Foreign direct investment (FDI) in Angola

FDI in Figures

According to UNCTAD’s World Investment Report 2021, Angola reported net FDI inflows of USD -1.9 billion in 2020, compared to USD -4.1 billion in 2019. This is because capital repatriation by multinational oil and gas companies has slowed down. The stock of FDI in the country decreased significantly to USD 16.8 billion in 2020 from USD 32.4 billion in 2019.According to UNCTAD’ Investment Trends Monitor, global FDI flows rebounded strongly in 2021, but FDI flows to African countries (excluding South Africa) rose only moderately. The petroleum sector remains the main destination for FDI flows. Most of FDI in Angola comes from China, Portugal, the USA, France and the Netherlands. Recently, trading company Toyota Tsusho and export credit agency, Japan Bank for International Cooperation (JBIC) signed a deal to invest USD 650 million in the Namibe Bay project, the first Japanese private sector’s investment in Angola.

Rich in hydrocarbons, minerals, fisheries and agricultural land, Angola also has significant hydroelectric potential. The government is trying to improve the business climate. A new private investment law was approved in June 2018, which reduces the minimum capital requirement, facilitates repatriating capital, and eliminates the requirement that local investors have a 35% stake. Competition law was also enacted in May 2018 (and an organization in charge of its implementation created in 2019) and a privatization law was adopted in 2019. In 2020, the government of Angola established a single contact mechanism for investors to obtain the necessary permits in a simplified manner. It also adopted a law allowing the creation of free trade zones with incentives and benefits. The National Agency for Investment Promotion and Export (APIEX) aims to stimulate economic growth, diversify the economy, and expand private sector participation in Angola's economy. The country lost four places in the World Bank's Doing Business 2020 annual business climate report, ranking 177th out of 190 countries. Angola also occupies 136th place out of 180 in the Corruption perception index of the organization Transparency International, in continuous progress over the past years. In addition to its vulnerability due to dependence on oil revenues, Angola suffers from high levels of bureaucracy and an underdeveloped financial system, as well as widespread corruption, poor infrastructure, ineffective ports, abundant but unskilled labour and high costs on the ground for businesses.

What to consider if you invest in Angola

Strong Points

The main assets of Angola are:

• Political and economic stability regained around a broad consensus and under the leadership of a solid political majority after 27 years of civil war,
• A large population makes the country the third-largest market in sub-Saharan Africa,
• Important natural resources (second-largest oil producer in sub-Saharan Africa, mining production, diamond production),
• Strong growth potential for non-oil sectors such as agriculture, construction and tourism,
• A young and booming labour force,
• Attractive for FDI in recent years.

Weak Points

Among the factors that are detrimental to foreign investment are:

• High vulnerability to oil price fluctuations: 98% of export earnings come from oil production,
• The suboptimal business environment with high market entry costs, heavy and relatively slow bureaucracy and overall low confidence in the current government by businesses,
  
• Inadequate infrastructure,
• The lack of qualifications of the workforce and a high unemployment rate (32.7% in 2020 - French Ministry for the Economy, Finance and Recovery) which sustains the high rate of poverty,
• The weakness of the judicial system, the persistence of corruption and the lack of transparency in general and in the public accounts in particular,
• High general government gross debt (120.3% of GDP in 2020 - IMF),
• An underdeveloped financial system.

Government Measures to Motivate or Restrict FDI

The Angolan government is strongly in favour of FDI, perceived as a necessity for the diversification of the economy. In fact, the importance of the New Private Investment Act of 2018 and the President's new policy to promote trust in compliance by fighting against corruption are evidence of this. Investors, foreigners or not, theoretically have the same right of access to incentives, even if the policy of "Angolanization" aims to promote the employment of nationals. Private investment (domestic and foreign) is regulated by ANIP (Agência Nacional Pelo Investimento Privado). To benefit from the tax incentives and other benefits provided by this law, foreign entities must invest an amount equal to or greater than US$1 million. Regarding capital repatriations, the law guarantees foreign investors the right to transfer dividends or other income from a direct investment out of the country. Ever since 2020, importing capital from foreign investors willing to invest in Angolan companies is immuned from licensing by the Angolan central bank. The Agency also sets priority sectors such as agriculture and fisheries, processing industries, rail, road, airport and port infrastructure, telecommunications and information technology, fisheries and its derivatives, energy and water, social housing, health and education, hotel industry and tourism. These sectors present considerable investment opportunities given their potential and the incentives put in place.

Bilateral investment conventions signed by Angola

Angola has signed a number of bilateral agreements. For more details, see the UNCTAD website.