the country into a regional, and eventually, an international player and diversify the economy away from oil and mining. Angolan officials are also keen to provide jobs, housing, health care, clean water, reliable electricity and other ben-
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efits for the country’s 20 million people. Eventually, 10,000 Portuguese companies were trading with Angola and tens of thousands of Portuguese executives, managers, technicians and other workers had moved south, many eeing their homeland’s high unemployment rate, which at the height of the crisis hit a painful 17 percent. Illustrating just how deep historical ties are, many of the Portuguese packing their bags for Africa were born or raised in Angola before their families ed back home during the decades-long struggle for independence and subsequent civil war which devastated the country. Today, almost 40% of the foreign companies operating in Angola are of Portuguese origin. By 2012, Angola had become Portugal’s fourth-largest export market after European Union partners Spain, Germany and France. That year 3 billion Euros ($4 billion) worth of Portuguese products were sold to Angola, accounting for 7 percent of total exports.
A bridge to Lisbon: Angola´s investments in major companies on the Lisbon Stock Exchange strengthened the economic links between the two countries.
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ROLE REVERSAL Portugal
BY 2012, ANGOLAN INVESTORS OWNED AROUND 3.8 PERCENT OF THE COMPANIES LISTED ON THE LISBON STOCK EXCHANGE, IN A WIDE ARRAY OF SECTORS INCLUDING TELECOMS, ENERGY, MEDIA, AGRIBUSINESS, CONSTRUCTION AND BANKS. As Portuguese investments and businesses grew in their home country, Angolan investors were quick to return the complement. Between 2002 and 2009, Angolan public and private investment in Portugal skyrocketed from 1.6 million Euros ($2 million) to 116 million Euros ($ 157 million). According to one leading Portuguese think tank, by 2012 Angolan investors owned around 3.8 percent of companies listed on the Lisbon stock exchange in a wide array of sectors including telecoms, energy, media, agribusiness, construction and banks. Total Angolan investment is now estimated to have reached between 10 billion Euros ($13.6 billion) and 15 billion Euros ($20.4 billion). Further investment is expected as the government puts state companies and assets on the block as part of the program to put the economy back on course. Hailing these new economic ties as the base for a “strategic partnership” that would deeply benefit both countries, Angolan and Portuguese leaders cooperated closely on fostering relations while urging their country’s entrepreneurs to continue their bilateral investing. Indeed, one of Angola’s main investors is Isabel dos Santos, the Britisheducated eldest daughter of President José Eduardo dos Santos. Forbes magazine describes her as Africa’s wealthiest woman and the continent’s first female billionaire. Over the last several years, she has purchased more than 50 per cent of the Zon multimedia and telecoms conglomerate; a large stake in Banco Portugues de Investimento, or BPI, the country’s fourth-largest private financial group and shares in Amorim Energia, a Netherlands-based Portuguese company which owns 40 percent of petroleum producer Galp. These holdings make Ms. dos Santos the third-richest investor in the Lisbon stock exchange with a personal fortune estimated at around $3 billion. Isabel dos
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Santos also sits on the board of Banco BIC Portugal, a subsidiary of one of Angola’s biggest banks and she has extensive interests in many Angolan companies, including Unitel, one of the country’s two mobile telephone operators. Angolan company Newshold, which owns stakes in several prominent Portuguese media companies, including Impresa, Cofina, the weekly newspaper Sol, two leading magazines, business publication Jornal de Negocios and other titles. On a visit several years ago to Angola, Portuguese Prime Minister Pedro Passos Coelho, who spent part of his childhood there, said : “Angolan capital is very welcome (in Portugal).” And while that is no doubt the case among government and business leaders, some in Portugal are not so enthusiastic, questioning whether it is a good idea for their country to partner with Angola because of its reputation for alleged corruption and crony capitalism. The International Monetary Fund has reported that there is $32 billion in missing government funds believed linked to Sonangol, and Transparency International rates Angola as one of the most corrupt countries in the world, ranking it in 153rd position out of 175 for its lack of transparency. As charges like these mounted, Portuguese chief public prosecutor Joana Vidal began a probe into the activities of a number of unidentified and highlyplaced Angolan business and political leaders. Apparently alarmed that the investigations might torpedo Angolan investments, Portuguese Foreign Minister Rui Machete appeared on Angolan radio to apologize for the prosecutor’s actions. But when opposition politicians howled for Machete’s resignation, claiming he had infringed on the judiciary’s independence, the foreign minister took back his apology and recanted. Machete’s backtracking unleashed an angry response from President Dos Santos. While Angola had good relations
with most major countries in the world, the president said in his annual state of the nation address to parliament in October 2013, “with Portugal, unfortunately things are not going as well. There have been misunderstandings at the highest level of state and the current political climate does not advise the implementation of the strategic partnership.” “In the battle against corruption,” dos Santos continued, “the anti-corruption organizations in the West are deliberately creating misunderstandings in order to intimidate Africans who are generating wealth and who want access to it. “They are creating the general impression that a rich African is invariably a corrupt one,” he said. “Elementary research in the oil sector would expose that American, English and French firms, along with ortuguese companies and commercial banks are extracting from Angola double digit billion dollar sums. “Why should they be allowed to own such huge corporate firms that are denied to us Angolans?” dos Santos concluded. Shortly after his speech, the government-controlled newspaper, the Journal of Angola, weighed into the fray, chastising Portugal for what it termed as “intolerable aggression.” The ap prompted ortuguese parliamentarians to rush to Luanda to try and make amends. Portugal’s economy now appears to be on the mend after bottoming out. In May, 2014, the country passed all the reviews by the architects of its bailout imposed three years earlier, the European Commission, the European Central Bank and the International Monetary Fund. “Everybody in the government shares with all Portuguese a feeling of mission accomplished,” Deputy Prime Minister Paulo Portas said at a news conference announcing the favorable reviews. With Portugal apparently on its way to financial health, it will almost certainly continue to be a tempting destination for Angolan investment and with so much shared history and so many billions of dollars at stake, the ex-colony and its former master will likely patch things up to restore their strategic partnership.
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Angola OIL & GAS
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A STOP-AND-START
REVOLUTION IN NATURAL GAS By Aled Bryon
n partnership ith ma or international oil companies, state-o ned Sonangol has made a firm commitment to developing i uefied atural as . Although ve ed b technical dela s and interruptions, the Angola pro ect still looks to be the future of the countr s most important industr . ean hile, e ploration continues for vast ne reserves of crude to offset the declining output in e isting oilfields.
IN TERMS OF CONSTRUCTION JOBS, REBUILDING AN ENTIRE COUNTRY IS ABOUT AS BIG AS THEY COME. Oil has long been the foundation of Angola’s economy, having attracted massive foreign investment and driven economic growth over the past decade. But with known reserves of Africa’s secondlargest oil producer expected to reach their peak by the end of the decade, Angola has embarked on a new energy adventure: the natural gas revolution. State-owned Sonangol has joined the oil majors Chevron, Total and – the ones responsible for developing the offshore fields and deepwater fields at the heart of the country’s oil boom – to form Angola N iquefied Natural as , a project that will allow the country to develop its energy industry in an environmentally-friendly fashion, while providing the revenues the government needs to help diversify the economy. Despite ranking second in sub-Saharan Africa in total natural gas reserves – . trillion cubic feet Tcf according to the latest il
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and Gas Journal estimates – Angola has always remained a small natural gas producer. However, the $10 billion Angola LNG project will change all that, marking a shift in the country’s oil and gas dynamic that re ects the new trends in the global energy market. Launched in 2008, Angola LNG is headed by Chevron, which owns a 36.4 percent stake, with state-owned Sonangol holding a 22.8 percent stake and France’s Total, BP and Italy’s ENI completing the consortium. While the initial target was to start exporting LNG by early 2012, after 18 months of delays due to technical glitches and labor shortages, the project finally shipped its first cargo to razil last une. First gas export at Angola N is an important milestone in support of our strategic plan to grow our production,” George Kirkland, vice chairman of California-based Chevron, said in a statement at the time. This project will commercialize natural gas resources
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OIL & GAS Angola
ANGOLA OIL & GAS
in western Africa to meet growing demand in the region and internationally.” However, in April 2014 the plant was once again shut down to allow its US contactor Bechtel to perform repairs after a succession of technical faults. Plant officials have said that production will not commence again until mid-2015, meaning LNG capacity likely won’t be reached for quite some time to come. The LNG facility in Soyo – just outside the capital city of Luanda – has an expected lifespan of at least 30 years, with the capacity to produce 5.2 million metric tons of LNG per year. Just as the United States hopes to be-
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S
AS AS C R C R
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T U AT , A ATTRACT ST TA R RT AST CA
come a net exporter of LNG through its shale gas production in the next two years, Angola likewise wants to take advantage of the growing rush for the resource. According to analysts at Ernst & Young, global LNG demand has risen by an estimated 7.6% per year since 2000, and will continue to increase at a rapid rate of 15 million metric tons a year through to the middle of next decade, led by growth in Asian na-
A ASC .
tions such as Japan and South Korea. For Chevron – which has also invested $77 billion on LNG production in Australia – such increasing demand is a huge opportunity that it aims to tap through the Angola project, just as other oil majors continue to invest in LNG around the world. For Angola, which seeks to diversify its economy from its oil exports – LNG provides part of the solution.
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Angola OIL & GAS
A
A ART CTS T RTS A
AR S A ST RS R T T U ACT R SU TS T AT S
Following the first shipment of N last year, in 20 the group confirmed the sale of three more cargos from the Soyo plant, said to be one of the world’s most modern LNG processing facilities. In the meantime, construction work will continue on the infrastructure project to transport natural gas gathered from offshore to a liquefaction plant, which at full capacity, will produce an additional 3,000 barrels of natural gas liquids propane and butane per day for export. Complementing the export terminal, Sonagas – the subsidiary of Sonangol that is moving aggressively to develop the country’s domestic production facilities and export markets – plans to construct a massive industrial park in Soyo. The industrial park will receive 125 million cubic feet per day of imported gas, which the companies installed there will then use to supply electricity, produce petrochemicals, and develop other downstream gas industries. When fully functioning, the Angola LNG project will also give an opportunity to continue the development of Angola´s oil and gas resources with less impact on the environment - providing cleaner and more reliable energy to domestic and international customers, along with good returns on the investments of its shareholders. Primarily, Angola LNG will be fed by associated gas – a substance produced with crude oil production that is usually ared as waste or re-injected into petroleum reservoirs. Instead, this gas will now be used either domestically, or liquefied and exported to other markets. As one of the world’s largest gas aring reduction projects – encompassing offshore and onshore operations to turn the previously ared gas into more productive uses – Angola N will reduce carbon dioxide emissions by up to nine million tons a year equivalent to taking around two million cars off the road . This will reduce greenhouse gas emissions while promoting the use of natural gas, a much cleaner source of energy. As climate change takes on ever greater importance – with most companies, and indeed countries, looking for an opportunity
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R AR R R, T S SS T R U S R T
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UCT A S S T AT T A R R T. T S AR R SS RS AR U T R . - orld ank report
to increase energy efficiency and curb pollution – Angola N is a standout achievement in reducing CO2 emissions. In a recent World Bank Report, Bjorn Hamso – manager of the organization’s lobal as Flaring eduction artnership, gave high praise for the project, saying: “Angola LNG marks a milestone for aring reduction and shows that when partners work together, it is possible to develop major projects with minimum impact on the environment. These are impressive efforts and results that should inspire others around the world.” Going forward, a “large number” of LNG sales from the plant in Soyo have already been signed, according to Angola LNG Marketing CEO Artur Pereira. Despite the fact that a portion of these deals will now have to wait until production resumes next year, if Angola LNG can further prevent the kind of technical issues that has slowed production since 2008, the future for the project – and the hope that it can make a real and lasting impact for the sustainable development of the country – looks bright. While LNG exports are temporarily interrupted, Sonangol continues to explore for new oil reserves to offset the decline in existing oilfields. The state oil company has targeted a crude oil production rate of 2 million barrels per day in 2015, up from last year’s 1.71 million bpd. Industry analysts are skeptical as to whether that goal will be reached; Angola’s crude output has averaged 1.65 million bpd during the first half of 20 , due to declining output at existing wells and extended maintenance issues. Production is expected to recover, however, as new discoveries come on line. France´s Total in June started production at its C offshore field, located 0 kms west of uanda, which has expected daily output of 160,000 bpd and proven reserves of 500 million barrels. Total, the largest foreign operator in Angola, has also decided to move head with the $16 billion Kaombo deepwater project, which could add another 230,000 bpd to the country´s output by 2017.
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Angola OIL & GAS
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THE TRUE EXTENT OF ANGOLA’S POTENTIALLY MASSIVE HYDROCARBONS RESOURCES MAY NOT BE KNOWN FOR YEARS TO COME.
ANGOLA OIL & GAS
Exploration activity in pre-salt formations is also slated to accelerate this year, with the government planning to auction off 10 onshore blocks. Pre-salt refers to the geological layers that were laid down before a salt layer accumulated above them during the breaking up of the supercontinents over 180 million years ago. It has been responsible for hugely significant finds in razil, where total reserves of around 50 billion barrels of oil are estimated. Due to its geographic similarities, explained by the scientific theory of plate tectonics and continental drift, Angola is also believed to hold large quantities of hydrocarbon resources from pre-salt formations. According to the U.S. Energy Information Agency, many oil majors invested in Angola are currently or planning exploration activity in pre-salt bearing blocks. So far, U.S.-based Cobalt International Energy has had the most success, making five pre-salt discoveries in the offshore wanza asin. What’s more, the ten onshore areas to go up for auction this year may offer more crude oil than previously thought, according to a surveying company that assessed the deposits in January. Norway’s Petroleum Geo-Services ASA said that “new
seismic images show more potential” than a previous survey showed 40 years ago, assuring that the sediments observed correspond to formations of hydrocarbons. It is now believed the ten blocks may account for over half of Angola’s known oil reserves, or at least 7 billion barrels. Opportunities to explore Angola’s lucrative pre-salt formations will not end there, either. Sonangol has recently announced that the company is planning a second auction for five offshore blocks, four of which are in the wanza basin and the other in the Congo basin. These five blocks will be auctioned off in two and half to four years’ time, and in the meantime will be the focus of geophysical or geological surveying by Sonangol. The true extent of Angola’s potentially massive oil resources is not likely to be known for some years to come. However, if Angola’s pre-salt discoveries prove to be anything as fruitful as razil’s across the Atlantic, and Angola LNG continues to develop as expected, the country’s oil and gas industry will be an increasingly important player in the world energy market.
A new reference in Africa
Bauxite Angola brings Angolan expertise in mining to Guinea-Bissau. Created in 2007 to explore and extract bauxite deposits, we are also currently building a port which will help connect Guinea-Bissau with other countries in the region and beyond. Furthermore, we work to bring a better quality of life to the communities in which we operate.
www.bauxiteangola.com
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OIL & GAS Angola
A SOVEREIGN FUND FOR SUSTAINABLE GROWTH While Angola’s oil resources have been almost solely responsible for the country’s robust growth in recent times, critics say that little of the resulting revenue has filtered down to make a lasting positive impact on ordinary Angolans. With the introduction of a new Sovereign Wealth Fund (SWF), the government is now promising to put the oil wealth to work towards the goal of generating wealth for all Angolans, by promoting more inclusive socio-economic development. The Fundo Soberano de Angola (FSDEA) – the brainchild of President José Eduardo dos Santos – was established in 2012 to promote greater national growth and prosperity by investing Angola’s oil income in different industries, across domestic, regional and global markets. In doing so, it is hoped that these investments will generate long-term and sustainable financial returns, improve the country’s infrastructure and create opportunities for Angolan citizens. Headquartered in uanda, the fund has an initial endowment of $5 billion – half of which has been allocated to projects in Angola, as well as other African countries. While investments in Angola will eventually focus on a diverse set of non-oil sectors such as agriculture, mining, and real estate, the FSDEA is initially concentrating on hotels and commercial infrastructure in the whole of Sub-Saharan Africa. “We are focusing on investments which are sustainable in terms of their long term returns and we also are focusing on the social and economic well being of the people in Angola and in the regions. That is where we see the potential of African institutions and countries growing and going forward,” the Fund´s Chairman, José Filomeno dos Santos, the son of President dos Santos, said in a recent interview. Considering the region’s growth potential – with its huge mineral reserves helping it to become a commodity hub – the FSDEA expects demand for hotels to be particularly high among international business travelers, thus offering the high probability of a good return on its planned investment in 50 properties over the next three years. The added rationale in creating this dedicated Hotel Fund is that the hospitality sector holds substantial potential for job and wealth creation and stimulates a local supply chain that positively impacts the region’s local economies. For Angola specifically, these types of investments will hopefully play a critical role in development of the country’s human capital, helping to build the foundations that are essential to improving the living conditions of its people. Meanwhile, the FSDEA is also currently setting up a separate infrastructure fund for Sub-Saharan Africa that will participate in projects including ports, airports and power plants. oth the hotel and infrastructure funds are expected to become operational in the coming months, with some possible projects already identified. The remaining half of the FSD A’s initial $5-billion endowment is intended to be reserved for capital preservation, meaning that it will be invested in interest-bearing assets such as sovereign and corporate bonds, as well as invested in stocks in developed economies that have highly regulated markets, such as the G7 countries. In the long term, investments in high risk- high return frontier markets outside of Africa will also be considered.
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For the time being though, the FSDEA will have a lot of work to do to before it can convince its own citizens of the Sovereign Wealth Fund’s true worth in terms of achieving comprehensive social progress. Until now, much of the population has been left aggrieved that the country’s oil money failed to bring real development to those who need it most, with large portions of wealth apparently siphoned off by corruption. The FSDEA has already come in for criticism because its chairman is the son of the country’s president. Some argue that the appointment immediately sapped the fund’s credibility. José Filomeno dos Santos says his studies in finance and experience in founding and running an investment bank qualify him for the job. While Angolans will have to wait and see what kind of genuine impact the fund will deliver, they will likely be encouraged by the success of SWFs in other resource-rich African countries. For example, otswana’s ula Fund – established in 1994 – is fed with income from exports of minerals and diamonds, and its value has increased substantially over the course of the last two decades through investments in foreign currency. This has helped lay a foundation for a future when its resource revenues may eventually run dry.
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Interview OIL&GAS
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INTERVIEW
JOSÉ MARÍA BOTELHO DE VASCONCELOS, MINISTER OF PETROLEUM
with
WF: Angola’s economy registered average growth rates of 10.5% between 2001 and 2010. How do you assess the country’s current climate of economic development and what are its prospects as a regional power? Judging by the indicators obtained prior to 2010, there is a clearly visible image of an economy that is on the rise. We should take into account the reality of the international economic and financial crisis of recent years, but the truth is that Angola has been maintaining a positive level of growth, currently above 3%. As you must know, oil has been the catalyst for our development, and we will continue to work in that direction with objectives and programs implemented by the government. Our economy should not be permanently held hostage to oil sector revenues, and so we must take advantage of these (other) resources to re-launch our economy. If we look at the macroeconomic indicators, we can see that Angola, in terms of exports, maintains practically the same levels that we had before. That is, 98% of our exports consist of oil and diamonds, although there are other mineral resources that are starting to be integrated into the revenue mix. In terms of revenues, we also had a decline from 75% to 70% (of the total) in the tax revenues that originate
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Petroleum will continue to dominate Angola’s economy for the foreseeable future. But as Petroleum Minister José María Botelhos de Vasconcelos points out in this interview, Angola’s dependence on oil has been reduced in recent years, as other industries contribute more to tax revenues and to overall economic growth. from oil. In another extremely important indicator, GDP, (oil) used to comprise 60% and today it represents about 43%.... We are a country with about 20 million inhabitants and we need to provide the people with the conditions required to reduce the differences between the various social strata of Angolan society. This translates into reducing poverty as much as possible. International institutions, connected to UN itself, have been making positive assessments of the levels of human development in Angola. Just to give you an idea, the level of poverty, which used to be at around 70%, is now down to 36%.
WF: Following the 20th anniversary (in 2013) of diplomatic relations between the USA and Angola, what would you say is the importance for Angola of having the United States as a partner? BV: We have a very positive relationship, because we always maintained cooperation with regard to energy. I mean, our greatest partners have been American companies, such as Exxon, Chevron, Halliburton, among other service providers from the sector. I can say that it is a relationship in which the dialogue has owed very well.
WF: In a sector in which there are major international players, what would be the policies to facilitate allowing local companies to enter the sector? BV: We already have some local companies participating in this industry, but as you must know, most of our activity is developed offshore. Nevertheless, we are starting a bidding process for some onshore concessions, where the policy that we defined is to promote the integration of more local companies, which may overcome their deficiencies by establishing partnerships with foreign companies with the required technical knowhow and financial resources. In terms of the provision of services, there is a whole process being implemented, in which some local providers are already present in the oil industry, involved to a degree based on the complexity of each of them. As I mentioned above, given the complexity of this sector, there are only three or four national companies that are in fact operating (Somoil, Crete, Falcon and Initial Oil).
WF: You recently said that the Angola LNG project signals a new stage for the hydrocarbons industry in Angola. How do you foresee the development of that industry and how is the project coming along?
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OIL&GAS Interview
BV: We all know that, when it was conceived, the Angola LNG project had the USA as its target market. But with the current reality, after the discovery of non-conventional gas three years ago, the American market is no longer as attractive. With regard to the project’s evolution, it is still moving forward and, as you know, there are regions in the world with greater need for gas than others, as is the case of Europe and Asia. At the moment, this is the target market for Angola’s natural gas. This is the project’s first stage of development and there will be a second stage, in which we will take advantage of this resource for the production of some petrochemical products.
WF: With regard to the introduction of the New Law on Foreign Exchange Policy, how was it received by the industry in Angola?
WF: In your opinion, what makes Angola one of the most competitive countries for the oil and gas business, when compared to other countries in the continent?
BV: I am certain that its implementation has been positive and there is, in fact, full compliance by the operating companies. But as you know, any new law sometimes causes concerns. Nevertheless, as I said, the implementation itself has been good and made incrementally. We established 24 months for its effective implementation until October (of 2013). In short, it is a process that is ongoing, safely and soundly, although there were some small negative reactions at the beginning, but overall, it has been developing in a very positive manner.
BV: Fundamentally, I think that it comes down to the instruments and mechanisms used in contractual relations in Angola that attract investments to the country. In this regard, we can mention our tradition in the oil industry, because we have always rigorously honored our contractual relations with our partners, which gives us conditions that maybe other countries do not have. Our Law on Private Investment is very well adapted to the reality of the country and contributes toward the great attractiveness that we have always had, since far back in time.
“OUR ECONOMY SHOULD NOT BE PERMANENTLY HELD HOSTAGE TO OIL SECTOR REVENUES, AND SO WE MUST TAKE ADVANTAGE OF THESE (OTHER) RESOURCES TO RELAUNCH OUR ECONOMY.”
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Angola U.S-CHINA RIVALRY
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U.S.-CHINA
‘BATTLE FOR AFRICA’ COMES TO THE FORE IN ANGOLA The U.S. government and American companies are eager to make up the ground lost to China in Africa during recent years. Angola has become a key battleground in this struggle for economic influence on the continent. By Jonathan Meaney sion to hold the first African Given China’s insatiable thirst Leaders Summit in Washingfor Africa’s natural resources ton in August, 2014. This push over the past decade, it came has sparked what has been as no surprise in 2009 when dubbed the “battle for Africa” the Asian giant overtook the between the world’s two largUnited States as Africa’s leadest economies – and Angola ing trading partner. Total trade between China and Africa has become one of the major stood at around $200 billion in battlefields. 2012, nearly double the $109 The changing trade and billion between the U.S. and investment landscape in AnA U.S.-manufactured Boeing 777 aircraft purchased by Angola´s national airline TAAG, the continent during the same gola re ects that of Africa as a it fi a ci g fro t e ort- ort a period. On a trip to Africa earwhole. China is now Angola’s lier this year – which included largest commercial partner; a stop-off in Angola – Chinese Premier Li Keqiang said he exbilateral trade reached $37.5 billion last year, according to pects Sino-African trade to double in the next six years. figures from the Chinese embassy. With large investments in The investment landscape has also changed drastically. infrastructure and energy, Angola has become the number While the United States, the United Kingdom and France one destination for Chinese investment in Africa. still hold the largest share of investments in Africa, China’s The total value of trade between the U.S. and Angola stake in the continent is growing significantly, particularly in was $10.2 billion in 2013 , making it Angola’s second largest energy and infrastructure. State-owned and private Chinese commercial partner – overtaking the former colonial master companies have become major investors, spending nearly Portugal – mainly due to oil imports. Between 2003 and 2011, $100 billion in projects in Africa over the last decade. the United States invested close to $25 billion in Angola, acThe U.S. government and businesses are now pushing cording to a report by consultants Ernst & Young; the largest to make up the ground lost to China in Africa in recent years part of this investment has come from oil and gas companies and to regain their dominant position. Last year, many media such as ExxonMobil and Chevron. reports pointed to arack bama’s first official visit to the The US-China battle for in uence in Angola came to the continent as a clear signal of this intent, as was his decifore earlier this year when in May, U.S. Secretary of State
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U.S-CHINA RIVALRY Angola
John Kerry and Chinese prime minister Li Keqiang touched down in Luanda within just a few days of each other. Both were eager to discuss expanding commercial ties with President José Eduardo dos Santos, who sees the two countries as strategic partners, along with Brazil and Portugal. With the emergence of the shale gas industry in the U.S., demand for Angolan oil will continue to fall at a time when China takes more than 40% of Angola’s petroleum and gas exports. Kerry wants to see commercial ties move beyond oil and gas. A renewed and modernized African Growth and Opportunity Act – which has facilitated the significant increase in trade ties with Sub-Saharan Africa since its establishment 2000 – could help to make this happen. “Angola’s economy has experienced, and continues to enjoy, a remarkable amount of economic growth,” Kerry said during his visit in May. “We talked about increased possibilities of cooperation in agriculture, in technology, in energy diversity, and also in infrastructure.” The Secretary of State commented that his trip was also an opportunity to repair diplomatic ties, damaged as result of a number of cancelled meetings, Obama’s decision not to visit the country on his African tour in 2013, and the U.S.’s historic support for rebel leader Jonas Savimbi, whose death in 2002 led to the end of the Angolan civil war. While support for Savimbi had come mainly from the conservatives (Ronald Reagan invited Savimbi to the White House in 1987 and hailed him a “freedom fighter , it was resident eorge W. ush who first invited resident Dos Santos to Washington in 2002 following Savimbi’s death. At the meeting, both leaders agreed to put political differences aside to advance commercial ties. Relations were further strengthened in 2009 when then Secretary of State Hilary Clinton made a working visit to Luanda, where she announced that Angola was one of America’s strategic partners in Sub-Saharan Africa. This led to the signing of a strategic partnership agree-
32-35 Angola US Relations 2 8x10,5.indd 33
THE U.S. GOVERNMENT AND BUSINESSES ARE NOW PUSHING TO MAKE UP THE GROUND LOST TO CHINA IN AFRICA IN RECENT YEARS AND TO REGAIN THEIR DOMINANT POSITION
ment in 2010, which paved the way towards deeper commercial and diplomatic ties, as well as expanded cooperation in agriculture and the strengthening of democratic institutions. Apart from trade and investment, China’s financial institutions have provided loans worth $14.5 billion since 2002. Now the United States is keen to get in on the act. This year alone, the U.S. xport-Import x-Im ank has recently signed two major loan deals worth $1.7 billion – American money which will be used to finance deals with American companies.
ecretar of tate o
The first loan, for $600 million, will finance the acquisition of three Boeing aircraft for Angola’s national carrier, TAAG. The second, for $1.1 billion, will pay for purchases from eneral lectric of locomotives and of electrical power equipment. (The latter is part of Obama’s Power Africa initiative, announced last year, which will invest $7 billion to increase access to electricity in SubSaharan Africa . “U.S. exporters are eager to realize the tremendous opportunities in this region, and the bank is helping them create and sustain American jobs by increasing their exports to Africa,” declared CEO of Ex-Im Bank Fred Hochberg during his three-day visit to Angola in June. edro odinho Domingos, xecutive Director of the U.S-Angola Chamber of Commerce, has said that he would like to see more U.S. financial institutions enter Angola. “We are trying to invite American banks into the market. We want to create links with big financial institutions like ank of America, Citibank and JP Morgan. We had a meeting with the governor of the central bank; he said that they are open to it, and the US banks would be welcome,” he explained in an interview with The Worldfolio.
err a resses or ers at a e eral lectric facilit i ua a i
a
14/11/14 16:02
APPLYING WEALTH TO SUSTAINABLE DEVELOPMENT
The Mining Society of Catoca Lda is a prospecting, exploration and diamond trading company. Founded in 1995, it has a firm commitment to sustainable enterprise. Activities range from investing in the professional development of its members, ensuring strict environmental procedures are adhered to, and helping the community in terms of education, health, culture and entrepreneurship.
www.catoca.com
Catoca 210x275 2.indd 1
11/14/14 11:47 AM
35
U.S-CHINA RIVALRY Angola
Angolan Foreign Mininter Georges Chikoti (r.) with U.S. Secretary of State John Kerry during the latter’s visit to Angola in May, 2014.
ANGOLA HAS BECOME THE NUMBER ONE DESTINATION FOR CHINESE INVESTMENT IN AFRICA, WITH A SPECIAL FOCUS ON INFRASTRUCTURE AND ENERGY.
The loans provided by Ex-Im Bank for power and transport infrastructure are part of a growing trend of U.S. investments outside of oil and gas. “There are an increasing variety of companies coming in,” U.S. Charges d’Affairs to Angola Heather Merritt said. “For those able to overcome some of the barriers to entry and the costs of doing business here, it has been a very rewarding market. That
32-35 Angola US Relations 2 8x10,5.indd 35
is why you see GE here, as well as John Deere Dealership, and that is why Microsoft has opened an office here. “We are looking at ways for U.S. companies and the U.S. government to continue to support Angola’s energy development – not just oil and gas, but distribution and generation and different ways we can get involved, as well as new technologies. There is definitely room here for hydro and solar, and wind,” she said. Ms. Merritt also highlighted that the U.S.’s involvement in Angola goes far beyond commercial interests. The work of U.S. Agency for International Development (USAID) and the social responsibility initiatives of U.S. corporations like ExxonMobil have focused on the fight against AIDS and malaria, through programs such as the President’s Malaria Initiative. USAID has also contributed to education development and the strengthening of local governance by helping municipal governments’ budgeting processes.
The U.S. has played an instrumental role in the post-war clean-up, particularly in the area of demining. “We have been doing this for around twenty years and we have spent billions in Angola helping clear out the remnants of war. This year we are spending about 6 million, and we are working with three NGO partners,” Ms. Merritt told The Worldfolio. Despite the claims of that the U.S. has a “lack of strategy” in Africa, the Charge d’Affairs argues that President Obama’s Power Africa Initiative, his trip to Africa last year, and his decision to host the first African Leaders Summit in Washington are all evidence of “a very clear, wellarticulated strategy for Africa.” She added Angola is a key part of this policy and that, along with South Africa and Nigeria, is regarded as one of the United States’ three strategic partners in Africa.
14/11/14 16:03
36_Angola_TheWF-CFM.indd 1
11/14/14 1:41 PM
37
Angola BANKING & FINANCE
ANGOLA’S BANKING BOOM:
NEW PLAYERS WRESTLE FOR THEIR SHARE OF A FAST-GROWING MARKET By Richard Middleton
Angola´s financial sector, like its economy, has seen rapid growth in the past decade, as the number of domestic banks operating in the country jumped from 13 in 2005 to 29 in 2014. Although the majority of assets remain in the hands of a few major banks, foreign investors have begun to seize on the opportunities present. Since the end of the civil war in 2002, Angola has leveraged its oil and gas reserves to support a recovery that has seen the country develop into sub-Saharan Africa’s third largest economy. ne of the industries that has benefited most from this expansion is the banking and financial services sector, which has experienced rapid growth on the back of the overall recovery. However, the concentration of assets in a handful of major banks, scant information about clients and a weak regulatory framework continue to hinder the growth of a sector which is essential to the development of the country´s non-oil economy. The assets of Angola’s financial sector increased from around $3 billion in 2003 to more than $57 billion in 2011. They jumped further, to over $71 billion in 2013, with deposits increasing by 8% year-on-year. Government investment in infrastructure projects and regulatory changes to the country’s financial systems have helped some of this growth
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and the wider global economic recovery has improved the country’s outlook. Moody´s Investors Service, which gives a Ba2 rating to Angola´s sovereign debt, in August upgraded the country´s outlook from positive to stable, citing the expansion of the oil and gas sector. However, Moody´s said the key constraints to Angola s progress are a lack of economic diversification and weak institutional strength.” Serious questions are also being asked about the extent of Angola’s recent financial reforms and their long-term impact. However, the potential that the nation presents has already helped its banking sector to become the third-largest in sub-Saharan Africa. “The banking sector in Angola is growing by 20% a year in terms of the total assets held,” says Alvaro Sobrinho, CEO of Banco Valor Angola. “And it’s not just banking, but a whole financial sector is now appearing, with other key players from asset managers to insurers increasingly finding a foothold.
14/11/14 16:28
Angola BANKING & FINANCE
38
THE ANGOLAN C DIT A T HAS N WIN Y AN A A F 50 Y A F TH AST FI Y A S, F CTIN TH A I ITY F AN S T AD N TH I ACH.
The number of banks operating in Angola has nearly doubled in recent years, from 13 in 2005 to 2 at present, helping its financial sector to become the third-largest in sub-Saharan Africa. That growth has seen 29 banks licensed to operate in Angola today, up from 13 in 2005. However, the bulk of business is done by just five institutions, which continue to exert the majority of control over the expanding sector and in 20 3 represented 72% of total assets, according to a report from global audit firm . The group is comprised of Banco Angolano de Investimentos (BAI), Banco Espirito Santo Angola (BESA), Banco de oupan a e Cr dito H , anco de Fomento Angola FA and Banco Bic (BIC). Each faces substantial competition from innovative entrants that are keen to profit from the return of steady economic growth to the country. ne of the top five, SA, was placed under government control in August, shortly after ortugal announced a . billion Euro ($6.58 billion) bailout for the bank’s parent company, Banco Espiritu Santo. The Angolan government, citing BESA’s deteriorating credit portfolio, also revoked a $5.7 billion loan guarantee it had previously extended to the bank. In October, the central bank said that BESA would need an injection of 25.8 billion kwanzas $ .3 billion in order to restore its solvency. BESA’s problems aside, Angola’s natural resource industries have attracted other foreign banks, including Londonlisted Standard Chartered, which recently opened a corporate branch in Luanda. Nigeria-based United Bank for Africa is also seeking a license to operate in Angola. C hillips duoza described the country as “a very interesting market and one that’s growing very rapidly. ther players looking at Angola include ortugal’s anco I and ussia’s second largest institution, T . Foreign investors’ confidence in Angola was shaken during
37-41 Banking and finance-V5 8x10,5.indd 38
the global financial crisis, when the country’s reliance on oil and gas exports became all too evident. The rapidly growing economy experienced a series of shocks that sent D plummeting from over 3 per year to 2. between 200 and 2008. Confidence is returning, however, with infrastructure projects and the rise of privately-financed initiatives helping to support D growth, which is forecast at 3. in 20 and 5. in 20 5, according to the International onetary Fund. Angola has also been building its international industrial relations, not least with ermany. Angola s exports to Europe’s powerhouse economy rose 55% in 2012/13 to 391 million uros. overnment officials and a variety of erman business owners have also visited to explore opportunities. eorges Chikoti, Angola’s minister of external relations, says strengthened ties will help power further economic expansion, and will in turn provide further opportunities for financial and banking service development. The entry of international banks such as Standard Chartered is also helping to power wider economic growth in its own right. Angolan insurer NSA holds a 0 stake in the new Standard operation and V. Shankar, the bank´s head of Europe, iddle ast, Africa and Americas operations, has said the firm will use its international branches in Asia, the Middle East and Africa to help develop relationships with its new Angolan clients. resident ose duardo dos Santos has also been keen to encourage entrepreneurship, partly via the National Development lan that kicked off last year and will run until 20 . “In this period of transition, the nation needs entrepreneurs and strong and efficient private investors to boost the creation of more wealth and employment, Dos Santos has said. The major objective of economic policy for this legislature is to promote the diversification of our economy, in order to make our development process less vulnerable and more sustainable.” To do this, Angola has been reforming its financial regulations to provide more structure and create a more stable macroeconomic environment. In 20 2, a foreign exchange law was enacted that requires the country’s oil companies to pay domestic taxes and settle bills in Angola’s kwanza, bolstering the currency and boosting profits for some uanda-
14/11/14 16:28
39
BANKING & FINANCE Angola
based banks. Oil operators must also now pay suppliers in kwanzas and use domestic lenders. n top of that, the nation’s extensive oil reserves, a sovereign wealth fund and wide-ranging attempts to diversify the economy are all set to help the purchasing power of Angolans rise by 5% per annum until 20 , according to the I F. This growth is helping to expand banking services to the country’s population. That expansion can be seen through the nation’s ATM system, known as ulticaixa, which has grown extensively across the country. edro una, C of interbanking service firm mis, has said that he expects the number of ATM transactions to top 30 million each month, up from just 10 million per month in 2010. Over 2.3 million Multicaixa cards are currently in circulation.
Yet overall banking penetration is still remarkably low at 30%, according to , which predicts that the figure will double by 2016. As evidence, it cites the growth in the number of bank branches, which rose by .2 in 20 3, with an average of 3 new offices opening each month. The pace of Angola’s banking and financial service revolution is clear. According to a World ank update from last year, the Angolan credit market has been growing by an average of over 50 per year for the past five years, re ecting the ability of banks to broaden their reach. The increase in the number of branches is certainly a factor; however the proliferation of mobile technology could also assist operations. Africa is the world’s second-most mobile connected region and developments such as the - SA mobile
payment system, which is a joint venture between odafone and enya’s Safaricom, allows payments to be sent from towns to rural villages and could transform Angola’s sporadic and largely Luanda-based banking operations. Other pan-African initiatives such as Safaricom’s M-Shwari account, which offers a savings account and microloans, could also reap benefits in Angola, where its ability to provide some kind of a credit rating system could assist banks’ abilities to provide credit. itor ibeirinho, partner and head of audit and financial services at Angola, says that the country’s banking sector “continues to present itself as one of the most dynamic sectors” but “one with growing challenges.” In a 20 3 report, ibeirinho said the sector needed to boost its client base to attract
Images from the Angolan 100-kwanza banknote: President José Eduardo dos Santos (left) and Antonio Agostinho Neto, the first resi e t of gola follo i g i e e e ce from Portugal.
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Angola BANKING & FINANCE
the growing middle classes and expand access to new services, including insurance products and investment funds, in order to earn commissions and service fees. Angolan companies have also struggled to find the required financial services to start and expand businesses, particularly with regards to sourcing credit. Small- and medium- sized enterprises (SME’s) continue to be dogged by the country’s fragile and in some cases non-existent financial infrastructure. Furthermore, while the country’s more established companies, and foreign-owned entities, can use collateral and relationships to access credit, domestic SME’s are left with little alternative but to seek financing locally. egulatory improvements are being made resulting in new revenue streams for existing financial instiutions in Angola and bolstering S growth. Among these improvements is the creation of the Fundo Activo de Capital de isco Angolano, a public venture capital fund which provides financing and management advice for SME’s, particularly startups with innovative projects (See the interview following this article). Acoording to 20 report from the World ank, The government has made substantial progress in establishing the necessary conditions for the financial sector to thrive, but critical challenges remain.” Angolan firms now enjoy greatly expanded access to the financial system, but the system is not yet capable of evaluating them accurately on their merits as borrowers. Continuing strengthening of its institutions and regulatory framework would support a diverse, efficient and competitive financial sector, which will be a vital asset to Angola’s continued growth and development.” To Angola’s credit, a variety of reforms have already been introduced with the intention of creating a more transparent and effective financial services industry. In 20 2, the Comit de stabilidade Financeira C F was launched to evaluate the main growth indicators of Angola’s financial system, including profitability, liquidity and solvency, and to assess
37-41 Banking and finance-V5 8x10,5.indd 40
40
how future policies could improve the sector. By the end of 20 , new regulations will be introduced to ensure all banks face stricter reporting and risk-management standards. As part of the reforms, the central bank´s Base Interest ate and the uanda interbank offered rate uibor , were created in 2012. Meanwhile, Angola’s Capital Markets Commission (CMC), set up in 2005, continues to work on developing a stock exchange, which has been subject to numerous delays. The uanda Stock xchange is now set to launch in 20 . A secondary debt market is slated to start operating in late 20 as a precursor to the exchange, and a private corporate debt market is also being planned. The government’s ability to push through these measures will be vital to securing longer-term financial stability and expanding the financial services market. Angola’s central bank has also recently shown its willingness to use interest rates to boost investment. After in ation fell to an historical low of . in une, the NA lowered the benchmark interest by half a percentage point to 8.75%. It was the fifth such cut such cut since the bank s onetary olicy Committee was created in ctober, 20 . As the banking sector grows, ibeirinho, of Angola, says increased international exposure will also create a “set of additional challenges related to corporate governance, risk management and compliance, not to mention continued business innovation and cost base optimization. n the other hand, ibeirinho adds, the financial institutions will likely continue to focus on innovation, quality of service rendered to the customer, as well as the exploitation and development of business opportunities arising as a result of the new legislation in force, such as, for example, those related to the tax system reform, the foreign exchange law or the capital markets (primary and secondary).” All this points to an expanding sector and, with the beginnings of a more sophisticated regulatory framework, even greater potential for new entrants. Technological advancements such as mobile banking remain relatively undeveloped in Angola, meaning large sectors of the population still do not have access modern credit and deposit accounts. While Angola’s financial services sector undoubtedly holds opportunities, the limitations around the country’s regulatory systems and the difficulty of imposing suitable credit checks will continue to affect the industry’s growth. These are not simple reforms and will require an even greater will to implement than the substantial changes that have been affected to date.
14/11/14 16:28
E
41
BANKING & FINANCE Angola
THE NUMBERS TELL THE STORY
Total deposits and assets of Angola´s major banks have been growing in recent years, due in part to the expansion of their branch networks, which has brought banking services to a larger percentage of the population.
TOTAL ASSETS #
MILLIONS OF AKZ
Financial Institution
2013
2012
1
BESA
Banco Espírito Santo Angola
1.107.13
1.007.218
2
BAI
Banco Angolano de Investimentos
1.039.693
1.033.428
3
BPC
Banco de Poupança e Crédito
988.181
919.369
4
BFA
Banco de Fomento Angola
868.032
759.902
5
BIC
Banco BIC
751.324
664.191
6
BPA
Banco Privado Atlântico
357.006
293.409
7
BMA
Banco Millennium Angola
223.483
175.527
#
8
BDA
Banco de Desenvolvimento de Angola
221.048
185.407
1
BAI
Banco Angolano de Investimentos
902.936
815.204
9
BSOL
Banco Sol
205.840
178.638
2
BFA
Banco de Fomento Angola
763.025
668.106
10
BNI
Banco de Negócios Internacional
184.176
162.145
3
BPC
Banco de Poupança e Crédito
731.953
629.491
11
BCGTA Banco Caixa Geral Totta de Angola
183 016
151.648
4
BIC
Banco BIC
615.478
525.785
12
SBA
Standard Bank Angola
148.492
61.977
5
BESA
Banco Espírito Santo Angola
349.163
349 112
13
BCI
Banco de Comércio e Indústria
98.897
106.513
6
BPA
Banco Privado Atlântico
276.290
204.753
14
KEVE
Banco Regional do Keve
98.200
85.815
7
BSOL
Banco Sol
182.475
154.469
15
FNB
Finibanco Angola
54.603
28.698
8
BMA
Banco Millennium Angola
162.727
112.915
16
BCA
Banco Comercial Angolano
30 854
36.651
9
SBA
Standard Bank Angola
134.737
52.022
17
BANC Banco Angolano de Negócios e Comércio 16.362
15.154
10
BNI
Banco de Negócios Internacional
133.500
125.102
18
BVB
132.395
112.668
19 20 21
SCBA
Standard Chartered Bank Angola
22
BCH
Banco Comercial do Huambo
23
BMF
Banco BAI Micro-Finanças
24
BPPH
TOTAL DEPOSITS Financial Institution
MILLIONS OF AKZ 2013
2012
Banco Valor
15.120
7.016
11
BCGTA Banco Caixa Geral Totta de Angola
VTB
Banco VTB África
14 .358
11.295
12
KEVE
Banco Regional do Keve
83.049
70.630
BKI
Banco Kwanza de Investimento
9.121
3.519
13
BCI
Banco de Comércio e Indústria
67.119
69.387
4.827
nd
14
FNB
Finibanco Angola
42.497
19.345
4.058
3.156
15
BCA
Banco Comercial Angolano
23.789
29.843
nd
nd
16
BANC Banco Angolano de Negócios e Comércio 10.739
9.474
Banco de Poupança e Promoção Habitacional nd
nd
17
BVB
Banco Valor
9.992
6.210
18
VTB
Banco VTB África
7.005
6.380
19
BCH
Banco Comercial do Huambo
2.507
1.772
20
BKI
Banco Kwanza de Investimento
1.015
2.376
21
SCBA
Standard Chartered Bank Angola
0
nd
22
BDA
Banco de Desenvolvimento de Angola
nd
nd
23
BMF
Banco BAI Micro-Finanças
nd
nd
24
BPPH
Banco de Poupança e Promoção Habitacional nd
nd
Exchange Rate: 1 US dollar = 99.85 kwanza. (November, 2014).
Source: KPMG, Análise do Sector Bancário Angolano, Outubro 2014.
37-41 Banking and finance-V5 8x10,5.indd 41
14/11/14 16:28
Interview FACRA
42
INTERVIEW TEODORO DE JESUS XAVIER POULSON, MEMBER OF THE MANAGEMENT COMMITTEE OF FACRA (FUNDO ACTIVO DE CAPITAL DE RISCO ANGOLANO)
FACRA, a public venture capital fund, provides financial, technical and management support to small and medium-sized businesses in Angola. One of the largest venture capital funds in Africa, FACRA offers a financing alternative for local entrepreneurs, particularly those with innovative projects. Teodoro Poulson talked to The Worldfolio about FACRA’s goals and how it hopes to contribute to Angola´s economic diversification.
WF: First of all, we would like to talk about your overall view of Angola. Before one decides to invest in a country, there are different variables to take into consideration, beyond the economy and finances. Do you think that political stability may be a factor in the growth of the number of new companies in Angola? TP: Precisely. In my opinion, peace is one of the most important factors in the development and growth of a country. In order to grow and reach a state of development, a country needs peace and harmony, and needs its population to feel at ease and know that free circulation of people and goods across the country truly exists. This is what attracts investors, boosts the confidence of the country’s international creditors, and shows that the country—in this case, Angola— has a higher organizational index. We are more stable because of this period of peace over the last approximately 10 years, that things are working very well and that what is happening is an example to be followed by the whole of Africa.
WF: Globally, we have seen that start-ups are playing a more important role in technological development. What is the role
42-43 interview FACRA-2 8x10,5.indd 42
played by FACRA in making it possible for the country to join this global trend? Can we say that FACRA is a driving force for innovation in the country? TP: It’s true, FACRA is focused on innovative projects. Why? Because innovation guarantees the sustainability of these projects. An innovative project with broader acceptance in the short, medium and long term attracts the confidence of people, because it is something that did not exist before in the market. This is why we are focused on innovation as a goal, because it generates added value for the product, strengthens the diversity of the economy, and expands the job market.
WF: You mentioned sustainable long-term development, and another key concept that we must talk about is economic diversification. What is the estimated impact? What is needed for the country s diversification TP: We hope that, by 2022, we will at least reach a level of employment above 500,000 jobs, and a contribution to the country’s GDP of about $10 billion. This is our primary objective and we are working to achieve these goals.And since we have a 10-year mandate, our main guidelines are aimed at reducing poverty, re-
placing imports with national products, and generating an expanded offer of goods and services for the population.
WF: In the past, you´ve talked about the importance of filling the gap between the large international companies that have been opeating in Angola for over a decade and the micro-compànies that work in isloation. What is FACRA´s investment strategy to support the growth of these microcompanies? TP: FACRA supports the growth of companies. Our objective is that these micro, small- and medium-sized businesses may grow, generate added value, and develop a revenue structure capable of ensuring their own sustainability. Not only during the period of investment by FACRA, but also later, in their regular daily operation, so that they continue to grow and thereby help to achieve the goals set by the government and which I just mentioned: diversifying the economy, generating jobs, reducing imports and replacing them with national production. Our greatest interest is boosting their growth, not only financially, but also in terms of know-how, through capacity-building and management sup-
14/11/14 16:39
43
FACRA Interview
port, to create the dynamics required for them to continue progressing and generating that development.
er. Because, in general, the promoter is the one that started the project, and we always give priority to the business promoter.
WF: In this context of promotion of small and medium-sized businesses, could FACRA be considered an alternative to conventional financing by the banking system hat are the advantages
WF: Considering the challenges of Angola, which is ranked 179th in the orld Bank report on the Ease of Doing Business, what is the direct or indirect role that these institutions can play in the growth, improvement and transparency of the Angolan financial sector
TP: FACRA has a lot of advantages because it is much more than just financing. It invests financially, but also provides management support. Therefore, FACRA is different from conventional financing. ecause a bank will only give financial support, and that’s it. FACRA isn’t like that: it accompanies management and creates institutional forms of support that promote the growth of the company. FACRA also does not charge interest, it takes on a business as its own, participates in its management, becomes a partner in the project, and later sells its participation— this is FACRA’s investment. Bank loans, on the other hand, are a different form of financing, which charges interest and, in a way, hinders the rapid growth of companies.
WF: With the future establishment of the stock market, there is a potential for profit from IPOs (Initial Public Offerings). hat are the other exit strategies for FACRA to get a return on its investment? TP: Good question. Our priority is to be the promoter, the owner of the project. Our primary intent is to sell our participation to the business promoter. Only in the event that the promoter is not interested, or does not have the capacity to buy our participation, will we resort to the alternative method, which would be the stock market. But we will only use the stock market as a last resort. Our primary intent is to sell our participation to the business promot-
42-43 interview FACRA-2 8x10,5.indd 43
TP: FACRA follows internationally accepted rules of governance. FACRA is an institution that always values transparency and clarity in all our operations. We are well trained and have a specialized team that deals with these projects; we are audited and accompanied by equally accepted and recognized international accounting firms. This means that we use and stand by very stringent criteria in our operations. We have no issues with regard to transparency.
WF: To conclude, what is the most rewarding aspect of your work? And what is your dream with regard to the development of small businesses in Angola? TP: The most rewarding part is seeing companies grow and produce, seeing the Angolan people produce what is consumed in Angola. This is our greatest satisfaction, as an institution and as a citizen of Angola. We want Angola and the Angolan people to be able to work to produce the goods and services required for local use. Therefore, our greatest challenge, our greatest desire, is for Angola to start consuming more national products. Because Angola has the potential, has the capacity, has sufficient natural resources to produce goods and services, not only for the Angolan people, but also to export. So, we want to reverse our role as importers and become exporters. Not just of oil, but of other goods and services.
14/11/14 16:39
Angola DOING BUSINESS
44
ANGOLA
Doing Business
DOING BUSINESS:
NEW RULES TO
CHANGE OLD HABITS By Jonathan Meaney
Angola offers both high risks and great rewards to investors and exporters. The rules for setting up a company are complicated and the processes often slow. Nonetheless, the country is intent on attracting capital from abroad. We take a look at recent changes to investment legislation and what they mean for business. As one of the world’s fastest growing economies, with a burgeoning middle class and an increasingly diversified industrial base, Angola is certainly an attractive destination for foreign investors and the range of fiscal incentives available make it even more so. The African continent’s global share of foreign destination investment FDI has grown from 3.2 in 200 to 5. in 20 2, and Angola has been one of the largest recipients of those capital in ows. The country is the seventh largest destination for FDI in Africa and third largest in the sub-Saharan region. Since the establishment of the first investment law in 2003 following the end of the civil war, Angola has attracted more than $50 billion of FDI, 80 of which has been in the coal, oil and gas sectors. While the oil, gas and mining industries will continue to dominate the foreign investment landscape, sectors such as real estate, construction, telecommunications, financial services, agri-business, and retail and consumer products have become increasingly attractive for foreign investors. Angola has been open and eager to attract foreign investment since 2002, the year that saw the end of the civil war. To attract the private investment needed to drive economic growth and rebuild infrastructure, the government in 2003 established the National Agency for rivate Investment ANI and introduced the asic
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Private Investment Law, which laid down the rules and incentives for both foreign and domestic investors. This law stipulated that Angolan and foreign investors would be treated equally and offered similar opportunities with respect to the country’s policy on incentives related to taxation and customs duties. The government introduced new investment legislation in 20 in order to encourage more private investment in a range of industries and prioritized zones for economic development. The new legislation alters fiscal benefits and incentives, aims to reduce bureaucracy and facilitate legal procedures, and provides a range of guarantees to eligible investors, such as repatriation of capital. One of the most notable changes to the private investment law is the minimum capital requirement for foreign investors to qualify for incentives. This has jumped from $ 00,000 to $ ,000,000. Investors should be aware that this minimum project capital requirement figure is per investor and not per company . For example, if a company has five foreign partners, the law considers each to be a private investor, therefore raising the minimum capital investment for a project to $5 million. argescale investments between $ 0 and $50 million must be assessed and approved by the Council of inisters. rojects above $50 million are subject to approval by a special presidential committee.
THE NEW LEGISLATION ALTERS FISCAL BENEFITS AND INCENTIVES, AIMS TO REDUCE BUREAUCRACY AND FACILITATE LEGAL PROCEDURES, AND PROVIDES A RANGE OF GUARANTEES TO ELIGIBLE INVESTORS.
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DOING BUSINESS Angola
NKING NK´S RA A B D L ESS. R G BUSIN THE WO N I N O I D S F D STAN ASE O ANGOLA MS OF E R E E R T E N H I W RIES, COUNT ing OF 189 . Understand siness 2014 . Doing Bu s. ld Bank, 2013 e Enterprise Source: Wor Medium-Siz d an l al Sm r fo ns Regulatio
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ANGOLA’S RAPIDLY DEVELOPING ECONOMY, GROWING
44-47 Doing Business-V2 8x10,5.indd 45
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Angola DOING BUSINESS
Investors are obliged to enter into a contract with the Angolan government, represented by ANI . The agency acts as a one-stop shop for foreign investors, whose main function is to streamline bureaucratic procedures, and to provide advisory support, technical and legal assistance and investor protection. The 20 legislation gave ANI more power to approve projects and decide on incentives, in order to speed up processing and approval time. ach project is assessed on a case-to-case basis by the agency, which also lays out the incentives available accordingly. As the government is determined to diversify the economy away from the oil and diamond industries, and to spread economic growth to areas outside of the main industrial centers such as Luanda, the size and range of incentives vary, depending on location and economic sector. Incentives are offered in sectors that the government has prioritized for development, such as: agriculture and cattle breeding; the processing industry; fishing and fish products; civil construction; health care; education; road and rail infrastructure; port and airport infrastructure; telecommunications; and energy and water supply. Almost every sector of the economy is open to foreign investors. However the law prohibits investment in areas which by law are the sole responsibility of the State of Angola, such as: manufacturing, distribution and sales of warfare equipment; banking activities related to the central bank and treasury; administration of ports and airports, and the national network of basic telecommunication infrastructures. Areas prioritized for development are broken into three zones A, and C. Investors are eligible for tax exemptions of up to five years in one A province of uanda and municipal centers of enguela, Huila and Cabinda provinces, and the municipality of obito , up to eight years in one provinces of wanza Norte, wanza Sul, engo, U je, undas and interior municipalities of enguela, Cabinda and Hu la , and up to 0 years in one C municipal centers of enguela, Huila and Cabinda provinces, and the municipality of obito . Investors are also eligible for an exemption of up to six years from customs duties and levies on goods and equipments, including heavy and special vehicles, from the start of the investment operations until the complete development. After that, investors are only liable to pay stamp duty and service-related fees. It should be noted that in January of this year, the government increased import duties on items such as beer, water, fruits, soft drinks, agricultural products and livestock, from as high as 30 to 50 , to encourage local production and to reduce dependence on food imports. This would potentially impact investors in the
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hospitality and food retail sectors. However, the government has identified some goods for protection and has also eliminated duties on equipment and raw materials needed for industrial production. In 200 , Angola established the uanda- engo Special conomic one S with the objective of lowering Angola’s high dependence on imports and consolidating the development of the Angolan business community. The industrial activity at the uanda- engo S has generated more than 3,500 jobs since its establishment. While the S does not offer the incentives available at the other development zones A, and C however the possibility of offering such incentives are currently being reviewed by the Ministry conomy of Finance , it does offer companies a convenient location in which to base their business activities and guarantees a reliable supply of water and energy. Despite the country’s obvious attractions, investors should be aware of the complications of doing business in Angola. ike the majority of Sub-Saharan African nations, it faces serious problems with corruption, red tape and poor infrastructure. In its Angola investment climate report 20 3, the U.S. State Department states that Angola offers both high returns and great risks to investors and exporters… the business environment remains one of the most difficult in the world. Investors must factor in pervasive corruption, an underdeveloped financial system, poor infrastructure and extremely high on-the-ground costs. Surface transportation inside the country is slow and expensive, while bureaucracy and port inefficiencies complicate imports and raise costs. In the World ank’s Doing usiness 20 index, which sheds light on how easy or difficult it is for a local entrepreneur to open and run a small to medium-size business when complying with relevant regulation, Angola ranks th of the 8 economies evaluated, one place lower than the previous year. The country scores considerably low in Starting a usiness 8th which, according to the Doing usiness 20 report, takes days, requires 8 procedures and costs 30. of income per capita I C . This can be put in context when compared with the Sub-Saharan regional average 2 . days to start a business, requiring 8 procedures at a cost . of I C. ther notable areas in which Angola ranks particularly low include 0th in etting lectricity which takes 5 days and costs 8 . of I C ; th in Trading across orders time to exports 0 days ; 8 th in nforcing Contracts time ,2 days at a cost . of the claim . However, Angola ranks better in indicators such as rotecting Investors 80th , Dealing with Construction ermits 5th , egistering roperty 32nd and etting Credit 30th . While doing business remains challenging, the situation has improved over the years. This is evident by the Doing usiness Distance to Frontier measure. This measure shows how far on average an economy is from the best performance achieved by any economy on each Doing usiness indicator. According to this measure, Angola has improved significantly since 2005, in the areas of Starting a usiness, egistering a roperty and Trading across orders. When dealing with the bureaucratic challenges and red tape, a recent report by consultants rnst and Young Y advises foreign investors that an understanding of the strategic objectives of government and aligning investor’s commercial interests to those objectives can go a long way to mitigating these challenges . ast year the government released The Angolan National Development lan 20 3-20 . The Y report goes on to say that
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DOING BUSINESS Angola
An encouraging aspect of the ND is the priority government has given to private investment to diversify the economy and create jobs. y 20 , the ND expects ANI to double the annual amount of private investment approved. For this to happen, ANI will have to continue to streamline and facilitate bureaucratic procedures. Another serious concern for investors is corruption. In Transparency International’s Corruption erceptions Index 20 3, Angola ranks 53rd out of the 5 countries evaluated. In the World ank’s Control of Corruption indicator, it ranks 5th with the highest-ranking country being deemed the most corrupt of all countries evaluated . However, there are signs that the situation is changing. The Y Angola report states that While there is undoubtedly substance to these concerns, the situation continues to improve. ver the last 8 months, a significant effort has been put in place by Angolan soci-
ety to rescue the social and moral values lost during the 0 years of violence that ended in 2002. The associated rescue of business values initiative [is] being led by the Chamber of Commerce and Industry of Angola (CCIA)… by maintaining high anti-corruption standards and working with authorities to root out corruption, responsible investors will be aligning their objectives with those of the CCIA, ultimately ensuring long-term sustainability of commercial operations, hopefully providing investors with confidence that this risk is being addressed. oth the World ank and the I F have praised Angola for its efforts to improve transparency, particularly in the oil industry. A World ank report released in une 20 3 said that The government has improved collection and reporting processes for oil revenues and transfers, and that the authorities have made significant strides in improving the transparency and
accountability of public financial management, but challenges remain. ikewise, an I F report released in 20 similarly stated that The government has stepped up its monitoring of oil revenue transfers to the budget, and work is ongoing to reduce the large unexplained residual in the fiscal accounts and to reduce quasi-fiscal operations by the state oil company. Angola’s rapidly developing economy, enormous natural resources and attractive investment incentives offer great opportunities for investors. While ANI and the government have made an effort to streamline slow and costly procedures and tackle corruption, serious challenges remain. Still, it is worth noting that the challenges of bureaucracy, corruption and infrastructure have not deterred U.S. companies, which invested close to $25 billion 2003 and 20 , making the United States Angola’s top foreign investor.
DESPITE THE COUNTRY’S OBVIOUS ATTRACTIONS, INVESTORS SHOULD BE AWARE OF THE COMPLICATIONS OF DOING BUSINESS IN ANGOLA.
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Interview MINISTER OF TRADE
INTERVIEW
with
ROSA ESCORCIO PACAVIRIA DE MATOS, MINISTER OF TRADE Trade Minister Rosa Escorcio Pacaviria de Matos tells how Angola has become more welcoming to foreign investors and what sectors are being given priority by the government.
WF: In your opinion, how can Angola encourage investors to invest with confidence? RP: At the moment, in Angola, we have a democratic government and a country that has been becoming increasingly globalized, ready to welcome any foreign investor with open arms. I can say that today they can invest with confidence, as long as they establish the right partnerships, with the right people and companies, at the right time. There are some investors who think that all they need to do is come to Angola and everything will be very easy. My advice would be to start by investigating the type of investment they want to make, learn about Angolan legislation—which is actually quite favorable—and find a suitable partner for their investment. We have various sectors for investment in Angola. After all, we cannot forget that this was a country ravaged by war.
“MY ADVICE TO INVESTORS WOULD BE TO START BY INVESTIGATING THE TYPE OF INVESTMENT THEY WANT TO MAKE, LEARN ABOUT ANGOLAN LEGISLATION —WHICH IS ACTUALLY QUITE FAVORABLE— AND FIND A SUITABLE PARTNER.”
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The areas that the government defined as priorities for investment are education, managerial staff training in the various fields of knowledge as well as technical-vocational training so that we may rise to the challenges presented by the economic diversification that is a goal for the country. Today, we still have to use the help of expatriates to fill that skilled labor deficit. For investors, an important area of investment may be related to trade, because we are currently building logistic structures to support commercial activity; we have agricultural production already in place and plenty of arable land, which means we have the conditions for achieving self-sufficiency in food. On the other hand, we feel that we must implement some mechanisms for protecting our internal production, because we are receiving, at the Ministry, 30,000 requests per month for product import permits. We have import monopoly groups in Angola; we have an import monopoly in wheat flour, rice, sugar, etcetera, and we want to invert this framework of dependence. Therefore, we are inviting investors to make their investments in key areas of local production. As I already mentioned, we have arable land, so there are reasons why we cannot produce wheat and other products that can be produced here.
We must create an internal production capacity; the distribution infrastructures and railroads for freight are being created. Note that we are part of the SADC (Southern Africa Development Community) and, therefore, want to be included in this economic integration. We must join the free trade zone and, at the moment, we are creating the conditions for the country to join. To that end, we are preparing a roadmap for joining the free trade area. Out of the 14 SADC countries, only three—Angola, DRC and Swaziland—are yet to join, but the latter two are already a few steps ahead of us. We may possibly join the area in 2015.
WF: Tell us about Angola´s trade relations with the United States. Are they limited solely to oil exports? RP: With regard to trade with the United States, I can tell you that we have solid relations, although our main calling card has been oil. It is true that the United States has really opened up to the African market, but if the African market does not work together, the continent will not be as competitive for the American market. It is true that for the United States, Angola exports only petroleum, but we are creating the capacities so that we can export other products—one of those conditions has to do with the certification and labeling of our products.
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MINISTER OF TRADE Interview
We created the National Institute for Exports precisely so that it can take charge of certification and promotion of our exports. In addition to oil, we are also exporting diamonds and other minerals, and we think that, with the liberalization of the market and with the increase of domestic production, we can progress toward increasing our trade balance.
WF: The banking and finance sector has been working hard to turn all of this restructuring into a reality. What is the State doing to facilitate and operate with commercial banks to benefit entrepreneurship? RP: We are currently working with the banking sector because business people have told us about several concerns they have, including financial support and the Angolan State’s guarantees for the fulfillment of that mission. The other concern has to do with surface rights for the construction of infrastructure, as well as with the facilitation of building permits. We are working with the banking sector so that it can support the business people that are going to be included in this commercial expansion program. We created what we call agricultural production corridors, and there are already four of them operating. Each corridor has four productive provinces and other non-productive ones, to create a kind of balance. There is a program for the purchase of farmers’ agricultural products, ca-
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lled PAPAGRO, which has the goal of continuously purchasing the excess production from farmers, co-ops and associations and taking them to the major consumption centers through the Logistics and Distribution Centers. The agricultural products are sold to Rural Logistics Agents through a contract to supply these products to large and medium-sized markets, small stores, hospitals, daycare centers, oldage homes and schools within their area of influence. This way, more jobs are created and the struggle against poverty is strengthened. We are conducting a survey to identify the illegal foreign labor force in Angola, especially in the area of commerce, so that we can replace them with Angolan workers.
WF: In this specific segment, what are the major priorities of the government? RP: Our major priorities are agriculture and the manufacturing industry.
WF: Please tell us a bit about the role of women in Angola and your own role as a woman at the head of the Ministry of Trade. Could you mention any program aimed at supporting and strengthening the contribution of women to the economic life of Angola? RP: Coming to this sector was a great challenge for me. I am a person who enjoys a challenge, and I have always enjoyed working in the field, getting my hands dirty. This has been the profile of the activities that I have been
performing until now. I know the whole national territory and I know the daily life of peasant women. Your question is a good one because many heads of household in Angola are women, and it should be noted that Angolan families can be quite large. With regard to support programs for women in Angola, for some rural municipalities where there is not a lot of food diversity, we created a card subsidized by the State for the purchase of staple products (including medicines in drugstores) for families whose head of the household are women. We also created community kitchens, where the cost of a meal is very low, to make it easier for low-income people, and we have women working and managing those kitchens. We have yet another program aimed at women, which is the program for the construction of agricultural greenhouses for the germination of farm products, where they buy the plants already as seedlings, instead of seed. We provide all the technical support to that program. We also have the school snack program, with a decentralized budget for each municipality, where women are again in charge of making the snacks. Apart from being the Minister of Trade, I am also a consumer, and therefore I feel the responsibility of watching over and protecting our population, so that we may have healthy food going from the farm fields to the consumer’s plate.
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Angola CONSTRUCTION
50
ARTICLE INFRASTRUCTURE
REPAIRING THE DAMAGE OF THE PAST
BUILDING FOR THE FUTURE By Rob Train
THE CONSTRUCTION BUSINESS IS FLOURISHING IN ANGOLA, AS THE GOVERNMENT MOVES TO REPAIR THE DAMAGE TO INFRASTRUCTURE LEFT BY THE CIVIL WAR AND TO MEET THE NEEDS OF A GROWING MIDDLE CLASS FOR HOUSING, HOSPITALS AND OTHER SERVICES. In terms of construction jobs, rebuilding an entire country is about as big as they come. The civil war that devastated Angola for 27 years until 2002 left much of the country’s infrastructure – roads, bridges, railways – in ruins. The oil-driven economic growth during the years after has brought boom times for the construction industry, as Angola struggles to repair the damage of war and to provide housing, schools, and hospitals for a growing population. The cranes that adorn the skyline of Luanda are evidence that the building trade is on a roll; the companies
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getting the business are from Portugal, Brazil, Greece and, most notably China. All have been drawn by the growth that has turned Angola into sub-Saharan Africa’s third-largest economy, after South Africa and Nigeria. Real GDP expanded by 7.43% in 2013, according to the central bank, although the IMF puts the figure at a more conservative 6.8%. The IMF also predicts that the non-oil economy will grow by 7.3% this year. “At this moment, Angola has one of the highest rates of growth in the whole world,” says Housing Minister Jose Silva. “One of our main goals is to reduce the country’s dependence on oil. Other sectors -- such as manufacturing, agriculture and civil construction – are now starting to contribute strongly towards that aim.” But infrastructure is only half of the equation; in order to grow, a country needs its workforce. And a workforce needs somewhere to live. One of the biggest challenges facing An-
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CONSTRUCTION Angola
gola is to provide adequate housing for a growing middle class. In 2008, President Jose Eduardo dos Santos pledged to build one million new homes within four years. A multi-national effort to do so was undertaken, with companies from China, Greece, Portugal and Brazil getting involved.
ONE OF THE BIGGEST CHALLENGES FACING ANGOLA IS TO PROVIDE ADEQUATE HOUSING FOR A GROWING MIDDLE CLASS The China International Trust and Investment Company (CITIC), which has been active across all sectors in Angola for many years, recently announced that ground would be broken on a new 6,000-unit development on the outskirts of the northern city of Malanje.
The project includes the construction of roads with domestic sewage and drainage systems, water and telecommunications networks, as well as electricity and a petrol station, police station, fire station and health centre. CITIC was also behind the Kilamba New City development, a vast project designed to house 500,000 people and provide services such as schools and shops and restaurants. After a slow start, the population of Kilamba has steadily grown and is estimated to stand at around 70,000 currently. Elsewhere, Greek construction company Argon Investment is involved in a $200-million commitment to build 70,000 houses in Angola, across all the provinces of the country. However, Housing Minister Silva notes that problems still exist in the sector: “The main difficulty we still face relates to factors linked to logistics, as we remain strongly dependent on the import of construction materials.
WHILE THE REBUILDING PROCESS UNFOLDS ON LAND, ANGOLA IS ALSO LOOKING OUTWARD TO HARNESS THE POTENTIAL OF ITS SEAFARING TRADE.
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Angola CONSTRUCTION
52
CONTAINER TRAFFIC AT THE PORT OF LUANDA HAS ALMOST DOUBLED OVER THE PAST FIVE YEARS.
Obviously, since cement is a basic raw material in the construction industry, this is one sector where companies could invest in order that the product be made locally. We do already have a cement industry here but it is just not able to keep up with the demand from a booming construction sector. We are working on containing the rise in the costs of materials and once this problem is resolved, then we’ll have prices that are much more affordable. The housing policy of the state is focused principally on the middle class and on people who are disadvantaged, but we also have within the program what we call free prices, which allows private-sector investors to still take on high-class construction projects.” China has been by far the biggest contributor to the rebuilding effort in Angola via a bilateral agreement by which the Asian nation extends loans for construction and infrastructure in exchange for oil. However, other countries have queued up to join the vast undertaking. Obredecht, a Brazilian firm active in 35 countries, has taken a lead role on key projects such as the provision of electricity and water as well as the construction of roads. In May, former Brazilian president Luiz Inácio Lula da Silva (“Lula”) visited Malanje ahead of the World Economic Forum for Africa, to see first-hand some of the projects being carried out by Obredecht. The Brazilian company has been involved in Angola since 1984, when it signed a contract for the construction of the Capanda hydroelectric dam on the Kwanza river, 360 km (220 miles) from the capital. However, the civil war prevented the project from getting off the ground until 2004, when the dam started generating electricity to supply Luanda. Unlike Chinese firms, which import their own workers under a clause signed into the bilateral agreement, Obredecht has sub-contracted many projects to Angolan firms. Likewise, the number of Angolans holding key positions within the company has risen from nine percent to 41 percent in recent years. Portuguese companies are also well established in Angola’s construction sector, which represents a significant proportion of their revenue. The two largest ones are Soares da Costa and Teixeira Duarte. The latter has been active in Angola since 1976 and its international market represents 81.2 percent of a total revenues of $1.26 billion, of which Angola accounts for 46 percent. Soares da Costa has been awarded the tender to build the headquarters of power company Empresa Nacional de
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Electricidade (ENE), in Luanda, for $46.9 million. In 2013, Soares da Costa’s biggest market was Angola, which accounted for 57 percent of total revenues. In February, it was announced that Angolan businessman Antonio Mosquito would assume a 66.7 percent stake in Soares da Costa through a capital increase of $70 million, to be underwritten entirely by Mosquito. However, the influence of foreign companies means that relations with local Angolan firms have not always been entirely cordial. The fact that Chinese firms are paid directly from Beijing while their Brazilian and Portuguese counterparts are exposed to the vagaries of the local economy has also been a point of contention. This has in turn led to some suspect construction work, with the Luanda General Hospital a case in point. Completed in 2006 in the Kilamba Kiaxi district by the China Overseas Engineering Group, the hospital was closed in 2010 due to structural concerns. The China Tiesiju Civil Engineering Group began construction of a new Luanda General Hospital in the same location in 2012, with work slated to be completed by July 2014.
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CONSTRUCTION Angola
The government in 2010 introduced a new procurement act, which a 2011 study by Norway’s Christian Michelsen Institute and the Angolan Centro de Estudios de Investigação Científica described as “a step forward in the sense of organizing a scattered legal framework and by promoting competition and procurement expertise.” The new legislative framework consolidates two previous separate laws governing the systems for public expenditure, provision of services and the leasing and acquisition of goods while also regulating the award of public works contracts. While the rebuilding process unfolds on land, Angola is also looking outward to harness the potential of its seafaring trade. The government is planning on building what will become the largest shipping terminal on the continent at Dande, 50 kilometers north of Luanda. Container traffic at Luanda has more than doubled over the past five years and Angola’s aim is to
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ANGOLA IS TRYING TO REBUILD RAIL LINKS WITH NEIGHBORING COUNTRIES TO FACILITATE THE TRANSPORT OF MATERIALS FOR EXPORT
ANGOLA CONSTRUCTION
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Angola CONSTRUCTION
challenge the port of Durban as the busiest in Africa. Angola is the gateway to the international markets for many landlocked countries with rich mineral resources, such as Zambian copper and iron ore from the Democratic Republic of Congo. Port administrator for commercial, safety and environmental affairs Alberto Antonio Bengue told Bloomberg in April that plans are to increase the number of containers handled in Luanda to more than a million by the end of 2014, up from 912,900 in 2013. Of course, in order to meet its goals for exports, internal infrastructure is required, with rail links to the ports and a reliable road system. Construction Minister Waldemar Pires Alexandre said in May that there are 11,000 kilometers of paved roads in Angola with a further 7,000 kilometers under construction. Angola’s railways are modern and efficient, but lack connections. There are three main lines, Luanda, Benguela and Moçâmedes, which serve the ports at the capital, Lobito and Namibe respectively – a total of 2,761 kilometers. At the World Economic Summit in Nigeria, Chinese Premier Li Keqian vowed to support a continent-wide rail network linking all the capitals of Africa, but such a project is a long way off. In the meantime, Angola is trying to rebuild rail links with neighboring countries to facilitate the transport of materials for export. The Benguela railway is under reconstruction with the aim of providing a direct link to Kamina in the DRC. But housing remains the major priority for Angolans, and international cooperation is key to achieving success in this area. It is an even more crucial component of the country’s future when it is taken into account that the median age in sub-Saharan Africa is 18, compared to 41 in Europe. Africa’s workforce is predicted to swell by 163 million in this decade. By 2035, it will be bigger than China’s, and by 2050 one-quarter of the world’s workers will be African, according to Director Magazine’s Africa Rising report. According to Housing Minister Silva, “There are many good examples of countries that have undertaken housing programs that have been very noteworthy, such as, for example, Brazil and Colombia, whose experiences in this area have been very positive. In Africa, you have Morocco, whose experience has been very interesting and deserves our careful study and attention. Here, what has in fact really caught our attention is the financing of housing, and in this respect we have been considering how to adapt the examples of Morocco and Brazil to our own sociocultural reality.” The road to recovery in Angola has been a hard one, but few could have predicted that just a decade on from a devastating civil conflict the country would be in the state of health it is now. There is still plenty to do but the cooperation of the international community and the entrepreneurial spirit of the Angolan people - the building blocks of a prosperous future - are firmly set in place.
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THE ROAD TO RECOVERY IN ANGOLA HAS BEEN A LONG ONE, BUT FEW COULD HAVE PREDICTED THE RECOVERY THAT HAS ALREADY TAKEN PLACE.
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Angola TELECOMS
ANGOLA TELECOMS In a bid to wean the economy off crude oil, Angola is banking on the ICT sector to become a chief engine of growth. Apart from sales of smartphones, digital TV and broadband, it is anticipated that modern ICT services will improve the efficiency of companies and organizations across the entire economy. (The World Bank estimates that a 10% increase in broadband penetration in a country translates to an increase of 1.2%-1.4% in GDP.) With the help of companies from China, Sweden, Belgium and Russia, Angola
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By Jonathan Meaney
MOVING AT HIGH SPEED
ith the introduction of the first net ork in Africa and the construction of the game-changing South Atlantic Cable S stem SACS , Angola is at the heart of the telecommunications revolution on the continent. has been pioneering the telecommunications revolution in Africa. “Angola is leading Africa´s development in the telecommunications sector,” says Amilcar Safeca, Deputy CEO of Unitel, the country’s largest mobile operator. “Information and communication technology is essential in the functioning of the modern economy, hence the focus on public and private investments in this area in recent years. In Angola, ICT will help companies to be more efficient and competitive; it will help in the emergence of new business
and in the country’s future growth.” Improving company efficiency is starting within the telecoms industry itself: the state-owned operator Angola Telecom(AT) is currently undergoing a large-scale restructuring process with the help of international consultants. “[This] is seen as a step towards greater liberalization of the country’s telecom market, improved efficiency of the national telco and its eventual privatization,” says a report by global telecommunications research and consultancy company, BuddeComm.
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TELECOMS Angola
The announcement earlier this year that AT expects to turn a profit in 20 5 for the first time in eight years is evidence that the overhaul is paying off. The company has forecast a net income of almost $ million in 20 5, compared with a loss of $ 0. million in 20 2. This return to profit will be mainly the result of a government injection of $314 million in November, 2012 – part of the restructuring process – to pay off debts, increase revenue collection, boost sales and extend and repair fiber optic cables.
T R A R
T C A S C A, S , U RUSS A, A A AS R T T C S UT A R CA.
For AT, the next possible step is entry into Angola’s lucrative mobile market. Mobile penetration has jumped from 20% to 5 in only four years, making Angola one of the fastest growing mobile markets in the world; uddeComm predicts penetration will hit 0 by the end of the year. Fixed-line penetration lags far behnd, at .5 , while Internet access , currently , is forecast to reach 26% by the close of 2014.
A third player in the industry would certainly help to further drive growth, bring down prices and improve services. But with rapid growth in penetration and millions of prospective new customers up for grabs, AT is not the only company considering a bid for the coveted third mobile license in Angola; South Africa’s TN and Vodafone’s African subsidiary, Vodacom, have also expressed their interest. The mobile market is currently a duopoly controlled by Movicel and Unitel. The latter is part-owned by Isabel dos Santos, Africa´s richest woman and the daughter of Angolan President Jose Eduardo dos Santos. Unitel is the dominant player, with a 0 market share and around 10 million customers. Both companies have been at the forefront of 4G LTE (Long-term Evolution) mobile technology – and not just in Africa, but on a global level. In January, Unitel, in collaboration with Swedish firm ricsson, became one of the first few privileged operators in the world to demo LTE Advanced (LTE-A) Carrier Aggregation technology, hailed by Ericsson as “the next step in the evolution of high-speed mobile broadband services.”
A
56-60 TELECOS V4-8x10,5.indd 57
T
A S A A R CA S T T T C U CAS S CT R, sa s Amilcar Safeca, eput
C
of Unitel, the countr s largest mobile operator.
14/11/14 16:43
Angola TELECOMS
Mobile penetration has jumped from
20% to 65%
58
MOBILE PENETRATION TO REACH 70% BY YEAR-END 2014
70% 60% 50% 40% 30%
2009
INTERNET PENETRATION TO REACH 26% BY YEAR-END 2014
2013
TELECOM PENETRATION IN ANGOLA
20% 10% 2010
“With this demo, we are well on the way to launching the most advanced mobile network in Angola and perhaps Africa in the near future. We are working with Ericsson to make this happen,” said Unitel’s Amilcar Safeca on the launch. The demonstration was the second milestone for the company in only four months. In October, 2013, the firstever LTE video roaming call in Africa was made in Angola on the Unitel network, using the carrier services of Belgian company, BICS. The call was made during the visit of a Belgian trade mission, between Belgian Foreign Affairs Minister Didier Reynders in Luanda and BICS Vice-president for operations and customer Services, Johan Wouters, in Belgium. Daniel Kurgan, chief executive officer of BICS, said the call “marks the next stage of the evolution of the telecom market in Africa and the further realization of LTE roaming across the globe.” But it was former Angola Telecom subsidiary Movicel, in partnership with Chinese phone giant T , that first introduced fourth generation LTE technology in Angola in 2012, putting the country ahead of many parts of the United States, Britain, and most countries on mainland Europe in the rollout of 4G mobile services.
56-60 TELECOS V4-8x10,5.indd 58
2011
2012
2013
2014
In order to keep the country at the forefront of the telecommunications industry, both mobile broadband and fixed-line operators plan to invest billions of dollars in improving infrastructure in the coming years. Most notable of these investments is the South Atlantic Cable System (SACS), also known as the Angola-Brazil cable. Launched earlier this year at a cost of over $200 million, SACS will stretch more than 6,000 km across the Southern Atlantic from the Angolan capital, Luanda, to Fortaleza, Brazil. Due for completion in 20 5, the SACS project will have an enormous impact on the telecommunications sector in Africa, South America and Asia. It has been reported that by connecting with existing cables, SACS could cut data traffic costs from South America, Africa and on to Asia by as much as 80%, as data traffic will no longer have to pass through urope and the US. This should translate into big savings for telecom operators that could be passed onto customers in Angola and across Africa. With cheaper and better services, it is anticipated that the cable will increase mobile penetration to 85 in the country within two years. SACS will also provide the shortest distance between the Sao Paulo and Hong Kong stock markets, as well as providing a faster route from Europe to South America.
14/11/14 16:43
59
TELECOMS Angola
S
CTACU AR
R
T A
The following graphics from the International Telecommunications Union (ITU) show the tremendous growth in the number of telephone accesses in Angola in recent years. The greatest increase has been in the number of cellular phones, which have more than doubled since 2008. Fixed-line phones have lagged behind, as mo-
ST
A
A T
.
bile telephony has overtaken many of its functions, particularly with the introduction of high-speed (4G) cellular networks. Broadband access is still minimal but has nonetheless doubled in the past two years. Despite the industry’s rapid expansion, the penetration rates (number of accesses per 100 persons) show that there is still a long way to grow.
MILLIONS OF ACCESSES 15
13.29
10 8.11
6.77 5
4.69 0.09 0.01
0.30 0.02
0.11 0.01
2007
2008
2009
8.91
9.49
0.30 0.02
0.30 0.03
2010
CELLULAR
9.80
0.30 0.03
2011
0.21 0.05
2012
FIXED LINES
2013
BROADBAND
THOUSANDS
2007
2008
2009
2010
2011
2012
2013
EAR
MOBILE ACCESSES
4,691
6,773
8,109
8,909
9,491
9,801
13.285
35.5%
FIXED TELEPHONES
94
114
303
303
303
303
215
(29.1%)
BROADBAND
11.7
11.7
20.0
20.0
25
31
48
53.9%
DENSITIES
2007
2008
2009
2010
2011
2012
2013
MOBILE ACCESSES/100 INHAB.
28.26
38.71
43.84
46.69
48.4
48.6
61.9
FIXED TELEPHONES/100 INHAB.
0.54
0.64
1.64
1.6
1.6
1.5
1.0
BROADBAND/100 INHAB.
0.07
0.07
0.11
0.1
0.1
0.16
0.22 Source: ITU
56-60 TELECOS V4-8x10,5.indd 59
14/11/14 16:43
Angola TELECOMS
Angola Telecom, Unitel, Movicel. MSTelecom and Startel are all behind this monumental project. All are shareholders in Angola Cables, which is covering the total costs of the cable’s construction. Angola Telecom has a 5 share, followed by Unitel 3 , STelecom , ovicel (6%) and Startel (3%). (See the interview with Angola Cables CEO Antonio Nunes, following this article.) Angola is not only investing in telecoms infrastructure projects on land and ocean; it is also aiming to go into space. With the help of Russian technicians, and financed by Russian bank VTB, the West African nation is constructing its very first satellite. Ango Sat, costing $300 million, is set to be in orbit by 20 – yet another groundbreaking venture for Angola in the telecoms industry. Like SACS, Ango Sat is expected to bring down prices while also improving services, particularly digital television. The Minister of Telecommunications and Information Technology Jose Carvalho da Rocha has said that Ango Sat will be subsequently followed by other satellites in the long
56-60 TELECOS V4-8x10,5.indd 60
60
term. This would put Angola’s foot firmly in the African space race, which is currently led by the sub-Saharan Africa’s other large petro state, Nigeria (now officially the continent’s largest economy following a GDP rebasing in March, overtaking South Africa), which now has several satellites in orbit. But Ango Sat and subsequent satellites mean much more than improved phone receptions, faster connection speeds and cheaper digital television. If Angola is to follow on the same path as Nigeria, satellite transmissions could have a much more important use. Nigeria’s satellites are being used to improve agriculture, by giving farmers access to detailed, accurate and up-to-the-minute weather forecasting that was never before available. They are also being used for security in the fight against Boko Haram extremists in the north of the country. Fortunately, Angola does not have a security issue on the scale of Nigeria’s, but like in Nigeria, satellites could be useful in efforts to improve agriculture, another priority sector in Angola for development and economic diversification. Like Ango Sat, fourth generation mobile broadband offers much more than faster YouTube streams and instant access to Facebook. It is revolutionizing business, healthcare and education. “Banking, healthcare, and other applications have evolved on mobile, not because it was particularly suited as a platform, but because there was simply no alternative,” states a report by U.S. networking equipment manufacturer Cisco on the evolution of the use of 4G in Africa. The ways in which advanced telecoms technology can be used to improve lives and businesses are virtually endless. Doctors can now make long distant diagnoses of those in isolated rural communities over the phone, using video calling or photo messages sent on instant messenger services. A small business owner will no longer have to travel for hours at a time to present a customer with an invoice; he or she can use a smartphone to send that invoice by email in a matter of milliseconds, and subsequently use this time for other productive activities. Mobile banking services are giving millions of people access to electronic payment services. Students can be taught English and other useful skills by teachers as far away as the U.S. or Britain using video conferencing technology. Angolans are using 4G smartphones for far more than YouTube and Facebook access; they are utilizing the technology much more innovatively – making small businesses, famers, individuals and large organizations work in a much more efficient and effective way. This will no doubt boost an already rapidly growing economy and has the potential to substantially improve livelihoods across the board.
14/11/14 16:44
Sin tĂtulo-10 1
11/14/14 12:38 PM
62
Interview ANGOLA CABLES
INTERVIEW with
ANTÓNIO NUNES, CEO OF ANGOLA CABLES
Angola Cables, a consortium of the countr s five telecoms operators, is constructing the South Atlantic Cable S stem SACS , hich ill connect Africa to South America b means of a ,
km submarine fibre optic cable stretching from uanda to ortaleza in
razil. n uanda, SACS ill oin up ith the est Africa Cable S stem, helping to turn Angola into a hub for telecommunications on the continent. n ctober,
, Angola Cables announced that SACS ill also connect ith a ne undersea cable to be built bet een
razil and the United States. That pro ect ill be undertaken in a partnership ith oogle, razil s Algar and Urugua s Antel.
A T T
U TA
S, C
A TS A
A CA S
WF. The SACS project is one of the most anticipated telecom projects in the world. Where did the idea come from and the how did Angola Cables undertake this exciting project? AN: This project comes directly from a governmental concept, which is to become one of the best (countries) in telecoms in Africa. Our government’s perspective is to invite private companies and enterprises that belong to everyone in the telecom sector in Angola, and together embark on this big adventure, which means a lot to the company itself. We come from a company with a mixed perspective, both with business and public support, like Unitel, which is quite a mixed company. That is where we started. Angola has an old relationship with Brazil. Brazil was the first country in the world to recognize Angola as an independent country. Therefore, our cultural, political and economic relationship with Brazil is very strong from the beginning. Brazil is also in need of these cables, so even if we are both independent countries, we need the same kind of infrastructure. Therefore, we decided to start developing that cable. The SACS project will also help in the development of the cable market in Africa; it will be a completely new road that will change the old telecom market.
62-63 INTERVIEW Angola Cables-2.-8x10,5.indd 62
S, TA R
T C
U
R
A T
C
UT T S
S
T
RASTRUCTUR
A
WF: Do you think you were the obvious choice to be the leader of Angola Cables because of your past successes at Unitel? AN: I came to Angola Cable because in 2009 they invited operators and I was part of them. They needed someone to help to manage the WACS (West Africa Cable System) project. Angola Cables was built to support WACS, which was the big project. At that time, the government invested $25 million and was willing to invest more. At that moment, it seemed unusual that the government would spend that kind of money on its own, so that is why they invited all the operators to participate. To make such a big project the government needed private support. At Unitel, we had been trained to make teams on our own. This project (WACS) compared to Unitel is a completely new and different story, where they have to share definitions, mentalities and perspectives with others. Again, it is a new learning process.
R
SACS R A
CT, TS
T U T
.
WF: What image did you want to implant when you arrived? AN: We need to change the image that people do not do what they are supposed to do, that we do not deliver things in time, this type of image. This doesn’t bring confidence to people. Inside of WACS, we are partners but outside, these companies remain competitors. It is really a new way to behave, even for myself. It was a completely new way to learn. When I was helping to build Unitel, everybody was my competitor, we were trained to do things by ourselves and today I see that everybody is my boss. One of the things that I learned at WACS is that if you have to be able to work with your competitor, because if we join forces we can have much more, so it makes sense to share infrastructure. WACS it is the perfect example of sharing infrastructure. At the end of the day, it is better for everyone, even if we are in competition.
The SACS pro ect ill also help in the development of the cable market in Africa it ill be a completel ne road that ill change the old telecom market.
14/11/14 16:51
63
ANGOLA CABLES Interview
This ne cable is bigger than Angola itself. e ill bring value to the continent because e are enabling people to communicate and the hole countr ill be part of that.
,1 5 km submarine ďŹ bre optic cable stretching from Luanda to Fortaleza in Brazil
WF: How will this technological improvement (SACS) have an impact on the development of Angola? AN: When we developed the telecom business, we saw an improvement of the country. We are bringing value to the country, we were able to enable people to communicate. Now, with this new cable, we understand that it is bigger than Angola itself; we will bring value to the continent because we are enabling people to communicate and the whole country will be part of that. For example, when we build this cable it will be the shortest way on earth to link Sao Paulo stock market with Singapore stock market. We can go from Sao Paulo to the USA, from the USA to London and then to Singapore. However, if you measure it, it will be much longer. That will be the shortest path between South America and Asia. Once again, Europe will be connecting with South America without having to go through the US. In terms of the industry, it will be a completely new way to look at networks in the world. If we look at the configuration of the networks today, it is a redundant path. When we have this connection we will have a complete ring of connections. We will have South America, North America, Europe, and Africa closed on a ring, which means that the communication ow will be completely new. AT&T saw our project and told us to go ahead and do it because they will be using for sure.
62-63 INTERVIEW Angola Cables-2.-8x10,5.indd 63
WF: How do you see Africa’s potential with regard to telecoms? Where do you see future opportunities? AZ: We have a huge potential, but there are bridges missing. To people that are not used to building bridges, it is a massive challenge; to us, it is just the way we do it. We are used to crossing a river and building bridges to cross that river. We learned that in our past. When we look at that what we are doing now, it is not much different from what we were doing before. Dealing with operator in Africa it is not an easy task, you need to make a name for yourself. From the outside, it is very complicated to work like that. I see people trying to make concessions in Africa complaining that it is not easy because we have a massive mix of private and state operation. To the outside world, it is a very complicated thing and therefore, they think Africa it is a country not a continent. What we are trying to do now, since we know both sides, is to build bridges. We are trying to make this connectivity to allow business development to grow. The potential is there. Just in the oil sector, this cable will be used a lot. We have many companies exploring oil in Angola, and in the region,;they are Brazilians, Americans, and Europeans and just from them, we have a potential use to the cable. The connectivity is so long and the cost is so high that it is slowing down the process. When we decrease the length, we can operate a drilling machine in Brazil from here, because the connectivity is very short. We are a growing country that needs to learn a lot and linking that information would be a great deal for us, and another great use for the cable. Therefore, just for us, there is a great potential to use the cable and if we take to other African countries, it will be massive.
14/11/14 16:51
Angola THE VIEW FROM HERE
64
THE VIEW FROM HERE By Nicholas Staines IMF’ representative in Angola
ANGOLA’S ECONOMY: GROWTH PROSPECTS BRIGHT, DECISIVE ACTIONS NEEDED The starting point on Angola needs to be the recognition that it is a post-con ict country hostilities ended in 2002 with large oil receipts 5 percent of exports and 5 percent of budget revenues and near half of D in 20 3 , and faces the opportunities and challenges of both. arge oil receipts have underpinned solid growth, but also make the country vulnerable to oil price volatility. The country’s oil dependency and its large infrastructure and human capital deficits also undermine competitiveness, hamper diversified growth in the non-oil sector, and make it heavily reliant on imports. It has also accentuated income inequalities. nce con ict ended, Angola’s macroeconomic policy stance was overstretched so that it lacked adequate policy buffers including foreign reserves to face the global crisis and the country was badly affected. Under an I F-supported program in 200 - 2, Angola made good progress in restoring macroeconomic stability the exchange rate stabilized, foreign reserves topped seven months of imports, in ation fell to single digits, and the fiscal balance turned into a surplus. ore importantly, the government has moved to strengthen policy formulation and coordination, including the formulation of a medium-term macroeconomic framework that allows it to assess and manage macroeconomic vulnerabilities more effectively. This puts Angola in a much better position than before to face another oil price shock. With macroeconomic stability largely restored, the government has been able to turn to its longer-term developmental objectives. The longer-term prospects for the oil sector are bright. reliminary explorations in the deep sub-salt fields, that geologically mirror those in razil, have been positive. If commercially fruitful, Angola could become the region’s top oil producer within a decade; though still early days, there is talk of production reaching 3 million barrels per day. eanwhile, however, production from existing oil fields is leveling off. roduction in 20 3 was a disappointing . million barrels per day and projections for production to reach and surpass 2 million barrels per day in the medium term are starting to look optimistic. A more cautiously realistic picture would be for output to edge up to around .85 million barrels. This implies that the oil production will add little to overall growth, though oil revenues will continue to underpin growth in the rest of the economy. erhaps more important to Angola’s longer-term stability and prosperity is what happens in the non-oil sector. The presidential elections in 20 2 highlighted the need for diversified and inclusive growth to spread the benefits of the country’s oil wealth more
64-65 THE VIEW FROM HERE-V3-8x10,5.indd 64
widely. Following the elections, the government has embarked on a medium-term National Development lan ND that puts priority on a large expansion of infrastructure spending transport, water, and electricity to support economic diversification. The large expansion in capital spending is critical for economic growth but also poses risks. The government is projecting a high growth dividend that may fall short of expectations, and will need to manage spending carefully to ensure good value for money and that the economy is not destabilized. indful of the destabilizing experience before the global crisis, the expectation is that the government will err on the side of caution. However, the fiscal expansion also comes at a time of softening oil revenues that have already deteriorated the fiscal balance by 0 percent of D over the past years, pushing it back into deficit in 20 3. oreover, to meet the plan’s large financing needs, the government is embarking on substantial domestic and foreign borrowing, including a possible sovereign debt issue. ut at the same time, the government is also shifting resources from foreign reserves into the new Sovereign Wealth Fund that is geared more towards long-term investments than to liquid assets that could serve a stabilization role should oil revenues fall.
a co acio al e gola office in Benguela
14/11/14 16:16
65
THE VIEW FROM HERE Angola
AC
ASSU
TI NS, 20 3-
20
A
D ,
C NT CHAN
I N N- I
C I,
C NT CHAN
,
UD
T
NA UN 20 3
I F S
T
20 3
20
20 3
20
5.
8.8
. 3
.8
3.
5.
2.
.5
-0.33
-3.5
2.
.5
.
.5
0.8
.3
.3
.0
8.0
.
.
.
.2
- .
20 5
Source: International Monetary Fund The above chart compares the macroeconomic assumptions behind the government´s 2014 budget with data from the Banco Nacional de Angola and projections from the International Monetary Fund-
Under an IMF-supported program in 2009-12, Angola made good progress in restoring macroeconomic stability: the exchange rate stabilized, foreign reserves topped seven months of imports, inflation fell to single digits, and the fiscal balance turned into a surplus. ut with foreign reserves above US$30 billion, or about a year’s worth of non-oil imports, the government has room to maneuver. eanwhile, the business environment remains difficult. Angola ranked poorly on the latest World ank’s Doing usiness index out of 8 though it was also rated amongst those that had most improved. usiness complaints include difficulties dealing with a centralized and bureaucratic government administration, acute shortages of skilled labor, poor infrastructure, limited access to finance, and slow judicial processes. uch of this is a legacy of Angola’s post-con ict history, exacerbated by high, oilfueled demand; effectively a function of delayed development that would find an echo elsewhere in the region. Improvement in these areas is critical, but progress - at best expected to be slow is hampered by limited institutional capacity. And addressing the human capital shortfall could take generations. ut what is perhaps most needed is a determined political assault to implement the structural reforms required to remove the blockages in the business environment. There are also other elements –expatriate labor quotas and tariffs to encourage nascent domestic production – that re ect the understandable political desire to give preference to Angolans, but that also make doing business more complicated. Continued macroeconomic stability, the successful implementation of the infrastructure program, and decisive action on
64-65 THE VIEW FROM HERE-V3-8x10,5.indd 65
the structural reforms needed to enhance the business climate would go a long way to support economic diversification. This, in turn, would support more inclusive growth to spread the benefits of the country’s oil wealth. High poverty rates and income inequalities are potentially destabilizing, especially once memories of conict wear off. And some provision is needed to take care of the poor and vulnerable; currently, the country lacks effective social assistance to protect them. Instead, large fuel subsidies used for both transport and private power generation provide the main conduit for distributing oil revenues though, as elsewhere, the poor benefit disproportionately little. The government is committed to reducing the subsidies to finance other spending priorities but is concerned about the impact on business and the vulnerable segments of the population. Improving electricity services will alleviate a large part of this concern. To protect the vulnerable, the government is also implementing a social assistance program based on direct cash transfers, but this too will take time to build up. reliminary government estimates are that overall output in 20 3 was .8 percent, driven by a large agricultural rebound following the drought in 20 2. The I F now projects real growth in 20 to moderate to percent because of a large but temporary drop in oil production during the first half of the year but should then recover to percent in 20 5 as oil production recovers. ver the medium term, we can envisage non-oil sector growth trending up to around 8 percent, but modest oil production growth will hold overall growth down to around percent.
About the author: Mr. Staines has been the IMF’s representative in Luanda for the past three years. He has been an IMF staff member for 15 years, working mostly on African countries. Prior to joining the Fund, he worked in the private sector as a macroeconomic modeler, forecaster and consultant. He previously spent several years as an academic teaching macroeconomics and finance. e holds a Ph.D. specializing in Finance.
14/11/14 16:16
Angola THE VIEW FROM HERE
66
THE VIEW FROM HERE Manuel José Alves da Rocha
ANGOLA’S ECONOMY: ENCOURAGING MACRO NUMBERS, CONTINUING POVERTY From independence in 1975 until the present, the Angolan economy has been dominated by the in uence of oil production and exports, which have accounted for 0 of D , particularly in the most intense years of the civil war, when agriculture, trade, transport, construction and manufacturing were almost nonexistent. Although, after the end of the civil war 2002 , it was possible to invest heavily in other sectors, particularly in basic infrastructure public investment between 2002 and 20 3 amounted to $ .5 billion , the process of diversification of the national economy, in which the government, the business sector and the banking system are engaged, did not give tangible results. The oil sector continues to dominate the economy, with a relative weight of between 3 and of the ross Domestic roduct. Moreover, this dominance also occurs in other indicators such as tax revenues those originating in petroleum represented over three fourths of total tax revenues in 20 3 , export revenues 5 of the total exports and international reserves. However, the tax realm has begun to show noticeable signs of diversification, registering increases in other sources of budget revenues fiscal revenues from the non-oil sector as a result of the Tax eform rogram T that is taking place. In the macroeconomic area, results have been more significant and sustained, but other aspects are equally relevant. The communiqu issued by the onetary olicy Committee of the National ank of Angola on anuary 2 , 20 regarding the results of 20 3, rightly recognizes these developments stability of the foreign exchange market; a .3 increase in credit to the economy, with a global amount in 20 3 of $33 billion; an in ation rate of . in 2002 it was 05. , representing a safe path to price stability; and interest rates of .5 and 3 for maturities of 3 and 2 months, respectively. The external position of the Angolan economy, measured by the stock of net international reserves and its dynamics of average annual variation is quite good $30. billion at the end of 20 3 and an average annual growth rate of 2 .8 , representing roughly nine months of imports of goods and services. The national economy has benefited from a number of positive factors and motivators for its growth. These include not only the economic policy measures implemented under government programs –it is in the process of implementing the National Development lan 20 3-20 , pending the results
66-67 THE VIEW FROM HERE-ROCHA-2-8x10,5.indd 66
from 20 3 – but also factors of an external nature upward movement of demand and prices in the international oil market; increasing trade relations with the most important and dynamic emerging economies and domestic support, as reected in the provision of funds by the banking system and the State to finance private investment. Despite these conditions, the Angolan economy continues to suffer from structural deficiencies that the banking system has tried to alleviate by assisting and supporting the correct formulation of investment projects that are bankable. The lack of competitivity of practically the entire non-oil economy is widely acknowledged, not only by international institutions according to the Doing usiness World ank, Angola has consistently occupied the lowest place in the world ranking in several items , but also by national institutions designed to support growth. The latest evidence of this lack of competitiveness was given by the postponement, once again, of Angola’s request to join the Free Trade Area of the Southern African Development Community SADC .
14/11/14 15:26
67
THE VIEW FROM HERE Angola
Banco Nacional de Angola headquarters in Luanda
From independence in 1975 until the present, the Angolan economy has been dominated b the influence of oil production and e ports, hich have accounted for of GDP, particularly in the most intense years of the civil ar, hen agriculture, trade, transport, construction and manufacturing were almost nonexistent. According to existing data, D should have grown at the average annual rate of 3.3 between 200 and 20 3, much lower than the approximately 0 growth in the 2002 2008 period. y 20 , the average annual economic growth rate according to the I F - should be around 5.5 , which does not allow significant improvement in the living conditions of the population the population growth rate according to the National Statistics Institute, IN , is 3.2 per year . il exports continued to be one of the most important factors of economic growth in 20 3, with a contribution of just under 2 percentage points to the growth rate of . of D , despite the decrease between 20 2 and 20 3. According to the elat rio de Fundamenta o do 20 a background report that accompanies the government budget , the value of oil exports in 20 3 was $ 5. 2 billion dollars, compared to $ 8. 0 billion dollars in 20 2, a percentage decrease of 5. . ne of the obstacles to a greater diversification of the economy and the creation of a structural competitivity has-
66-67 THE VIEW FROM HERE-ROCHA-2-8x10,5.indd 67
been the energy sector. The government is in the process of implementing an ambitious program of production and supply of electricity about $ billion by 20 - involving productive activities and families - which is expected to yield significant results for the living conditions of the population and the reduction of production costs in the economy. D per capita has increased since 2002, reaching a value of $ ,3 5, for a total value of economic activity of nearly $ 22 billion in 20 3. However, Angola remains among the countries with a low level of human development, according to the United Nations; the national average monthly salary in 20 2, according to the National Accounts, was only 3 ,000 kwanza, equivalent to about $3 0. The ini index, which measures inequalities in income distribution, is 0. and has worsened since 2002. According to an official survey on the living conditions of the population, conducted in 2008 200 , about 0 lived on less than two dollars a day and 0 of the national income was concentrated in the hands of 20 of the population. The poverty rate officially presented 3 is very controversial, given the actual living conditions of the population, especially in rural areas, where income differences are much more pronounced. About the author: Manuel JosĂŠ Alves da Rocha, an Angolan economist, is associate professor at the Catholic University of Angola and Director of its Center for Studies and Scientific Research (CEIC). He is the author of 15 books on the economic and social reality of Angola and sub-Saharan Africa, the most recent one on capital flight from the region.
14/11/14 15:26
Angola AGRICULTURE
68
AGRICULTURE:
SWEET ENERGY FROM SUGAR CANE
By Benjamin Jones
Spreading out to the horizon below the towering Black Rocks of Pungo Andongo in Angola´s northern province of Malanje, tens of thousands of acres of sugar cane reach toward the sky as they ripen under the tropical sun. If all goes according to the ambitious plans of investors, these bright green plants will soon help kick-start a reborn Angolan sugar industry. Part of the harvest will be turned into ethanol and provide biomass to produce much-needed electrical power for local residents and industry. Begun three years ago, the 100,000acre farm - said to equal in size the New York City boroughs of Manhattan, Brooklyn and the Bronx - is already being described in superlative terms as the country’s largest agricultural project and its biggest renewable-energy development. The first harvest by the Angolan Bio-energy Company, known as Biocom, is scheduled for this year, with 40,000 metric tons of processed sugar destined for the domestic market. Angola, which once produced enough of the sweetener to fulfill its own needs and also export some, currently imports all the sugar it consumes. As sugar output steadily increases, Biocom executives hope for an annual production target of 260,000 tons within four years, easily surpassing the 225,000 tons the country now imports from foreign suppliers. If world prices allow a good return on investment, Angolan
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Like other oil-rich nations, Angola has long neglected its farm sector, to such a degree that 90 percent of the food the country consumes is imported. Matters were made worse by the civil war, which left a legacy of damaged infrastructure and land mines scattered across the countryside. The farm sector is now undergoing a rebirth, thanks to public-private partnerships and cutting-edge technology.
sugar will join oil, minerals and other resources once again on the export market. However, Biocom’s $500 million investment, located 200 miles east of the capital is not just about sugar. Eventually, the company plans to convert 15 percent of production into 30 million liters of ethanol a year. If all goes well Angola could one day joining Brazil and the United States as a top producer of the renewable, eco-friendly fuel that is being used increasingly around the world. Biomass-fed generators will also produce 28 megawatts per hour of electricity that will be pumped into the province’s power grid to benefit rural residents and local industry.
“ANGOLA IS BLESSED WITH ABUNDANT WATER AND A CLIMATE AND RICH SOIL PERFECT FOR BOTH TROPICAL AND SUB-TROPICAL FARM PRODUCTS.” JOINT-VENTURE COOPERATION Biocom is as prime example of Angola’s innovative take on boosting its agricultural sector and renewable energy production while creating technology jobs in the country’s interior. It also also re ects the country’s efforts to foster public-private cooperation in joint ventures. Angola’s National Private Investment Agency and state-run Sonangol Holding have 20 percent of the company, while the country’s Damer and Brazilian conglom-
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erate Odebrecht hold 40 percent each, with the latter playing a key practical role in getting the project off the ground. Dozens of Biocom technician trainees traveled to Brazil to learn all there was to know about processing sugar and turning it into ethanol and electrical energy, an activity in which Odebrecht has long been involved. Their six-month course included theoretical and practical classes taught by the Brazilian experts, covering everything from mechanized harvesting and sugar cane storage to the finer points of biomass energy production and ethanol use. This mammoth project is a prime example of the Angolan government’s
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multi-faceted plan to open up the country’s interior to economic activity, increase agricultural production, promote alternative exports to wean itself off the almost total reliance on extractive industries for foreign exchange and create employment. Experts say Angola has an excellent chance at meeting all those goals, due to several important factors including the country’s natural attributes and its history as a major agricultural producer. Angola is blessed with abundant water and a climate and rich soil perfect for both tropical and sub-tropical farm products. The country has 140 million acres of arable land and the southwest plateau
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affords rich grazing areas for cattle and other livestock.
ANGOLA AS A MAJOR AGRICULTURAL PRODUCER The experts also note that during colonial times the country was a major producer of sugar, coffee, cotton, rubber, sisal, corn, potatoes, beans, cassava, peanuts and a wide variety of fruit for both the domestic and export markets. In those days, Angola only had to import wheat, as it was self-sufficient in every other major food crop. But then came the chaos of the independence struggle, Portugal’s abandonment of its African colonies and, in An-
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AGRICULTURE Angola
ANGOLA AGRICULTURE
has made a concerted effort to correct the situation and put Angola’s agricultural sector back on its feet. Flush with its billions of dollars in annual petroleum income, the government is pouring vast financial resources into upgrading or creating new rural infrastructure, including roads and bridges to improve market access for farmers. It is also providing training programs for rural residents in farming, animal husbandry, soil treatment and irrigation training programs while establishing agricultural study and research centers.
THE GOVERNMENT IS POURING VAST FINANCIAL RESOURCES INTO UPGRADING RURAL INFRASTRUCTURE TO IMPROVE MARKET ACCESS FOR FARMERS
gola’s case, a decades-long and devastating civil war which ended just a dozen years ago. In the con ict, much of the country’s transport and other infrastructure were heavily damaged. easants ed to the safety of the cities in an unprecedented internal migration estimated to have affected four million people, or a third of the population. Even worse, an estimated 10 million landmines were planted around Angola. The government’s wrong-headed agricultural policies didn’t help matters. As Portuguese farmers and traders returned home with independence, productivity plunged. In response, authorities set up state farms, much like Soviet collectives. However, these also proved unproductive and vast swathes of farm land were turned over to the peasants. Since peace was declared in 2012, the government, with both public and private foreign assistance,
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This year, authorities also moved to raise farm productivity and reduce the country’s dependence on food imports, which make up some 90 percent of all food consumed. New import duties were levied on a range of food items such as eggs, fruits and vegetables. Angolan trade officials say they hope the measures will slowly lower food costs, especially for the two-thirds of the population who live on less than two dollars a day, and go a long way towards slashing the country’s annual food import bill which is estimated at around $5 billion. At the local level, government officials and Angolan and foreign experts are giving small farmers a hand up through a variety of programs funded domestically and internationally. Agricultural processing plants such as grain mills and juice production facilities are being set up, as are agri-business training programs and micro-credit schemes. With the beginning of each growing season, central government authorities and provincial officials purchase and distribute vast amounts of starter supplies for small landholders.
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Angola AGRICULTURE
Depending on the province and its special needs and climate, these could include thousands of tons of seed corn, beans, sorghum, fertilizer, pairs of oxen and other livestock as well as tens of thousands of farm implements such as hoes and ploughs. For example, officials in Benguela province are working to transform it into the country’s biggest production center for tomatoes and bananas through training schemes and massive investment to upgrade local irrigation systems. At the same time, more than a dozen agricultural development centers are being established for this year’s growing season with starter supplies being provided to some 100,000 peasant farmers and their families. Land mines are also being cleared. With foreign financing and guidance, Angolan teams are disarming and destroying land mines littering the countryside. Apart from the danger they represent, the mines also hinder the planting of crops and grazing of livestock.
TARGETING NEEDS In another agreement highlighting cooperation between Angola and foreign and multinational organization partners, Brazil and the Food and Agricultural Organization of the United Nations (FAO) are targeting the need for agricultural and veterinary research. Under the terms of the deal signed this year, more than 100 Angolan researchers will receive technical and short-term training at the Brazilian Agricultural Research Corporation, as part of the $3 million program. “The availability of highly qualified researchers and innovators who understand the complexity of development challenges is key to making great strides in agriculture and food security in Angola,” said FAO Assistant Director-General for Technical Cooperation Laurent Thomas at the time the program was launched. Also active in Angola is the U.N. Industrial Development Organization, or UNIDO, which has launched a project to rehabilitate Angola’s agricultural machinery manufacturing industry, one of the sector’s most basic activities.
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efore the civil war, five local firms were major contributors to agricultural production by manufacturing farm tools and implements for the individual farmer but are now largely dormant. In its bid to jumpstart the industry, UNIDO is engaged in pilot projects such as replacing machinery, providing spare parts for existing machinery, raw materials and product components and manufacturing consumables. There is also assistance in marketing the finished products, technical knowhow, mechanical engineering, machine tool electronics, induction furnaces and business management.
COFFEE AS AN EXAMPLE Coffee alone is an excellent example, not only of Angola’s agricultural heritage, but of the current challenges facing the sector, its tremendous potential and the opportunities for foreign investors. Coffee beans were a major source of revenue for the colony before independence, when Angola was the third largest producer in the world. But just four years ago, coffee growing accounted for only 0.6 percent of the total area under production. Angola’s robusta beans are highly prized by traders and consumers alike and are used primarily in espressos, the most popular brew of choice in hip coffee shops around the world. ut Angolan officials are also keen to expand Arabica coffee production in Huambo province where hundreds of acres of greenhouses have been built and tons of special fertilizer are distributed. In one promising case of foreign involvement in the coffee industry, a Vietnamese company which is the largest robusta producer in the world has signed on to a ten-year project
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to rehabilitate and restore almost 250,000 acres of coffee plantations. Funding is being provided through a credit line from Brazil. Although it shares linguistic and cultural ties with Angola, Brazill isn´t the only player; U.S., Canadian, Portuguese, Spanish and Japanese investors are backing agri-business projects around the country, while the ubiquitous Chinese are involved in a rice-growing scheme in Kuando Kubango province.
MAJOR POTENTIAL All this effort appears to be paying off, according to a recent World Bank report. Agriculture, which employs two-thirds of the Angolan labor force, has posted respectable growth rates over the past several years despite a slight downturn triggered by a drought in 2012 that cut the yields of many food crops in ten of the country’s 18 provinces. The World Bank describes the sector as having significant potential,” but cautions that challenges remain. “Improving the productivity of the agricultural sector is critical to reducing poverty,” the World Bank report said. “However, less than 30 percent of Angola’s arable land is currently under cultivation and per-acre productivity is among the lowest in the region.” The bank said Angola’s recent efforts to facilitate access to markets through improvements in infrastructure in rural areas have improved agricultural output, with crop production in Angola growing faster than the regional average. However, it counseled that much remains to be done to raise the country’s agricultural productivity to the level of its regional competitors.
IMPROVING THE PRODUCTIVITY OF THE AGRICULTURAL SECTOR IS CRITICAL TO REDUCING POVERTY, ACCORDING TO A WORLD B ANK REPORT ON ANGOLA
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CHINA IN ANGOLA Angola
CHINA IN ANGOLA:
WIN-WIN PARTNERSHIP OR MARRIAGE OF CONVENIENCE? By Rob Train
CHINESE COMPANIES, BANKROLLED BY A GENEROUS PROGRAM OF GOVERNMENT FINANCING, HAVE MADE GREAT INROADS IN ANGOLA, WHICH CHINA VALUES AS A SOURCE OF OIL AND A MARKET FOR ITS EXPORT GOODS. MORE THAN 500 COMPANIES AND 100,000 WORKERS BEAR WITNESS TO CHINA’S GROWING INFLUENCE IN ANGOLA. HOWEVER, THEIR BUSINESS AND LABOR PRACTICES HAVE OFTEN MADE FOR AN UNEASY FRIENDSHIP. Following independence and its emergence from the grip of a 27-year civil war in 2002, Angola was as much in need of foreign assistance to rebuild as any other young African nation. In the late 1970s, when the colonial powers were performing a gradual withdrawal from the old continent amid a clamor for independence that was reaching fever pitch, few African countries were looking to the East for partnership opportunities. But at the same time China was experiencing steady GDP growth on the back of vast public spending commitments, while simultaneously entering the international markets in a variety of sectors. The opportunity was apparent: oil-rich Angola faced the task of rebuilding a national infrastructure devastated by con ict; industry-heavy China needed to be powered. This led to the widening of economic and political ties throughout the following decade. In 1984, Angolan Foreign Trade Minister Ismael Gaspar Martins travelled to eijing to sign the first ilateral Trade Agreement between the two countries. A Joint Economic and Trade Commission followed in 1988. Cooperation between the two countries expanded to the extent that in 2010 bilateral trade stood at more than $120 billion, making Angola China’s largest trade partner in Africa.
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At the same time, Angola became China’s largest source of oil, which the People’s Republic reciprocated with massive loans for infrastructure and development. The agreements signed between the nations stipulated that 70 percent of development projects in Angola be awarded to Chinese companies. The China International Fund (CIF), a private company based in Hong Kong, is at the forefront of Angola’s development drive. However, former Minister for Economic Coordination Manuel Vicente told the Financial Times in 2012, that the CIF was completely detached from the estimated $10billion oil-for-loans deal between the two countries from 2004 to 2010. Vicente, now Angola’s Vice President, was CEO of Sonangol, Angola’s state oil company, until his appointment to the Cabinet on September 26, 2012. The bulk of Chinese lending to Angola has been carried out by the ExportImport Bank, a state-owned entity. The loans are repayable over 17 years, a much better deal for Angola than similar credit lines offered by European lenders, which demand repayment within four to five years. Although the credit lines were first extended to help Chinese companies investing in Angola, these soon were able to branch out on their own and signed a combined total of $22 billion in contracts in 2009 alone.
“Angola is a credible partner,” Chinese Premier Li Keqiang, told reporters during a two-day visit to Angola in May, 2014. “Angola has the biggest Chinese community and number of companies from China in Africa.” Through Sonangol, CIF’s involvement in Angola has led to billions of dollars of investment in roads, infrastructure, and construction, including of hospitals and schools. The vast majority of these projects are carried out by Chinese companies, which prefer to import their own workers rather than hire locally. This has led in turn to conflict, with Chinese companies occasionally the target of hostility from Angolans. But it is also a signal of China’s commitment to Portuguesespeaking countries. In response to tensions created by drafting in Chinese workers for jobs Angolans are perfectly capable of doing themselves, Sonangol has now imposed limits on the number of foreign workers that can be on its payroll; it seems likely that others will follow suit.
THE OPPORTUNITY WAS CLEAR: OIL-RICH ANGOLA FACED THE TASK OF REBUILDING ITS NATIONAL INFRASTRUCTURE; INDUSTRY-HEAVY CHINA NEED-
ED TO BE POWERED.
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Angola CHINA IN ANGOLA
THE PRESENCE OF CHINESE COMPANIES HAS BEEN STEADILY EXPANDING, RESULTING IN THE CREATION OF A SERVICES CENTER BY THE CHINESE CHAMBER OF COMMERCE IN ANGOLA (CCCA) THIS YEAR.
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behind the Angola National Tourist Area Project, which aims to capitalize on the prospects inherent in the country’s rich but not fully exploited tourism offer. A significant part of the task facing the Angolan tourism industry is the fact that large swaths of the country outside Luanda remain all but inaccessible to foreign visitors. That is where CITIC has focused its efforts. Earlier this year, Chinese Ambassador to Angola Gao Kexiang paid a visit to southern Angola to see for himself the effort being made to complete the Moçamedes Railway project, which aims to extend the line in southern Angola from Menongue to Cuito Cuanavale to connect with the Eastern Transversal line that links the Democratic Republic of the Congo with Namibia, and could help to boost tourism in Angola. Contained within Angola’s borders are soaring peaks, dense tropical rainforests, white sand beaches and vast, open plains. The allure of Angola’s natural resources is seen as a key driver of the country’s economic resurgence. In 2002, when the civil war finally ended, tourism receipts in Angola were zero. But after just a few years the country witnessed an in ux of visitors, drawn to the exceptional beauty of the country. Currently, the tourism industry employs some 50,000 Angolans, but there is a chronic lack of hotel beds. Little wonder, then, that the tourism industry has turned to Chinese expertise to bridge that gap. Construction of the first four-star hotel in ndjiva, the capital of Cunene province, was undertaken by Chinese company Guangdong Group Ltd., in cooperation with Angolan firm S Constru oes. The ricila hotel was constructed at a cost of $14 million dollars and has 64 rooms and several suites. But that’s just the tip of the iceberg. Angola has a rare and exquisite tourism offer, which encompasses the best of the African continent in a single country. It’s clear that there’s a goldmine to be tapped.
Foto: Estelle Maussion
In late 2013, Chinese Deputy Premier Wang Yang announced, at the Fourth Forum for Economic and Trade Cooperation between China and Portuguese-speaking countries, that a new raft of credit lines would be opened and economic and development zones set up wherever they were desired. The Forum was inaugurated in 2003 and is based in Macau, Portugal’s former trading outpost in the China Sea. Trade between China and the Forum’s member nations -- Angola, Brazil, Cape Verde, Guinea-Bissau, East Timor and Mozambique, reached $128.8 billion in 2012, and $ 8.5 billion in the first three quarters of 20 3. In Angola, the presence of Chinese companies has been steadily expanding, resulting in the creation of a services center by the Chinese Chamber of Commerce in Angola (CCCA) this year. It is estimated that there are around 500 Chinese businesses in Angola, employing some 100,000 expatriate Chinese nationals. The center’s mission is to ease visa problems faced by workers and facilitate permits for Chinese enterprises. Among the members of the CCCA are ZTE Corporation, Huawei, Sinosteel Corporation, China Petroleum & Chemical Corporation (Sinopec), China National Overseas Engineering Corporation (COVEC) and the China State Shipbuilding Corporation (CSSC). Of these, telecoms equipment manufacturer Huawei stands out for its expansion program in Angola, which encompasses a vast roll-out of digital connectivity across the country to grant 18,000 young Angolans access to the internet, as well as providing online resources for schools. It is estimated Angola currently has around 19 percent internet penetration, a much higher figure than the continent-wide average. Also present on the ground is the China International Trust and Development Corporation (CITIC), which has been responsible for some of the keystone development projects undertaken in Angola, such as the Kilamba Kiaxi social housing area 18 kilometers outside of the capital, Luanda. CITIC is also Chinese Premier Li Keqiang met with Angolan President José Eduardo dos Santos during a visit by the former to Angola in May, 2014.
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In Luanda alone, the current shortfall in hotel beds is estimated to stand at 3,000. “This situation is expected to improve in coming years with the opening of a number of new hotels,” ANIP stated earlier this year. Chinese companies do not just provide the infrastructure for increased tourism. They, along with other foreign nations sending expatriates over, particularly Portugal, provide a ready-made middle class able to take advantage of the new routes and hotel offers. Much of the population of Angola, as in so many other emerging African nations, lives on roughly two dollars a day, so the middle-class is augmented by itinerant workers on higher wages. While that might not sit well with Angolan unemployed, the fact remains that other than remittances, much of the money earned by Chinese and Portuguese workers goes straight back into the Angolan economy. It is not ideal – a vast in ux of foreign workers into an alien country is rarely a recipe for cordial relations – but in the case of the Chinese, integration is steadily becoming the rule, rather than the exception. In some countries – Dubai, notably, and also Zambia - foreign nationals live in compounds and do not interact with the people of their host country. But in Angola, Chinese guest workers have already branched out into fields other than big construction projects.
On the streets of Luanda, it is not uncommon to hear Chinese street vendors hawking their wares, or to see signs offering traditional oriental massages. Chinese real estate entrepreneurs, retail salespeople and shop owners also abound. ut in turn, concerns over the in uence – and indeed Angola’s self-perpetuated reliance on Chinese loans – has also had the middle and upper classes peering over their broadsheets with mild concern. In the past two years, several contracts that were initially to go to Chinese companies have been given to Indian, Brazilian, American and European companies. While China remains, and is likely to remain, the country’s main economic partner, the government of President José Eduardo do Santos has strengthened diplomatic and security ties with the United States, Europe, Brazil and other Asian powers, such as India, according to a TradeMark Southern Africa report. The same study notes that US firms such as Chevron employ Angolans to staff their plants, in contrast to the Chinese policy. Is China’s in uence in Angola sustainable iven China’s dependence on oil from Angola and the importance the African country has for Chinese exports, the union looks set to be a lasting one. But with other countries taking a far from altruistic interest in Angola’s natural resources, China will have to pull out all the stops to maintain its pre-eminence.
Moving Luanda forward TCUL is Luanda’s public transit company, with 40 bus lines within the province of Luanda. TCUL also runs services between Luanda and various points throughout the country - namely, Benguela, Sumbe, Malange, Uíge, Huambo and N’Dalatando. With upgraded vehicles, more routes and better customer services, we aim to get Luanda going from A to B more efficiently, quickly and safely than ever before. TCUL also engages in the business segment of sales of advertising space on buses. This far-reaching and impactful business enables individuals and organizations to publicize their businesses, brands, products, services, etc., on the interior or exterior of the bus.
5º Avenida - Cazenga - Cx. Postal 14211 Luanda / República de Angola
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Angola LAND MINES
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LAND
MINES
THE CIVIL WAR’S
LETHAL LEGACY By Robert Latona
our decades of conflict left Angola ith the unenviable title of the most land-mined countr in the orld. The government, aided b international organizations, has been orking to remove this threat hich, apart from having tragic conse uences for individuals, has also been an obstacle to economic development.
Dozens of casualties were registered last year in Angola in a war that has no soldiers -- the battle the country’s past stubbornly insists on waging against its future. Long after the civil war that devastated the country from 1975 to 2002 came to an end, land mines continue to claim new victims – there were 89 confirmed in 20 . eanwhile, government and international organizations work to remove this threat to life lying just below the soil the country needs to develop its agriculture, transportation and infrastructure. xperts give a conservative figure of 0 million mines planted throughout the country during the civil war, or one for every two Angolans. Because anti-personnel mines are designed to wound and maim rather than kill the victim, it is tragically commonplace to see some of the country’s 70,000 or so amputees as just another component of the urban landscape. In the aftermath of the con ict, Angolans have taken on primary responsibility for dealing with this situation. According to government figures, between and 20 3,a total of 2,833 anti-personnel mines were cleared, 2 , anti-tank mines neutralized and about 2.7 million explosive devices recovered. As of 2014, some 7,000 square kilometers of land had been cleared of mines. The first attempts at de-mining took place between 1994 and 1998, during the lull in fighting between A opular ovement for the iberation of Angola and UNITA National Union for the Total Independence of Angola forces. During that interval, the short-lived coalition government established
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the National Demining Institute INAD , which continues to have primary responsibility for identifying and locating mine emplacements, as well as training and supervising brigades of sappers tasked with neutralizing them. The institute is also in charge of programs for educating people about the dangers of unexploded mines. INAD is a linchpin component of a larger policy-making entity, the CNIDAH, or National Intersectorial Commission for Demining and Humanitarian Assistance, on which the Armed Forces and ministerial bodies are represented. CNIDAH sees to the strategic planning, mobilizes resources get the job done, and evaluates the outcome. Its broader remit also includes supervision of social reintegration and humanitarian assistance programs aimed at mine victims. CNIDAH also coordinates with those foreign governments playing an essential role in helping Angola deal with its mine problem. Among the most generous is Japan, which granted nearly $ 00 million last year to finance clearing in oxico -- the southeastern province that vies with neighboring Cuito Canavale as the country’s most mine-infested region.
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ANGOLA Land Mines
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R S AR CT
T AT A SA S U. . A STRAT R A R T C ST UCAT
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WOMEN AND CHILDREN OFTEN THE VICTIMS One of the greater tragedies of the landmine saga is that the victims, more often than not, are women and children. “Women and girls are disproportionately affected by landmines, notes United Nations Development rogram Administrator Helen Clark. They have different needs when it comes to education about risks and different challenges when they or a family member is killed or injured.” To bring that point home, the government sponsored a gala in 2008, in which contestants from each of the country’s 18 provinces vied for the title of iss andmine Survivor at Luanda’s trendiest nightspot. The event’s motto was “Everyone has a right to be beautiful,” and a selection of photographs of the contestants later toured in oland and Norway. Additionally, at least 8,000 of the 70,000 amputees were children at the time that their limbs, sight or hearing were taken from them, victims of their own innocent curiosity about the objects deliberately planted near fresh water sources, shady groves and other soft targets with no military justification whatsoever. As in some other countries, notably Zimbabwe and ozambique, an undisclosed percentage of Angola’s minerelated casualties are self-in icted. Throughout Africa, it is widely and wrongly believed that a substance called red mercury can be recovered from mines and other unexploded ordinance: terrorists are supposed to pay cash over the counter for it, because it’s used to enrich uranium for nuclear bombs or cover stealth aircraft with a paint that renders them invisible to radar. The only drawback is that red mercury doesn’t exist -- not in nuclear devices or anywhere else, but especially not in unexploded landmines.
INTERNATIONAL NGOS DO THEIR PART The presence of international N s and donor groups in Angola goes back to the parenthetical peace interval from 1994 to 8. Foremost among them are the ines Advisory roup A ritain which lost one of its members in an explosion in Angola in 1997 - the same year it was proclaimed cowinner of the Nobel eace rize. Also active are g enschen gegen inen eople against ines ermany and the Scotland-based HA Trust. The latter organization owes much of its high public profile to Diana, rincess of Wales, whom HA hosted on her 1997 visit to Angola. The media-savvy princess knew that photographs of her chatting with a victim or holding a recovered mine in her hands would be plastered on front pages all over the world, calling attention to Angolans’ plight, as indeed they did. Her visit also helped pave the way over some politically rough terrain towards Ottawa, where a treaty outlawing the manufacture, storage and use of anti-personnel mines came into force in 1999. In August, 20 3, it was Diana’s son, rince Harry who arrived in Angola on a four-day visit to confer with demining teams sponsored by the HA Trust and reaffirm his family’s support for the cause that stirred his mother’s passionate concern. He was told about the landmines and other explosive devices that HA experts have been locating and putting out of business at an average rate of 0 per month over the past five years. ut many more are still out there; the five provinces where HA operates contain 553 confirmed minefields.
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Among the questions raised during rince Harry’s visit was whether the governments responsible for this state of affairs be held accountable. art of the problem is that just about everyone was responsible: both of the principal Angolan factions in the civil war, along with their foreign sponsors -- the United States, Soviet Union, Cuba, ortugal, aire, China and South Africa -- but it was Cuban occupation forces that first employed mines on a massive scale to isolate the towns, military installations and power plants under their control. As the con ict dragged on, however, those mines were increasingly used as an offensive weapon against civilians to deny them access to their food crops, firewood and livestock. Creating a climate of terror worked well enough as strategy: people ed one of Africa’s most fertile countrysides to seek refuge in a handful of big cities that today are home to of the population. oads, railways and bridges -- so essential for domestic commerce and so neglected by Angola’s former colonial rulers -- were seeded with anti-tank mines, making them the priority for ongoing clearance campaigns.
A SLOW AND DANGEROUS PROCESS Detecting mines is a cumbersome, labor intensive and slow process -- and, at the risk of stating the obvious, an exceedingly dangerous one. Only the Cuban forces who supported the A bothered making maps of the minefields they created, so just knowing where to start, comes down to surveying
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sites where casualties have already been recorded and adopting the mentality of an individual who plants death traps without regard for who the victim may be. Nowadays, mines are made almost entirely of plastic in order to thwart conventional metal detecting probes. Israeli researchers, however, have come up with a method of scanning from the air to detect variations in the nitrogen content of the soil that would indicate the presence of mines. And scientists in the United States are achieving promising results with ground penetrating radar, but, sadly, such equipment is still a long way in Angola’s future. Technology will never be enough- Skill, along with an inordinate amount of luck and personal courage are all that Angola’s 7,000 trained mine removal technicians have at their disposal. That, plus a sharp-edged garden trowel. A skilled, trained sapper may need an hour or longer to scrape away at the earth surrounding a land mine. The trick is to avoid contact with the trigger mechanism on the mine’s upper surface while digging away at the soil from a low angle, going in deep enough so that any contact avoids the spring-loaded trigger. Once the emplacement has been confirmed, a painted stake is driven in the ground to mark
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the spot where a follow-up team lays a string of firecracker charges for controlled detonation. Dogs are extremely good at detecting the scent of the high explosives in buried mines. The tricky part is training them to keep a safe distance, but skilled handlers have had few problems and remarkable successes in teaching their animals to play the game safely. g , the erman N , has two facilities in Angola where canine mine-sniffers are groomed for their mission. Animals may also become the beneficiaries of demining. One of the most ambitious initiatives to come off the drawing board in recent years involves the recovery and transformation of parts of Kuando Kubango province, also in the warravaged southeast, with a view to their eventual inclusion in what is set to become the world’s largest wildlife sanctuary. Assembled from outlying territorial contributions of Namibia, Zimbabwe, Botswana, Zambia and Angola, the Kavangoambesi Transnational Wildlife ark would provide Africa’s animals with a secure habitat the size of Italy, and create a tourism-driven economy to benefit inhabitants that now rely on subsistence farming.
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TOURISM:
UNDISCOVERED PLACES
FOR INTREPID TRAVELERS
The Cunene River near the border between Angola and Namibia
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By Rob Train
Like many other industries, tourism in Angola was stunted by the damages inflicted b the civil ar. Toda , the tourist numbers are increasing as travelers from home and abroad discover the countr s ide-ranging treasures: miles of pristine beaches, national parks that have been restored and stocked ith ildlife and an elegant cit nightlife are ust some of its attractions. When the civil war ended in 2002, few people in Malanje – the continent’s third-highest - Anwould have considered Angola as a tourist desgola is Africa in microcosm. The Atlantic coast is tination. A mere trickle of intrepid travelers a , 50-kilometer expanse of white sand beaches entered the country that year, but in every suband the temperatures range from the sultry tropsequent calendar cycle, the number has risen ics of Cabinda to the cool conditions of Lubango like the waters of Angola’s many surging rivers, in the south, where the seasonal Cacimbo mists reaching a crescendo in 2012 with more than take hold. The jewel in Angola’s crown is the nahalf a million foreign visitors, an almost 500 pertional parks network, which was ravaged during cent increase in little over a decade, according the civil war for natural resources and, as is the to World Bank estimates. case across the continent, plagued by poachers. Angola’s government has invested heavBut a government initiative coordinated by the ily in its tourism offer as a means of lessening Quissama Foundation gradually reintroduced dependence on revenues from oil and precious lost species into the synonymous reserve. Called stones. A significant push to improve the counNoah’s Ark, the project entailed importing anitry’s infrastructure has resulted in thousands of mals from South Africa and Botswana to repopukilometers of new roads being built and raillate Angola’s natural spaces. Today, elephants, ways restored. The government has prioritized cheetahs, lions, antelope, wildebeest, leopards, the travel and tourism sector and growth indicagnus and zebras roam Angola’s protected parks, tors are expected to remain positive in years to another tourism draw. come, leading the ministry to set a target figure of . million foreign tourists to Angola in the year 2020. To this end, the Ministry of Tourism has launched a concerted effort to place itself on the world stage at international tourism fairs. In 20 alone, Angola has participated at FITUR in Madrid, BIT in Milan, ITB in Berlin, BTL in Lisbon, FIT in Havana and INDADBA in Durban, South Africa. At BTL, it was noted that Angola had made significant progress in terms of investment in the sector, with the construction of new hotels, the improvement of Sand dunes on the Cunene roads, the business opportunities available and the country’s overall tourism potential. No small wonder, because Angola is full of However, the majority of the foreign surprises. The climate and topography changes cash spent in Angola still registers in Ludramatically from one province to the next. From anda. Angola’s capital city is rated the most tropical rainforests to the parched plains of the expensive in the world and has earned that Namibe desert, soaring mountains and raging accolade several times from human rewaterfalls such as the spectacular Kalandula falls sources consulting firm Mercer. Oil wealth
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has helped to build up the streets of the central business district and high-class hotels – many of them located near the Cuatro de Feveriero airport – and eateries jostle for the dollars dropped by visiting executives and resident expatriate workers. Top of the line four- and five-star hotel rooms start at around $ 00 to $500 dollars, while a threestar can cost $300. There is a burgeoning bed-and-breakfast sector emerging nationwide to cater for more modest budgets and a handful of hostels exist in the capital – although these are purely for the hardiest of travelers. Eating out can also be an eye-watering experience in Luanda; the bill at most restaurants catering to tourists and expats will easily exceed $100 per person. Nearby the city are several getaways, including Palmeirinhas Beach to the south and Santiago Beach to the north. Mussulo Island lies 35 kilometers offshore from Luanda and is a favorite destination for foreign visitors looking to escape the capital. A tidal lagoon accessible only by boat, Mussulo Island is a white sand haven of the sort that adorns travel brochures the world over, complete with a wide range of accomodation and restaurants. Closer to the city, the Ilha de uanda,a .5 mile-long sandspit, holds beaches, bars, casinos and nightclubs that cater to both locals and foreign visitors alike, against the backdrop of the imposing Fort Sao Miguel. Throughout Luanda, colonial-era architecture jostles for space with imposing modern skyscrapers. Angolan tourism as a whole is still heavily reliant on business travellers but recreational visitors are starting to discover the unspoiled country outside Luanda. Eco-tourism companies have sprung up to cater for the more adventuresome visitor and have opened up areas of Angola that would have been inaccessible 10 years ago, even if one such firm describes the conditions of the roads that must be traversed to reach them as “challenging.”
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Unfortunately, while many African nations exercise little in the way of bureaucratic zeal when it comes to visa applications, Angola takes it to the lower limit. The application process for an ordinary tourist visa or one covering a business conference would test the patience of the most seasoned traveler. Still, it is a vast improvement from several years ago, when tourist visas did not exist and practically no information on traveling around the country - if you were lucky enough to get in - was available via any medium. Today, many of the eco-tourism travel companies will happily arrange visas, hotels, airport transfers and onward travel across the country. The rewards for those travelers willing to jump through the hoops are found in a country where mass tourism has yet to swamp the natural reserves and where they can get a real glimpse of the African wilderness as it was before the European colonial powers arrived. In an age of globalization and overpopulation, Angola’s natural beauty still lies very much off the beaten track. But a colonial throwback is also one of the new attractions Angola has to offer: the Benguela railway, built in the early 20th century, has recently reopened and is considered to be one of the most spectacular rail journeys in the world, running from the Atlantic coast through the central highlands and onto the city of Luau, on the border of the Democratic Republic of Congo. Aside from the destruction wreaked on its national infrastructure during the civil war,
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Elephant sunset
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Zebras are among the animals that can be found in Angola´s protected parks
Another view of the dunes along the Cunene River
The Epupa, or Monte Negro Falls rise to a height of 40 meters
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TREASURES AND PLEASURES, NEAR AND FAR Most business travellers and foreign residents in Angola spend the vast majority of their time in Luanda. While tourist infrastructure is lacking in much of the country’s interior, a few destinations provide a sure reward to travellers. Some of the best, close by and far from the capital, are listed below. MUSSULO ISLAND. A weekend getaway just south of Luanda but well removed from the big-city chaos, Mussulo Island is in fact a peninsula. Most travellers arrive by boat, taking the 22 mile trip from the pier in Luanda. Apart from its natural attractions – white sand beaches and coconut trees - the island features chalets for rent, resort spas and other amenities. The shore facing the mainland offers tranquil waters, perfect for aquatic sports, while the Atlantic side boasts isolated beaches and dunes, making it an ideal spot for viewing the sunset. KISSAMA NATIONAL PARK. Located 70 kms 3. miles south of uanda, issama is one of Angola’s largest areas for viewing wildlife. Like most of the country´s national parks, Kissama (also spelled uicama was neglected during the civil war and fell victim to poachers. An ambitious international program, Operation Noah´s Ark, began to repopulate the park in 2000, by importing animals from Botswana and South Africa. Today, Kissama boasts a growing population of elephants, rhino, dwarf forest buffalo and roan antelope, along with a wide variety of bird species. KWANZA LODGE. Not far from Kissama, on the mouth of the Kwanza River, sits this privatelyrun lodge, which offers cabin accommodations, a restaurant and bar, all surrounded by the natural vegetation on the riverbank. A popular spot with fishermen, it has a sport fishing vessel that can take serious anglers as far as 500 nautical miles into the Atlantic. Visitors can take a river cruise on the Kwanza or enjoy the palm-lined beach at Cabo Ledo, just south of the lodge. For bookings, contact Trix or Danie at kwanza@aasafaris.com or by phone 2 3 0 8. BENGUELA RAILWAY. A legendary feat of engineering completed in 2 , the enguela railway was built to connect the Port of Lobito on the Atlantic with the copper mines in Zambia and the Congo, more than 800 miles away. The railway was shut down in 2 after suffering extensive damage during the civil war, but was reopened in 2012. Tourists who want to get the feel of colonial rail travel can take the twice-daily service on the 8.5 mile route west from enguela 3 2 miles south of uanda to Puerto Lobito. Those who choose to travel east will have less choice; the service to Huambo, for example, runs only once a week.
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The Baobab tree, known as the “Tree of Life,” can store up to 100,000 gallons of water in its trunk
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The Kalandula Falls, in Angola´s northwestern Malanje province , is one of the largest waterfalls in Africa by volume
Angola’s main obstacle to increasing tourist arrivals in recent years was the inclusion in July 2007 of national flag carrier TAAG Angola Airlines on a European Union blacklist due to security concerns over aircraft safety. Still, the blacklisting did not affect the trend of rising foreign visitor numbers year-on-year. The ban on operating flights to and from EU countries was lifted in March 2010 after the government restructured the company and invested in a major overhaul of the fleet’s aircraft. TAAG had been granted permission to operate flights to Lisbon a year earlier. Today, the company is one of Africa’s leading airlines, with a modern fleet of Boeing 737-200s, 737-700s, 777200ERs and 777-300ERs. Flying out of Luanda’s Cuatro de Fevereiro airport, TAAG’s list of destinations includes the European Union, Beijing, Dubai, South Africa, Russia and Brazil, as well as several domestic stops. Companies that operate inbound services include British Airways, Lufthansa, Emirates, Iberia and KLM. TAAG has achieved important objectives. After the blacklisting, the government had to outline a plan to rebuild TAAG, with the main objective of restructuring the company’s operational area. Those efforts culminated in 2010, when TAAG was the only African airline to have its
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EU security ban lifted, because it was able to pass the audits to which it was subjected and, consequently, the airline’s credibility began to be restored. Other than IATA, at the African level there is also another association, AFRAA, and TAAG has held the chairmanship of its executive committee since 2011, says the airline’s chairman, Dr. Joaquim Teixeira da Cunha. Air travel has opened Angola to the wider world and TAAG’s investment in the country’s domestic airports has gone some way to solving the inherent problems in overland journeys. What’s more, a new craving on the part of cruise ship passengers to explore previously unthinkable destinations has benefitted uanda. Since 200 , several operators have included the Angolan capital on their itineraries, among them Holland America Line, Yachts of Seabourn, Oceania, Silversea Cruises, Princess Cruises and Cruise and Maritime, all of which will be docking in the Ilha de uanda bay in 20 , 20 5 and 20 . All of this is a boon to the government’s plan to cash in on the exceptional tourism offer that Angola enjoys. In a continent largely overrun with package deals and by-thenumbers tours, Angola presents something of a final frontier for people wishing to really scratch beneath the surface
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of Africa. Problems persist in transport and infrastructure, but the government’s commitment to promoting tourism as a means of sustainable non-oil related income has smoothed over many of the issues connected with getting around the country. One of the quickest and most effective ways to achieve this was to develop a modern and efficient network of airports. As. TAAG’s Dr. Cunha explains, “In broad strokes, the government outlined a program to rehabilitate and modernize the airports in the whole country. All provincial airports benefited from this modernization program, and they still continue to benefit from large investments to create the conditions required for the operation of aircraft and for the proper handling of passengers.” He adds that currently, a new airport is being built in Luanda, with the aim of turning it into a regional hub, providing a connecting link to Latin America, especially to countries like Brazil, Cuba and, eventually, Argentina. The new airport could also be a point of connection with Europe, because many African countries have no national carrier and travelling from one to another often requires going through Europe.
Inner gorge of the Monte Negro falls
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MOST EXPENSIVE CITY
By ESTELLE MAUSSION
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ollo ing a long period of conflict, Angola toda has emerged as an oil-rich countr ith one of the fast-gro ing economies in the orld. ut the former ortuguese colon is much more than that: its rich and livel culture reflects the influences of the rest of Africa, as ell as ortugal and razil.
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Angola is often called the “new Dubai of Africa,” mostly because of its renovated and lively capital, Luanda. The city´s recent development is best symbolized by the Ilha, a new bayside boardwalk lined with palm trees imported from Miami, where residents and visitors can stroll, rollerblade or savor an ice cream in the sun. Once a year, the Angolan capital makes the international news, because it heads the Mercer survey of the world’s most expensive cities for expatriates. ast year it took first place, ahead of oscow, Tokyo and Singapore. “The prices are totally crazy here, and not only for expatriates but for everyone”, says Aldemiro Ladislav, a 23 year-old university student. “Everything is very, very expensive - food, clothes, electrical devices, cars, housing... it’s hard to believe but it’s true, that is our day-to-day life.” If you don’t know how to bargain, the “mamas” selling vegetables and fruits on the street will charge you five dollars for a pineapple. In an ordinary restaurant, a dish such as fried chicken with French fries or fish of the day with rice will cost between $30 and $40. A night in a “pensao” (hostal) costs about $150 and you’ll have to pay at least $100 more if you choose to stay in a hotel. This hyper-in ation is the result of the country’s recent history. The conicts that roiled Angola for over four decades, between and 2002, were enormously destructive: roads, trains, communication lines were destroyed, while agriculture and many other industries were ruined. Since the civil war ended in 2002, the country has been recovering very at a rapid pace, thanks to its oil resources. Angola is today the second-largest oil producer in Africa following Nigeria, producing 1.7 million barrels a day in 2013.
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The government of President José Eduardo dos Santos, in power since , has been spending the money to rebuild and modernize the country, but the process is far from being completed. “There are still problems with infrastructure, logistics, water and electricity supply , says Salim alimamade, professor of economics at the Catholic University of Angola. “And, as the country is not producing enough, it has to import the vast majority of the food and goods. All of that means higher prices.” The oil-based economy, combined with the presence of a large number of expatriates, has combined to create a real-estate bubble and a shortage of essential services, all of which contribute to rising in ation. It’s a difficult situation but we are now used to it. veryone finds their own solutions and tactics to get through it,” says Aristide, a student in biology. WIth a population of five million, or a quarter of the country’s total population, Luanda is on a different scale than other Africa capitals such as Lagos or Cairo, which have 15 million inhabitants each. But it’s still a very chaotic place. Built by ortuguese in the th century to house 500,000 people, the city has undergone rapid growth without any urban planning. As a result, its electricity, water and telephone systems are all undersized or outdated. The shortage of public transportation creates horrendous traffic jams, while the collective taxis - blue and white Toyota vans called “candongueiros” (“illegal traders”), famed for their dangerous driving - further complicate the situation. “I have to wake up every day at 5 a.m. and leave at 5:45 a.m. in order to avoid traffic and get to my office in the city center,” says Maria, a 33 year-old Angolan woman who works at a bank and lives in a condominium in the suburbs of Luanda. For newcomers, this can be very disturbing. ecause of the traffic and the time wasted waiting for people, it’s really hard to have more than two meetings on the same day, complains a South African businessman on a commercial visit. Security is also a major concern. As in most African countries, simple measures are required, such as driving with the car
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Photo by Arianne Martin
doors locked, not carrying any object of value, or avoiding walks at night. ery recently, the Angolan authorities observed an increase in crime, which was followed by a strengthening of the police force and the launch of a so-called “zero-crime” operation. But what is most striking for the strangers is that Luanda, perhaps more than any African capital, is a place of extreme contrasts. The city is home to both a rich elite and a massive poor population; to both modern skyscrapers and decrepit colonial buildings; to luxurious suburban developments and sprawling slums. Nothing illustrates this dichotomy better than the Ilha, a 4.5 mile-long peninsula on the bay of Luanda. Not many years ago, it was a peaceful spot, peopled by fishermen, where traditional celebrations were held and a gentle lifestyle was the norm. Today, it houses fashionable nightclubs, expensive seafood restaurants and trendy bars where expats and wealthy Angolans enjoy themselves on the week-ends. However, the local population is still there in the background, holding their modest parties on the beach. “I don’t like to come back here to where my house was, it’s too painful”, says Fernando an Angolan teacher, evicted from the Ilha because of a road reconstruction. “I had to move very far from here, where I miss the ocean and the solidarity of our former neighborhood.” Across the street, young people are enjoying themselves at a new club where patrons can drink and dance until sunrise. On the Ilha, there´s always a reason to have a good time, whether it´s Carnival in February, Women’s Day in March, the winter – called cacimbo – in July or the New Year.
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That’s because fun, music and dancing are an essential part of the Angolan way of life. Despite the difficult conditions they live in, Angolans are very welcoming and friendly, always quick with a smile or a laugh. Silence can hardly be found because there’s music everywhere: in restaurants, in the streets, in cars, even in offices. The sound heard is usually is kizomba, the typical Angolan music, created by a fusion of West Indian zouk, African rhythms and semba, an Angolan mixture of traditional and modern rhythms with European and Latin American styles. “’Kizomba’ means ‘party,’ or ‘advertisement’ in Kimbundu, one of Angola’s national languages,” explains Domingos Nguizani, director of the Angolan National Ballet. “During the civil war, the music helped the population to think about something else. At that time, people gathered during the week-end, trying to forget the violence of the battles by listening to music, singing and dancing,” he adds. izomba is also the name of the dance associated with the music. Everyone in Angola, from the youngest to the oldest, knows how to dance kizomba, a colorful, two-person dance. “This dance is more and more popular today, and is known all over the world. There are kizomba classes in Lisbon, Paris and London”, says Eduardo Paim, the singer-songwriter who helped to popularize the step in the 80’s. The dance did create the success of the music, because of the creativity and freedom it offers.” In Angola, a new generation of young singers invented kuduro, which is a mixture of kizomba with R&B or electronic music. Rap also enjoys great popularity, from romantic rap-
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pers to revolutionary ones, who criticize the long-serving Angolan president, the style is very lively. Other well-known artiists include Paulo Flores, the Angolan king of semba, or Waldemar Bastos, a guitarist and singer whose music combines Afropop, Portuguese fado and razilian in uences. Music is just one example of Angola’s dynamic culture. The country is also alive with theatre artists, one-man show producers, painters and fashion designers. The sisters Delfina and eatrice eraldo created their own brand of clothing, eraldo Fashions, and have participated in fashion shows in Luanda, Windhoek, and even New York, during African Fashion Week. Their designs are inspired by styles from Africa, Europe and Brazil. Angola is indeed an astonishing melting pot of in uences the ortu-
guese colonial past, the Soviet-dominated period, and the strong links with Brazil as well as with the rest of Africa. The country’s cuisine re ects this richness the cod and steak with pepper sauce dishes from Portugal, barbecues from Brazil, and beans in palm oil, mashed manioc and seafood from the Angolan and African heritages. The Angolan traditional cuisine also reminds us that Angola is still largely a rural country. “Luanda is not really Angola, the capital is an anomaly in the country”, Angolans like to say. A trip outside of Luanda will show you that the rest of Angola consists of villages, small and quaint cities, forests, deserts, beaches and mountains. The country has a wide variety of landscapes and a high tourism potential. Nowadays, only 500,000 persons per year come to visit
the country, mainly on business trips. ut in the future, the figure is expected to be much higher; Angolan authorities plan to welcome more than four million tourists annually in the decades to come.
Designs by Angola´s Geraldo Fashions have been seen on runways from Windhoek to New York.
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Kizomba LIFESTYLE
ANGOLA’S “RAINBOW CUISINE” COMBINES FLAVORS FROM NEAR AND FAR Africa is home to a diverse set of regional cuisines, many of which combine strong local culinary customs with foreign avors that re ect their colonial past. In Angola’s case, this “Rainbow Cuisine” brings together the ancient agricultural traditions of indigenous tribes with alternative spices from Asia and India, and the European tastes of the country´s former colonial masters, the Portuguese. When they first arrived in the 500s, the ortuguese introduced a wide variety of herbs and spices to the country, such as the hot chili peppers known as “peri-peri,” black pepper, garlic and the vital ingredient, olive oil. Angola’s traditional dishes were soon being amended to include what were then exotic new elements. Today, everyday Angolan cuisine remains simple, hearty and heavily in uenced by its traditional fishing and agricultural roots. Typical ingredients include seafood, chicken, beans, rice, vegetables and various sauces (which are invariably packed with ortuguese inspired avour. Among the seafood varieties prawns and white fish such as tilapia are popular and used in many recipes. Eating out in Luanda, though, is also extremely expensive. Better news, however, is that local beer remains a welcome exception, with a bottle setting you back less than a dollar. Small wonder that one of the nation’s favourite traditional dishes is also said to be a great hangover cure!
HERE ARE SOME OF THE BEST-KNOWN ANGOLAN DISHES: Calulu de Peixe (Fish Calulu) is a classic Angolan stew infused with the Iberian avours of ortugal. It consists of dried and salted fish, fresh fish, onions, tomatoes and hot chilli peppers cooked in red palm oil with okra and sweet potato leaves. While its medicinal properties may be up for debate, there can be no dispute about its delicious avor. This stew is typically served up with a side of Funje, an ancient Angolan recipe made from cassava our, with a consistency similar to mashed potatoes When served together, Calulu de Peixe and Funje make a perfect plate to represent the coming together of traditional Angolan cuisine with the taste of the country’s colonial past. Other favorites include Moamba de galinha, or chicken moamba, is often called the national dish of Angola. It consists of chicken with a hash made from palm oil paste, or red palm oil, along with okra and garlic. It’s served with rice or Funje and often accompanied by wild spinach. A variation called moamba de ginguba features peanut sauce instead of red palm oil. Cocada amarelha. Diners with a sweet tooth will enjoy this yellow coconut pudding prepared with sugar, grated coconut and egg yolks, a dessert that is also popular in Mozambique.
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RESTAURANTS: Cais de Quatro Av. Murtala Muhamad, Casa do desportista, Ilha do Cabo. Tel. 2 23 3 5 5 . oasting “the best view of the Bay of Luanda,” Casi de Quatro has a wide and varied menu ranging from seafood dishes to sushi and pizza.
Cocada amarelha, Angola’s sumptuous conconut pudding.
NIGHTCLUBS: Two of the restaurants mentioned above, Lookal and Coconuts, turn into high-powered discotheques once dining hours have ended. Some of the others that shouldn’t be missed are: Chillout. Av. urtala uhamed. Tel. 2 222 30 3. Upscale and sophisticated, uanda s premier nightspot is situated at the far end of the Ilha. The I area is recommended, as the place does become packed. Saturday nights are for izomba and local crowds predominate. Teatro Elinga. Largo Tristao da Cunha, 17. 244 2 2 858. reat music, professional D s and a pleasant surrounding in a charming old building, make Elinga popular with expats and locals alike. iami each. Av. urtala ohamed. 2 2 3 885. An emblematic uanda locale, iami each has a restaurant, bar, discotheque and, like its competitors on the Ilha, fabulous ocean views.
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Cafe del ar. Av. urtala ohamed. Tel. 2 2 205 777. A relaxed atmosphere and a privileged location at the end of la Ilha have made Cafe del Mar one of the capital s most popular spots for informal dining, snacks, or just drinks. ookal. Av. urtala uhaned, 2 0. Tel 2 38 2 735. Locals and expats alike praise this restaurant as one of the best in the capital, despite the high prices. Lobster is the speciality of the house, but before dining, try one of the trademark black caipirinhas. Tambarino. Av. Amilcar Cabril, 23. Tel. 2 23 0 00. A traditional restaurant featuring seafood specialties, an ample wine list and professional service. All these combine to make Tambarino a classic among Luanda eateries. Naquele ugar. ua de Setembro. Tel. 2 2 322 5. ocated next to the fortress of San iguel, Naquel ugar has a great view of the city. Seafood dishes are the specialty, but the steak with pepper sauce is also recommended. ahia. 83 8 Av de Fevreiro. Tel 2 222 3 0 0 ne of the most popular restaurants on the Marginal, the renovated, palm-lined boardwalk on the Bay of Luanda. Its three levels of seating include a romantic, candlelight venue and a top- oor pizzeria.
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FROM SEMBA TO KIZOMBA:
EXPLORING ANGOLA’S MUSICAL SENSUALITY
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Angola ma ell be one of the most musical countries in Africa. ver the centuries, Angolans have combined their o n music and dance traditions ith influences from urope and, most notabl , razil. Toda , Angola has begun e porting its musical and dance st les, as evidenced b the popularit of kizomba in clubs and dance halls from isbon to os Angeles.
Any conversation about contemporary Angolan music must necessarily begin with semba. First popularized in the 50s, semba is a style of music and dancing that is the main in uence behind other genres that have originated from the West African nation, such as kizomba, which took semba’s sensuality to a whole new level, and kuduro, a fast-paced Angolan style of techno and house music. “The body of the man that comes in contact with the body of the woman at the level of the belly button – this is one definition of the word semba in the context of dancing, which shows the highly sensual nature of Angola’s popular forms of music and dance. Semba was strongly influenced by the cultural traditions of the antu a general label for the 300– 00 ethnic groups in Africa who speak Bantu languages) and African rhythms such as kazukuta and kabetule. Semba songs are traditionally sung in Kimbundu, a Bantu language widely spoken in north Angola. One of the first modern Angolan bands to sing in Kimbundu was Ngola Ritmos, in the late 40s and 50s. That was a daring move at a time when the language was prohibited in Angola by the Portuguese. The subject matter of semba songs usually focuses on social events and activities, day-to-day life and, before independence in 5, the freedom of Angola. Ngola Ritmos also contributed enormously to the spreading of semba music globally and in uenced the guitar-driven style of later semba artists such as iceu ieira Dias, os aria and Nino Ndongo. Barceló de Carvalho, the Angolan singer known as Bonga, is one of the most successful Angolan artists to popularize semba music internationally. A nomad who spent time in Portugal, ermany, elgium, France, as well as returning to Angola, Bonga remains a hero to many Angolans and was fiercely and openly critical of the political regime that was established following the country’s independence in 5.
Initially, semba was a single dance where a man would move rhythmically in front of a woman. Then, in one sudden movement, he would grab her by the hips and draw her close to him so that their bellies were touching. Nowadays, semba is a couples dance with large, often acrobatic, steps to a fast beat, where there is much room for improvisation. Following independence in 5, zouk an Angolan style of music derived directly from zouk music from the French Caribbean) began to take over at parties. By the beginning of the 80s, kizomba, a style of music and dance which incorporated both zouk and the semba, was becoming popular. To the untrained eye of a spectator unfamiliar with the dancing style of kizomba ( a word which can mean both “party” or “dance” in Angola), it has some similarities with tango. But it can certainly seem more sensual, on account of the intense gyrating hip and lower body movements. Partners dance intimately close together on tempo, as well as on the off-beat, and occasionally use syncopation (musical rhythm in which stress is given to the weak beats instead of the strong beats). ike semba, kizomba music is in uenced by traditional African rhythms and, traditionally, by the Kimbundu language, but, like unlike semba, kizomba music is characterized by a slower and usually very romantic rhythm – hence its similarities with tango. Since its humble origins in Angola in the early 80s, kizomba has gone on to become hugely popular throughout the world, particularly in lusophone (Portuguese-speaking) countries and across West Africa. In recent years, this sensual dance has also taken hold in the United States, particularly in San Francisco, New York, Seattle, os Angeles, and Washington DC. As Kizomba has spread globally, it has naturally taken on new forms and in uences from around world, but, “The roots of kizomba are and will always be Angolan,” said Angolan professional dancer and choreographer edro ieira Dias in an interview with Jornal de Angola. “Angola will always be the fountain from which people drink the pure water of Kizomba.”
Singer Waldemar Bastos’ music combines Afropop, Portuguese fado a ra ilia i ue ces
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