Chinese firms can tap into Angola
Crude oil exports have always been a pillar of Angola’s economy, and declines in oil prices have resulted in a significant reduction in Angola’s fiscal revenue. International development agencies have helped the Angolan government draft national economic development plans to promote diversification.
At the same time, excessive government debt has made foreign capital the most important promoter of economic diversification. As the Angolan government has limited ability in macroeconomic governance, attracting foreign investment is inevitable.
In the current economic situation, Angola relies heavily on crude oil exports, but many areas of the economy have taken off, making entry into the market cost effective yet highly rewarding. The oil industry in Angola has been controlled by Western companies in all aspects from exploration and production to refining. The current Angolan government has realized the necessity and urgency of developing deep processing of crude oil independently. Investment in oil refining in Angola will inevitably receive the support of the Angolan government, which will facilitate administrative approvals.
The main minerals in Angola include diamonds, iron, phosphate, copper, manganese, lead, tin, zinc, tungsten, gold, quartz, marble and granite. CITIC Construction, part of Chinese Stateowned conglomerate CITIC Group, has invested in an aluminum and steel plant in Angola, which is expected to produce 10,000 tons of aluminum extrudates per year.
Angola also has fertile land and many rivers. The natural conditions for the development of agriculture are gifted. But decades of civil war have caused severe damage to the Angolan agricultural production system, and nearly half of the food supply depends on imports or aid.
In view of this, some private enterprises in China have begun to explore large-scale planting of sugarcane to produce brown sugar and using local cassava flour for making snacks.
Furthermore, Angola has moved to vigorously promote economic diversification, gradually reduced the dependence of the national economy on the oil industry, and introduced measures to support the development of small and medium-sized enterprises.
However, coupled with low market access, Angola also has plenty of investment risks that cannot be ignored.
The local financing costs are too high. Additionally, Angola imposes strict foreign exchange controls, and, in addition to the 35 percent business tax, there are quota restrictions.
Another concern is power shortages. Numerous cities and regions, including the capital, cannot ensure normal daily electricity supply.
It’s also difficult to implement policies. Although international development agencies such as the World Bank and the UN Development Program have actively helped Angola to formulate development strategies, there is little follow-through.
As soon as policy documents are issued, they begin to gather dust, and implementation and accountability are not even discussed. According to the World Bank’s Doing Business 2017 Report, Angola ranked 182 among 190 economies in the world.
In recent years, the security situation in Luanda, the capital, has deteriorated and crimes occur frequently. There have also been numerous cases of armed robbery against Chinese citizens, causing heavy losses. In addition, Angola is also an area of infectious diseases such as dengue fever, yellow fever and cholera. Some diseases are transmitted through mosquito bites, and some are caused by unsafe drinking water and poor personal hygiene.
Based on this, I am inclined to propose the following suggestions for companies intending to invest in Angola:
First, public-private partnerships can be adopted to seek cooperation with the Angolan government, international and local financial institutions for project contracting, joint financing, construction engineering, operation and maintenance expansion.
Second, professional training can be increased, as there is a great shortage of skilled workers.
Third, efforts should be made to build close relationships with the local people. Communication and contact with Angolan trade unions should be strengthened, and local standards of employment should be adhered to.
We can also enhance contacts with non-governmental organizations to promote timely industry development and promote companies’ images. The author is an associate researcher with the Chinese Academy of International Trade and Economic Cooperation. bizopinion@ globaltimes.com.cn
As the Angolan government has limited ability in macroeconomic governance, attracting foreign investment is inevitable.