Angola 2007 Investment Climate Statement – Angola

Openness to InvestmentAngola welcomes investment and created the National Private Investment Agency (ANIP) to assist investors and facilitate new investment. In 2003, the government of Angola replaced the 1994 Foreign Investment Law with the Basic Law for Private Investment (Law 11/03). Law 11/03 lays out the general parameters, benefits, and obligations for foreign investment in Angola, and recognizes that investment plays a vital role in the country's economic development. It encourages domestic and foreign investment by providing equal treatment, offering fiscal and custom incentives, simplifying the investment application process and lowering the required investment capital. The 2003 investment law is part of an overall effort by the GRA to create a more investor-friendly environment. Other legislative measures include the new Company Law that came into effect in April 2004 (No.1/04, of February 13) and a Voluntary Arbitration Law (No.16/03, of July 25) that has been approved but not yet implemented. The Company Law consolidates the rules applying to the incorporation of commercial companies in Angola, which were formerly spread amongst several laws, and the Voluntary Arbitration Law will provide the legal framework for non-judicial resolution of disputes. These investment-friendly laws, however, are subordinate to decrees and regulations issued by other government ministries who theoretically could restrict or negate investment protections in the 2003 Investment Law. Investments in the energy, diamond, telecommunication and financial sectors continue to be governed by legislation specific to each sector.
Foreign investments of $100,000 to $5 million require ANIP approval. The Council of Ministers must approve investments over $5 million, as well as any investment that requires a concession (such as oil or mining) or includes the participation of a parastatal. After obtaining contract approval from ANIP or the Council of Ministers, the investor must register the company, publish company statutes in the official gazette (Diário da República), obtain a business license, and register with the fiscal authorities. Foreign investments under $100,000 do not require ANIP approval, but still must be registered, published, and licensed as described above.
Obtaining the proper permits and business licenses to operate in Angola can be time-consuming. The World Bank Doing Business in 2006 report identified Angola as 170th of 175 countries surveyed to establish a business, requiring 124 days to register a business compared with a regional average of 62 days. In August 2003, the government established the “Guichet Único,” or one-stop shop, to simplify the process and reduce the registration time by placing representatives of various government ministries in one place. However, the Ministry of Justice’s Guichet Único lacks authority over the other government ministries which must approve licenses, permits, and other requirements, and thus has encountered great difficulty in expediting company registration. Nonetheless, the Guichet Único issued 320 new business licenses in 2005, more than double the 151 issued in 2004. The Ministry of Justice is in the process of reorganizing the Guichet Único to increase its efficiency with the assistance of advisors from the Portuguese Ministry of Justice.
There is no formal discrimination against foreign investment, but Angolan or other companies familiar with the bureaucratic and legal complexities of the business environment often hold an advantage. The Promotion of Angolan Private Entrepreneurs Law adopted in July 2003 gives Angolan-owned companies preferential treatment in tendering for goods, services and public works contracts.
In December 2005, the government appointed a commission to oversee the creation of a stock exchange, the “Bolsa de Valores.” The commission is reportedly still at work and announced in December 2006 that it hoped the stock exchange would start operations by mid-2007. When it starts operating, the exchange should provide equal access to foreign and domestic investors.
Conversion and Transfer Policies Economic and financial reform measures in recent years have improved local access to foreign exchange and facilitated remittance and transfer of funds, but Central Bank Order 4/2003 imposes firm controls over the transfer of funds abroad. While Investment Law 11/03 guarantees the repatriation of profits for officially approved foreign investment, and investors can remit funds through local commercial banks, under Order 4/2003 the Central Bank must authorize the repatriation of profits and dividends exceeding $100,000. In addition, the Central Bank can temporarily suspend repatriation of dividends or impose repatriation in installments if immediate repatriation will have an adverse effect on the country's balance of payments. Companies have complained in the past about waiting several months to remit funds abroad, but since 2004, the Central Bank has loosened controls and bank service time now has been reduced to a matter of hours.
Expropriation and Compensation The government of Angola is highly unlikely to expropriate the assets of foreign investors. However, prior to 1992, the government used the failure to fulfill contractual or other obligations as justification for expelling foreign investors and expropriating their facilities. Changes in legislation and enforcement of existing laws, which occurred during the last five years, pose some risk of reducing company profits. This is especially true in the petroleum sector, which has been subjected to local content regulations and three new petroleum laws promulgated in 2004. The legislative process is convoluted and subject to high-level dictacts. Additionally, vague provisions in some laws permit various interpretations.
Dispute Settlement Angola's legal and judicial system suffers from a lack of capacity and is not efficient in handling commercial disputes. Legal fees are high, and most businesses avoid taking disputes to court. The World Bank’s Doing Business in 2006 survey estimates that commercial contract enforcement, measured by the amount of time elapsed between filing of a complaint and receipt of restitution, takes 1011 days in Angola, almost double the regional average. In July 2003, the National Assembly approved the Voluntary Arbitration Law (VAL) to provide a general legal framework for faster, non-judicial arbitration of disputes, except for cases expressly excluded by the law. The VAL has been published in the official gazette, the Diario da Republica, and is now in effect. The US Department of Commerce’s Commercial Law Development Program has improved criminal case management in Angola’s Luanda Province by instituting random selection of judges to hear cases and a computerized case tracking system. Angola is not a signatory to the United Nations’ New York Convention, the World Bank’s International Center for Settlement of Investment Disputes (ICSID), or the United Nations’ Convention on for the International Sale of Goods (CISG). Angola is a member of the Multilateral Investment Guarantee Agency (MIGA), which provides dispute settlement assistance. Past MIGA efforts to resolve foreign investment disputes have proven successful, although no cases involving U.S. companies were referred to MIGA in 2006.
Performance Requirements and Incentives Angola's investment law provides for equal access to incentives for both foreign and domestic investors. Investors benefit from a more standardized set of incentives based on Law 17/03 of July 25, 2003, which apply to high priority sectors such as agriculture, manufacturing, energy, water housing and fisheries. The incentives may include exemption from industrial and capital gains taxes for up to 15 years and from customs duties for up to 6 years. Many foreign companies already operating in Angola enjoy some form of tax or duty waiver. Companies should apply for such incentives when submitting their investment application to ANIP. ANIP and other government ministries are willing to accommodate large foreign investments and to advise on the range of incentives that could be available for investments in particular sectors or regions of the country.
Angola imposes or enforces few specific performance requirements on foreign investments. The government encourages "Angolanization" of companies operating in the country and greater use of Angolan suppliers of goods and services. Decrees 5/95 and 6/01 limit expatriate staffing of local companies established in Angola by national or foreign investors to 30 percent of the workforce, and require Angolan and expatriate staff with the same jobs and responsibilities to receive the same salaries. International oil companies are working with the government on a new local content initiative that will establish more explicit sourcing requirements for the petroleum sector. The Petroleum Ministry expects to enforce this in the near future. Oil service companies may meet these requirements by partnering with local Angolan firms, hiring more Angolan employees, or substituting locally-produced products or services for imports. Foreign investors can set up fully-owned subsidiaries in many sectors, and frequently are encouraged, but not required, to take on local partners.
In the oil and diamond sectors, companies are expected to invest in infrastructure and social services to benefit local communities, constructing schools, equipping hospitals, or funding micro-credit programs. When signing contracts for new concessions, oil companies commit themselves to pay a “social bonuses” destined for such projects. In the diamond industry, foreign investors and the government share an informal understanding that the foreign investor should invest in social projects for the local population in the province or region of the investment. The government also encourages downstream investments in facilities such as refineries and diamond processing plants.
A July 2004 rule requires an Environmental Impact Study for investments in petroleum, mining, road construction or power stations. Before projects can be licensed, companies must submit their Environmental Impact Studies to the Ministry of Urbanism and Environment for approval.
Right to Private Ownership and Establishment Foreign and domestic private entities have the right to establish, acquire, and dispose of interests in business enterprises. Public enterprises hold some practical advantages in access to markets and credit. All non-urban and some urban land is ultimately under state ownership, but can be leased to private entities. Regulations to implement the 2004 land tenure law should clarify land use and ownership, but these regulations have not yet been issued. Rights to explore and produce oil and diamonds are granted for limited periods of time and only as partnerships between private companies and the resource owners, the Angolan parastatals, Sonangol and Endiama. Diamond exploration concessions are normally granted for three to five years, with the possibility of extension. Diamond production contracts are negotiated following a viable discovery. Oil exploration concessions normally last for ten years. The government allows and encourages public-private partnerships and participation of private investors in public utilities such as electricity and water. For example, private companies have gained operator rights, as concessionaires, to hydroelectric dams and terminals in the Port of Luanda.
Protection of Property Rights intellectual propertyAngola has basic intellectual property rights protection and is working to strengthen existing legislation and enforcement. While current protection is weak due to a lack of enforcement capacity, in 2006 the Government’s economic police confiscated and destroyed small amounts of pirated goods, such as DVDs, music cassettes and pharmaceuticals. Angola’s National Assembly adopted the Paris Convention for the Protection of Industrial Intellectual Property in August 2005, incorporating the 1979 text and the World Intellectual Property Organization (WIPO) patent cooperation treaty concluded in 1970 and amended in 1979 and 1984. Angola follows international patent classifications of patents, products and services to identify and codify requests for patents and trademark registration. The fee for each patent petition varies by type of request.
The Ministry of Industry administers intellectual property rights for trademarks, patents, and designs under the Industrial Property Law 3/92. The Ministry of Culture regulates authorship, literary, and artistic rights under the Copyright Law 4/90. No court cases testing the strength of these laws involving U.S. intellectual property have been filed.
real estateAngolan parliament passed a new Law on Land and Urban Planning which came into effect in September, 2004. In principle, it affirms that all land ultimately belongs to the state, but in practice, most urban and some non-urban land will effectively become privately owned through long-term renewable leases. Owners must, however, wait five years after purchase before selling land. The implementing regulations for the law, when written, are supposed to set out guidelines defining different forms of land occupation (including commercial use, traditional communal use, leasing, and private homes). This law addresses past ambiguities about land tenure and should encourage more property investment.
Transparency of Regulatory System The government is making progress in establishing regulatory standards and reducing bureaucratic complexity. Traditionally, the regulatory system has been complex, vague, and inconsistently enforced. In many sectors, no effective regulatory system exists due to lack of capacity. The Angolan Communications Institute (INACOM), sets prices for telecommunications services and is the regulatory authority for the telecommunications sector. To attract more private investment in electrical infrastructure, such as dams, power plants and distribution grids, the government approved new licensing regulations for the energy sector in July 2004 that provide a more solid legal basis for investors. The Central Bank drafted a new finance sector law to establish clearer rules for banking supervision. Initially scheduled for the 2005 legislative calendar, the draft still awaits approval by Angola’s parliament.
Efficient Capital Markets and Portfolio Investment Angola’s financial sector, though still underdeveloped, has grown rapidly. The Angolan Central Bank announced in November 2006 that as of June 2006, total deposits reached $6.8 billion, up from $4.6 billion in 2005. Most banks focus their operations on short-term commission-related activities such as currency trading and trade finance. Foreign investors do not normally access credit locally, and local investors either self-finance or seek financing from non-Angolan banks and investment funds. Subsidized government loan programs to promote economic development are available only to majority-owned Angolan companies and on a very selective basis. Local businesses must take loans in kwanzas, the Angolan currency, though exceptions are granted. Kwanza-based loans have interest rates ranging from 60-70 percent to compensate for inflation, whereas interest rates for dollar-indexed loans are generally below 10 percent.
Past triple-digit inflation resulted in a high level of dollarization in the economy and banking system, with 70 percent of banking assets held in dollars. Since the end of the civil war, the Central Bank has devoted considerable effort to rebuilding trust in the kwanza, bringing inflation down to 17.7 percent in 2005 and 10 percent in 2006. The mandatory reserve requirement for non-government deposits, whether in kwanzas or foreign currency, is 15 percent. The reserve requirement for government deposits is 100 percent, a measure that seriously limits the lending by state-owned banks.
Private banks, particularly those from Portugal, have rapidly entered a sector that was traditionally dominated by state banks. As of late 2006, Angola had 15 commercial banks, three of them state-owned. Two of the Angola’s three major banks are privately-owned. Under the 2000-2001 IMF Staff-Monitored Program, the government began assessing its two remaining state-owned commercial banks for privatization, taking initial steps to privatize the Bank of Commerce and Industry (BCI) but not the Bank of Savings and Credit (BPC). BPC has an extensive branch network throughout the country and manages government payments. Two other Angolan Banks, the Banco de Fomento Angolano (BFA) and the Banco de Credito International (BIC), however, are also increasing the number of their branches throughout the country.
Banks have begun to offer a more diverse array of financial products and instruments. Auto loans and mortgages are increasingly available, as are 15-year mortgages at eight percent interest. However, unclear land titles and ill-defined property rights may, in some instances, complicate and lengthen the process of applying for a mortgage. In other financial services, three new insurance companies, Nossa Seguros, Global Seguros and Mundial began operations in 2006.
Banks have a low lending rate of 35% of deposits. It is difficult for borrowers to offer collateral due to a weak access to credit histories and unclear land titles. Banks prefer to make their profits from transactions, short-term trade financing, and investments in high-interest government bonds. In the past, state and state-affiliated companies enjoyed privileged access to loans, often at concessionary rates, leading to several bank failures. Currently, the non-performing loan rate is relatively low, reflecting conservative lending practices throughout the sector. Legislative changes and development in the banking sector are expected to produce widen availability of credit. The new land law should reduce confusion over property rights and help identify sources of collateral. The Central Bank is working to improve its credit database and is promoting a new financial sector law and the nation’s first money laundering legislation.
The Central Bank has developed a market for short-term bonds called Central Bank Titles (Títulos do Banco Central) and long-term bonds called Treasury Obligations (Obrigacões do Tesouro). Most of these bonds are bought and held by local Angolan banks. The Obrigacões have maturities ranging from 1 to 7.5 years, whereas the Títulos have maturities of 91 to 182 days. For up-to-date information on current rates, see www.bna.ao. The government issued more than $300 million worth of bonds in 2006. An additional 200 million worth of government bonds is traded privately by local Angolan companies as well as by major international banks.
Below is a chart containing a list of commercial banks operating in Angola.BANKS CONTACT INFORMATION CAPITALIZATION PRINCIPLE CLIENTS BCI, Banco de Comercio e Industria Adriano Rafael Pascoal, CEO, tel. 244 2 330769 Fax 244 2 331498 e-mail secretariado@bci.ebonet.net Kz 615.034.394,60 = USD 7.687.930 Public Enterprises BPC, Banco de Poupança e Credito Paixao Junior, CEO tel. 244 2 334280 Fax 244 2 391580 e-mail bpc@bpc.ebonet.net KZ 783.000.000.00 = USD 9.787.500 Macro/Micro credit loans. Public Administration BAI, Banco Africano de Investimentos Jose Calos de Castro Paiva, CEO, tel. 244 222 335127 Fax 244 222 335486 e-mail rabreu@bainet.ebonet.net Kz 6.531.817.500.00 = USD 32.500.000.00 Oil companies. Private companies/ individuals BFA, Banco de Fomento Angolano Isidro Pinheiro, CEO, tel. 244 2 638900 fax 244 2 638110 Kz 2.800.000.000.00=USD 35.000.000.00 Macro credit loans,Private companies and individuals BCA, Banco Comercial Angolano Benvindo Pitra, CEO, tel. 244 2 449548 fax 244 2 449516 e-mail bca@snet.co.ao Kz 938.700.000.00 = USD 11.733.750 Personnal loans, private medium size companies Banco Sol Sebastiao Lavrador, CEO, tel 244 2 440330 fax 244 2 440226 e-mail banco.sol@ebonet.net Kz 969.339.000.00 = USD 12.116.737 micro credit loans, private small companies Banco Regional do Keve Amilcar Silva, CEO, Tel. 244 2 394161 Fax 244 2 395101, e-mail servicoscentrais@bankeve.com Kz 456.000.000.00 = USD 5.700.000 Agro Industry Banco Totta de Angola Mario Nelson Maximo, CEO, tel. 244 222 332729 fax 244 222 333233, e-mail tottango@ebonet.net Kz 793.609.000.00 = USD 9.920.000 Private investment Banco Millennium Angola Maria Nazare Dang, General manager, tel. 244 222 397922 Fax 244 222 397397 Kz 509.807.334.00 = USD 6.372.500 Corporate, Banking Investments Banco Espirito Santo Angola (BESA) Ricardo Espirito Santo, CEO, tel. 244 222 333776 Fax 244 222 333772 Kz 800.000.000.00 = USD 10.000.000 Corporate, Banking Investments Banco de Credito Internacional (BIC) Fernando Teles, CEO, tel. 244 222 371227 Fax 244 222 395099 Kz 807.941.050.00 = USD 10.099.000 Corporate, Macro credit loans, Individuals Novo Banco Tom Mitro, General Manager, tel. 244 222 244 912 509159 Kz 391.058.220.00 = USD 4.888.000 Micro credit loans Banco de Negocios Internacional (BNI) Mario Palhares, President Kz 1.600.000.000.00 = USD 20.000.000 Corporate, Private banking investments Banco Privado Atlantico (BPA) Carlos da Silva, CEO Kz 800.000.000.00 = USD 10.000.000 Corporate, Management of assets, banking investments BDA, Angolan Development Bank Paixão Franco Junior, President Kz 4.000.000.000.00 = USD 50.000.000 Macro/micro credit loans, Private banking investments
Political Violence Political violence is not a substantial risk in Angola. The August 2006 Cabindan Peace Accord largely brought an end to the low-level insurgency that was pressing for an independent state in the oil rich province of Cabinda.
Corruption Angola needs more progress toward good governance, the rule of law, and against corruption to lower investment risks provide greater assurance to investors. Under pressure from the international community, the government made significant strides towards greater transparency by publishing financial information and preventing extra-budgetary expenditures. Angola is a signatory to the UN Convention Against Corruption but not to the OECD Convention on Combating Bribery. While currently an observer in the UK’s Extractive Industries Transparency Initiative (EITI) the Government has announced it is considering full membership. Angola is a participant in the New Partnership for Africa’s Development (NEPAD), which includes a Peer Review Mechanism on good governance and transparency. Angola’s government approved an Audit Court in 2000 to investigate misuse of public funds by public institutions. In the beginning of 2005, the Audit Court handed down its fourth embezzlement sentence and ordered government officials to return misappropriated funds, but final disposition of the case is not known.
Petty corruption is a problem worsened by low civil service salaries and a proliferation of bureaucracy and regulations that present opportunities for rent-seeking. Complicated procedures and long bureaucratic delays sometimes tempt investors to seek quicker service and approval by paying gratuities and facilitation fees. Transparency International's 2006 Corruption Perception Index (CPI) placed Angola at 142 out of 163 countries. The Heritage Foundation ranked Angola 139 out of 161 countries surveyed on its 2006 Index of Economic Freedom, and described Angola as “mostly unfree.”
Although Angola's public and private companies historically did not use transparent accounting systems consistent with international norms, IMF demands have spurred regular audits of Angola’s largest public companies by major international accounting firms. The government approved an audit law in 2002 that sought to require audits for all “large” companies, but it has not yet been possible to enforce this rule due to the lack of a professional accounting oversight body. The National Bank of Angola hopes to foster a professional body of accountants to enforce standards and certify qualified accountants. US firms operating in Angola are required to adhere to the Foreign Corrupt Practices Act.
Bilateral Investment Agreements Angola does not have a bilateral investment treaty or bilateral tax treaty with the United States, however the USG has initiated discussion for a Trade and Investment Framework Agreement (TIFA) with Angola. Angola has signed bilateral investment agreements with Italy, Germany, Portugal, South Africa, and the United Kingdom, but has not ratified or implemented any of these agreements. Angola ratified a bilateral investment agreement with Cape Verde in 2004. A list of current bilateral investment treaties and their status can be found at the United Nations Conference on Trade and Development (UNCTAD) website.
OPIC and Other Investment Insurance Programs The Overseas Private Investment Corporation (OPIC) has provided investment insurance to projects in Angola in recent years, and U.S. investors can apply for OPIC insurance, including coverage under its Quick Cover program for projects less than $50 million in certain sectors.
Angola is a member of the Multilateral Investment Guarantee Agency (MIGA), which provides insurance to foreign investors against certain risks such as expropriation, nonconvertibility, and war or civil disturbance. MIGA also provides investment dispute resolution on a case-by-case basis.
Labor Angola’s General Labor Law went into effect in 2000 and provides significant protection and benefits to workers. The law expands maternity and other leave and provides the right to strike and bargain collectively. The law spells out proper procedures for hiring workers. For work contracts of indefinite duration, the law provides for a basic probationary period of up to six months, during which the worker or employer can terminate the contract without notice or justification. After the probationary period ends, dismissed workers have the right to appeal to a Labor Court. Many employers prefer to reach a monetary settlement with workers when a dispute arises rather than bring cases before the Court. The World Bank Group’s 2006 Doing Business report placed the average cost of firing a worker in Angola at 58.5 weeks worth of wages versus a regional average of 71.2 weeks of wages.
The local labor force has limited technical skills, English language ability and managerial ability. Many employers invest heavily in educating and training their Angolan staff.
Since 2003, the government has conducted annual surveys of the oil industry to implement a requirement that oil companies hire Angolan nationals when qualified applicants are available. If there are no qualified nationals apply for the position, then the companies may request the government’s permission to hire expatriates. This rule also requires equal pay and benefits for equal work. The Angolan government replaced its Immigration Service from top to bottom in 2006 due to scandals which emerged regarding the selling of work visas. The reconstruction of the Immigration authority created problems in the issuance of work visas that are as of December 2006, only, in part resolved.
The constitution grants the right to engage in union activities and labor strikes, but the government may intervene in labor disputes that affect national security, particularly strikes in the oil sector. Chevron employees struck in 2004 to demand equal pay for equivalent work but the strike collapsed when the government made its opposition clear and some concessions were made. Labor unions independent of the government-run unions exist and are working to increase their influence.
Foreign-Trade Zones/Free Ports In March 2003, Angola agreed to adhere to the SADC Free Trade Protocol that seeks to harmonize and reduce tariffs and by establishing regional policies on trade, customs, and methodology. However, Angola is delaying implementation of this protocol until 2008, in order to have time to revive domestic production so that Angolan goods have a chance to compete with the expected flood of imports from other SADC countries, particularly South Africa. In September 2004, the government announced reduced customs duties on imported goods and in December exempted businesses and individuals in the enclave of Cabinda from all customs duties. These reductions and exemptions do not apply to the oil industry. Angola has signed customs cooperation agreements with Portugal and São Tomé and Principe, and with Namibia – in December 2006. It is expected to sign others with South Africa and members of the Community of Portuguese Speaking States (CPLP). Angola is also currently negotiating customs agreements with Zambia and the Democratic Republic of Congo, all fellow SADC members.
Foreign Direct Investment Statistics According to the UN Conference on Trade and Development’s (UNCTAD) 2005 World Investment Report, Angola received US $800 million in FDI during the first half of 2006. It was the second largest recipient of FDI in Sub-Saharan Africa in 2004 at over $2 billion, down from $3.5 billion in 2003, and the largest overall recipient in Sub-Saharan Africa between 1999 and 2004. The petroleum sector received 93 percent of 2004 FDI. From 2000 to 2005, average annual inflows of FDI were $1.9 billion and FDI stock in 2005 stood at $12.48 billion, or 57 percent of GDP. Most of Angola’s FDI comes from the United States, followed by France and the Netherlands. FDI outflow and stock has been negligible. FDI outflow from Angola is negligible.
Angola also is a recipient of several lines of credit from the following countries:
China -- USD 6 billion
Portugal -- USD 900 million
Brazil -- USD 750 million
Spain -- USD 600 million
Germany -- USD 500 million
EU -- USD 200 million
India -- USD 50 million