Heavily dependent on oil revenues and investment, Angola is opening up its economy like never before as it pursues opportunities in sectors such as agriculture, fisheries, industry and financial services with the help of established foreign partners, including Japan.
The Angolan economy is opening up to investors like never before, with the recent acceleration of its drive to diversify and attract the interest of foreign companies active in a wide range of industries and sectors.
Long dependent on oil revenues to fund social and economic development projects and programmes, the country of 33 million people is embracing privatization through the sale of stakes in state-owned companies and exploring investment opportunities with the support of partners solids from many of the most advanced countries in the world, such as Japan.
This strategy is working relatively well and got a boost a few months ago when a pair of US companies signed a contract with Angolan authorities for a $2 billion solar project in four southern provinces.
The announcement was made by US President Joe Biden, who said: “The project will help Angola meet its climate commitments, including generating 70 percent (against around 60 percent today) of carbon-free energy by 2025. ”.
The announcement was in line with promises by Angolan President João Manuel Gonçalves Lourenço in the run-up to the August elections, in which he pledged to oversee a massive infrastructure spending spree that will address energy issues through investment in new power capacities, particularly in the field of renewable energies, given its favorable climate and natural resources, which means a particular focus on solar and hydroelectric projects. Improvements will also be made to transport and logistics networks, such as highways, ports and aviation infrastructure.
Certain strategic elements of Angola combine to make the country an attractive market for international investors, with political stability, high mineral and hydrocarbon wealth and access to large and populous markets across southern Africa among its main assets.
Oil price hike boosts foreign earnings
Renowned ministers and analysts are confident that the rise in oil prices on the international market will not affect the diversification paradigm of the Angolan economy.
The oil sector is currently responsible for less than a third of the Angolan Gross Domestic Product, against 43 percent in 2011, when the economic diversification strategy was launched.
This progress is welcome and will serve as a solid foundation for subsequent phases of focus on non-oil activities, said Angolan Finance Minister Vera Daves. Questioned about which sectors will help Angola to reach this goal in the medium and long term, the minister is unequivocal: agriculture, fisheries and industry.
“Agriculture is the champion and we are growing in the fishing sector as well, while significant growth in the transport segment has also been registered in recent months”, said the minister. “All three sectors should be the engines of growth in the non-oil economy , but agriculture surpasses them in terms of investment, effort, commitment and motivation”.
“In the oil sector, investments will continue to arrive to keep production stable. Over time, we should see interesting things happen in the gas field as well. We are seeing the private sector making moves in that direction.
In renewable energies, the Solar farms are also attracting a lot of interest, but they are public investments, while financing for gas projects is centered on private investments”.
Vera Daves drew parallels between the oil sector and the banking and financial services sector, noting that both enjoy decent levels of competition and operate and are regulated to strict international standards.
This impressive standard of compliance is another reassurance for investors that their funds will be processed efficiently, securely and transparently.
Angola now has the third largest banking sector in sub-Saharan Africa, behind South Africa and Nigeria. The sector became more robust, better capitalized and helped accelerate the process of digital transformation and currency stabilization.
“Whether in Angola or abroad, when talking about the oil and financial sectors, they are relatively similar”, explained Vera Daves. “In terms of law, compliance, requirements, quality of service, we can improve, but even so, we are to improve the quality of our service. The National Bank of Angola has been working hard to align with international best practices and demand that the financial system also achieve this alignment,” she said.
Foreign Direct Investment Flow
Over the past two decades, the performance and growth of the country’s financial sector has improved through government measures that have encouraged additional lending to manufacturers and entrepreneurs. Angola’s profile also benefited from the holding, in 2019, of the Tokyo International Conference on African Development.
“Our experience with Japan is one of the best”, observed Mário Augusto Caetano João, Minister of Economy and Planning of Angola. “We have had important investments and financing from Japan over the years, mainly in the restructuring and rehabilitation of our textile factories. We have resorted to Japanese machines, mainly for the automobile industry”.
With a focus on providing solutions and services to large corporations and high net worth individuals, BCS Bank is well positioned to explore Angola’s potential and support local and foreign investors in their pursuits.
Since launching in 2015, BCS has boldly chosen to be different, focusing primarily on niche areas such as transactional services, including trade finance, project finance, commercial and corporate banking.
“Our bank plays a vital role in the economy, as it actively contributes to the diversification of the economy, financing local production projects”, said CEO Rafael Kapose. ”
Angola’s trade balance continues to be forced by imports, and we serve as a important partner for importers. The diversification of the economy led to an increase in exports of various products. Many companies are now adapting to the new reality and trying to benefit from the expansion of the export sector”.
With a very strong presence in Angola’s towns and cities, Banco BIC is the country’s largest private bank in terms of number of branches, with 250. The bank is also a leading figure in terms of the amount of credit provided and deposits held. Furthermore, Banco BIC is one of the few banks involved in an initiative dedicated to supporting the manufacturing industry, export diversification and import substitution.
“Angola must welcome the entry of Japanese companies”, said CEO Hugo Teles, who has been working with the business community for almost 20 years. “They have an efficient and productive way of working, and we need that. Japan has an industry that transforms everything; we have the raw material. There are many things to be done and whoever comes first will take the lead. There are many opportunities and Banco BIC is here to support them.”
Black gold reserves offer rewards to companies across the supply chain
Recently crowned Africa’s biggest oil producer, Angola is using record returns to finance new infrastructure and services, while looking to the future with renewable energy.
Somoil is Angola’s largest oil company, with a wide range of upstream and downstream operations that make it a major employer. The Angolan oil industry has enjoyed a strong upward trajectory for several decades and the country is now one of the main oil producers on the continent.
While economic diversification is a promising medium to long-term objective, the rich potential of the hydrocarbon sector has attracted a number of offshore oil giants such as TotalEnergies, BP, Eni and ExxonMobil.
In the second quarter of last year, Angola became the largest oil producer in Africa. OPEC data confirmed that Angolan production has overtaken West African rival Nigeria in first place. OPEC’s Monthly Oil Market Report revealed that Angola generated 1.16 million barrels per day in May, placing it ahead of Nigeria, which suffered production declines.
Such an impressive scale means that opportunities in the upstream and downstream segments abound, with major foreign companies using a range of Angolan businesses for crucial operations and support services, both tangible and intangible.
Created almost half a century ago, Sonangol (Sociedade Nacional de Combustíveis de Angola) is the exclusive licensee for oil and gas exploration. The company’s activities cover exploration, research and development, commercialization, production, storage, transport and refining of hydrocarbons and their derivatives, and can be carried out independently or in association with foreign companies.
Somoil leading figure of the industry
In the private sector, the largest local oil company is Somoil, an extremely successful company that is a textbook example of how private enterprise is supporting social and economic development through substantial investment, employment, training and foreign exchange creation. significant foreign.
Led by dynamic CEO and President Edson dos Santos, the company has thrived in recent years, embracing a culture of innovation and commitment to excellence across its broad spectrum of operations.
These include core activities such as exploration and production of oil in shallow water and onshore blocks, development and commercialization of crude oil and its derivatives, along with a network of gas filling stations and a new focus on renewable energy development, in instead of just traditional fossil fuels.
Earlier this year, the company teamed up with British oil and gas production and development company Sirius Petroleum to acquire stakes in world-class energy assets.
The agreement for blocks 18, 27 and 31 of the Angolan offshore was closed with the company Sonangol. Prior to this agreement, the company reached an agreement with France’s TotalEnergies and Japanese oil company Inpex Corp., involving their respective interests in offshore block 14.
“This opportunity (with Sirius) is in line with Somoil’s growth strategy; entering ultra-deep waters not only reinforces our portfolio, but represents a huge step towards becoming one of the main players in the energy industry in Angola”, he said. Edison dos Santos.
“Angola has been blessed with very good geology and the success of our exploration is recognized, but also the flexibility that the Government of Angola has been showing in relation to the industry has made the difference.
We have a lot of exploration potential in many new activities . In 2022, we saw an increase in the number of drilling rigs; Angola also restarted moving exploration wells, which is a very strong sign that the industry is growing again.
The positive trend will continue in 2023, which means that the energy sector will continue to be a major contributor to the Angolan economy”.
Having worked closely with Japanese people and companies throughout his career, Minister of Economy and Planning Mario João is generous in his admiration and eager for Japanese investment to help shape and enhance the country’s future. “Our experience with Japan is one of the best,” he said.
“As Japan is the third most robust economy in the world, we want to continue to deepen economic relations with Japan and bring Japanese companies here for the many business opportunities such as renewable energy and disruptive technologies in areas such as agribusiness, automobiles and phytopharmaceuticals (compounds derived from plants with pharmacological activities)”, added the minister.
Focus on the future through renewable energies
In March last year, oil giants Eni and BP signed an agreement to create a 50-50 joint venture that will create Angola’s largest hydrocarbon producer. Although the market is dominated by many international oil companies, Somoil has done an admirable job of maintaining a lucrative market share.
The company has a strong track record of success and, amid rising oil prices, nearly doubled its production in two years, a move that helped the award-winning company declare its highest-ever revenue in 2021.
While extremely proud of its history and roots, Somoil is now looking to move away from oil-only operations and into energy activities. At the same time, noted the senior executive, the company wants to increase integration by increasing its downstream product portfolio. “Our renewable energy business is also growing, particularly solar energy”, said Edson dos Santos. “We also signed a partnership with a large foreign company to help us develop the skill set we need in the solar area, and with solar panels in Angola”.
Strong and consistent foreign direct investment flows have been an important factor in Angola achieving its development ambitions in the oil and gas industry and other sectors.
While many millions of dollars have already arrived, significant potential is still waiting to be unlocked by international investors, many of whom will look to local partners like Somoil to optimize project returns.
“There is a lot of stability in Angola, especially in the oil industry,” he said. “The government really listens to private investors and, again, the oil industry has some examples of that, like the marginal fields.
There is a decree on marginal fields, which came out in 2018, and unlocked significant resources.
“We also had new decrees around natural gas; now we can explore and reserve. A big step for a resource that was basically being wasted, but today is bringing value to the country.
In fact, gas has brought more revenue to Angola, in 2021, than diamonds, which has been a tremendously positive development”, said Edson dos Santos.
“Angola is a beautiful country, with an excellent climate, which is blessed in terms of nature – deserts, forests, coastline – so it is a perfect match for any investor. We are a friendly and truly young population.
Angolans are young and the evolution in terms of quality of human resources and skills has changed significantly in the last 20 years”.
“I’m probably the first generation in my family to graduate from college, but all my young relatives go to college; it’s not big news anymore, it’s expected. Human resources are now available in terms of quantity and quality. Most Angolans are bilingual, speak English or French, as well as Portuguese”.
The Luanda-born entrepreneur is keen for more international companies to share in the success of the country’s economic growth through FDI or alliances and partnerships with local actors, not only in the hydrocarbon industry, but also in other aspects of the economy. “We need more private energy companies,” he said.
“I urge investors from Japan and other countries to consider Angola as a place to invest. The opportunities are tremendous, not just in the energy sector, but in agriculture, fisheries, mining and tourism.”
