New law strengthens capacity to attract private investment in Angola

21 November 2016

With the new private investment law Angola has improved conditions to stimulate investment, which are necessary to diversify the economy, but should deepen reform and make better use of infrastructure such as the Lobito Corridor, said researcher Áurea Mouzinho.

In the recent study “Understanding the regulatory landscape of FDI in Angola” for the South African Institute of International Affairs (SAIIA), Mouzinho said reforms introduced by the new law “substantially simplified investment procedures related to the repatriation of capital and the system of tax breaks.”

“These improvements are of great importance, since they increase the impartiality of the private investment regime. However, it remains to be seen how the new regulations will work in practice and, specifically, whether these measures will lead to a significant reduction of bureaucracy and delays in the investment approval process,” she said.

According to Mouzinho, better regulation should come alongside “major institutional reform, particularly in terms of transparency, fiscal management and rule of law.”

The latest edition of the World Bank’s “Doing Business” report notes that Angola facilitated the minimum capital required to set up a company and reduced taxes, in addition to taxes on income and on profits, but overall kept the country in the lower end of the rankings (182nd out of 190 countries).

The new version of the private investment law, and other relevant reforms, considers a company “Angolan” if it has its headquarters are in Angola and 51% or more of its capital is held by Angolan citizens, in addition to establishing mandatory partnership requirements with Angolan citizens, public companies or private companies for investments in the sectors of energy and water, transport and logistics, construction, among others.

The Angolan partners must hold at least 35% of the capital and take effective part in the management of the company, as outlined in the shareholders’ agreement.

Responsibility for promoting private investment was assigned to the newly founded Angolan Agency for Investment and Export Promotion and, after the adoption of the new law, the government has taken steps to create special ministerial departments and units of the provincial government to support and monitor the investment process.

“Whether the special ministerial departments actually help reduce bureaucracy and delays in the investment process will depend in the long run, on the government’s ability to coordinate activities and monitor the performance of various bodies,” said Mouzinho.

According to the researcher, another factor working for the government to improve the attractiveness of the Angolan economy as a point of access to regional markets is the use of infrastructure such as the Lobito Transport Corridor, reopened in 2013 after reconstruction funded by China, “a route that is particularly important to achieve this, as it is already installed.”

“The Lobito Corridor is of great strategic importance for the Angolan economy. (…) The reconstruction of the railway, in itself, supported the emergence of intermediary shopping centers that attract small businesses and informal transport operators. There are also ample opportunities to use the local workforce. The Lobito Corridor crosses between 12 million and 20 million hectares of arable land with grazing potential and accessible water sources,” that remains unexplored.

According to the study, between 2013 and May 2015 coal, oil and natural gas projects were by far the biggest recipients of foreign investment – US$65.576 billion, or 87.27% of the total.

After that came real estate, with US$4.138 billion, or 5.51% of the total, financial services, with US$1.242 billion and construction materials, with US$1.197 billion. (macauhub)