Largest Special Economic Zone in Angola opens up to private investors

29 August 2016

The largest Special Economic Zone in Angola, the Luanda-Bengo SEZ (ZEELB), which was built with the support of China, will open most of its industrial units to private investment in an effort to rationalise resources and stimulate economic diversification.

The latest investment project in the ZEELB belongs to CITIC Construction (Angola), which will invest US$40 million in an aluminium smelter to reduce imports of this material, with a positive impact on Angola’s balance of trade.

The Economist Intelligence Unit (EIU) said in its latest report on Angola’s the decision was “a positive step” in a context of slow economic growth due to the downturn in the oil sector, as the “involvement of private companies will help boost the non-oil sectors for a government which remains highly state focused.”

The sale of the industrial units, 53 of a total of 73 in the ZEELB, is an effort by Angolan state oil company Sonangol, which since 2011 has managed this 8,300 hectare facility, to reduce costs and increase efficiency.

“The sale will help the authorities to raise revenue in the short term and reduce maintenance costs, although it involves loss of long-term income,” said the EIU.

“The measure is in line with the government’s wider policy response to the oil price crisis, which is to raise skills and private sector capital to help expand non-oil production and create more jobs,” it added.

Funded in part with Chinese credit lines, the ZEELB was intended to support the diversification of the economy, offering preferential terms to companies that set themselves up there, such as electricity, road access, customs clearance and administrative support and tax incentives.

The project has attracted several companies and led to the creation of nearly 5,000 jobs, but, according to the EIU, various units are only half full or completely empty, in a context of adverse economic and financial difficulties facing industrial companies.

The SEZ includes plants linked to engineering, metal containers, taps, plastic bags, electroplating and metal pavilions, and for manufacture of furniture and mattresses, among others.

Published in June, the presidential order stipulated the sale of industrial units in the ZEELB by the end of August to private companies with capital, skills and enough technology to leverage those industries.

In 2006, the China-Africa Forum gave “significant priority” to the objective of creating up to 50 SEZ abroad, which are now being implemented, with investment of US$700 million by Chinese companies in 16 SEZ, according to figures from the Chinese Trade Ministry.

In the recent study entitled “The role of special economic zones in the development of African countries and Chinese foreign direct investment,” researchers Fernanda Ilhéu and Hao Zhang of the Lisbon Institute of Economics and Management noted that over 35 years, the special economic zones have had “a decisive role in the development of places like Shenzhen, Zhuhai, Xiamen, Shantou, Hainan and Shanghai and that African countries can and should take advantage of this experience. (macauhub/AO/CN)