Doing Business In Angola: A Comprehensive Guide

Angola is one of the fastest-growing economies in Africa, with a young, eager-to-learn population and an abundance of natural resources. However, it is a challenging market to enter due to high costs, slow payments, complex bureaucracy, and language barriers. Companies intending to invest in Angola should be prepared for a lengthy and costly market entry process, and should familiarise themselves with the country's unique regulations and cultural norms. This includes understanding the legal system, which is weak and fragmented, and based on Portuguese and Customary Law. Building strong relationships with local partners is key to navigating these challenges and establishing a successful business in Angola.

Understanding the business environment, foreign investment, and setting up a business

Angola is one of the fastest-growing economies in Africa, offering excellent business opportunities for investors. However, the market also presents a challenging business environment. Companies intending to invest in Angola must consider several aspects, including high costs, slow payments, complex bureaucracy, and language barriers.

Understanding the business environment

Angola's business environment is challenging, with companies facing high costs, slow payments, a lack of capacity, complex bureaucracy, ineffective communication networks, language barriers, and cultural norms and customs. The government and its organisations are also known to be difficult to deal with, requiring a patient approach.

Foreign investment laws

The Private Investment Law sets out the general framework for foreign investment in Angola, with incentives offered for investments over US$1 million. Foreign companies are defined as any company where Angolan citizens do not hold more than 50% of the share capital. Foreign investors are guaranteed the right to dispose of their resources freely and transfer profits, dividends, and gains abroad.

Setting up a business

The process of registering and licensing a business in Angola is bureaucratic and time-consuming. Companies must also submit an Environmental Impact Study for approval if their activities could impact the environment. Additionally, local content requirements mandate that companies purchase most of their services from Angolan-owned businesses.

Angola's tax year runs from 1 January to 31 December, and all companies must prepare their financial statements annually and submit them to the Commercial Register. Various taxes and duties apply, including VAT, corporate tax, capital gains tax, social security contributions, and property tax.

Labour, taxation, accounting, and reporting

Labour

The Angolan General Labour Law (7/15) of 2015 divides employers or companies into categories, with each category subject to specific employment laws. For example, micro, small, and medium-sized firms have more flexible regulations and cost-effective work standards.

The law also divides employees into two categories: national and foreign residents, and foreign non-residents or expatriates. Foreign employees face strict immigration, recruitment, and hiring procedures, and they can only be hired on a fixed-term basis of between 3 and 36 months.

The Angolanisation Principle, also known as the 70/30 rule, is a key factor in Angola's employment regulations. It requires any company with more than five employees to employ at least 70% Angolan citizens and 30% foreign non-residents. This principle has been implemented to promote local employment and skill development, as Angolan workers suffered greatly during the country's civil war from 1975 to 2002.

Taxation

Angola has a range of taxes, including corporate income tax (CIT), personal income tax (PIT), value-added tax (VAT), withholding tax (WHT), capital gains tax (CGT), net wealth/worth tax, and inheritance and gift taxes. The standard VAT rate is 14%, with reduced rates of 5% and 7% for certain transactions, such as foodstuffs and hotel and restaurant services. Excise duties are also levied on various products, including sugar, alcoholic beverages, tobacco, jewellery, aircraft, and art objects, with rates ranging from 2% to 50%.

Accounting

All companies in Angola must prepare their financial statements in accordance with the Angolan Accounting Law and the Angolan General Accounting Plan (PGCA). The financial statement must include a balance sheet, income statement, cash flow statement, notes to the financial statement, and an optional explanatory note on the cash flow statement. Companies must also hire a certified auditor and submit their financial statements annually to the Commercial Register.

Reporting

Companies in Angola are required to submit an Environmental Impact Study for approval prior to any project that could impact the environment. Additionally, local content requirements mandate that companies purchase most of their services from Angolan-owned businesses.

Business culture, etiquette, and language

Angola has a rich and dynamic culture, and its business community is equally diverse. The country's business culture is formal and hierarchical, with status being a key factor in decision-making. Final decisions are often made after consultation with subordinates, so the process can be slow. It is important to be patient when conducting business in Angola.

Angolans value relationships and trust, so it is crucial to take the time to get to know your Angolan counterparts and build trust with associates at all levels. Meetings are often used to get acquainted, and business may not be discussed during the first meeting. Greetings are also formal and courteous, including a handshake. Women should avoid making direct eye contact during the greeting process, especially in rural areas. However, this practice is less common in urban areas and among younger generations. When speaking to someone who is older or more senior, indirect eye contact is a sign of respect.

When addressing government officials, use the title "Excellency" or "Excelencia" without their surname. Business cards are expected, especially from visitors, but they are given without formal ritual. Although not all Angolans have business cards, it is expected that expatriates and business travellers will have them.

The primary language in Angola is Portuguese, so it is useful to know some key phrases. While senior executives in the oil and gas industry speak English, associates at lower levels may not. Language barriers can be a challenge when doing business in Angola.

Business attire is typically casual due to the hot climate. Men wear lightweight suits, while women wear longer jackets and skirts. Gifts are not expected but are welcomed. If invited to an Angolan's home, bring fruit, flowers, or chocolates, and a small gift for the children is always appreciated.

Legal and regulatory considerations

Angola has a civil law system based on Portuguese civil law. The country has one of the largest reserves of natural resources in Africa, with the dominant industries being oil and gas, diamonds, and agriculture. As such, foreign investment is governed by the Angolan Private Investment Law and the Private Investment Regulation, which apply to all investments made by foreign entities in the country, regardless of the amount.

Upon the submission and approval of a foreign investment project, foreign investors are entitled to pursue their investment in the country and are eligible to repatriate dividends. Foreign investments can benefit from different tax benefits and incentives depending on factors such as location, applicable private investment regimes, sector of activity, investment amount, and the creation of direct jobs for Angolan nationals.

The import and export of foreign capital are subject to specific procedures before the National Bank of Angola (BNA). The BNA supervises all exchange operations, which are determined as follows:

• Acquisition or movement of coined gold
• Purchase or sale of foreign currency
• Opening and movement of foreign currency bank accounts by residents or non-residents in the country
• Opening and movement of national currency bank accounts by non-residents in the country
• Settlement of any transactions for goods, capital, and current invisible operations

The residency concept for exchange matters is established by the Foreign Exchange Law. The following are deemed non-residents:

• Individuals and corporate entities domiciled or with their head office registered outside Angola
• Individuals absent from Angola for a period exceeding one year
• Branches, affiliates, representative offices, or other forms of representation outside Angola
• Diplomats, consular representatives, other representatives or those with equivalent status, and their family members

The Securities Law provides the legal framework for securities and derivative instruments markets, issuing entities, public offerings of securities, regulated markets and respective infrastructures, prospectus, securities, and derivative instruments investment activities and services, as well as the sanctionary regime.

The Competition Law and Competition Law Regulation establish the principles and rules governing competition in Angola, prohibiting collective practices, unilateral anti-competitive conduct, and abuse of dominant position.

The General Employment Law is applicable to all employment relationships in Angola and to Angolan citizens working in Angola or abroad. Foreign employees require a work visa/residence permit to work in the country and must meet other requirements such as being at least 18 years old and having no criminal record.

The business registration and licensing process is bureaucratic and time-consuming. The Private Investment Law requires a minimum investment of USD 1 million to benefit from incentives, and the government must approve any projects involving oil and gas. Companies must also submit an Environmental Impact Study for approval before the consideration of any project that could impact the environment.

Opportunities and challenges in key sectors (e.g., oil and gas, agriculture, education)

Angola's economy is heavily dependent on the oil and gas sectors, but the country also has a lot of potential in agriculture and education. Here is an overview of the opportunities and challenges in these key sectors:

Oil and Gas

Angola has an estimated 9 billion barrels of proven crude oil reserves and 11 trillion cubic feet of proven natural gas reserves. The petroleum industry is vital to the country's economy, accounting for about 75% of its revenues. However, the sector faces several challenges, including industry barriers, high operating costs, and restrictions on foreign exchange. The business environment is difficult to navigate, even for reputable multinational companies.

There are also ongoing restrictions on foreign exchange, making it difficult for companies to repatriate their dividends. The high production costs, averaging US$40 per barrel, deter new players and limit new investments. The sector has witnessed the downsizing and withdrawal of many service companies, contractors, operators, and investors.

However, the Angolan government has implemented reforms to boost the sector, including transferring concessionaires' rights from the national oil company Sonangol to the National Agency for Petroleum, Gas, and Biofuels (ANPG). The government is also prioritizing refinery development to reduce dependence on imported refined petroleum, which costs the country over $2 billion annually.

Agriculture

Subsistence agriculture is the main livelihood for most Angolans, but more than half of the country's food is imported. Angola has fertile soils, abundant water, and a favourable climate, with almost 58 million hectares available for agricultural development, including 35 million hectares of arable land. However, only about 15% of arable land is currently cultivated, and the country faces challenges such as insufficient infrastructure and a lack of commercial credit.

The Angolan government has made agricultural development a priority to diversify the economy and reduce dependence on food imports. They have established target areas for agricultural production development, including stimulating beef and corn production to meet domestic demand. The private sector in agriculture is expanding, with several large agro-industry growers, often involving foreign investors.

Education

Education in Angola has become inaccessible to many, with more than one-fourth of the population considered illiterate and approximately two million children out of school. The country's education system was severely affected by the civil war, with many schools destroyed or abandoned. While recent legislation and funding for schooling have improved, the system still lacks essential resources, and the improvement process will be long-term.

The World Bank has granted a 10-year program worth $550 million to support Angola's tertiary education system and enhance the quality of programs. The goal is to increase the number of highly qualified graduates with market-aligned skills. With continued government prioritization and investment in the education system, Angola has the potential to become one of the educational powerhouses of Africa.

Frequently asked questions