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Angola’s privatisation drive gains traction

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Tyo Industries Lda, a factory producing a variety of soaps "Diana" and "Rainha", sold on the domestic market. With 300 employees, Tyo Industries Lda is able to produce 75 tons of soap and toilet soaps per day. It started in 2018. Image credit: ZEE

Angola’s privatisation drive gains traction

Angola’s privatisation drive gains traction

Angola’s much touted privatisation drive has gone a long way to lure foreign investors to the once closed economy. WhyAfrica (WA) interviewed Manuel Francisco Pedro (MFP), Chairman of the Board of Directors of the Special Economic Zone of Luanda-Bengo (ZEE) of Angola, to find out more about doing business in Angola.

By Leon Louw, owner of WhyAfrica and editor of the WhyAfrica magazine 

(WA) Manuel, the Angolan government has been on a substantial privatisation drive since 2019. What measures have the government taken to fast-track privatisation and how effective have these measures been?

(MFP) Angola’s Privatisation Program (Propriv) covers virtually all relevant sectors of the economy including finance, telecommunications, mining, agriculture, and energy. Since 2019, the government has collected 567 billion kwanzas (1 billion euros) with the privatisation of 96 assets. Propriv has also been extended for another five years.

The privatisation programme has been rather successful so far. By divesting companies and assets, a total of 2,747 jobs have been secured, of which 1,462 are new and 1,285 previously existing.

The government also plans to privatise 73 assets from 2023-2026.

In 2023, for the third phase, the government plans to privatise a minority stake in Sonangol (the national oil and gas company) and Endiama (the national diamond exploration and production company).

Other assets that should also attract international attention are UNITEL (Angola’s main telecom company), BFA, the most profitable bank in the Angolan market, ENSA, the insurance company, and TV Cabo, a provider of cable, fibre, and satellite telecommunication services.

The plans to privatise the Unitel and TV Cabo are a great example of the government’s intent to open this sector, diversify investments and continue the technological and digital modernisation of Angola’s economy.

How is Angola attracting Foreign Direct Investment (FDI)?

Angola offers numerous attractive business incentives and investment laws that support foreign investments. One of President João Lourenço’s priorities, since his first inauguration in 2017, was to diversify the country’s economy and to attract more FDI, which is why some new reforms were implemented.

The New Private Investment Law (2018) made it easier for foreigners to invest in Angola giving them the same rights to access tax incentives and investment aid as locals. The issue of capital repatriation is now protected by law, ensuring that foreign investors have the right to transfer and repatriate dividends or other income from a direct investment.

The New Private Investment Law also offers tax incentives, with tax reductions in the range of 20% to 50%, for periods of up to two years, regarding industrial tax, capital investment tax, and tax applicable to the acquisition of property intended for investment. Under this law, the government established the contractual investment regime. It means investors can negotiate certain incentives and tax benefits directly with the government if their project meets certain legal requirements and has a structural impact on Angola’s economic development.

Since 2020, the inflow of capital from foreign investors who wish to invest is exempt from licensing by the Angolan central bank (BNA). The Special Economic Zone of Luanda-Bengo (ZEE) is also playing its part to attract more FDI and investors to Angola as it has a very competitive offering, such as the lowest operational costs in Southern Africa with a reliable electricity supply, potable water, and world-class infrastructure.

The ZEE is also transitioning from a Special Economic Zone to a Free Trade Zone to offer better and bigger incentives to investors—like its own tax regime, as well as customs, exchange, labour, and migration incentives that will be even more investment-friendly.

Angola has historically relied on its oil and diamond reserves to drive the economy. In its endeavour to diversify the economy, which sectors of the economy is the country focussed on specifically?

Currently, the focus is agriculture as the government anticipates economic growth of 3.5% between 2023 and 2027, driven by economic diversification, especially agribusiness. Agribusiness is the government’s big bet for the next five years, and financing lines have been secured from the Development Bank of Angola. There are close to 58 million hectares of fertile, arable land – with the potential for two harvests a year.

Planagrão (National Plan for Grain Production) has already been approved with abound USD500-million per year and an equivalent amount for infrastructure and access to production areas. Planagrão will enhance the development of wheat, rice, soya, and maize crops and from 2027 should produce six million tons of these grains per year. In 2021, Angola produced about 3.14 million tonnes of grain a year.

Initially, Planagrão will be developed in the provinces of Moxico, Lunda Norte, Lunda Sul and Cuando Cubango, over an area of more than two million hectares.

There is also Planapescas (National Plan for the Promotion of Fisheries), for which the government will channel USD300-million dollars and another USD300-million over the next three years to support animal production and derivatives.

In total, more than USD3-billion, including public infrastructure, will be used to position Angola among the main African agricultural producers.

How does a foreign company that wants to invest in the ZEE go about it? What are the regulations, laws etc?

The ZEE was set up to attract FDI, boost national production, and help diversify the economy, so we have made investing in the ZEE very simple.

Firstly, you need to look at your area of investment, as the ZEE is made up of two separate reserves. The Viana Reserve is for the implementation of industrial projects and the Uala Agro-Industrial Reserve is for agribusiness. The Viana Reserve is more than 4700 hectares and has 166 companies and service providers. Investors from countries like China, Portugal, Eritrea, the United Kingdom, France, Spain, Lebanon, Brazil, India, Cuba, Turkey, and the United Arab Emirates have set up shop here.

The Uala Reserve sets over 2800 hectares, has great agribusiness potential and is at an embryonic stage. We are working with the government and private investors to develop the infrastructure there.

The reforms mentioned earlier, allow foreign investors the same rights and regulations as local investors, as laid out in the New Private Investment Law. There is no minimum investment or need for a local partner. The ZEE also set up the Guiché de Apoio ao Investidor (GAI) or Investor Support Office in 2021 to ensure investors have a seamless integration into the ZEE’s business environment. The goal is to simplify all bureaucracies involved in setting up a business. The GAI is a one-stop shop that brings all of Angola’s key public administration departments into one building at the Viana Reserve. It offers help with everything from taxes, banking, and licenses to municipal accounts. If you are interested in investing at the ZEE, you can get in touch with us at, info@zee.co.ao to set up a site visit.

Currently, the ZEE wants to attract investors primarily in agriculture and food processing, light and heavy manufacturing industries, as well as digital technology and the pharmaceutical industry. Between 2019 and 2023, the ZEE has managed to gross a total of 11.240.528.832,00 Akz in revenue, which is equivalent to 15.011.510,28 USD, using the current exchange rate.

What opportunities do Angola present for foreign investors?

Agriculture and privatisation present many opportunities. Furthermore, the government has identified the following preferential sectors.

  • Energy production: The government has an ambitious infrastructure construction plan for the country. The objective is to reach our goal of 9.9 GW of installed generation capacity and a 60% electrification rate by 2025 with power transmission lines to cover 60% of Angola. Angola’s 2025 Energy Strategy is largely based on renewable energies to strengthen the national electricity system. A previous geographic study showed Angola has the potential for 55 GW of solar energy, 18 GW of hydroelectric energy and 3 GW of wind energy.
  • Mining: Angola currently has 36 of the world’s most critical minerals, namely chromium, cobalt, copper, graphite, lead, lithium, nickel, gold, Neodymium and Praseodymium (used in car batteries).
  • Telecommunications and related infrastructure: We’re extending the existing mobile and fibre networks throughout the inhabited territory.
  • Infrastructure with large investments
  • Oil and gas pipelines to Zambia, DRC, and Namibia;
  • Development of the Lobito Corridor;
  • Benguela and Cabinda Refineries;
  • Deep-water port of Barra do Dande;
  • Caculo Cabaça hydroelectric dam;
  • New International Airport of Luanda (which shares 10km of land with ZEE);
  • Improvement and maintenance of the country’s road network and
  • Expansion and improvement of the rail network
  • Agribusiness
  • Water supply

 Will the mining and mineral resources sector play a significant role in this diversification process?

Angola has 36 of the 51 most valued minerals in the world, so it has enormous potential for economic profitability in the extractive industry. In addition, Angola is one of Africa’s largest diamond producers. The national diamond company, Endiama, has been highly profitable and a minority stake in the company is up for privatisation.

Will a mining company, for example, be guaranteed tenure and how will its rights be protected?

Access to mining rights is covered by the law and allows individuals or legal entities, nationals, or foreigners who intend to carry out mining activities to apply for the respective concession of rights.

According to the terms of the Mining Code and complementary legislation in force, granting of mining rights is carried out through a public tender procedure or at the request of the interested party to the supervisory body.

Granting mining rights on an industrial or semi-industrial scale is always preceded by favourable geological information from the competent body, and by negotiation within the scope of a process of investment and granting of mining titles. If there is no public tender, the mining rights for reconnaissance, prospecting, exploration, evaluation, and exploitation are attributed to the first applicant, if they have the necessary technical and financial capabilities to carry out the mining activity required.

Companies will only lose exploration rights if they do not begin activities within 180 days and if they do not produce for more than six consecutive months.

Mining rights are only barred to persons under eighteen years of age, persons convicted of crimes against property and the economy, persons considered by the competent authority, with a final decision, to be responsible for serious environmental damage defined as such under the law, debtors in arrears for tax obligations or social security contributions, legal persons undergoing liquidation, merger or demerger, persons under a bankruptcy or insolvency process; legal persons whose representatives or agents are covered by the impediments of the commission of crimes and environmental damage.

How will the Special Economic Zone benefit investors in the mining, agriculture, and energy sectors?

The Special Economic Zone of Luanda-Bengo already benefits from the economic, financial, and fiscal reforms implemented since 2018, which facilitate foreign investment. But these benefits will be maximised when the ZEE becomes a Free Zone. (See question 3 for agriculture)

In mining, besides iron, phosphate, copper and gold exploration, there are also 35 diamond prospecting projects, 10 kimberlites and 25 alluvial deposits.

In energy, the Angolan government plans to leverage energy sustainability via renewable resources to reach a target of 9.9 GW of installed generation capacity, and to achieve a country’s electrification rate of 60% by 2025.

The Angola 2025 Energy Strategy is largely based on renewable energies to strengthen the national electricity system, while also reducing dependence on fossil fuel-based energy production.

Moving towards renewable energy will help the country meet energy needs in the immense rural areas of the country, reduce pollution from the energy sector and make it more profitable, and environmentally friendly.

The Democratic Republic of the Congo (DRC)/Zambia/Angola corridors and railway developments will be a watershed for the entire region. How significant is this development and how will it improve infrastructure and logistics, especially for the mining companies in these countries?

Railways are another key sector for the development of the Angolan economy. The Luanda, Lobito and Moçâmedes rail corridors will be awarded concessions to private entities.

Luanda railroad will have to rebuild the 215-kilometre section between Zenza do Itombe and Cacusso, with the project to expand the railroad to the Lundas to link it to the DRC.

The Benguela railroad will be fundamental in transporting goods to Zambia and the DRC and will also transport goods from these countries to the port of Lobito. The concession of this corridor is expected to generate USD2-billion in revenue for the Angolan state and provide numerous great opportunities for private investors.

The Moçâmedes Railroad will follow the same privatisation model, with concessions to private companies, in a structure that is pivotal to transporting minerals from Cuando Cubango province. The project also includes extending the rail line to the borders with Namibia and Zambia.

At the same time, to what extent are Angola’s ports being improved?

The Port of Luanda is undergoing renovations to work with the new Luanda International Airport and road structures in the country’s capital. The future deep-water port of Barra do Dande, about 50 kilometres north of Luanda and very close to the new airport, is already being developed.

All these structures will be privatised in part, or under long-term concession, paving the way for private participation. The port of Barra do Dande even led to the Memorandum of Understanding between the administrations of the Portuguese ports of Sines and Algarve and the Angolan Barra do Dande Free Zone during the Portuguese Prime Minister’s recent official visit to Angola.

The port of Lobito will also be modernised to provide the necessary interface with the Benguela Railroad and the future gas and oil pipeline that will link the new Lobito refinery to Zambia.

What are the main challenges for Angola in the next five years?

The main challenges centre around diversifying the economy to make it less dependent on oil revenues. We want to increase the production of essential goods to reduce imports and improve energy supply, extending it to the whole country.

We are also working on transitioning the energy matrix based on the potential of renewable energies, namely solar, wind and green hydrogen. And the use of water resources to produce energy and supply drinking water.

How will Angola benefit from the African Continental Free Trade Agreement?

The Africa Free Trade Agreement (AfCFTA) will significantly change the trade landscape between the countries of the African continent. It is the worlds’ largest free trade area, a market with 1,2 billion consumers and it represents an excellent opportunity for the continent’s businessmen and entrepreneurs.

This agreement may also create a new paradigm in the business relationship of African countries that have preferred to increase commercial relationships with countries on other continents. Now, with the level of taxes and fiscal contributions, African companies only stand to gain if they have greater commercial activity with companies in other African countries.

And given our plan to diversify the economy, with the respective increase in production capacity, Angola has a plethora of opportunities to sell the goods it produces domestically and to export to any of the other 54 countries that signed the AfCFTA agreement.

What advice will you give to companies that are interested in investing in Angola? What are the problems they might encounter and how should they go about it?

The Angolan government’s goal is to increase domestic production, reduce imports, increase exports, and generate more jobs for Angolan citizens, through the creation of a more sustainable and inclusive private sector-led economic model that is less dependent on oil revenues.

There is a set of economic sectors that deserve special attention and that hold many opportunities for new investors and entrepreneurs, public and private, such as agriculture, agro-livestock, agro-industry, energy production, water supply, mining, telecommunications, and digitalisation of processes and services.

The improvement of the business environment in the Republic of Angola is now a reality and became more evident with the New Private Investment Law of 2018, which placed all investors, domestic and foreign, on the same level, with the same rights to access tax incentives and financial support.

FOREIGN DIRECT INVESTMENTS IN USD TO ANGOLA

The top ten countries ranked according to FDI between 2018 and March 2023:

  • United Arab Emirates: USD351.7-million, 234 projects
  • United Kingdom: USD283-million, 234 projects
  • China: USD225-million, 24 projects
  • Germany: USD93.6-million, 4 projects
  • France: USD36.8-million, 3 projects
  • Belgium: USD24.5-million, 2 projects
  • Hong Kong: USD20.5-million, two projects
  • Portugal: USD19.2-million, 45 projects
  • Eritrea: USD12-million
  • Switzerland: USD10-million
Manuel Francisco Pedro (MFP), Chairman of the Board of Directors of the Special Economic Zone of Luanda-Bengo (ZEE)

Angola’s privatisation drive gains traction

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Angola’s privatisation drive gains traction

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Angola’s privatisation drive gains traction

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