Investing in Angola: Between extremes

Angola is a land of extremes. While many Angolans live in deepest poverty, the Angolan economy is the third largest in Sub-Saharan Africa, with annual GDP growth regularly topping 10% over recent years. In a country which spent nearly 30 years in a state of civil war, peace has now firmly taken hold. While Angola ranks 172nd out of 183 for ease of doing business (IFC “Doing Business” Report 2012), record foreign investment is flowing into the country.

At the heart of the story is Angola’s wealth of natural resources. Angola is the second largest oil producer in Sub-Saharan Africa, and holds substantial and varied mineral reserves, including diamonds, iron ore, phosphates and gold. Its agricultural and fishing potential are also considerable. Public and private investment are at record levels and show no sign of abating. Considerable investment is being directed towards infrastructure development, which, with housing, is an urgent priority following the devastation of the civil war.

Foreign construction companies wishing to do business in Angola must meet a series of legal and economic requirements. Angola’s position in the “ease of doing business” rankings warns us that clearing these hurdles is not straightforward and can be time-consuming and bureaucratic. However the significant business opportunities may well justify the time and effort involved.

Private investment framework

Under the new 2011 Private Investment Law, foreign investors wishing to establish a company or branch office in Angola must have their venture approved as a “Private Investment Project” by the Angolan Private Investment Agency (Agencia Nacional de Investimento Privado (ANIP)). To qualify under the Private Investment Law, ventures must comply with the following legal and financial requirements:

• Foreign investment projects require a minimum investment of US$1 million (in goods and/or cash).
• The company or branch registered in Angola must agree an investment contract with ANIP. This confers a right to repatriate profits (subject to the control of the Angolan central bank - the BNA).
• However an investor cannot simply repatriate profits as it wishes. Repatriation is instead governed by conditions negotiated with ANIP on a case-by-case basis and incorporated into the investment contract.
• The extent of repatriation permitted (and its timing) depends on a number of factors, including the amount and duration of the investment, the profits made and the impact of repatriation on national reserves. For example, a foreign entity investing US$1 million in a project in the Luanda area would currently only be allowed to repatriate profits two years after full implementation of the project.

Once the investment is approved, ANIP issues a Private Investment Registry Certificate (Certificado de Registo de Investimento Privado (CRIP)), which is required before the investor can take further steps such as importing capital, establishing a local company/branch office or pursuing the necessary permits and licences.

Permits and licences

Construction work in Angola is governed by the Ministry of Urbanism and Construction. If a company wishes to become directly involved in construction works, a General Construction Permit from the ministry is a vital pre-requisite. There are a number of categories, subcategories and classes of the General Construction Permit (as per Decree No. 09/1991). The particular (sub)category determines the type of construction activities the holder may engage in, and the particular class relates to the value of the construction works; the higher the class of permit, the greater the value of the construction works permitted.

The performance of private construction work in Angola also requires a licence (an authorisation for construction, known as an “Alvará”) issued by the governor of the province where the works are to be undertaken. An application must be made to the relevant provincial government in accordance with Decree No. 80/2006.

And the reward?

Although the regulatory requirements governing investing and doing business in Angola are numerous and complex, and compliance in most cases is likely to be laborious, they do not appear to be deterring UK investment in Angola, which currently exceeds US$3 billion per annum, second only to China. If and when the bilateral investment treaty between the UK and Angola (already agreed and signed) is brought into force, this is likely to provide further security to UK investors. In any event, with careful consideration and advice, and a measure of patience and persistence, meeting the regulatory requirements is certainly achievable. The reward is gaining access to one of the fastest-growing markets in Africa.

Kwadwo Sarkodie is a partner in the Construction & Engineering Group at Mayer Brown International LLP
Gonçalo Falcão is a Mayer Brown LLP partner.