Attitude toward Foreign Direct Investment
Angola’s business environment remains one of the most difficult in the world. Investors must factor in pervasive corruption, an underdeveloped financial system, poor infrastructure, abundant but unskilled labor and extremely high on-the-ground costs. Surface transportation inside the country is slow and expensive, while bureaucracy and port inefficiencies complicate trade and raise costs.
However, the GRA actively seeks FDI although it also sets barriers to protect domestic businesses. In August 2015, a new private investment law was enacted that creates incentives for investment in the following strategic sectors: 1) electricity and water, 2) tourism and hospitality, 3) transportation and logistics, 4) telecommunications and information technology, 5) construction, and 6) media. Investments in the other key sectors of mining, finance, and oil are governed under different laws.
According to this law, responsibility for assessing foreign investments falls to the government ministry overseeing the sector where the investment will occur. For investments under $10 million, oversight and approval is under the jurisdiction of the Economic Commission of the Council of Ministers. For investments over $10 million, the Office of the President must approve and provide oversight.
There is no longer a minimum dollar figure required to invest in Angola. However, the private investment law distinguishes between foreign and local investors by establishing a lower bar for Angolan investors to be able to access fiscal incentives offered by the GRA: local businesses must invest a minimum of $500,000 versus the $1 million required of foreign investors. In Angola’s costly business environment, the financial incentives offered certainly could impact investment decisions.
The private investment law also sets a minimum of 35 percent local participation/partnerships in foreign investments for the six outlined strategic sectors: 1) electricity and water, 2) tourism and hospitality, 3) transportation and logistics, 4) telecommunications and information technology, 5) construction, and 6) media. The previous law did not require local partnerships with the exception of the energy, banking, and insurance sectors, though to be successful in Angola, the majority of foreign operators had local associates of some kind. The 35 percent minimum local participation requirement is likely to challenge foreign investors pursuing large investments projects in qualifying local partners especially due to local capital constraints as well as the lack of technical capacity in certain industries.
The law also requires foreign investors to pay higher taxes on dividends and profits they repatriate, particularly on repatriation within the first several years of the initial investment. The new tax on dividends starts at 15 percent, and can rise to as high as 50 percent depending on how much and how soon after the initial investment the repatriation takes place to encourage in country reinvestments. In an attempt to incorporate foreign companies into Angolan banking and taxation systems, the law requires financial operations through Angolan banks. The government later provided additional clarifications to the investment law by issuing several presidential decrees. Decrees No. 181/15 and No. 184/15 issued September 2015 provided further clarifications on operational details and roles of ministries in the decision making process of approving investments. They also enabled the creation of technical support units within each ministry to assess investments and increase each ministry’s capacity to assess investments. The decrees provided additional information regarding the creation of APIEX.
The new investment law divides Angola into Zone A and Zone B. Fiscal incentives for investing in Angola’s less developed regions (Zone B) are twice the level of incentives compared to those given for investing near Luanda and other major city centers (Zone A). Additional tax breaks/reductions are available for investors who create more local jobs, generate higher export receipts, and source more local content in their operations.
The law expressly prohibits private investment in the areas of: defense, internal public order, and state security; banking activities relating to the operations of the Central Bank and the Ministry of Finance; administration of ports and airports; and other areas where the law gives the GRA exclusive responsibility for its operations. However, it is common for Angolan companies operating in these restricted sectors to subcontract parts of, or the entire project to foreign companies. Investment in the petroleum, diamond, and financial sectors are governed by sector-specific legislation. Details on the petroleum investment guidelines are outlined in the Country Commercial Guide Best Prospect Summary of the Oil and Gas industry.
Angola’s foreign exchange laws require all companies operating in Angola to make all payments through local (Angola-domiciled) banks using Angolan currency (kwanza). This law aims to strengthen demand for the kwanza, and build the capacity of Angola’s underdeveloped financial sector. The law was implemented in two phases: first, from 2012, oil companies are required to pay taxes owed to the Angolan Ministry of Finance through a local bank; then in July 2013 the regulation expanded to all companies operating in Angola, requiring them to use local banks (and local currency) for all payments, including payments to suppliers and contractors domiciled abroad.
Foreign exchange availability in the market during 2015 averaged $1.46 billion per month. This rate is down from the US$1.6 billion monthly average in 2013 and 2014. For the first quarter of 2016, foreign exchange values available in the market dropped to $600 million monthly with euros also being auctioned (source: BNA). Weekly auction values have fluctuated from zero to $300 million since the beginning of 2016. Foreign exchange is auctioned by the Central Bank (BNA) to commercial banks for approved imports. Per the February 24, 2016, Presidential Decree No 40/16, foreign exchange availability in 2016 is expected to meet only 63 percent of demand and will prioritize: 1) employment retention (raw materials and inputs, equipment, technician salaries, and oil sector operations); 2) inflationary control (food, consumer necessities, fuel); 3) health and education; and 4) priority government expenses for necessary operations. Angolan companies report waits of 3-8 months to access foreign exchange for imports.
When, drafting and entering into contracts with Angolan entities, foreign investors generally seek to ensure that contracts are not governed by Angolan law, so as to avoid the accompanying GRA mandate that contracts be denominated and paid in kwanzas; a currency which has little commercial or practical use outside of Angola. Companies often find it advisable to seek appropriate legal advice prior to negotiating binding law, arbitration and payment clauses, and to seek to ensure that contract payments are denominated in and made in US dollars.
In addition to different applications of the new Angolan Investment Law between Angolan and foreign companies, Angolan or other companies familiar with the bureaucratic and legal complexities of the Angolan business environment hold an advantage over newcomers. In addition, the Promotion of Angolan Private Entrepreneurs law gives Angolan-owned companies preferential treatment in tendering for government contracts for goods, services, and public works. Only firms with a majority Angolan stake can benefit from Angolan Government’s loan guarantees, generous terms, and subsidized interest rates of the newly implemented US$1.6 billion fund to support micro, small, and medium-sized businesses from Angola Ministry of Economy’s Angola Invest Program
Other Investment Policy Reviews
Angola has been a member of the World Trade Organization (WTO) since 1996. There have been no investment policy reviews for Angola from either the Organization for Economic Cooperation and Development (OECD) or the United Nations Conference on Trade and Development (UNCTAD) in the last three years. The World Trade Organization (WTO) performed a trade policy review of Angola in September 2015. Excerpts of the Trade Policy Review concluding remarks by the WTO Chairperson are as follows:
Members noted that Angola had implemented a number of measures aimed at import substitution. Its applied tariff rates have been significantly increased and range from 2 percent to 50 percent, with a simple average of 10.9 percent (up from 7.4 percent in 2005). Members urged Angola to rectify the instances where applied tariff rates and other duties and charges exceed the corresponding bound levels. Several Members invited Angola to clarify the status of its recent Decree on import quotas, which is yet to be implemented. In lieu of import substitution, Members suggested that Angola reduce production costs through lower import tariffs on inputs and further trade facilitation measures with a view to enhancing competitiveness and promoting local production.
Members welcomed Angola’s new mining code and sought information about opportunities for foreign operators. They sought clarifications about Angola’s agricultural policy aiming at food security and about the sustainability of its fisheries sector. Some participants inquired about Angola’s plans to broaden its General Agreements on Trade in Services (GATS) commitments beyond its three existing sectors. Members were also interested in the Government’s priorities regarding, inter alia, competition policy, Sanitary and Phytosanitary (SPS) and Technical Barriers to Trade (TBT) regimes, and state-trading and state-owned enterprises. Noting that Angola’s intellectual property regime had not been substantially updated since 1992, Members urged the country to effectively implement the TRIPS Agreement and to broaden its participation in international conventions on intellectual property.
Laws/Regulations on Foreign Direct Investment
Obtaining the proper permits and business licenses to operate in Angola can be time-consuming. The World Bank Doing Business 2016 report identified Angola’s permit and licensing process as one of the most time-consuming of all countries surveyed (ranked 181 out of 189 in the survey). Launching a business typically requires 66 days, compared with a regional average of 27 days. While, the government established the “Guichê Único,” or one-stop shop, the process remains slow. In 2012, the government opened approximately twenty “Balcões Únicos do Empreendedor” to serve a similar role as the Guichê for micro, small and medium-size enterprises. In addition to the Guiche Unico process, new business owners must also complete processes at the Ministry of Commerce, the tax office, and a provincial court in the location where the business is headquartered.
The Angolan Investment and Export Promotion Agency (Agencia Promocao de Investimentos e Exportaces de Angola - APIEX) , housed within the Ministry of Commerce, is Angola’s investment and export promotion center, tasked with promoting Angola’s export potential, legal framework, environment, and investment opportunities in the country and abroad. APIEX, established on September 30, 2015, by Presidential Decree No. 184/15after the promulgation of Angola’s 2015 investment law, has gotten to a slow start as exemplified by its non-operational website (www.apiexangola.co.ao).
The new private investment law no. 14/15, passed August 11, 2015, identifies six key industries which the government has defined as a priority: 1) Electricity and Water, 2) Tourism and Hospitality, 3) Transportation and Logistics, 4) Telecommunications and Information Technology, 5) Construction and 6) Media. Investments in the key sectors of mining, finance, and oil are governed under different laws. For more details on the oil and gas sector please refer to the Country Commercial Guide’ (CCG) Best Prospects.
In response to Angola’s economic situation, a Presidential Decree No 40/16 was issued February 24, 2016 outlining strategies for economic recovery. This Decree called for measures to: 1) encourage private investment in productive areas for domestic consumption and for exports including support by government credit facilities; 2) prioritization of productive-sector related infrastructure development (energy/water, transportation/construction, human resource development and business climate improvement); and 3) expansion of government revenue sources, such as taxes.
Limits on Foreign Control and Right to Private Ownership and Establishment
Angola limits foreign equity participation more than most countries in Sub-Saharan Africa. Foreign ownership is limited to 49 percent in the oil and gas sectors, 50 percent in insurance, and 10 percent in banking, although foreign companies may exceed these limits with Council of Ministers approval. Private capital participation in fixed-line telecommunications infrastructure is prohibited. In the publishing, TV broadcasting, and newspaper media sectors, foreign ownership is limited to 30 percent. (http://iab.worldbank.org/data/exploreeconomies/angola) The new private investment law requires at least a 35 percent domestic stake in FDI across the six strategic sectors. The private investment law expressly prohibits private investment in the areas of: defense, internal public order, and state security; banking activities relating to the operations of the Central Bank and the Ministry of Finance; administration of ports and airports; and other areas where the law gives the state exclusive responsibility.
In December 2014, the GRA implemented the Electricity Sector Transformation Program (PTSE), which unbundled Angola’s two electricity companies to create three separate public companies. While the new companies are still public, the restructuring aims to pave the way for additional private sector investment, including off-grid and renewable energy projects, and eventual privatization. Electricity sector investment is open to both foreign and domestic firms (15 Luanda 698; 2015 ICS). Power Africa can facilitate investment in Angola’s energy and water sector. It is estimated that Angola has 18,000 MW of hydropower potential and the country’s National Development Strategy for 2013-2017 suggests private investment for small-scale wind and solar off-grid solutions.
In May 2015, the Angolan subsidiary of Portuguese conglomerate Nabeiro purchased Liangol, the Angolan state coffee company, for 1 billion USD. Angola, once the 4th largest coffee producer in the world, is seeking to develop the coffee industry after it was devastated by the civil war.
Screening of FDI
Until the passage of the new private investment law in August 2015, responsibility for screening new FDI fell to the National Agency for Private Investment (ANIP). ANIP was folded into a new investment and export promotion APIEX by Presidential Decree 184/15 in September 30, 2015, APIEX has experienced a lot of growing pains and the transition of expertise from ANIP has been slow.
With the new law, however, FDI review and approval is now the responsibility of the government ministry overseeing the sector where the investment will occur. Final approval for investments under $10 million is given by the Economic Commission of the Council of Ministers. For investments over $10 million, the Office of the President is provides final approval. The process can be time consuming and difficult to navigate, thus it is strongly recommended to retain legal counsel to assist in the investment application process.
The following documents are needed for investments under $10 million:
There are several objectives that the GRA seeks to accomplish through its FDI screening process: 1) create jobs for Angolans or transfer know-how to Angolan companies, 2) protect sensitive industries such as defense and finance, 3) prevent capital flight or other behavior which could threaten the stability of the Angolan economy, and 4) economic diversification.
Contact Information: Mário Líronel, Departamento de Promoção e Captação do Investimento; Agência para Promoção de Investimentos e Exportações (APIEX) de Angola. Rua Kwamme Nkrumah Nr.8, Maianga, Luanda, Angola Tel: (+244) 995 28 95 92| 222 33 12 52 Fax: (+244) 222 39 33 81 email: firstname.lastname@example.org; www.apiexangola.co.ao (under construction as of May 2016).
The Pricing and Competition Bureau under the Ministry of Finance was created in 2011 (Presidential Decree 162/11) to ensure the coordination and consistency of revenue and price.
Angola does not have a competition law, but it is possible to occasionally find references in statute to the prohibition of certain restrictive agreements and practices. For example, the law regulating the press expressly forbids situations of monopoly or oligopoly that may prejudice the independence of the media, pluralism, and fair competition. However, given the creation of the Pricing and Competition Bureau, developments in this area are expected in the near future. Single-firm conduct is not specifically regulated in Angola.