Angola is the third biggest market in Sub-Saharan Africa, and one of its fastest growing economies. Situated on the south-western coast of the continent, it is estimated that Angola will overtake Nigeria within the next 2 years to be sub-Saharan Africa’s leading oil producer with production figures currently close to 2 million barrels per day (bpd).
The UK is the second largest overseas investor in Angola with annual investments of over US $3 billion and this figure is likely to grow. The profit:investment ratio is good and Angola is a market with significant opportunities for UK companies across a range of sectors. However, Angola presents unique investment challenges for new investors such as high entry costs, bureaucracy, lack of capacity and poor infrastructure. As a result, investors are strongly advised to familiarise themselves with these challenges and work with the local UKTI team, based at the British Embassy in Luanda, to gain credible information about the range of market entry issues.
Strengths of the market
The Angolan government is keen to diversify the economy and is offering attractive incentives to encourage private investment in the non Oil & Gas sector. After years of neglect due to three decades of civil war, the government is making significant efforts to rebuild the country’s infrastructure and drive forward development. As such, year on year approximately 30% of the annual budget has been earmarked for priority social sectors: education, health and housing. Both the government and Angolan companies are keen to do business with British companies and hold them in high regard.
Opportunities in Angola
Angola is a nation emerging from the effects of more than three decades of civil war that completely destroyed the country. Lack of infrastructure, lack of capacity and most importantly lack of human resources, combine to present formidable challenges for the government.
However, they also constitute staggering opportunities for new and existing investors. The country is rich in terms of natural resources, which allows the government to finance huge projects.
There are significant opportunities for British companies. UKTI Angola has identified the following sectors as offering the best opportunities for British companies:
• Energy – Oil & Gas, Power
• Financial Services
• Education & Training, including English, vocational skills etc.
• Construction and Maintenance
• Health and Social care
• Food & Drink
The Angolan government has declared its intention to minimise imports, in order to enable the economy to be self-sufficient, by offering greater investment incentives within agriculture and the development of the industrial sector. The construction of roads, airports, ports, hospitals, schools and most importantly, affordable housing tops the government’s agenda; there is a pressing requirement to bring about significant reductions in the huge housing deficit the country currently experiences.
The oil and gas sector is highly competitive and developed. However, there is still a huge scope of opportunities to be explored in the supply chain, such as, onshore and offshore medical care, catering, health and safety provision; specific training courses etc.
Trade between UK and Angola
The value of the UK’s bilateral trade in goods with Angola has increased year on year and in 2012 stood at over £700 million. Traditionally, the UK’s involvement in Angola has been within the Oil & Gas Sector. However, in the last 2-3 years, more and more British companies have begun participating in many other sectors. In the Financial Sector Standard Chartered Bank and HSBC have established offices. Astra Zeneca and GSK have launched their products within the Angolan market. Diageo has recently launched an entity there. Other British companies operating in Angola include: BP (the largest UK investor), British Airways, De La Rue, PWC, Lonhro, Aggreko, Wood Group, KPMG, Ernst & Young and Amec.
Top exports from the UK to Angola 2012:
General industrial machinery and equipment £206 million
Iron & steel £112 million
Specialised industrial machinery £65 million
Professional, scientific and control instruments £36 million
Manufactures of metals £19 million
Angola is a mineral resource rich country, rich in oil, gas, diamonds, coffee, sisal, marble, iron and natural resources. However, after nearly three decades of conflict, the country has just started rebuilding its infrastructure which was neglected during the war. Likewise, institutions and human capital are weak and rebuilding is bringing tremendous challenges for the government. Angola’s economy is almost totally dependent on revenues from the oil industry which adds up to nearly 86% of the total GDP.
Realising the scale of challenges inherited through 30 years of war, the government has decided to embrace a market economy backed by a program of economic diversification in order to minimise the country's dependence on oil revenue. A new Ministry of Macro Economic Coordination has been created with the sole purpose of finding modern mechanisms of self-sustainability through the concept of diversification, enhancing private investment in the primary, secondary and tertiary sectors. The ministry is also looking to privatise a number of industries, and recently passed a law permitting Public-Private Partnership initiatives.
Angola, five times or so the size of the UK, has a population of around 19 million people. The population is divided into three main ethnic groups: Ovimbundu, Kimbundu and Kikongo. It is estimated that approximately half the country’s population lives in the capital, Luanda, a city that was initially built for less than half a million people.
The social challenges caused by the war are enormous and have a direct impact on the lives of ordinary Angolans. With approximately 80% of the population totally illiterate and 5% functionally illiterate, Angola faces a huge capability deficit.
For five centuries the Portuguese ruled Angola, considering it a province of Portugal. The beginning of the armed struggle on 4 February 1961 culminated in a declaration of independence on 11 November 1975. Thirty years of devastating conflict between the three political movements followed, involving an armed struggle against the Portuguese.
The conflict ended in 2002 with the death of the opposition leader Jonas Savimbi, and Angolans embraced the peace and reconciliation process. Eight years after, the country held its second general election giving a historical victory to the ruling MPLA party that formed the government. One of the main priorities following the election was the approval of a new constitution which was completed in 2010. General elections took place again in August 2012, involving the three historical parties and some other new parties, resulting in the MPLA being returned to power but with a reduced majority.
Source - UKTI
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