What To Consider If You Want To Invest In Angola
Political and economic stability regained around a broad consensus and under the leadership of a solid political majority after 27 years of civil war. A large population makes the country the third-largest market in sub-Saharan . Africa, Important natural resources which make Angola second largest oil producer in sub Saharan Africa, mining production, diamond production, Strong growth potential for non oil sectors such as agriculture, construction, and tourism, a young and booming labor force, and an attractive for FDI in recent years.
Investment opportunities in Angola includes:
- Agriculture, Forestry & Fisheries
- Tourism Industry
- Electricity Industry
- Minerals
- Oil and Gas
- Agribusiness
- Construction & Real Estate
- Financial Services
Main Sectors Of Angola Economy
Angola is Africa's second largest oil producer, a net producer of natural gas, and also the third largest producer of diamonds in the continent, surpassed only by Botswana and the Democratic Republic of Congo. The Angolan economy which is the third largest in sub Saharan Africa is dominated by the oil and gas industry, which accounts for about 50 percent of its GDP and is the primary source of revenue for the country as more than 70 percent of government revenue and 90 percent of Angola's exports come from oil activities. In addition to diamonds, the country also produces gold, granite, gypsum, marble, and salt, and possesses numerous undeveloped minerals with potential for extraction including beryllium, clay, copper, iron ore, lead, lignite, manganese, mica, nickel, peat, phosphate rock, quartz, silver, tungsten, uranium, vanadium, and zinc. The industrial sector represents 54.4 percent of GDP and 8 percent of employment. Currency shortages caused the manufacturing sector to contract by 6.5 percent in the first quarter of 2019.
Despite its potential, the agricultural sector is underdeveloped and not very productive, contributing to 6.7 percent of GDP but employs 50 percent of the population. Only about a third of Angola's arable land is used for harvests; of those, only 100,000 out of 5 million arable hectares benefit from machinery or animal traction for sowing and harvesting. Angola's agriculture mainly consists of subsistence farming. The key industrial crops are coffee and cotton. The Government recently heavily invested in coffee, sugarcane, and ethanol productions, which should help to diversify agricultural revenues and exports.
The services sector predominantly banking, communication, tourism is also growing rapidly, accounting for 39.3 percent of GDP and employing 42 percent of the population. Tourism is growing, although there is a severe shortage of hotels and other types of accommodation. The construction sector is booming at 9 percent of GDP, driven by a large reconstruction program launched by the government.
In 2020, the supply and demand shock induced by the COVID 19 crisis particularly affected the oil sector, mining production, and transportation and services, which were hit hard by the lockdowns.
Investment opportunities in Angola:
After signing the peace agreement, Angola has experienced 6 years of sustained stability and growth that has been critical to its development and growth. In the past years, the country has embarked on an ambitious reconstruction program. Luanda is the capital city of Angola and has the characteristics of a city with a great amount of potential for development. Many new buildings are being built in various points of the capital. Provinces outside the capital are also developing through expanding necessary infrastructure to better connect the country. The Kwanza which is the Angolan currency has recently been gaining strength increasing an appetite for goods and services within the country. Political and economic stability has opened new and excellent opportunities for investment. The growth in GDP over the year 2007 to 2008 is 13.2 percent, from 2006 to 2007 was 16.7 percent and from 2005 to 2006 19.6 percent.
Below are some of the opportunities:
Agriculture, Forestry & Fisheries:
In past Angola has proved to be a world power in terms of agricultural production and at one point was the world’s fourth largest coffee producer though this is not the case anymore. Some of the farmers and agriculturists have estimated that only 3 percent of their arable land is cultivated now. Therefore the potential in Angola is enormous, although the success of the sector depends directly upon the outcome of the civil conflict. The government in Angola has made the rehabilitation of coffee plantations a priority. In this regard, Angola has made efforts and has taken up assistance from the UN agency for the World Food Programme. This aid is important for the development of the sector and the country has received assistance from the EU in the form of seeds and farming equipment. The Ministry of Agriculture in Angola is in the process of reforming its legislation in order to ensure that its policies are carried out with greater commitment in the interests of guaranteeing food self sufficiency for the people.
Tourism Industry :
Angola has a tropical climate, beaches, rivers, mountains, wildlife, and cultural attractions all factors giving it an excellent opportunity for growth in the tourism industry. But still, the development of this sector has not yet begun in earnest. The visas are still difficult to obtain for the region. Even as the wildlife resources have severely depleted in the region, many species in Angola are still roaming free like elephants to the rare giant Palanca. There is a huge geographical variety right from the tropical beaches to inland mountains and lakes are sure to be a major drawcard. There are a lot of traditional crafts present in Angola some of them in ivory, wood, ceramics, and metal, quite different from styles found elsewhere in Africa. Other aspects of Angolan culture such as dance, music, and nightlife add to the Angolan attraction. Angola has much to offer in its cuisine. There is fish, shellfish, and meat cooked with strong spices, some of the country’s specialties. The hotel industry of Angola requires coming up further as the demand far exceeds supply. The restructuring of existing hotels is underway and also there is plenty of opportunities for the construction of new ones.
Electricity Industry :
The Angolan electricity industry has tremendous potential for growth. Despite the global financial meltdown, the current growing demand for electricity is estimated at 12.0 percent per annum. The national program for reconstruction is expected to remain a significant driving force. In 2004, the Capanda dam started its operation almost doubled the country's electricity capacity, and began a new era for the Angolan electricity industry. The surge in economic growth has led to the rise in the country´s electricity industry. Angola has a huge potential in the generation of hydroelectricity, which is still currently underdeveloped. Thus the underdeveloped industry has put additional pressure on the Angolan government to help rebuild it through a reconstruction program. The Angolan government is expected to channel 8.4 billion dollars towards the industry.
The current electricity industry reformation is expected to significantly reduce investment barriers. Investment laws in Angola give foreign and domestic investors equal access to investment incentives and enable the participation of the private investor in public infrastructure projects such as electricity supply. Though the environmental regulations are becoming tighter, potentially increasing the risk in investment and thus adding to the requirements for investing in both existing and new power plants.
Minerals :
Diamonds: Angola was the fifth biggest producer of diamonds in the world in the year 2006 and the main geologists of the world estimate that the alluvial backups of Angola can total up the 130 million of carats. The country has at least six gold mines of kimberlites virgin and these gold mines are among the ten biggest of the world, an estimate of 180 million carats in the value of several billions of dollars. With substantial golden deposits, iron, phosphates, manganese, copper, leads, quartz, plaster, marble, black granite, beryl, zinc, and numerous strategic minerals, Angola was described as one of the greatest world treasures among the countries in development
Oil :
Angola is exporting about 90 percent of its crude oil primarily to China and the US.US imported nearly 496,000 barrels per day of crude oil in 2007 from Angola's 507,000 total oil imports, making it the sixth largest supplier of crude oil to the United States after Nigeria. For most of 2007, Angola was the second largest exporter of crude oil to China after Saudi Arabia. Occasionally surpassing the kingdom. The monthly records show that China imported around 650,000 barrels per day of Angolan crude in the December of 2007 as compared to US imports of 440,000 barrels per day for the same month. Other export destinations include Europe and Latin America, mainly Brazil, the fellow lusophone country is increasing political and economic links with Angola, specifically in the oil sector.
Agribusiness:
Many investors are unaware of Angola’s rich agricultural history. Before the civil war, Angola was a key exporter of numerous agricultural products, including coffee, maize, tobacco, and rice. In the early 70s, Angola became the world’s fourth largest coffee exporter. Underpinning the country’s research capabilities were good agricultural credit and rural trading as well as favorable climatic conditions, vast water sources including plentiful rainfall and surface water, and fertile soil.
However after a brutal civil war decimated the country, the agriculture sector took a knock. Today, the climate, rainfall, and soil remain, yet irrigation is lacking, little credit is available, and trading and information networks are all but nonexistent. The government is upgrading irrigation systems through dams to grapple with consistent floods and drought. Through partnerships with China and Brazil, credit has increased. Still, the sector could benefit greatly from increased foreign capital and knowledge sharing.
A lack of information in the system is a major challenge, says Jordao Jose, a local Angolan farmer, adding that it further undermines productivity Where foreign investors can create the greatest impact is in strengthening collectives and developing downstream agro processing facilities to address the high price of local production has To illustrate: Shoprite and the newly opened Kero grocery stores in Lunda Sul source processed goods from South Africa because costs are lower. Imported chicken costs 5.80 dollars per kilo in the capital Luanda after custom duties, while a domestic chicken costs 7.80 dollars.
A dozen domestic eggs can sell for as high as 5.00 dollars, double the cost of an imported dozen. Maize, rice, and wheat production also barely meet the country’s demand. The market potential is high, adds Mr. Jose, but convincing farmers to work collectively is hard since locals prefer to battle it out for small pieces of the market. Hopefully, he continues, greater capital and cooperation with the help of foreign investors can help realize larger returns and success.
Construction & Real Estate:
Downtown Luanda resembles a construction site. Newly laid roads and related transport infrastructure are one of the city’s, and country’s, greatest needs. Construction operators say though that the boom will be slow. The city needs everything says Janio, an owner of a family construction business, and we do everything. When transport construction slows, he continues, that’s why]we will just look to real estate building there we’ll probably make more money.
Angolan real estate requires the least explanation. Booming oil prices continue to drive real estate prices. A hotel room costs 450 dollars per night, while office space costs 100 dollars per square meter. Prices are so high that most foreign workers will insist on paid housing before accepting any work assignment in Angola. Though the high towers and condominiums will bring big returns, the greatest opportunity exists in lower cost housing. About a third of the country’s population lives in the capital. As this number grows, the low cost housing need in Luanda will become even more obvious, especially considering the more economical pockets of locals.
Financial Services:
The Angolan banking sector has seen astronomical growth. Total assets skyrocketed from 2.9 billion dollars in 2003 to an estimated 62.5 billion dollars in 2012. Such figures make the sector the third largest in Sub Saharan Africa after Nigeria and South Africa. Yet only 40 percent of the county is banked, similar to Mozambique and Zimbabwe, but far less than South Africa and Mauritius. Five banks control nearly 80 percent of the sector’s assets. But the government is adamant that the industry has become more diversified, creating greater opportunities for investors.
Angola is located in Southern Africa. It shares borders with Zambia on the East, the Democratic Republic of the Congo on the North, Namibia on the south and bordered by the South Atlantic Ocean on the West.
It gained independence from Portugal on 11 November 1975. Its capital is Luanda with 18 Provinces. It is a multiparty republic with a President as Head of state and the government.
It runs a Unicameral National Assembly which serves as the legislative arm of the government. Angola has three main ethnic groups, each speaking a Bantu language, but Portuguese is the official and predominant language. Christianity is a major religion.
It has a civil legal system based on Portuguese civil law. It has an area size of 1.25 million square kilometers. The country’s geographical position provides investors with access to the regional market of 16 countries with an estimated 200 million population and GDP of 600 billion dollars. Having emerged from 27 years of civil war in 2002, ground travel in some parts of Angola can be problematic. The country’s northern province of Cabinda also poses a security risk.
Angola has an estimated population of 32.5 million comprising mostly of younger population less than 25 years which makes up about 66.5 percent of the population, those in the age bracket of 25 to 64 years makeup of about 31.2 percent of the population and above 65 years age group makes up of about 2.3 percent of the population. The average population density is estimated at 20.1 inhabitants per kilometer square.
In terms of human development indicators, it has a life expectancy of 63.4 years for women and 59.3 years for Men. It has an overall literacy level of 71 percent.
Angola is Sub Sahara Africa’s 3rd largest economy. The country has made substantial economic progress since the end of the war in 2002. Per capita income has grown multiple folds since 2003 to reach an all time high of 5400 dollars in 2014.
The country’s economy is heavily dependent on oil and gas as it constitutes about 50 percent of the country’s GDP and about 90 percent of the country’s export.
The country is also rich in diamond, cotton, timber, fish products, etc which continue to contribute to rising non oil exports. Major imports include machinery and electrical equipment, vehicles and spare parts, medicines, food, textiles, military goods.
Angolan authorities have made significant progress on macroeconomic stability and structural reforms. Angola has delivered on some of its key reforms including Preventing and Combating Money Laundering, Privatisation program, Banking sector re capitalisation, Monetary, and Exchange Rate Reforms, Subsidy reform and Public financial management reforms.
As the country seek to diversify its economy from oil and gas, the potential sector with opportunities includes Agriculture, Beverages, Electricity, Real Estate, Manufacturing Industry, Mining, Tourism, Renewable Energy, Transport, Insurance, etc.
Foreign Direct Investment
According to UNCTAD’s World Investment Report 2021, Angola reported net FDI inflows of minus 1.9 billion dollars in 2020, compared to minus 4.1 billion dollars in 2019.
This is because capital repatriation by multinational oil and gas companies has slowed down. The stock of FDI in the country decreased significantly to 16.8 billion dollars in 2020 from 32.4 billion dollars in 2019.
The petroleum sector remains the main destination for FDI flows. Most of FDI in Angola comes from China, Portugal, the USA, France, and the Netherlands. Recently, trading company Toyota Tsusho and export credit agency, Japan Bank for International Cooperation signed a deal to invest 650 million dollars in the Namibe Bay project, the first Japanese private sector investment in Angola.
Rich in hydrocarbons, minerals, fisheries, and agricultural land, Angola also has significant hydroelectric potential. The government is trying to improve the business climate.
A new private investment law was approved in June 2018, which reduces the minimum capital requirement, facilitates repatriating capital, and eliminates the requirement that local investors have a 35 percent stake. Competition law was also enacted in May 2018 and an organization in charge of its implementation was created in 2019 and a privatization law was adopted in 2019. In 2020, the government of Angola established a single contact mechanism for investors to obtain the necessary permits in a simplified manner.
It also adopted a law allowing the creation of free trade zones with incentives and benefits. The National Agency for Investment Promotion and Export aims to stimulate economic growth, diversify the economy, and expand private sector participation in Angola's economy.
The country lost four places in the World Bank's Doing Business 2020 annual business climate report, ranking 177th out of 190 countries.
Angola also occupies 142nd place out of 180 in the Corruption perception index of the organization Transparency International, in clear progress since the last report.
In addition to its vulnerability due to dependence on oil revenues, Angola suffers from high levels of bureaucracy and an underdeveloped financial system, as well as widespread corruption, poor infrastructure, ineffective ports, abundant but unskilled labor, and high costs on the ground for businesses.
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Conclusion
Angola is Sub Sahara Africa's 3rd largest economy. Its economy emerged from 27 years of civil war in 2002. Exports 90 percent of its crude oil primarily to China and the US. Construction sector is booming at 9 percent of GDP, driven by a large reconstruction program.
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