Sunday - June 16,2019

Angola seeks American capital and expertise

Angola seeks American capital and expertise

President of the US-Angola Chamber of Commerce sat down with The Worldfolio to discuss the commercial ties between both nations and how recent changes in energy prices, Angola’s new foreign investment laws and strong competition from Chinese companies can affect the level of American investment in the country.

The US is the second largest commercial partner in Angola at the moment. In 2013 the bilateral trade totaled over $10.2 billion. Now, with the emergence of the shale gas industry in the US, the demand for Angolan gas is declining. Where do you see other commercial ties beyond oil and gas between Angola and the United States?

It is a very interesting point; it is something the Angolan government has brought to our attention in an even more focused manner than it has in the past few years. The Angolan government and business community are really seeking to diversify away from oil. It will always have in the US a good trading partner for its oil simply because all oil is not the same and certainly there will be a need for a certain amount or percentage of the type of oil that Angola provides to the US, even if the quantities are going down. But I think it also provides an opportunity for us to look at some of the other sectors where we can begin to increase and diversify both trade and investment with Angola; everything from machinery to agricultural products to many other things.

I think we will probably see a continued decline, just a little in the medium term, but I am sure it will stabilize. We are hoping and pushing for there to be an uptick in other sectors to achieve a balance. The oil sector probably accounts for 95 or 97 percent of what is traded between the two countries, especially from Angola, but I think it would be healthy to have bring other more items to the table – particularly Angolan exports.

The US Department of Commerce is opening an office in Angola. How do you think this will affect the country?

I think similarly they (the US Government) are looking to promote diversification, increased trade and investment. They have a temporary person there now who is setting up; I think the definitive officer will arrive in mid-January, if I am not mistaken. Their objectives, I think, are much in line with what the US is trying to do in Africa at large and of course in opening an office in Angola seeking ways in which US businesses can do increased business with Angola, and the continent. That was a topic during the Obama administration’s African Summit - looking at ways and means to enhance the American presence in Africa from a business perspective. Oil is one sector and it has a plethora of other things that come along with it; but it is still just one sector and there are so many other sectors/things that the US is good at and should thus have the opportunity to promote in Angola.

Speaking of the oil prices, have you seen a cut back in US companies or oil related companies doing business in Angola?

I think it is early to tell but I am starting to hear anecdotally of things. I think the first instance, which is probably not just Angola related, would be the “Baker-Halliburton” merger. I think it is a sign of how a company might create more efficiency and to gain greater economies of scale in operations, at least for them from an engineering perspective. I know there will be some other types of cut backs; I have heard from some of our other members, for example, that they may be reevaluating their investments and objectives. It is a little bit early, but I do project that we will see some changes in the next year or two.

We know the US dollar has strengthened by over 3 percent against the Kwanza. Have you seen the effects of this stronger dollar on the Angolan economy?

Not directly, not yet. In some sense it is because Angola, Luanda in particular, is simply a very expensive place to live and to work; so even 3 percent has had a marginal impact in my opinion. I don’t think it has made people change their vision or perspective about doing business in the country as it is still a very expensive place to work; we have to admit that this is true. But returns are significant as well. I have not seen the change in the dollar making much difference at this point.

In terms of the reform of the foreign investment law, obviously in 2011 we saw a lot of changes, amongst them an increase in minimum capital requirements from $100,000 to one million. Has this had a notable effect on US investment in Angola?

Yes, I think a lot of people when they learn about it kind of stop in their tracks and turn around to reflect. There have been a number of people who have investigated what this means; and clearly others who are still moving into investing in Angola, creating businesses and joint ventures. But I do think that the move to a million dollars, and just saying “it costs a million dollars” without explaining to people that you don’t have got to come with a suitcase of a million dollars, so to speak, did put a little bit of a damper on some who felt: “We can do something someplace else in a less expensive way”.

I do know that they (the Angolans) have been reviewing this policy. However, I think it did slow the investment process and not just from a US perspective, but for some others as well. So, yes, you want good investors, you want people who are serious, people who understand what it costs to do proper business in Angola and to be able to reap the benefits that come with taking that type of investment responsibility on. At the same time I think they have realized it is a bit of a stretch for some, particularly if you want to build the SME sector. Not everybody is going to come with that type of capital or portfolio that allows them to register a business at that level. I think they have recognized this and there has been discussion of scaling it back a bit, making it something may be seen as more achievable by businessmen who want to come into the country.

This foreign investment law was also intended to reduce bureaucracy. How do you think that has affected perhaps the ease of doing business in Angola? The ranking is not the best; I believe it is 179 out of 189 countries. Do you think this has affected maybe for the better or the worst in recent years?

I know that they are aware that doing business in Angola, setting up shop is not easy, that is to say that they are not very highly ranked on the list. And I know that they have intentions of undertaking a series of reforms to improve that, to make a viable, functional, one-stop shop “Guichet Unico”; in that will probably take more than a day to register, but it will certainly take less time than it is taking now. I also believe that the Economy Ministry is looking at how they may be able to put something in place to provide electronic platforms for people to be able to do registrations electronically, without having to physically be there and eliminating a lot of the paperwork. That would be very helpful, along with a reform in the amount that is needed to make an investment.

In terms of this new law that was passed on tax imports mainly for the food and drink industry, has this affected US companies exporting to Angola?

We don’t have very many members who are in that particular sector but I have heard from some in the poultry industry. Angola is one of the largest importers of frozen chicken from the US and I have heard that this new law has been a bit difficult for those in that industry. And there may be a few others as well that have suffered a bit as a result. That those within the US offices of commerce and the US trade representative’s office have been looking to see if adjustments can be made that would allow for these products to continue to be exported to the country – particularly as they are products that people are interested in using. They haven’t yet gotten to the point in the country (Angola) where they have substitutions for these imports.

The US being the second largest commercial partner in Angola we have to take into account the competition between China and the US in Africa as a whole. We know there are approximately 500 firms that have presence in Angola and over 100,000 Chinese workers. The bilateral trade between Angola and China reached $37.5 billion last year, three times as much as with the US. What do your member companies say about this Chinese presence? Are they seeing a direct competition within their industries? And in terms of financing –because the Chinese government finances a lot of the commercial relationship between the countries– what are they saying about how the US government is helping the companies?

I think there is a healthy dose of competition. There are clearly different strengths that the US companies operating in Angola bring to the table. The Chinese are very, very present in the construction industry. What I see and what I hear from some of our members are in other sectors, textiles, for example, which is kind of a new industry that is beginning to emerge. Those who I have talked to who are going into this industry, for example, have turned to Chinese machines and financing to provide them with the necessary foundation and technical competence. You also see a lot of trade - especially with products they are bringing in from China as well.

One of the things I think is not as competitive for the US right now - and this is something we probably need to pay more attention to- is that we do have facilities (such as the ExIm Bank, POIC, etc.) that should foster a better enabling environment for US businesses to be able to work and trade with Angola. However, when I listen to the stories from members and others who come to me, especially when I am in Angola, they talk about the resources that are needed to start their businesses, about the Angolan programs and the facilities they have to access, and notably they reference the Chinese model which they say is so much easier than the US programs. I am not going to say it is better, but it is easier.

There are sound reasons why US programs have stricter requirements in place; but I think we should examine what US programs do and don’t (can or can’t) achieve by having the threshold that high. Are US programs squeezing too many people out? Is there something we as a Chamber can do to build the capacity that is needed for business people who wish to benefit from these facilities, to help the to meet the threshold? This is something we are beginning to look at more in the Chamber, because I would not like to say that our own US facilities for financing and assisting businesses are too stringent. I think if we are going to promote them, then we have to also find ways to make people eligible/qualified.

ExIm Bank has in recent years provided a total of $1.7 billion in financing for Angolan purchases from US companies Boeing and General Electric. Are you aware of any more financing in the pipeline that could have an effect on US exports to Angola?

Not other than additional large scale programs at this point for Boeing; and GE also has something in the works. I am approached regularly, and I know our office in Luanda is also approached regularly, by people who are more in the SME sector, who are very interested in potential ExIm financing. They know the resources are there, there is a $120 million facility that has been in place, there was another billion signed during a US-Angola Chamber of Commerce luncheon during the US-Africa Summit, of which at least half or a third of that is for more traditional or SME transactions, i.e., not just for the large projects like airplanes and so forth.

But it goes back to the point that I was making earlier about the difficulties that many who attempt to access this facility face. Their real interest is to capitalize on being able to develop this relationship with the US, with American businesses, to access American products, American know-how. And so we are aware that the resources are there but the money has not been disbursed as of yet. We at the Chamber would like to do something to change that; we are talking, of course, to those on this side in the US as well as to US officials in Angola to see what we may be able to do to facilitate that. Again, working on these capacity issues, looking at the requirements and so forth to see if we can’t begin have some success stories for ExIm. They are there; we have just got to get them through the ExIm pipeline and out to the other side as functional successes.

After the Summit took place, have you seen more interest in companies, maybe larger scale, medium scale or smaller scale looking to doing business in Angola?

We have seen a general increase in requests for our Doing Business in Angola Sessions. We did one in Los Angeles right after the Summit. There was a “Post-Summit” buzz as well; people became very interested and they continued to follow up with us. Houston has always been interested because of the oil and gas sector; but I think there are a number of other people who are becoming interested not just in that sector but also in some of the other areas.

I saw a little bit of an uptick in terms of people noticing that Angola is open for business via an increase in requests for information, etc. There is still a lot of educational work to do about Angola, compared to some countries that seem to be more easily than known than Angola currently. The interest I see is there and I have seen it grow in the past two years in particular, but after the Summit there was a bit of an uptick or spike.

Angola is already the world’s fifth-largest diamond producer by value. Worldwide demand for the gem is expected to rise 4.5% this year, due largely to the increase in diamond jewelry sales in China and India. This has led to a renewed interest in Angolan diamonds, marked by the return of industry giant DeBeers to the country. Are any US companies set to benefit from this trend?

There have probably been a few that have been investigating. We don’t have any current members that are in the sector; but I do know that with regard to the development plan for the industry there will probably be some opportunities opening up. They reference doing upgrades in laboratories, they are looking at doing some upgrades in training, and I think that we will see some of US institutions doing geospatial mapping. I think there are a lot of things from a technological standpoint that will also become of greater interest.

I did have a discussion with the Minister of Mines right before I left Angola the other day, and I could tell that they are quite interested in continuing to bring the top tier of technology, know-how and capacity - things that will allow them to really define and better exploit the sector. Diamonds, yes; but also for mining in general because there are a lot of other mineral resources in the country that can also be exploited. I think they are really looking at bringing to bear some of the best and the brightest resources to really lift that sector to the top of its game.

I think that the Angolans would be interested in coming to the US as well not just for conferences, but also to have direct meetings about the mining industry writ large, about diamonds and other minerals as well. The US probably has some of the best technologies in the world to facilitate enhancements in the sector. So I can imagine that we are going to hear more about that sector.

I know you have had a lot of experience with Africa in general, what peaked your interest in Angola?

When I decided that I was going to take the position one of the reasons that Angola peaked my interest is that it’s in a post conflict renaissance which provides tremendous opportunity for growth, development, and innovation. You still have some of basic capacity and related needs that one sees in usual emerging economies (moving from a humanitarian context to a real economic development context), but at the same time the opportunities are tremendous.

One of the things that you see if you have been in economic development for a long time as I have is ways and means that you get from one level to the next. That requires you to really focus on ensuring that you build a private sector with a strong foundation, and you provide capacity building for those particularly in the medium (SME) sector. The big businesses will be there, they are good for the overall business environment as they create some opportunities, jobs, etc. How then do you share that both outwards and downwards? What is it that you can persuade them (big business in particular) to do when working with others that need to be pulled along to continue to lay that solid foundation for the country? What is it that you can do with businesses in the US who are also looking for global opportunities in the world to get them to invest in a country and its people? And Angola provides a perfect case for being able to kind of combine those elements. There are tremendous opportunities to do some things in the country that I probably couldn’t do in some other places that have not had the same experiences as Angola.

Fonte: The worldfolio