Africa Outlook takes a closer look at Angola's business and investment potential.
If you've been on our website at any point in the last few months, you'd have noticed that Angola has been a fixture in our news section with numerous multi-billion dollar business deals – Chevron's LNG milestone probably the biggest story.
Angola is a land of extremes. Many Angolans live in deep poverty, but its economy is the third largest in Sub-Saharan Africa. And, while Angola ranks 172nd out of 183 for ease of doing business (IFC "Doing Business" Report 2012), foreign investment is flowing into the country.
Angola's economy expanded 7.4 percent in 2012 and the government forecasts growth of 7.1 percent this year. It ranks as one of the fastest growing economies in the world.
This really is a rag to riches story. Since almost 30 years of war ended in 2002, the country has enjoyed a period of rapid and sustained economic growth. Much of this growth is directly attributable to the development of the oil and gas sector and Angola is Africa's number two oil producer after Nigeria.
Wells continue to spill returns and results.
One firm gathering rich rewards in Angola is BP. In June it announced its PSVM project, the largest subsea oil and gas development, will reach peak production of 150,000 barrels of oil a day in December, earlier than previously expected - the company said in January that output wouldn't reach that level until 2014.
The project is currently producing about 100,000 barrels a day, up from 70,000 barrels earlier this year, according to Martyn Morris, BP's regional president.
"This is a milestone not just for Angola but also for the world," he told Bloomberg.
Angola is one of BP's most profitable production hubs and partners in the project include state oil and gas company Sonangol and the Angolan state oil company Statoil ASA.
"We are happy with how PSVM is doing," Morris added
BP also has a 13.6 percent stake in Angola LNG, a project led by U.S. supermajor Chevron.
It recently started producing and exporting liquefied natural gas (LNG), with its first cargo leaving for Brazil.
"Angola LNG is entering the market at an exciting time," said Artur Pereira, the spokesman for Angola LNG.
The first cargo was sold to Sonangol.
"The world LNG market is expected to remain tight over the coming years, with very limited new LNG capacity coming on-stream. We are delighted to be producing and shipping our first LNG cargo," Pereira said in a statement.
Angola LNG said it plans to produce 5.2 million tonnes of LNG a year from its Soyo plant.
"First gas at Angola LNG is an important milestone in support of our strategic plan to grow our production," said George Kirkland, vice chairman of Chevron, the world's third-largest energy company by market value. "This project will commercialize natural gas resources in western Africa to meet growing demand in the region and internationally."
The project has an expected life span of at least 30 years.
"Angola LNG's vision is to be a reliable and competitive supplier, a strong community partner, and a role model for the economic development of Angola." said António órfão, Chairman, Angola LNG Ltd. "The project provides a solution to minimise flaring and environmental pollution by gathering associated gas from Angola's offshore oil fields to provide clean and reliable energy to our customers and a return on investment for our shareholders."
Not without challenges
Doing business in Angola is not as simple as it may seem though, and this is largely down to bureaucracy.
The first setback is money, as you must have a minimum capital of $1 million.
Experts also claim that the country's state administration does not make life easy for companies, with procedures constantly multiplying.
Indeed, regulation can be a deterrent to foreign investors, such as the regulation requiring companies to pay taxes and facilitate other transactions through the country's banking. But the country's implementation of Basell III and the International Financial Reporting System (IFRS) will change this.
Also, the Angolan authorities have made significant efforts in recent years to bring up to date the country's legislation and there have been significant changes to its tax system designed to make the country an attractive business partner.
Another problem however is that Angola's capital, Luanda, is also one of the most expensive cities in the world. There are constant interruptions in the supply of water and electricity, meaning companies and industries have to use alternatives like water tanks and generators and there is also high absenteeism amongst local workers due to big families, contagious illnesses due to a lack of basic sanitation and insufficient skill levels.
What a gem!
Oil isn't the only story. It is about diamonds too, the country's second largest export commodity after oil. Other minerals such as gold, barite, iron, copper, cobalt, granite and marble are also abundant.
Angola has cut mine taxes and plans to spend billions of dollars to attract investment into mineral deposits.
Corporate taxes were reduced to 25 percent from 35 percent and market regulation responsibilities have been moved to a new, independent office.
Investment from the likes of diamond producer De Beers, which has found diamonds in a 3,000km² concession in the Lunda North province, has followed.
De Beers pulled out of Angola in 2001 after losing the right to sell more than $800 million of gems. It went through three arbitration rounds with Endiama, the state diamond company, before returning in 2005.
In a recent Bloomberg interview, Pedro Lago de Carvalho, De Beers' business manager in Angola, said Angola,(which had the fifth-largest gem output by value in 2011) lies behind only Russia and Canada in unexplored potential.
"We are confident we can find something that will allow us to recover all our investment. The contract is clear, there is no debate."
Angola has many other investment opportunities, from construction to agriculture. To learn more visit www.anip.co.ao.
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