Angola: A Business Haven For The Savvy Entrepreneur

Angola is a challenging but potentially lucrative place to do business. It has the third-largest economy in sub-Saharan Africa, with a young population and an abundance of natural resources. The country is seeking to diversify its economy away from oil, which currently constitutes nearly 94% of foreign earnings, and there are many opportunities for businesses in sectors such as construction, infrastructure, agriculture, and education. However, companies should be aware of challenges such as high costs, slow payment, complex bureaucracy, and language barriers.

Angola's economy is growing, but it's heavily dependent on oil

Angola's economy is growing, but it is heavily dependent on oil. The country has an impressive economic growth rate driven primarily by its oil sector, which accounts for almost 75% of its revenues. Angola is the second-largest oil producer in Africa, with an estimated 9 billion barrels of proven crude oil reserves. However, the country faces the challenge of reversing the decline in oil production observed in the last decade.

The oil industry is vital to Angola's economy, contributing about one-third of its GDP. Crude oil, natural gas, and refined oil account for nearly all of Angola's exports. In 2020, the country produced 1.3 million barrels of oil per day, the lowest level in the last decade. To boost oil output and the economy, the Angolan government has implemented various measures, including strategic plans for hydrocarbon exploration, tax incentives, and investments in the oil industry.

Angola has also developed a strategy to support its domestic oil refining sector. Despite being a significant oil producer, Angola struggles to meet the national demand for refined products. The country has only one active refinery in Luanda, with a capacity of 65,000 barrels of refined oil per day. To address this, Angola plans to increase its oil refining capacity to 425,000 barrels per day by 2025, with several new refineries in the pipeline.

The Angolan government is also working to attract more foreign investment in the oil sector. In the first quarter of 2021, foreign direct investment inflows in the petroleum industry reached 1.6 billion US dollars. Major international oil companies dominate the market, with a share of over 90% in crude oil production. The government is taking steps to diversify the economy and has expressed interest in developing renewable energy sources. However, oil and gas remain the mainstay of Angola's economy, and the country is predicted to become the top oil producer in the region within the next five years.

The business environment is challenging

Angola is a challenging place to do business. It is a high-risk, high-opportunity market, so it is not for the faint-hearted. However, with its impressive growth rates, young population, and abundant natural resources, it offers huge potential for those who are up for a challenge.

One of the biggest challenges of doing business in Angola is the complex bureaucracy and ineffective communications network. The registration and licensing process is time-consuming and bureaucratic, and the government must approve any projects involving oil and gas. Companies must also submit an Environmental Impact Study for approval before considering any projects that could impact the environment. The government and its organizations are not considered easy to deal with, and the legal system is weak and fragmented, making it difficult to understand and constantly changing.

Another challenge is the high cost of doing business in Angola, particularly in the capital city of Luanda, which was voted the world's most expensive city in 2014. Companies need to be prepared for market entry to take longer and cost more than in other countries.

Language barriers and cultural norms and customs also present significant challenges to doing business in Angola. Portuguese is the official language, and the penetration of the English language is one of the lowest in the world. This can make it difficult for companies to communicate and establish relationships with local partners and stakeholders.

Furthermore, Angola faces a lack of capacity and skilled labor, with a lack of skills among the populace being a particular challenge. The government is in the process of 'Angolanising' the workforce, requiring companies to hire Angolan nationals, which can make it difficult to find qualified personnel.

Overall, while Angola offers numerous business opportunities, the market environment is challenging due to high costs, slow payment, complex bureaucracy, language barriers, cultural differences, and lack of capacity and skilled labor. Companies intending to invest in Angola should be prepared for these challenges and take the necessary steps to establish strong local partnerships and navigate the complex regulatory environment.

Angola is a high-risk, high-reward market

One of the main challenges of doing business in Angola is the complex bureaucracy. The registration and licensing process is time-consuming and cumbersome, requiring companies to navigate a difficult and frequently changing legal system. Companies must also submit an Environmental Impact Study for approval prior to any project that could impact the environment, and the government's approval is required for projects involving oil and gas.

Another challenge is the high cost of doing business in Angola, particularly in the capital city of Luanda, which was voted the world's most expensive city in 2014. Companies need to be prepared for high daily subsistence costs, such as accommodation, food, and travel. Additionally, the process of importing goods into Angola is challenging and complex, especially for newcomers. It is important to find reliable local partners and carry out thorough market research to navigate the distribution network and various taxes.

Despite these challenges, Angola offers high rewards for investors. It is one of the fastest-growing economies in Africa, with a young and eager-to-learn population. The country has experienced double-digit growth since 1990 and has the third-largest economy in sub-Saharan Africa. Angola is the second-largest oil producer in the region and is predicted to become the top producer in the next five years. However, the country is working to diversify its economy away from oil dependency, creating opportunities in other sectors such as agriculture and construction.

The government is investing significantly in infrastructure development, including improving public services, developing the tourist sector, and enhancing transport links. There are also opportunities in the education sector, as English is set to become compulsory in grades 5 and 6, creating a high demand for English training and educational resources.

In conclusion, Angola presents a high-risk, high-reward market for businesses. While the complex bureaucracy and high costs may pose significant challenges, the country's economic growth, diverse sectors, and focus on diversification offer attractive opportunities for investors.

The country is trying to diversify its economy

Angola is attempting to diversify its economy, which is currently heavily dependent on oil. Oil and gas are the mainstay of the economy, with Angola being the second-largest oil producer in the region. However, the country is vulnerable to fluctuations in the world oil price, which has impacted its fiscal revenues and public infrastructure spending in recent years.

Angola's new president, João Lourenço, has embarked on reforms to foster a dynamic local entrepreneurial sector. The government is also looking to increase investment in renewable energy and climate-resilient infrastructure. Angola has significant potential for clean electricity generation and agriculture, but building climate resilience is key to driving sustainable and inclusive economic growth.

To achieve a resilient and inclusive development vision, Angola needs to mainstream climate considerations into planning and fiscal management, reform fuel policies, and boost private sector investment in renewable energy. The country also needs to improve governance to ensure that the remaining oil wealth is channelled into strengthening resilience.

The World Bank's Country Climate and Development Report (CCDR) for Angola identifies five pathways to achieving a diversified and climate-resilient economy:

• Managing water resources to produce clean electricity, abundant food, and livable cities
• Ensuring a green and climate-resilient power supply, including hydropower, solar, and wind
• Leveraging vast arable land resources to become a hub for climate-smart agriculture and food production
• Building green and resilient cities to catalyze growth and job creation
• Boosting human capital and fostering a culture of climate-preparedness to power climate-resilient development across sectors

By following these pathways, Angola can drive economic growth, create good jobs, and improve living conditions for its citizens.

The UK is one of Angola's largest investors

Angola has the third-largest economy in sub-Saharan Africa, with a population of around 24 million. The UK is one of the largest investors in Angola, and in 2013, the two countries agreed on a High Level Prosperity Partnership, one of only five across Africa. This has helped to develop a strong relationship in trade between the two countries.

Angola's economy is dominated by oil and gas, with the country being the second-largest oil producer in the region. However, the government is increasingly looking to diversify. Angola has a growing middle class and a young population (50% are under 21), who are eager to learn. The economy has had an average double-digit growth since 1990, and the country has abundant natural resources.

The UK is well-positioned to benefit from Angola's desire to diversify its economy. There are several incentives for British businesses to export to Angola, including the fact that UK companies are respected and liked in Angola. Additionally, Angola is focusing on diversification, which opens up many opportunities for UK companies. The time zone in Angola is GMT +1, and GMT during the UK summer, making it convenient for UK businesses to operate in the country.

There are also several opportunities for UK businesses in specific sectors in Angola. These include:

• Infrastructure: Angola's infrastructure spending has significantly increased in recent years, with the government investing in improving public services, developing the tourist sector, and improving transport links across the country. UK companies can provide manpower development and training in the rail subsector, warehousing, haulage and logistics, and water treatment services.
• Agriculture: Angola has dedicated just under half of its total land mass to agricultural land, and most goods are currently being imported. The Angolan government is keen to bring inward investment into the sector and has identified it as a top priority. UK companies can provide training and education, food processing and manufacturing, poultry and fish farming, and distribution, haulage, storage, and waste recycling.
• Education and training: With about 50% of the population being 21 or under, the demand for education in Angola is exceeding supply. English training, in particular, is in huge demand. From 2016, the Ministry of Education is planning to make English compulsory at grades 5 and 6 in public schools. UK companies can set up English schools, supply equipment and resources, provide distance learning products, and collaborate with local universities.
• Power: Angola is looking to invest USD 16 billion in improving its power sector, including in renewable energy. The country has ambitious plans to build new power stations and generating units, as only 20-30% of the population has access to an electricity system, which is subject to frequent power cuts. UK companies can provide oil and gas supply chain, generation infrastructure, renewable energy technologies, and energy metering and monitoring systems.

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