Improving the business climate and wooing investors

The government has acted fast to revamp the legislative framework in order to make it more secure and investor-friendly

Improving the business climate and wooing foreign investors are top priorities for Angola as it strives to wean itself off its over-dependency on oil. As oil revenues dwindle and other sectors of the economy have yet to offset the shortfall, the government has taken a series of initiatives to facilitate private and foreign investment.

In March this year, it officially established the new Private Investment and Export Promotion Agency (AIPEX), whose mission is to stimulate growth, diversify the economy and expand private sector participation. In June, it signed an agreement with the Angolan American Chamber of Commerce to produce Angola’s first investment guide.

Another important step was the revision of the Private Investment Law, including the removal of the obligation for foreign companies to partner with a local company to do any business. The amended law also removes the obligation for any joint venture to have 35% of its capital owned by an Angolan business partner.

In addition, the legislation removes restrictions on small scale foreign investment: up to now, the minimum investment required was $230,000. This provision was meant to protect Angolan investors but in practice it prevented medium-sized foreign companies from entering the market.

A more secure environment

Other key provisions of the new Investment Law are the establishment of a new competition authority that will ensure fair competition in all the economic sectors, the end of monopolies in some key sectors such as telecommunications and cement production, and the suppression of the requirements to employ Angolans. The legislation also states the objectives of reducing bureaucracy and creating a more secure investment environment, although it doesn’t specify how.
Apart from improving the legal framework, the government also hopes its economic policy will entice more private and foreign players to invest in the country, in particular through its privatization program whereby 74 state-owned companies, predominantly in the industrial sector, are set to be sold off. This information was given in May to investors as part of the country’s Eurobond issuance, according to Reuters.

New investment opportunities

Angola’s first ever stock exchange, called Bodiva and created in 2016, is set to play a role in the privatization program. Bodiva started as a debt and securities stock exchange and will launch in earnest its stock market activity next year. The chairman of the country’s Capital Markets Commission (CMC), Mário Gavião, said in November that the privatization program was due to be approved soon and that it will follow a specific timetable, which he said, “will be a major boost to the share market,” according to the Macau-based information website Macauhub. Will this be enough to lure back foreign investors? While the flow of foreign direct investment (FDI) reached $4.1 billion in 2016, according to Santander Trade, which cites UNCTAD figures, it declined sharply last year, with a negative inflow of -$2.25 billion. The current FDI stock is $12 billion, estimated at 9.9% of the GDP.

Most of the FDI come from four countries: China, the USA, France and the Netherlands. China has played a major role in rebuilding the country in the years that followed the end of the civil war, in 2002. As of 2015, according to Reuters, there were 50 Chinese state companies and 400 private businesses operating in Angola. But although China is set to keep playing a major role, the government is also keen to boost other countries’ investment, not the least because it repays China in oil, which curtails its capacity to sell crude on world markets.

So far, American involvement has been mainly focused on the oil sector, with major companies operating in the country such as Chevron and ExxonMobil. While US exports also concentrate in the oil and gas sector, the US Department of Commerce says that “medium-term potential exists for US companies in the areas of agriculture, industry, energy, water and transportation.” In particular, it identifies prospects in agricultural equipment; health; marine technologies (fisheries and ports); aviation and rail, and agricultural products.

Angola is the United States’ third largest trading partner in sub-Saharan Africa and one of its three strategic partners together with Nigeria and South Africa. The bilateral dialogue has focused on eight key areas: political-social/regional stability, trade/economic growth, health, energy, agriculture, regional security cooperation (focused on maritime security and peacekeeping), education, and consular affairs. Although Angola is far from being a priority for the Trump administration, Washington has now an opportunity to prevent China — its current trade war foe — from having a greater grip on Angola’s economy by encouraging more American investment in this strategic African country.