Wednesday, Oct 26, 2016
Industry & Trade | Africa | Angola

UK is Angola’s second biggest investor

UK second only to China for foreign business activity

8 months ago

Beyond oil and gas, UKTI has identified various sectors as the most promising for British companies: energy, financial services, education and training, construction and maintenance, agriculture, food and drink, health, social care and transport

Investing $3 billion in 2014, the UK is Angola’s second biggest investor after China and was one of the first countries to recognise the African nation’s independence. Now, programmes such as the high-level prosperity partnership and agencies like the UKTI are pushing for even greater bilateral economic and social co-operation.

Foreign partnerships have formed an integral part of the rapid development of Angola, which is now sub-Saharan Africa’s third-largest economy. The United Kingdom, Angola’s second-largest investor, invests more than $3 billion annually. Furthermore, as a result of the High Level Prosperity Partnership (HLPP) between the UK and Angola, relations are at an all-time high.

While having the appropriate local business partners is an important aspect in any market entry, it is especially important in Angola, which presents bureaucratic registration and licensing hurdles to overcome, as well as several “Angolanisation” factors that mean a minimum number of Angolans must be involved in any venture.

Enabling UK companies to navigate and succeed in the Angolan business environment are agencies such as the Foreign Office’s commercial arm, UK Trade & Investment (UKTI).

The relationship between the UK and Angola has always been strong, the UK being one of the first countries to recognise Angola’s independence in 1974 and having supported its development ever since. Historically, bilateral relations between the UK and Angola have had oil and gas at their core. Much has been due to BP’s involvement, which has invested more than $25 billion in its Angolan assets and plans to invest at least $20 billion in exploration and development over the next 10 years. However, there are many other sectors and opportunities opening up where the UK can and should play a key part. In 2012, the top UK exports to Angola were: general industrial machinery and equipment, iron and steel, specialised industrial machinery, professional scientific and control instruments, and manufactured metal products, which totalled around £438 million. UKTI has identified various sectors as currently the most promising for British companies: energy, financial services, education and training, construction and maintenance, agriculture, food and drink, health, social care and transport.

Nestled between the South African Development Community (SADC) and the Economic Community of Central African States (ECCAS), Angola has ambitious road-link plans across the country to capitalise on its strategic location and is aiming to increase its volumes of exported goods in order to become more self-sufficient. As such, enormous investments have been made in roads and railways. Angola has 193 airports and millions of dollars have been invested in improvements at the nation’s ports.
Meanwhile, in the utilities sector, as part of its 2013-2017 plan for energy and water the government aims to reach 7,879MW total installed power generation capacity, and increase access to clean water to 100 per cent for its urban population and 80 per cent for those in rural areas. This represents quite a feat for a country that had 70 per cent of its infrastructure destroyed during the civil war.

Besides oil and gas, where each day more oil is found and on-shore capacity is set to increase, English language skills are in demand. Many Angolans do not speak English – a tool that would greatly help them become more efficient exporters and take full advantage of their relationships with other African nations. It is not only a question of language learning, but of building capacities for other industries as well. The sustainability of the nation’s economic diversification depends greatly on the development of its human resource skills.

“The transport sector is wide open to companies or entrepreneurs wishing to bring added value to the country”

Augusto da Silva Tomás, Minister of Transport

In addition, with renewed government interest in spurring agricultural output, British expertise in agriculture is also highly valued. According to Job Graça, Angola’s Minister of Planning and Territorial Development, the agricultural sector is expected to grow 12 per cent in 2015 as a result of irrigation projects and the consolidation of agribusiness ventures, which include cattle breeding, among others. He also expects the manufacturing and construction sectors to rise at rates of around 10 and 11 per cent respectively.

The telecom sector is extremely vibrant, with products and services that match or surpass those in more mature markets. Since Angola is such a large country with a mix of urban and rural populations, good mobile connectivity is a key communication element in the development of its infrastructure. In fact, Angola was one of the first countries in the world to get 4G mobile connectivity. Mobile technology has leapfrogged the country’s fixed-line networks and offers wireless services similar to those in developed and mature fixed-line network markets. For example, in Angola, the internet is accessed more through mobile than via fixed-line connections. According to Unitel’s British CEO, Tony Dolton, mobile networks in Angola are as good as any in Europe in terms of call quality and network data connectivity. In major cities throughout the country, data can be downloaded at speeds over 25Mb/s. Even so, fixed-line networks are still being developed. Unitel invested approximately $2 billion in a national/metropolitan network. In the capital city of Luanda, there are now approximately 310 miles of underground fibre connecting businesses and people.

Unitel, with its strong history of working with the community, has been taking its corporate social responsibility (CSR) component very seriously. It is studying the best ways to collaborate with education and health institutions, by connecting them and helping them get the resources they need, offering low prices and sometimes even free services. For example, it recently collaborated with a government initiative to support the emergency services. All on-call doctors and ambulance staff were given a phone and the technology necessary to connect these phones when they lose contact through their two-way radios (whose coverage is not as good as Unitel’s). This back-up communications support is of tremendous help.  

Unitel and Movicel are Angola’s main mobile phone providers, however there are several regional competitors studying this growth market, which is very appealing. In Mr Dolton’s opinion, there is room for one more national provider, capping the ideal market size at three players, the reason being that if more than three operators coexist, this will affect rural populations, which are far less profitable than the urban population base. If revenues fall due to a decreased urban client base share, then the money to reinvest in the technology necessary to serve rural populations will no longer be available. As a result, the industry at a national level would become unsustainable.

This is a point where government regulation is paramount so quality service can be maintained for all members of society and a level playing field kept for all operators.

British activity is also evident in Angolan healthcare and financial services sectors, both of which are expected to expand. According to the Director of UKTI Angola, John Woodruffe, “There is a feeling here that things are moving forward. Construction is everywhere, buildings are going up and business is growing. We are beginning to see the development of a middle class that is the cornerstone for Angola’s future socio-economic development.”

“The UK has cutting-edge technology, good universities and solid institutions, so join us and explore our potential”

Dino Matross, Secretary General of the MPLA

The HLPP is a UK cross-government initiative, laun-ched at the end of 2013. Led by the Foreign Office, it has the support of its UKTI commercial arm and the Department for International Development (DFID). The aim to develop new markets in Africa has already proved successful in Angola. By strengthening economic cooperation, capitalising on advantages, and sharing priorities in specific sectors. The focus has been on promoting high-quality investment and expertise in oil and gas, agriculture, financial services, and education. Another key agent is the Centre for Business Ethics, which supports Angola’s efforts in increasing transparency.

The UK’s Ambassador to Angola John Dennis says, “At this important moment in our already excellent relationship, I look forward to helping strengthen it further. There is a growing scope for our two countries to work together, including in investment and trade.” With regard to the UK’s contribution to Angola’s diversification plan, Mr Dennis highlights Glasgow University’s partnership with Sonangol in developing human capital for the oil and gas industry.

With an economy that depends on oil revenues for 90 per cent of its GDP, Angola is keen to diversify. The UK Prime Minister’s Trade Envoy programme in the region is a partner in this diversification effort and also part of the plan to help double total UK exports to £1 trillion by 2020. Many senior officials from the Angolan government have visited the UK recently to strengthen bilateral links. Likewise, David Heath, the former UK Trade Envoy for Angola, was in Luanda on an official visit in February 2015, which was his third trip there in nine months.

The UK is also supporting Angola with its financial system and know-how. The London Stock Exchange is impressed with the team leading the Angola Stock Exchange project and relationships have been strengthened with Banco Nacional de Angola and the Sovereign Wealth Fund of Angola. Mr Dennis advises investors to have a long-term vision and trust the opportunities available. In this bustling and dynamic country, the UK should and can be part of its success story.

Many UK-based companies are already in full swing in Angola’s business scene. Diageo, Astra Zeneca and GSK have a number of products on the market. Other high-profile British companies operating in Angola include: BP, British Airways, De la Rue, PWC, Lonhro, Aggreko, Wood Group, KPMG, the University of Newcastle and Amec. Standard Chartered Bank and HSBC have also established offices in Angola.

“The transport sector is wide open to companies or entrepreneurs wishing to bring added value to the country,” states Transport Minister Augusto da Silva Tomás. “UK investments in Angola focus mainly on the sectors of finance and oil. But other British interests could come with their knowledge and experience to take advantage of our beautiful land and our economic and geographic potential to expand their investments at a regional level.”

During Mr Heath’s last trip to Angola, representing UK support for the African nation’s economic diversification, he visited places such as Malange in rural Angola, focusing on the agricultural sector. Enthusiastic about Africa, Mr Heath commented, “I believe passionately that we need to take every opportunity we can to increase our overseas trade.”

The trade envoy argues that fast-growing economies such as Angola’s cannot be ignored. As an advocate for business in Angola, he encourages more British companies to seize these opportunities for mutually beneficial partnerships. Although obstacles exist, he pointed out that the HLPP “demonstrates the desire of both countries to strengthen our economic cooperation” and provides an excellent platform for UK-Angolan joint prosperity because it offers a two-way street focused on a sustainable long run.

Following a meeting with representatives from the Organisation for the Management of Arable Land (Gesterra) and a tour of the Pedras Negras commune, he also added: “UK investors are going to be excited by what I have seen here. We will work with them, and the Ministry (of Agriculture) here, to develop specific projects.”

The challenges in the Angolan market include those pertaining to Africa in general, along with others particular to the republic. Financial instability exists, however the government has been adopting a number of measures in order to curb it. Corruption is a reality, and communications are difficult due to infrastructure and human filters.

Nevertheless, things are improving. Angola is a young society. It is open to new ideas and benefits from an entrepreneurial and energetic approach to doing business. It is also a large country – more than five times the size of the United Kingdom – and change is progressive.

Because of the frank dialogue and cooperation between the UK and Angola, the relationship is flourishing. By not turning a blind eye to the challenges and having current and future opportunities in mind, it is a relationship that will continue to mature and bear even more fruit in the near future.

“Countries in the world should collaborate more,” says Dino Matross, Secretary General of the MPLA. “The UK has cutting-edge technology, good universities and solid institutions, so why not join us and explore our potential together?”

Africa has always been a land of opportunity, and in today’s global economy it belongs to those who are willing to see and go further.




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