Angola offers both high returns and great risks to investors and exporters. Oil and diamond revenue and intensive infrastructure rebuilding following the end of civil war in 2002 create business opportunities. From 2004 to 2008, the Angolan economy had double digit growth rates, but the collapse of the oil and diamond market kept overall growth flat in 2009. Although the global financial crisis slowed Angola’s heretofore explosive growth in 2009, projections are that Angola will return to double-digit growth for 2010. The business environment, however, is one of the most difficult in the world. Investors must factor in pervasive corruption, an underdeveloped financial system, poor infrastructure and high on-the-ground costs. Surface transportation inside the country is slow and expensive while bureaucracy and port inefficiencies complicate imports.
The National Private Investment Agency (ANIP) helps facilitate new investment under the 2003 Basic Law for Private Investment (Law 11/03). Law 11/03 lays out the general parameters, benefits, and obligations for foreign investors, provides for equal treatment, offers fiscal and custom incentives, simplifies the investment application process and sets capital requirements. However, investments in the energy, diamond, telecommunication and financial sectors continue to be governed by legislation specific to each sector. Decrees and regulations issued by other government ministries may take precedence over the 2003 Law. Present or future rules may erode or negate investment protections offered by the 2003 Investment Law. The 2003 investment law was part of an overall effort by the Government of the Republic of Angola (GRA) to create a more investor-friendly environment. Other legislative measures include the Company Law and the Voluntary Arbitration Law. The Company Law consolidates the rules that apply to the incorporation of commercial companies in Angola, and the Voluntary Arbitration Law provides a legal framework for non-judicial resolution of disputes.
In 2008, President dos Santos created a commission consisting of senior economic advisers tasked to overhaul ANIP. As part of its mandate, the commission explored changes impacting private investment, including Angola’s tax incentive structure, customs policies, and immigration laws and regulations as they affect business and investment in the country. The commission presented its findings and recommendations to the president in April 2009. Changes to policy will occur during 2009-2010 and prospective investors are advised to monitor ANIP’s website.
ANIP must approve foreign investments of $100,000 to $5 million. 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 involves the participation of a parastatal. After obtaining contract approval from ANIP or the Council of Ministers, the investor must register the company, publish the company’s 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.
Obtaining the proper permits and business licenses to operate in Angola can be time-consuming. The World Bank Doing Business in 2010 report identified Angola as one of the most time-consuming countries surveyed for establishing a business (169 out of 181). Launching a business typically requires 68 days compared with a regional average of 45 days. The government established the “Guichet Único,” or one-stop shop, under the Ministry of Justice, bringing together representatives of various ministries in one place, in an effort to simplify and speed up company registration time. However, the Ministry of Justice lacks authority over the other government ministries, and the process remains slow. With the assistance of advisors from the Portuguese Ministry of Justice, the GRA Ministry of Justice is in the process of reorganizing the Guichet to increase its efficiency.
While no formal discrimination against foreign investment exists, 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 gives Angolan-owned companies preferential treatment in tendering for goods, services and public works contracts.
The government continues to work on the creation of a stock exchange, the “Bolsa de Valores.” No visible progress has been made during the year; however, the government issued an announcement saying that it hoped the stock exchange would start operations in mid 2010.
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. However, in response to the global financial crisis, in which Angola saw its oil revenues decline by over 60 percent, the government sharply reduced the amount of U.S. dollars auctioned off to the commercial banking system from March until November of 2009. While Investment Law 11/03 guarantees the repatriation of profits for officially approved foreign investments, and investors can remit funds through local commercial banks, under Central Bank Order 4/2003, the Central Bank (BNA) must authorize the repatriation of profits and dividends exceeding $300,000. In addition, the Central Bank can temporarily suspend repatriation of dividends or impose repatriation in installments if immediate repatriation would have an adverse effect on the country's balance of payments. In 2009, the BNA temporarily stopped all foreign wire transfers of U.S. dollars and other currencies in an effort to help stem the flow of foreign exchange reserves out of the country during the crisis. While the BNA is again approving wire transfers, it is requiring much more detailed information from the transferring entity, including copies of employment contracts for any individuals paid off-shore with U.S. dollars. These new documentation requirements are expected to be permanent, and have significantly increased the BNA’s approval time for transfers.
Expropriation and Compensation
The Government of Angola is unlikely to expropriate the assets of foreign investors directly. Starting in April 2009, however, the GRA stopped paying its contractors as a result of the loss of oil revenues during the financial crisis. The GRA began paying its contractors again in August 2009, but only partially, and as of February 2010 had an estimated USD 4 billion in arrears. In 2007, the GRA cancelled quarrying permits for several companies, including an American-owned company, without compensation or adequate explanation. Prior to 1992, the government used 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 pose some risk of reducing company profits. This is especially true in the petroleum sector, which has been subject to local content regulations and three petroleum laws promulgated in 2004. The legislative process is generally secretive and closed to public review. Additionally, vague provisions in some laws permit varying interpretations.
Angola's legal and judicial system lacks capacity and is inefficient. Legal fees are high, and most businesses avoid taking commercial disputes to court. The World Bank’s Doing Business in 2010 survey ranks Angola at 181 out of 181 on contract enforcement, and estimates that commercial contract enforcement, measured by time elapsed between filing a complaint and receiving restitution, typically takes 1,011 days in Angola at an average cost of 44 percent of the claim. The Voluntary Arbitration Law (VAL) provides 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 Diário da República, and is in effect. 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 the International Sale of Goods (CISG). In 2008, the Attorney General ruled that Angola’s specialized tax courts were unconstitutional. This effectively left businesses with no legal recourse to dispute taxes levied by the Ministry of Finance as the general courts consistently rule that they have no authority to hear tax dispute cases and refer all cases back to the Ministry of Finance for resolution. 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, but no cases involving U.S. companies were referred to MIGA in 2009. The Angolan and U.S. Governments have successfully negotiated a Trade and Investment Framework Agreement (TIFA).
Performance Requirements and Incentives
Angola's investment law gives foreign and domestic investors equal access to investment incentives. Incentives for such high-priority sectors as agriculture, manufacturing, energy, water and housing 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 now operating in Angola enjoy some form of tax or duty waiver. Companies need to apply for such incentives when submitting an investment application to ANIP. ANIP and other government ministries are willing to accommodate large foreign investments.
While Angola does not impose or enforce many specific performance requirements on foreign investments, the government encourages "Angolanization" of companies and greater use of Angolan suppliers of goods and services. Decrees 5/95 and 6/01 limit expatriate staffing of local companies set up 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 and social benefits. A decree promulgated on October 14, 2008 requires oil companies to first seek Angolan employees to fill any vacant position prior to seeking expatriate appointment, which must first be authorized by the Ministry of Petroleum. 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. Oil service companies may meet these requirements by partnering with local Angolan firms, hiring more Angolan employees or substituting local products 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 2009, the GRA began to more strictly enforce Decree 5/95. Expatriate employees can now expect to receive no more than three renewals to their one year work visas for a total of four years. Approval for the fourth year is contingent upon the foreign investor identifying the Angolan employee who will take over the position after the expatriate leaves at the end of the fourth year.
In the oil and diamond sectors, contracts with the government spell out the commitments companies make to invest in infrastructure and social services to benefit local communities, such as building schools, equipping hospitals or funding microcredit programs. The government also encourages downstream investments in facilities such as refineries and diamond-processing plants.
The Angolan government requires an Environmental Impact Study for investments in petroleum, mining, road construction or power stations. The Ministry of Environment must approve all Environmental Impact Studies before projects can be licensed.
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 have not yet been issued. Oil and diamond production and exploration rights are granted for limited periods of time and only as partnerships between private companies and the resource owners, Sonangol and Endiama, respectively. Diamond-exploration concessions normally last three to five years, with the possibility of extension. Diamond-production contracts are negotiated following a viable discovery. Oil-exploration concessions normally last for 10 years. The government allows and encourages public-private partnerships and participation of private investors in public utilities like electricity and water. Private companies have concessions to operate hydroelectric dams and shipping terminals in the Port of Luanda.
Protection of Property Rights
Angola has basic intellectual property rights protection. Angola’s National Assembly adopted the Paris Convention for the Protection of Industrial Intellectual Property in August 2005, incorporating the 1979 text and the patent cooperation treaty concluded in 1970 and amended in 1979 and 1984. The Ministry of Industry administers intellectual property rights for trademarks, patents and designs under Industrial Property Law 3/92. The Ministry of Culture regulates authorship, literary and artistic rights under Copyright Law 4/90. No court case involving U.S. intellectual property has tested the strength of these laws. Angola is a member of the World Intellectual Property Organization (WIPO) and 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.
Angola’s Law on Land and Urban Planning affirms that all land ultimately belongs to the State, but permits most urban and some non-urban land to become effectively privately owned through long-term renewable leases from the Angolan government. Registering parcels of land over 10,000 hectares must be approved by the Council of Ministers. Registering property takes 6 months, according to the World Bank’s “Doing Business in 2010 Survey, with fees reaching 11.4 percent of property value. Owners must also wait five years after purchase before selling land. Implementing regulations, when written, are supposed to set out guidelines defining different forms of land occupation, including commercial use, traditional communal use, leasing and private homes.
Transparency of Regulatory System
The government is making progress in establishing clearer written regulations. 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. Revised energy-sector licensing regulations have improved legal protection for investors to attract more private investment in electrical infrastructure, such as dams, power plants and distribution grids. A 2005 banking supervision law continues to wait for National Assembly action.
Efficient Capital Markets and Portfolio Investment
Angola’s financial sector, though still underdeveloped, has grown rapidly and key indicators have improved in recent years. By December 2008, total deposits exceeded $18 billion, up from $6.5 billion in 2007. Most banks focus their operations on such short-term commission-related activities 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.
In the 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 in 2002, the Central Bank has devoted considerable effort to rebuilding trust in the kwanza, bringing inflation down to 12 % in 2006, 11.8 % in 2007, and 13.2 % in 2008; however, inflation rose to 13.99 % in 2009. The mandatory reserve requirement for non-government deposits whether in kwanzas or foreign currency, is 30 percent. The reserve requirement for government deposits is 100 percent, a measure that seriously limits lending by state-owned banks.
The number of private banks has been growing since 2003, transforming a sector previously dominated by State-owned banks. Two of Angola’s three largest banks are privately owned. As of late 2009, Angola had 18 commercial banks, three of them State-owned. While every provincial capital has at least three bank branches, only 7.5 percent of the population uses banks, and few businesses even apply for loans. By mid-2009, credit to the private sector amounted to just 15.4 percent of GDP; while bank deposits totaled only 17.9 percent of GDP.
Banks have begun to offer a more diverse array of financial products and instruments. However, banks in Angola extend little unsecured credit, requiring instead significant amounts of collateral in the form of property or dollar deposits from the borrower. The GRA’s non-payment of contracts for most of 2009 strained the commercial banking system, as government spending drives the non-petroleum economy, resulting in an increase of non-performing loans on bank balance sheets. At present commercial credit in Angola remains tight. 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, four new insurance companies, Nossa Seguros, Global Seguros, Mundial Seguros and GA Seguros began operations in 2006. In 2009 Garantia Seguros also began operating.
Banks had a low lending rate of 51 percent of deposits in 2009. Banks are blocked from identifying customers and requiring collateral because State-owned property cannot be offered as collateral, the judicial system is weak, credit histories cannot be tracked and few houses have street addresses. Banks profit from transactions, short-term trade financing and investments in high-interest government bonds, but also increasingly from loans, especially in the construction sector. In the past, State and State-affiliated companies enjoyed privileged access to loans, often at concessionary rates, leading to several bank failures.
The Central Bank has developed a market for short-term bonds called Títulos do Banco Central and long-term bonds called Obrigações do Tesouro. Most of these bonds are bought and held by local Angolan banks. The Obrigações 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. In 2007, the government issued $3.5 billion in a single issue subscribed by a number of Angolan commercial banks. In 2009, the government attempted to issue $9 billion worth of Kwanza denominated bonds, but sold only $600 million of the bonds. In November 2009 the government approved the issuing into international markets of medium term treasury bonds, at an estimated nominal value of $4 billion. The bonds will be placed in two parts of $2 billion between April 2010 and December 2010.
In December 2005, the government announced plans to develop a stock market and appointed a commission to oversee its creation. It had not opened as of the end of 2009. The government may privatize some state-owned companies and list them on the stock exchange. The state oil company SONANGOL and the state diamond company ENDIAMA are expected to be listed on the stock exchange.
Below is a chart listing commercial banks operating in Angola.
|LIST OF COMMERCIAL BANKS OPERATING IN ANGOLA|
|BANKS||CONTACT INFORMATION||SHAREHOLDERS||CAPITALIZATION||PRINCIPLE CLIENTS|
|1||BCI, Banco de Comercio e Industria||Adriano Rafael Pascoal, CEO, tel. 244 2 330769 Fax 244 2 331498 e-mail firstname.lastname@example.org||State||Kz 615.034.394,60 = USD 7.687.930||Public Enterprises|
|2||BPC, Banco de Poupança e Credito||Paixao Junior, CEO tel. 244 2 334280 Fax 244 2 391580 e-mail email@example.com||State||KZ 783.000.000.00 = USD 9.787.500||Macro/Micro credit loans. Public Administration|
|3||BAI, Banco Africano de Investimentos||Jose Calos de Castro Paiva, CEO, tel. 244 222 335127 Fax 244 222 335486 e-mail firstname.lastname@example.org||Sonangol, Deputy Prime Minister Aguinaldo Jaime, Minister of Petroleum, Disiderio da Costa||Kz 6.531.817.500.00 = USD 32.500.000.00||Oil companies. Private companies/ individuals|
|4||BFA, Banco de Fomento Angolano||Emidio Pinheiro, CEO, tel. 244 2 638900 fax 244 2 638110||BPI,Portuguese Bank of Investments||Kz 2.800.000.000.00=USD 35.000.000.00||Macro credit loans,Private companies and individuals|
|5||BCA, Banco Comercial Angolano||Benvindo Pitra, CEO, tel. 244 2 449548 fax 244 2 449516 e-mail email@example.com||South African Bank (ABSA), and some private Angolan Businesses||Kz 938.700.000.00 = USD 11.733.750||Personnal loans, private medium size companies|
|6||Banco Sol||Sebastiao Lavrador, CEO, tel 244 2 440330 fax 244 2 440226 e-mail firstname.lastname@example.org||Mr. Lavrador, Ana Paula dos Santos, (President Dos Santos wife)||Kz 969.339.000.00 = USD 12.116.737||micro credit loans, private small companies|
|7||Banco Regional do Keve||Amilcar Silva, CEO, Tel. 244 2 394161 Fax 244 2 395101, e-mail email@example.com||Mr. Amilcar Silva, Dr. Carlos Gomes member of the board, Minister Higino Carneiro is the principal shareholder||Kz 456.000.000.00 = USD 5.700.000||Agro Industry|
|8||Banco Totta de Angola||Mario Nelson Maximo, CEO, tel. 244 222 332729 fax 244 222 333233, e-mail firstname.lastname@example.org||Portuguese group Bank Totta & Açores||Kz 793.609.000.00 = USD 9.920.000||Private investment|
|9||Banco Millennium Angola||Maria Nazare Dang, General manager, tel. 244 222 397922 Fax 244 222 397397||Portuguese Group Millennum BCP||Kz 509.807.334.00 = USD 6.372.500||Corporate, Banking Investments|
|10||Banco Espirito Santo Angola (BESA)||Ricardo Espirito Santo, CEO, tel. 244 222 333776 Fax 244 222 333772||Portuguese, Group Espirito Santo ||Kz 800.000.000.00 = USD 10.000.000||Corporate, Banking Investments|
|11||Banco de Credito Internacional (BIC)||Fernando Teles, CEO, tel. 244 222 371227 Fax 244 222 395099||Portuguese Group Amorim, Isabel dos Santos (President Dos Santos daughter)||Kz 807.941.050.00 = USD 10.099.000||Corporate, Macro credit loans, Individuals|
|12||Novo Banco||Tom Mitro, General Manager, tel. 244 222 244 912 509159||Chevron, World Bank||Kz 391.058.220.00 = USD 4.888.000||Micro credit loans|
|13||Banco de Negocios Internacional (BNI)||Mario Palhares, President||Private Angolan businesses||Kz 1.600.000.000.00 = USD 20.000.000||Corporate, Private banking investments|
|14||Banco Privado Atlantico (BPA)||Carlos da Silva, CEO||Global Pactium (Angolan Capital Investors), AAA Insurance Company (Sonangol Group)||Kz 800.000.000.00 = USD 10.000.000||Corporate, Management of assets, banking investments|
|15||BDA, Angolan Development Bank||Paixão Franco Junior, President||State||Kz 4.000.000.000.00 = USD 50.000.000||Macro/micro credit loans, Private banking investments|
|16||BANC||Sergio de Sousa Tel. 222 339285||Private Angolan businesses||USD 10.000.000||Private banking investments|
|17||VTB Afica||Lukianenko Vassillievitch Tel. 222 393634||Russian Investment||USD 20.000.000 ||corporate banking|
|18||Finibanco Angola||Humberto Leite 222 636021||Portuguese investment||USD 10,000,000||Private banking investments|
Other Instruments: It is U.S. Government policy to promote good governance, including host country implementation and enforcement of anti-corruption laws and policies pursuant to their obligations under international agreements. Since enactment of the FCPA, the United States has been instrumental to the expansion of the international framework to fight corruption. Several significant components of this framework are the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (OECD Antibribery Convention), the United Nations Convention against Corruption (UN Convention), the Inter-American Convention against Corruption (OAS Convention), the Council of Europe Criminal and Civil Law Conventions, and a growing list of U.S. free trade agreements. Angola is not a part of any of these conventions, but generally all countries prohibit the bribery and solicitation of their public officials.
Political violence is not a substantial risk in Angola. However, the security situation in its oil-rich enclave of Cabinda has worsened somewhat in the last year although it remains better than it was before the 2006 peace accord between the leading separatist movement and the central government. Cabinda has continued to experience violence, often targeted at foreigners.
Corruption, including bribery, raises the costs and risks of doing business. Corruption has a corrosive impact on both market opportunities overseas for U.S. companies and the broader business climate. It also deters international investment, stifles economic growth and development, distorts prices, and undermines the rule of law.
It is important for U.S. companies, regardless of their size, to assess the business climate in the relevant market in which they will be operating or investing, and to have an effective compliance program or measures to prevent and detect corruption, including foreign bribery. U.S. individuals and firms operating or investing in foreign markets should take the time to become familiar with the relevant anticorruption laws of both the foreign country and the United States in order to properly comply with them, and where appropriate, they should seek the advice of legal counsel.
The U.S. Government seeks to level the global playing field for U.S. businesses by encouraging other countries to take steps to criminalize their own companies’ acts of corruption, including bribery of foreign public officials, by requiring them to uphold their obligations under relevant international conventions. A U. S. firm that believes a competitor is seeking to use bribery of a foreign public official to secure a contract should bring this to the attention of appropriate U.S. agencies, as noted below.
U.S. Foreign Corrupt Practices Act: In 1977, the United States enacted the Foreign Corrupt Practices Act (FCPA), which makes it unlawful for a U.S. person, and certain foreign issuers of securities, to make a corrupt payment to foreign public officials for the purpose of obtaining or retaining business for or with, or directing business to, any person. The FCPA also applies to foreign firms and persons who take any act in furtherance of such a corrupt payment while in the United States. For more detailed information on the FCPA, see the FCPA Lay-Person’s Guide at: http://www.justice.gov/criminal/fraud/docs/dojdocb.html.