Angola: Construction, Infrastructure and Development Scoping Visit

19-23 January 2013

A Report by British Expertise

I Introduction

This report was commissioned by UK Trade & Investment (UKTI), and is the result of a scoping visitjointly funded by UKTI, British Expertise and delegate companies. The specific brief was to investigatethe opportunities available in Angola for UK construction services companies, focussing on infrastructure and development. Furthermore, a key goal of the visit was to assess the particular challenges UK companies might face when seeking work in Angola.

The scoping visit took place from the 19-23 of January 2013. During the programme I was accompanied by representatives from six UK companies who were considering the market or had already begun projects in Angola. The delegates are detailed at the end of this document.

The two-day meeting programme for the scoping visit was developed by John Woodruffe, Head of UKTIAngola, his Deputy Mateus Keven and José Paulo, Trade and Investment Adviser at the British Embassyin Luanda. I am grateful to John and his team for all their efforts in putting the programme togetherand to HMA Richard Wildash LVO, for his support.

Mateus and Jose accompanied the group on calls and assisted with interpretation.

Special thanks should also be given to HE Ambassador Miguel Gaspar Fernandes Neto and Counselor Dr Henriques Assis at the Angolan Embassy in London for their support and assistance.

It should be noted that the programme comprised meetings that were often at a ministerial or seniorlevel. Consequently, a number of issues were discussed at the ‘headline level’. It is not within theremit of this report to deliver extensive detail on the specifics of individual projects.

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II Executive Summary

The UK has not traditionally been heavily involved in trade with Lusophone Africa - Angola, straddlingSouth and West Africa, developed for much of its history beyond the British sphere of interest. Thatsaid, UK commercial engagement with Angola is increasing; over the calendar year 2012 UK visibleimports from Angola increased by 154% compared to 2011 figures to nearly £805 million. Visible exports to Angola over this time also increased by 7%, to over £401 million. In 2011 Angola was the35th largest destination for UK trade in services, with a value of over £1 billion. In 2012 the UK stoodas the second largest overseas investor in Angola.

In the past, most UK involvement with Angola had been in the Oil & Gas sector. BP is the largest soleUK investor in the country, with assets of around $15 billion in country, with a further $15 billion to beinvested over the next decade. However, over recent years companies from a variety of sectors havestarted to focus on the Angolan market: HSBC and Standard Charter Bank have opened up representative offices and Diageo and GSK have launched their products in the market.

Other companies operating in Angola include: Crown Agents, Aggreko, British Airways, KMPG, Ernst & Young and De La Rue.

In our particular sector of interest, companies such as Mace and Atkins have successfully started toengage with the market.

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UK Business in Angola

Angola has a natural historical, cultural and linguistic affinity with the rest of the Lusophone world;Brazilian and Portuguese companies are notable across the sectors.

Since the end of the civil war China has played a key role in the development of Angola. China had aparticularly complex relationship with Angola since decolonisation. All of the warring Angolan liberation movements received Chinese support at some time during the post-colonial period, but fulldiplomatic relations between the MPLA led Luanda Government and China were only commenced in1983. Much of this cooperation based was around the arms trade. Whilst China’s ‘less conditional financing’ (Corkin, 2011, p3) of projects in the post war period was clearly hugely beneficial to the development of the ruined physical infrastructure of Angola, there is still a sense in Angola that Chinais an ambivalent force. The relationship since the end of the civil war seems to have moved from a‘heady embrace of mutual convenience’ (Corkin, 2011, p4), infrastructure for the Angolans, increasedaccess to current and future oil revenues for the Chinese, to a rather more complex relationship. Just as the country’s leadership is aware that, long term, its economy cannot be purely based on theenergy industry it too realises the importance of developing diverse foreign relations. The Chinese undoubtedly hold substantial commercial sway in Angola, but that does not necessitate that othercountries should stay away.

Key Competitors for Business

Important Points

Visas

One of the first challenges any business considering the Angolan market will face is acquiring a visato enter the country. This process can be extensive, so applications should be made well in advance.Although things have noticeably improved recently and normal visit visas should, subject to all paperwork being properly submitted, be issued within a maximum of 15 working days and sometimes quicker.

Security and Safety Risks

Any business visitor to Angola should consult the Foreign & Commonwealth Office’s Travel advice(http://www.fco.gov.uk/en/travel-and-living-abroad/travel-advice-by-country/sub-saharan-africa/angola). Travel is not currently recommended to Lunda Norte, Lunda Sud and the restive Cabindaprovince. There is a high level of crime in Luanda; the streets should be avoided in hours of darkness.Driving standards are low across the country and roads are poor outside of the capital.

Corruption Risk

In 2009, President dos Santos introduced a Zero Tolerance approach towards corruption, which included a transparency audit of public accounts conducted by Ernst & Young. Even with these newmeasures, Angola still ranks at 157/176 on Transparency International’s Corruption Perception indexwith the openness of public budgets ranked as minimal. Corruption of all forms exists across thecountry from petty bribes for low ranking public servants to high level political corruption. Procurement laws are not consistently adhered to. In particular there are ‘major transparency concerns’ (Chêne, 2010, p10) with regards to Chinese commercial involvement in the country. Companies should perform all appropriate due-diligence when considering projects in Angola.

Language

As part of the evermore important Lusophone world, Angolans are used to conducting business inPortuguese. As the country continues to become more outward looking, it is likely the prevalence ofEnglish and French language skills will increase, but at present businesses should be prepared to use translators and interpreters for all interactions. Any collateral or promotional material shouldalso be prepared in Portuguese.

Health

Even with its growing wealth, life expectancy in Angola is approximately 51 years and the country hasthe world’s highest rate of diarrheal disease. It is also in a malarial region. Visitors to the countryshould ensure they have all the appropriate vaccinations, and take all necessary anti malarial precautions.

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Priority Sectors

UKTI Angola has identified the following sectors as offering the best opportunities for British companies:

• Oil & Gas

• Power/Renewable Energy

• Education

• Construction

• Financial Services

• Healthcare

• Food & Drink

Views of the Author

This was a fascinating scoping visit, the author and the delegate companies certainly returned to theUK with a much better understanding of the country’s needs and plans in the development of its infrastructure. A number of delegate companies already had business in Angola, and others were successful in building contacts with partners who could lead them to new opportunities. Some delegates have already planned their return to the country. The country’s economy is set to continue togrow at a more than healthy rate, yet Angola remains ‘one of the most unequal societies in the world’(AfDB, 2012, p3). Infrastructure development, increased employment opportunities and economic diversification must be realised quickly in order to avoid entrenching the socio-economic divides thatalready exist in the country.

Whilst there are evident opportunities in the country, a short scoping visit would never be sufficient indrilling down into the details of major developments. This is not simply due to our busy schedule overa short period of time, but also because of the diffuse and labyrinthine processes prevalent in thecountry. High-level individuals may have the ultimate sign off on projects and provide an overall steer;but project delivery is a rather more complicated affair. Powerful ministries may have varying concerns across a variety of sectors depending of the interests of key figures involved.

For the author, the issue of who holds authority or power in the commercial sector in Angola was ofparticular interest, as it serves to demonstrate the complexity of the environment any UK business entering the market will find themselves in. From a British Expertise perspective this is always anarea of attention, thanks to the interests of our sister organisation The UK Anti-Corruption forum.

During our meeting, the British Ambassador to Angola stated that ‘business and politics are inextricably linked’ in Angola, although this is a common fact across much of Africa and the MiddleEast, the Angolan situation is particularly interesting, ‘it is common for government officials and civilservants to hold positions in private companies in addition to their public functions’ (Chêne, 2010, p4).Public servants working in a particular sector may even have business interests in the sector in whichthey represent the State. This is naturally of importance for UK companies working in the constructionsector since the implementation of the 2010 Bribery Act. Working on major construction projects inAngola will be challenging for UK companies, examples of real success certainly exist, but it is vitalthat companies make all the appropriate investigations.

According to Transparency International ‘Angola continues to face major challenges of weak governance and widespread corruption. Corruption manifests itself in various forms, including bureaucratic, political and grand corruption, embezzlement of public resources, systematic looting ofstate assets, and a deeply entrenched patronage system that operates outside state channels’(Chêne, 2010, p1). Even with the 2009’s presidential crackdown on corrupt practices, ‘Angola’s overalllegal and institutional anti-corruption framework remains highly inadequate’ (Chêne, 2010, p1). According to the Economist Intelligence Unit, even the President reportedly sits at the centre of a ‘vast patronage network’ (EIU, January 2013, p3). It is important to note, then, that in Angola commercial and political decisions can be influenced by a variety of factors emanating from the power structures that exist well beyond what might be considered the remit, in the European context,of the State or the Commercial Sector.

Angola’s development has been driven by wealth generated by the State oil company, Sonangol, overrecent decades; Sonangol functioned in its own economic enclave allowing the Angolan State to persist, without making the necessary economic and social developments that could have destabiliseda country without such bountiful natural resources. It is not surprising then that major Chinese-funded housing projects, such as the $US 3.5 Kilamba development outside of Luanda (a mixed development of some 200,000 homes, retail outlets, schools and medical centres) has had difficultyattracting residents, when mortgage provision in the country is extremely limited and much of thepopulation live on under $US 2 a day.

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The Angolan leadership has begun to realise that the status quo cannot persist if country’s full potential is to be realised. In order to build a middle class of the kind required to fill developments like Kilamba.

The fact that the country is reaching out to new partners, with new standards, and consciously seekingto diversify its economy must be considered encouraging. In 2007, the academic Ricardo Soares deOliveira described Angola as an example of a ‘successful failed state’ (Soares de Oliveira, 2007, p609),in that the oil & gas wealth, grown in the protected enclave of Sonangol, allowed the upper echelonsAngolan society to prosper without necessitating the broader socio-economic changes required to develop an inclusive, diverse economy that creates jobs across Angolan society. TheAfrican Development Bank (AFDB) notes that whilst, ‘the Government of Angola is actively driving various initiatives designed to create a more competitive business environment that enhances enterprise development and stimulates growth’, ‘much remains to be done’ (AfDB, 2012, p3). As the‘future of Angola hinges on the further successful diversification of its economic activity’ (AfDB, 2012,p3), it is vital for the Angolans that more international companies come to the market to help makethis process successful. In the short-to-medium term Angola will no doubt remain a difficult place forUK construction services companies to do business, but if companies go to Angola prepared for thechallenge ahead they will be in a prime position to help one of Africa’s largest economies truly realiseits potential.

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III Political and Economic Background

• Population: approximately 20 million

• GDP per head: $US 7,803 (EIU 2013 Estimates)

• Literacy rate: 70%

• Population below national poverty line: 36.6%

• Infant mortality rate: 98.4 deaths per 1000 live births

It has only been just over a decade since the end of the Angolan civil war; peace emerged with thedeath of Jonas Savimbi and the subsequent demobilisation of his forces in 2002. Savimbi had been the leader of the União Nacional para a Independência Total de Angola (UNITA) during the war that immediately followed the end of Portuguese occupation in 1975. The civil war began primarily as abattle between two former liberation movements, the aforementioned UNITA and the Movimento Popular de Libertação de Angola (MPLA). UNITA’s leadership was drawn predominantly from the Ovimbundu ethnic group, whereas the MPLA was primarily drawn from the Ambundu ethnic group,the Luandan elite and a small minority of White Angolans. The war also served as proxy conflict between international powers; for extensive periods of the hostilities, UNITA was supported by ‘Western’ powers and the MPLA was aligned to the communist and soviet states. Over the course ofthe Cold War, these allegiances shifted and by the 2000s most countries accepted the MPLA as theGovernment of Angola. More than half a million people died during the 27 year conflict, with millionsleft displaced and without access to basic sanitation and services.

In the decade following the end of the conflict, the Angola has experienced ‘a period of rapid and sustained economic growth’ (AfDB, 2012, p1), with its population is now the third largest market inSub-Saharan Africa . Angola has one of the world’s fastest growing economies with an average GDPgrowth per annum of 11.6% between 2002 and 2012. Much of this growth has been driven by the development of the country’s oil, gas and mineral sectors.

After Nigeria, Angola is Sub-Saharan Africa’s second largest oil producer and is expected to overtakeNigeria within the next ten years. Currently the country is producing approximately 2 million barrelsper day, with further deeper fields in the Kwanza Basin still to be exploited. Natural gas reserves arethe second largest in Africa at approximately 3 billion cubic metres. The development of the parastatal Sonangol, which manages the country’s oil and gas reserves, is Angola’s key commercialsuccess story.

It is important to note that whilst the Angolan Government is keen to diversify the country’s economyaway from its reliance on its hydrocarbon resources, the Angolan economy is still enormously dependent on the sector. Fluctuations in the oil market can have a major impact on other sectors ofthe economy. In 2008-9, the collapse in oil prices caused serious macroeconomic imbalances whichrequired the Government to agree a stabilisation programme supported by the International MonetaryFund (IMF). This was particularly problematic for the construction sector, but the IMF Stand-ByArrangement and improved oil prices allowed the Government to pay any arrears by 2011.

After oil, diamonds are Angola’s second largest export; other mineral and precious metal resourcesare also abundant and are being successfully extracted.

Basic Facts

In 2012, the African Development Bank (AfDB) estimated that the construction sector was responsiblefor 8.9% of GDP, this share has more than doubled over the last 10 years. Much of the social andphysical infrastructure of Angola was destroyed by the decades of conflict, and the sector necessarilyhad to grow. According to the Africa Infrastructure Country Diagnostic (AICD) report of 2011, ‘Angolahas shown an exceptionally strong commitment to financing the reconstruction and expansion of itsinfrastructure’ (Pushak and Foster, 2011, p1), driven primarily by a financing agreement with Chinathat was backed by future oil and gas revenues.

The Government has supported and encouraged major investment in rail, road, ports, airports, power and housing provision. Despite the county’s huge energy resources, the power sector is in aparticularly poor condition. Most Angolan households and business have to utilise their own generation facilities. In 2008 only around 30% of the population had access to power.

From 2005-2009 Angola spent $2.8 billion improving the road network but it is still inadequate, withsome towns inaccessible by road. The network covers 62,560km, with only 17% of officially classifiedand urban roads being paved. Angola has three operational railways covering nearly 3000 km thatused to carry millions of tonnes of freight to Angola’s port cities, but as of 2011 only around a third ofthe lines were fully operational and the Government is currently working the complete rehabilitation of these lines for both passenger and freight use. The Port of Luanda has been a key driver of Angola’spost war recovery, but it is regularly congested. A dry port was developed and a new container port tothe north of Luanda is planned to ease the congestion. In the years immediately following the war, Angola’s air transport capacity grew dramatically, but ‘rather than capacity or competition’ (Pushakand Foster, 2011, p27), the sector’s limit on its expansion remains safety and oversight.

Whilst Angola’s infrastructure is improving, it is still poor and preventing the country from taking fulladvantage of its resources beyond the energy and mineral sectors. In particular the necessary steps to help develop Angola’s agricultural sector have yet to be made. With abundant water and good quality soil, the sector is ‘the sleeping giant’ (AfDB, 2012, p2) of the economy. Costly food imports (Angola is a net importer of food) are encouraging social divides in the country. This has not escaped Government attention, and it should be expected that improving regional infrastructure to drive agricultural production and related employment opportunities will remain a focus for the administration for decades to come.

The Government of Angola has been led by the MPLA since the end of the civil war. In the August 2012elections, the MPLA received 72% of the popular vote. These were arguably the first elections to takeplace in a period of stable democratic development. Although the majority of international observersreported that the 2008 elections, in which the MPLA won 82% of the vote were mostly fair and free,some NGOs question the result. According to the Economist Intelligence Unit (EIU), the MPLA extends‘complete hegemony’ (EIU Report, January 2013, p3) over the Angolan political system. The new constitution of 2010 established a presidential-parliamentary model, which allows the leader of thelargest parliamentary party to become the president. A limit of two five-year terms per president wasset, but this has not been applied retrospectively, it is possible that President José Eduardo dos Santos could remain president until 2022. He is currently the longest serving president in Africa.UNITA, as the primary opposition party, are unlikely to wield any major national political power for the foreseeable future, although they are seeking to take advantage of many Angolan’s continued discontent with the lack of economic benefit felt by the masses in a time of economic growth. Recently, UNITA took the provocative decision to give Jonas Savimbi’s son a key party role.

Until 1991, the MPLA defined itself as Marxist-Leninist but now official pursues a social democraticmodel. That said, the economic and political power structures of the Angolan state are very centralised. As commented elsewhere in this report, the oil and gas sector run through the mechanisms of the Sonangol is one of the few areas of the economy where a more-or-less free market model has been able to develop.

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In order to demonstrate the quality of construction projects possible in Luanda, delegate companyMace kindly arranged a visit to their waterfront project, Torres Kianda. The development is mixed used and will include four commercial office towers, a shopping complex and basement car park. The project is valued at around £215 million, and is due for completion in 2015. The developer is Portugal’s Fase, with Mace being responsible for project management. The four, 25 storey towers,shopping centre and landscaped courtyard will occupy a whole 103, 000m2 block. One of the towers isdue to become the new headquarters of the Banco Africano de Investimentos (Angola’s largest bank).

Mace won their role in July 2009.

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IV Meeting and Visit Reports

Site Visit - Torres Kianda (Kianda Towers) Mixed Use Development, Luanda

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During this session the delegation were given a comprehensive view of the UK’s growing relationshipwith Angola by HM Ambassador to Angola and John Woodruffe. GLA (Gabinete Legal Angola) also gavethe delegation a detailed presentation regarding the specifics of setting up and operating commercialventures in Angola.

Governmental Meetings

British Embassy Briefing - HMA Richard Wildash LVO, John Woodruffe (UKTI), Renata Valenti (GLA), Higino de Brito (GLA)

The session began with an insightful presentation from Richard Wildash, which sought to give the delegation a better understanding of the UK mission in Angola. The Ambassador had been in post for three years, and remarked that despite the decade since the end of conflict, the civil war and itsconsequences still dominates many areas of public and private life; it still shapes the thinking of numerous Government programmes.

With the emergence of peace, the Ambassador noted that the first priority of the Government was todevelop the basics of necessary infrastructure. With Chinese support, ‘spectacular progress’ on improving the physical infrastructure of country was made, but the social infrastructure of the state is still lacking. Around 50% of the country still lives on under $2 a day, and the Government is keen toencourage development in healthcare, education and other basic services to help improve equality.The Ambassador remarked that this imbalance in Angolan society ‘must change if society is to be stable in the longer term’. However, many Angolans are contented to some degree by the achievementof peace after such a long conflict, consequently social development may be seen as secondary to thecontinued peace in the nation. The Ambassador was keen to stress, however, that if poverty was notproperly addressed in the medium term Angola unrest is possible.

Before the current British Coalition Government came into power Angola ‘was seen as a peripheralcountry’, the Embassy was lightly resourced and the British attitude to Angola was ‘almost activelynegative’. Since 2010, the Ambassador felt there has been a ‘complete change’ in approach which reflects the UK’s increased appreciation of Angola’s role as a key African power. For the Ambassador,the political importance of the country is clear; it is a member of OPEC (Organisation of the petroleumexporting countries), SADC (Southern African Development Community), CEEAC (Central African Economic Community) and is a regional military power. Both of the Ministers for Africa who haveserved under the Coalition have visited the country, as has the Lord Mayor of the City of London.

At the intergovernmental level, the Ambassador remarked upon a new sense of ‘readiness and keenness’ to build greater commercial and diplomatic links between Angola and the UK. In February2012, Foreign Minister Georges Rebelo Chicoti, was the first Angolan Minister to make an official visitto the UK. At present there is much ‘good will’ and ‘political will’ to build more concrete relations, butit will be a challenge to ‘translate it into outcomes’.

The Ambassador went on to address our commercial relations more specifically. He stressed that itremains hard to convince British companies to come to Angola even if the macroeconomic outlook ispositive, with current estimates of growth over the coming year at 6%. There is perceived dominanceof Portuguese and Brazilian companies, although UKTI are trying to counteract this by emphasisingthe possibility for partnering with the Brazilians and Portuguese and the potential for the formation ofJoint Ventures (JVs). Furthermore, the reputation of Angola in the UK regarding corruption and ease of doing business is ‘very bad’.

The country lies at position 157 of 176 countries in Transparency International’s Corruption PerceptionIndex. The Ambassador reminded delegates that this was of course based on the perception of corruption, and that the Angolan Government have been making progress towards the implementinganti-corruption measures. In 2009 President dos Santos put in place a ‘zero-tolerance’ strategy on

HMA Richard Wildash LVO

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corruption, which included a transparency audit conducted by Ernst & Young. Since 2009, the Ambassador stated that public property and the assets of officials were being more rigorously assessed. However, the Ambassador did admit that corruption was culturally engrained, and it wouldrequire a very drastic change in mindset and economic conditions to be reduced effectively. He suggested that the UK 2010 Bribery Act would help by ‘demonstrating standards’. Four years ago, theInternational Monetary Fund (IMF) agreed the largest ever Structural Adjustment Programme (SAP)concluded with a Sub-Saharan African country in a single tranche with Angola, reports suggest thatthe IMF have received substantial co-operation from the Angolan side and have been given all the levels of access they required.

The Ambassador gave brief mention of the widely reported ‘missing $32 billion’ from Angolan publicaccounts. Whilst there had been speculation that this had been due to corrupt practices but IMF investigations revealed it to be the consequence of now banned ‘quasai-fiscal transactions’ by Sonangol which had been operating as a de-facto Government department.

The Ambassador concluded that ‘despite challenges, Angola remains a bright prospect for the UK’. He encouraged interested UK companies to visit regularly, and to build trusted relationships with local partners and most importantly, to take appropriate legal advice and perform due diligence at allpoints. UK companies should ‘proceed with care’ in a this ‘challenging environment’, but successfulprojects for UK companies in Angola does demonstrate that it is a market worth considering.

GLA is a firm of eight Angolan lawyers; it is a member of the PLMJ International Legal Network. PLMJ is the largest Portuguese legal firm and is active across the Lusophone world. Their presentation gave the delegation details on setting up operations and investments in Angola. It was emphasised that the further companies look beyond Luanda and into the regions, the more favourable the investment conditions are. A Luanda-centric view in the search for business opportunities was discouraged.

Foreign companies seeking to operate in Angola must apply to the Agência Nacional para o Investimento Privado (ANIP – the national investment agency) for approval. This applies if a companywishes to set up a branch office or incorporate a new local company. The approval process takes 2-4months to approve, with a period of 1-2 months of preparation required before application. An investment of $US 1 million per investor is required (note that this is not required per project and isover a specific period of time). According to a law due to be implemented this year, for investments of this level to be permitted, there must be a minimum of three persons or companies investing in Angola (investments with only two sources must be a minimum of $US 2 million, and there are limitson when profits might be repatriated). If you wish simply to provide services to Angolan company fromoutside, business is limited to a value of $US 300,000. There is no required local share for companiesset up in Angola, apart from in the oil and gas sectors where there is a mandatory 51% local share.

Businesses considering setting up operations in Angola should note that the country is split into threeinvestment ‘Development Zones’:

• A - Province of Luanda, the capital-municipalities of the Provinces of Benguela, Huila, Cabinda and the Municipality of Lobito

• B - Remaining municipalities of the provinces of Benguela, Cabinda and Huila and the Provinces of Kwanza norte, Bengo, Uige, Kwanza Sul, Lunda Norte and Lunda Sul

• C - Provinces of Huambo, Bie, Moxico, Cuando Cubango, Cunene, Namibe, Malanje and Zaire

Each zone permits a series of different incentives for foreign investors, including reductions or exceptions from industrial tax, tax on invested capital on distributed profits, stamp duty, customs duties, and consumption tax. Real Estate Tax transfer for any buildings or land acquired may also be

Renata Valenti and Higino de Brito

available. Incentives vary depending on the size of investment, and the number of local jobs generated.Incentives are most extensive in Zone C and progressively reduced in Zones B and A.

There are laws in place supporting an Angolanisation of the workforce used by foreign companies.Foreign companies must employ 70% Angolan nationals and follow strict training rules to ensure thatthe skill base of the country is developed. ANIP will require full details from registrant companies onhow many expatriates and foreign nationals will be employed, and how many of these will have a focuson training Angolan staff. This information will be extremely important when seeking to secure working visas for employees; it is necessary to demonstrate why an Angolan employee could not perform particular roles.

GLA too emphasised that working in Angola is a far from easy task. The speakers raised the issue ofpayment in Angola which is regularly a problem for international companies. It is often difficult to collect debts, especially from the state. Payments can often be delayed by arduous and inefficient bureaucracy. GLA recommended ensuring that any contracts related to Angolan projects have an arbitration clause, as the route through the courts is not recommended. Some British companies inAngola have longstanding debts owed to them.

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John Woodruffe closed the session with a few key words of advice to the delegates. Despite admittingthat entering the market required ‘patience, frequent visits with interlocutors along with deep pockets’, there are real opportunities for British companies assist in the development of Angola andthe environment is rapidly changing. In the coming decades new city developments, worth hundreds of billions of dollars, will bring about the transformation of the country’s social and physical infrastructure.

John Woodruffe

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The Minister began the meeting with the delegation with a broad overview of his Ministry’s role and responsibilities. The Ministry is generally charged with the ‘organisation of space in the country’, hisstaff are involved across urban planning, zoning and the development of land ownership legislation.His key priority, however, is to address the provision of low cost housing and housing for the Angolanmiddle class and the infrastructure related to such developments.

In 2009, the Angolan Government set aside around $US 50 billion and planned to use cheap foreigncredit lines to provide a million affordable homes across Angola. The Minister explained that this target was supposed to have been reached by now, but it had been harder to achieve than expected.He believed that they had currently reached about 50% of their target and that the goal of a millionhomes could be reached in ‘three of four years’.

This housing target is set to be reached using a variety of programmes. Some homes are planned tobe directly state financed, others will be financed by private developers with the State providing thebasic infrastructure, with the State will then buying the housing units from the developer at a fixedprice. This second method is intended to help support the development of the private constructionsector in the country and encourage investment in Angola. Additionally the Ministry is also looking into schemes that would provide the facilities for Angolans to buy their own land; with the governmentassisting them in the purchase of tools and materials to build their own homes.

In March 2013 a new budget will be announced by the Ministry, which will give further detail on howthe target number of homes will be reached. New bids for upcoming ministry-led projects will be announced soon in the local press and online (the most detailed announcements will be in the localpress). Any companies bidding for projects should ensure that they have the appropriate Alvará or permit in place to work in the country (details can be found http://www.cidadao.gov.ao - in Portugueseonly). The projects are likely to seek the services of international consultants in planning and qualitycontrol. A need for architects and designers is also expected.

When questioned on the Angolan Government’s approach to international partners, the Minister wasclear that Angola wanted to encourage ‘diversity’, and that British companies ‘should not worry aboutthe Brazilians and Chinese’. The Minister asserted that “China had its time”, low prices had been attractive at first but he felt the quality of construction was not as high as might have been desired. In the past, China had been a very important source of finance and expertise, but their prices are nolonger as attractive as they once were.

For his final remark, the Minister stated simply that three factors were key for international companies to win work from his Ministry and others, ‘quality, capacity and presence’.

HE José António M.C. Silva - Minister of Urbanism and Housing

The Minister and a senior group of his colleagues from the Ministry and subordinate organisationsmet with the delegation. The group included the Secretary of State for Construction, António TeixeiraFlor. The Angolan side also comprised, the National Director for Infrastructure, the Government Director for Building and Property and representatives from the Department for International Affairsand the Ministry of Planning. The Minister emphasised that his Ministry had responsibility of somekind for all civil-engineering works in the country. Readers should note that the Ministry is responsible for the oversight of the Instituto Nacional De Estradas De Angola (INEA) who manage thedevelopment of Angola’s road network.

The Minister began the meeting by briefing the delegation on the country’s plans for bridge building.He described the Ministry’s bridge building plans as having two focal points 1. To maximise the benefitof the country’s investment in bridges and 2. To use bridge building as a driver for employment, especially for those leaving military service. This second element was given particular attention by the Minister as new bridges are required across the country’s secondary and tertiary road networks.The Minister detailed the development of a synergy between small local construction companies andthe Angolan military’s own engineering department to develop a ‘civil way of looking after state assets’, whilst providing work for those leaving military duty.

The Minister also described Angola’s need for assistance in the development of large scale municipaldrainage systems, and invited companies involved in commercial residential housing to register withthe Ministry. The Minister stated that he was keen to define the future direction of his Ministry’s projects in the near future, and foresaw the need for assistance particularly in the area of design.

The Ministry of Construction, it was explained, has a very wide remit and is involved across all elements of infrastructure and construction. It regularly works in partnership with other ministries tojointly deliver projects in marine works, energy, dams, rail, airports, water, municipal building projectsand healthcare to name but a few.

HE Fernando Alberto de Lemos Soares da Fonseca - Minister of Construction

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On the final evening of the visit, the delegation met with Dr. Henriques Assis, an experienced Angolandiplomat in English and French speaking countries who has worked on both sides of the Atlantic. Dr Assis is currently based in London and was able to give the group some unique insights into thechanging commercial and diplomatic relationship between the UK and Angola. Dr Assis remarked thatfor much of modern Angola’s history the UK had only a limited relationship; diplomatic relations werenot extensive and BP was the only British company of note with a presence in the market. Dr Assiswas also conscious to point out that many further opportunities to develop the UK’s commercial engagement should emerge as Angola continues to recognise the need to build regional infrastructure and create more jobs outside of the Luanda area.

In the years immediately following the war, Dr Assis remarked that the China’s ‘support without conditions’ approach was very attractive and helped the nation begin to get back on its feet. However,the UK presents ‘another vision’, a ‘different world view’. Of particular interest to Dr Assis was the opportunities an improved relationship with the UK presented for building further links with the Commonwealth. The development support mechanisms of the organisation make greater involvementvery attractive for this growing African power. Furthermore, the Commonwealth provides a windowonto English-speaking cultures and societies which would be very helpful for Angola as it seeks to improve its English-language capabilities.

As one might expect from a diplomat who has worked in English-speaking countries, Dr Assis’s viewson Portuguese language requirements for working in Angola where markedly different from those the group elsewhere encountered on the visit. Whilst we were regularly informed that in order to win business in Angola it was necessary to have factored in some Portuguese-speaking capability, Dr Assis felt that it is important not to consider ‘language as a barrier’, much more important is the‘agressivity’ or dedication of the company wishing to involve themselves in the market. Whilst the UKGovernment, and UK companies may interested in accessing the Angolan market through ‘third-country partnerships’ with Lusophone companies, Dr Assis did not think this was a necessity. He felt it was possible to ‘go direct’, and use translators and interpreters, ‘where necessary’.

Dr Assis ended by affirming that as peace and stability was maintained across much of the country,Angola could cease having a ‘fire-fighting approach’ to development, and focus on a sustained periodof development and the building of truly democratic institutions.

On the final evening of the visit, the delegation met with Dr. Henriques Assis, an experienced Angolandiplomat in English and French speaking countries who has worked on both sides of the Atlantic. Dr Assis is currently based in London and was able to give the group some unique insights into thechanging commercial and diplomatic relationship between the UK and Angola. Dr Assis remarked thatfor much of modern Angola’s history the UK had only a limited relationship; diplomatic relations werenot extensive and BP was the only British company of note with a presence in the market. Dr Assiswas also conscious to point out that many further opportunities to develop the UK’s commercial engagement should emerge as Angola continues to recognise the need to build regional infrastructure and create more jobs outside of the Luanda area.

In the years immediately following the war, Dr Assis remarked that the China’s ‘support without conditions’ approach was very attractive and helped the nation begin to get back on its feet. However,the UK presents ‘another vision’, a ‘different world view’. Of particular interest to Dr Assis was the opportunities an improved relationship with the UK presented for building further links with the Commonwealth. The development support mechanisms of the organisation make greater involvementvery attractive for this growing African power. Furthermore, the Commonwealth provides a windowonto English-speaking cultures and societies which would be very helpful for Angola as it seeks to improve its English-language capabilities.

Dr Henriques Assis - Counsellor, Embassy of the Republic of Angola in London

As one might expect from a diplomat who has worked in English-speaking countries, Dr Assis’s viewson Portuguese language requirements for working in Angola where markedly different from those the group elsewhere encountered on the visit. Whilst we were regularly informed that in order to win business in Angola it was necessary to have factored in some Portuguese-speaking capability, Dr Assis felt that it is important not to consider ‘language as a barrier’, much more important is the‘agressivity’ or dedication of the company wishing to involve themselves in the market. Whilst the UKGovernment, and UK companies may interested in accessing the Angolan market through ‘third-country partnerships’ with Lusophone companies, Dr Assis did not think this was a necessity. He felt it was possible to ‘go direct’, and use translators and interpreters, ‘where necessary’.

Dr Assis ended by affirming that as peace and stability was maintained across much of the country,Angola could cease having a ‘fire-fighting approach’ to development, and focus on a sustained periodof development and the building of truly democratic institutions.

16

EuropeAid is the development wing of the European Commission. It formulates the European Union’sdevelopment policies and is active across the developing world.

‘They need our brains, they don’t need our money’, declared Manuela Navarro. Despite Angola’s dramatic divide between the wealthy and the impoverished, the Government of Angola is cash-richand EuropeAid considers its expertise best utilised in providing technical support and assistancerather than funding for major infrastructure projects. Indeed, the Angolan Government is certainlymore liquid than many of EuropeAid’s donor governments. EuropeAid provides assistance for institutional reform and works across a variety of sectors including; mining, health, financial services,water and sanitation.

Europaid’s major focus in Angola has been on improving the provision of clean water and sanitationinfrastructure, working with both the Angolan Government and NGOs. The majority of EuropeAid’s Angolan budget is used in supporting a variety of NGO led projects in this sector across the country;working with organisations such as Oxfam, World Vision and UNICEF. Much of the technical assistance in this sector is given via Agua de Portugal, the Portuguese State Water company.

The primary challenge for the EuropeAid team in Angola was to assist the country in reaching UN’sMillennium Development Goals in the water and sanitation sectors. Whilst the urban areas of Angolawere considered to be ‘well on the way’ to being at acceptable levels, rural Angola is lagging behindthe desired level of development.

In 2012 the Angolan Government stated that it would be investing $US 1.25 billion in water supply systems across the country through its Agua Para Todos (Water for All) drive. Ms Navarro emphasised that the funding of the sector was not an issue, but rather the fact that there are very few Angolan’s with the appropriate qualifications and experience to run and manage a water network.This was a key area where EU support can assist Angolan development needs.

Only 0.006% of the Angolan budget comes from EU aid sources. The EuropeAid office Angola administers a budget of only around €17 million. Consequently it would be safe to conclude that EuropeAid related projects would only be of interest to niche British development consultancies.

Development Agencies

Manuela Navarro, Business Development Manager and Maria José Santos Baptista, Project Manager - Social Sector Development and Infrastructure - EuropeAid

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18

The delegation was the first British group to visit the AfDB in Angola. The AfDB is a regional multilateral development bank which is active across the continent. Whilst the UK makes a substantial contribution to the bank, (£567 million for 2011-2013) it is well known that the UK businesses have limited engagement with the AfDB. For example, in 2011, under 1% of consultancyprojects offered by the AfDB were won by UK companies. The AfdB manages all bids and calls to tender for its via its website: http://www.afdb.org/en/

The AfdB, though founded in 1963, has only been active in Angola since 1982. The office closed whenhostilities intensified, only opening fully again at the end of the war. The AfDB in Angola focuses ontwo ‘pillars’ of work, namely the economic infrastructure and the physical infrastructure of the country. The AfDB wants to help Angola develop a more competitive, entrepreneurial and diverse formal economy, whilst at the same time encouraging the development of infrastructure that ensuresAngola is not only a country that’s regions are well connected, but a country that is closely linked to itsneighbours (eg. the AfDB is supporting a feasibility study the rail link to Zambia).

The Angolan Government does not have a ‘comprehensive and integrated approach’ to building aneconomy that is not solely depended on the oil and gas sectors. The AfDB sees their position as offering an important source of information and guidance for the Government. The Bank is currentlyrunning a number of initiatives in Angola including projects in agriculture, transport, water sanitation,workforce training, fisheries, SME development and capacity building in the Ministries of Planning and Finance.

Naturally, from the delegation’s perspective, the second pillar of the AfDB’s operation is of primary interest. Mr Septime and Mr Muzima affirmed that Angola is well positioned country, with abundantnatural resources; the key issue is making those resources accessible. The Bank is currently workingon a series of masterplans for the Ministry of Energy; taking a regional perspective on the possibilitiesfor renewable and hydroelectric projects. A transport masterplan for the country has been requestedby the Ministry of Transport; of particular interest will be rail links to ports along the Lobito corridor.With the Chinese rehabilitating the connection between the Democratic Republic of Congo and Zambia, Angola hopes to develop its own direct link. They have been making further efforts to improvelinks to Ambriz Port. The progress on the masterplan (and any related tenders) is currently delayed asthe AfDB waits for the Government side’s team to be confirmed.

Mr Septime was clear that major work was also needed beyond ‘hard infrastructure’. The AfDB encourages the Angolan Government to ‘look at the bigger picture, especially with regard to trainingand education’. Higher Education needs to be put ‘at the core’ of the country’s strategy for businessand commerce, primary and secondary education provision is not sufficient to develop the requiredskilled workforce.

Due to Angola’s increased wealth, in 2011, the board of the AfDB considered removing the infrastructure pillar from their programme. However it was decided that if the Bank wants to promotechange in sector, it must be operational within that sector to play a truly catalytic role. Providing comment from outside was ‘not deemed sufficient’.

With regards to barriers to trade UK businesses might encounter, a lack of Portuguese speakingskills was highlighted as being a key issue. Mr Septime remarked, ‘If you don’t speak Portuguese –you are out’, it is a ‘a real constraint’ for foreign companies. Corruption ‘is still there’, although it wasnoted that bureaucracy seemed to be improving, with it being remarked that in Brazil processes canbe just as arduous. When questioned on the strength of the Chinese in the market, Mr Septime wasquite clear in that their major advantage was simply that ‘they bring the money’.

Martin Septime, Resident Representative and Joel Daniel Muzima, Principal Country Economist -African Development Bank (AfDB)

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The World Bank is revising its Country Partnership Strategy with the Angolan Government for the nextthree or four years. Along with their office in Luanda, projects managers are based in Maputo andWashington DC. Currently the World Bank is implementing 5 projects across Angola and has a totalbudget of approximately US$ 460 million. A strategy is in place for the next three years but after thispoint the World Bank is keen to see Angola graduate on to International Bank for Reconstruction andDevelopment (IBRD) led initiatives, as the country’s economic outlook continues to look more stable.

Ms Cavalho remarked that these negotiations were ongoing, and that a key issue for the World Bank is to emphasise the particular advantages that the IBRD can offer over loans backed by future oil revenues for infrastructure development. The IBRD is able to offer a lot of advice and support in thedevelopment of projects, and their effective financial management for ‘very little’ and would ultimatelyproduce better outcomes compared to other forms of project finance. There is a hope that if the graduation process is accepted and all relevant internal budgets approved, the World Bank will be ablecommit to more work in public service provision, economic diversification and technical assistance.

The primary projects currently being implemented in the Angola by the World Bank are:

1 An emergency rural road improvement project (approved in 2007) - this due to be completed inMay 2013, although the Angolan Government are negotiating to extend it. All contracting for theproject is completed.

2 Provincial water sanitation - this $US 7 million project has now started to support the goals ofthe Agua Para Todos imitative which has brought much needed extra funding to the sector.

3 A portfolio of social development programmes is run in partnership with the Ministry of Planning, financed with around $US 81 million from the World Bank and $US 40 from the European Union. It covers a variety of capacity building and development initiatives across social infrastructure of the country, in particular in schools and healthcare facilities.

4 In 2008, the World Bank allocated $US 30 million for agricultural projects, but only 3% of thisfund has been dispersed. The package is now going through a restructuring process.

5 A major healthcare project ($US 98 million) co-financed by the Government is working towardsthe municipalisation of the health service, and is funding medical equipment.

Ms Cavalho advised that any companies seeking to work in the country must ‘keep up individual relations’, companies without an office in Angola were at a ‘big disadvantage’ when it came to doing work derived from Government or development bank programmes. She warned that on the Government side, decision making is extremely centralised and that usually the World Bank is not in the position to interfere or speed up decision making processes.

Whilst life in Luanda has improved substantially since 2003, Ms Cavalho was clear the rural environment is extremely difficult. For the full impact of Angola’s growing wealth to be felt by all sections of society, it is vital that the Angolan Government address its inefficiencies.

Ana Maria Cavalho, Operations Officer - World Bank

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João Gago Nicácio Gomes holds senior roles not only in the Angolan Association of Contractors forConstruction and Public Works (AECCOPA), but also forms part of the leadership of the LusophoneConfederation of Construction and Estates (CIMLOP) and the Angolan Council of Business Associations (CAEA). He welcomed the delegation to his residence for a briefing on the goals of the organisations he represents. The Secretary of State for Environment was present to offer commentfrom the Government side.

AECCOPA was founded in 1998, with the intention of bringing all professionals involved in Angolanconstruction projects into one organisation. It seeks to promote a cooperative approach between its250 member companies that range from SMES to larger organisations. Members are involved acrossthe sector; from those in the material supply chain to project manager. It aims to develop ‘the bestpossible conditions’ for the construction industry as a whole in Angola, and encourages the sharing of knowledge, skills and experience between its members. AECCOPA is a close partner of the Angolan government, and has participated in the programme to build 1 million new Angolan homes,detailed elsewhere in this report. AECCOPA is the Angolan wing of the multinational umbrella organisation, CIMLOP.

The President has welcomed other British delegations in the past and was keen to offer his organisation’s support to British companies in the infrastructure and construction sectors. He waskeen to encourage more international investment into Angola and utilise international expertise to realise a more regimented approach to regional development. He is attracted by the British reputationfor high quality work delivered to an appropriate schedule.

When questioned upon the issue of corruption in the construction sector in Angola, the President gave frank and insightful comment. He admitted that in the immediately post-war period, China’s ‘no questions asked’ investment approach was extremely attractive. He compared the situation to a mandrowning, who throws up his arm to grab the first had that is extended to him. At this time there wasno substantial drive to address the varying types of corruption and bribery simply because people were only concerned with ensuring the continued safety and survival of their families. The situation isnow changed.

It was explained that AECCOPA has had little interaction with British companies, but the President is keen for his member companies do build new relationships and investigate the possibility for joint-venture projects. He felt that roads, water supply and energy were areas that could be particularly fruitful for Angolan-British partnerships. He encouraged the delegation to ‘be aggressive’when seeking business in Angola. The President also noted the need for foreign expertise in capacitybuilding to help Angola to develop an entrepreneurial culture and to entrench the skills necessary fora functioning market economy.

The Secretary of State for Environment gave brief comment on her hopes for the building of a truly developed Angolan tourism sector, which would require major investment in infrastructure and the rehabilitation of potential touristic locations.

The delegation raised the topic of the notoriously arduous visa processes for foreign workers in Angola, the President simply responded that it is just as difficult for many Angolans to get visas tomeet potential partners in Europe, especially in the UK.

Professional Federations Meetings

João Gago Nicácio Gomes (accompanied by HE Paula Christina D. Fr. Coelho, Secretary of State for Environment) - President, Associação dos Empreiteiros de Construção Civil e ObraPúblicas de Angola (AECCOPA), Vice President, Confederação da Construção e do Imobiliáriode Língua Oficial Portuguesa (CIMLOP), Vice Preseident, Conselho Das Associações Empresariais de Angola (CAEA).

V Delegates

The delegation included representatives from:

ESL Group 6 - 8 Salisbury Road Wrexham LL13 7AS UK

Tel: +44 (0) 1978 263668 Fax: +44 (0) 1978 311709 email: info@eslgroupuk.com http://www.eslgroup.ws/

PolypipeBroomhouse Lane Edlington Doncaster DN12 1ES UK

Tel: +44 (0) 1709 770000 Fax: +44 (0) 1709 770001http://www.polypipe.co.uk/

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Mace 155 Moorgate London EC2M 6XB UK

Tel: +44 (0) 20 3522 3000 http://www.macegroup.com/

Mabey Bridge LimitedChepstow Monmouthshire NP16 5YL UK

Tel: +44 (0) 1291 623 801 Fax: +44 (0) 1291 625 453http://www.mabeybridge.com/

Pinnacle International Freight LtdUnit 1 Swannington Road, Broughton Astley Leicester LE9 6TU UK

Tel: +44 (0) 845 6216 111 Fax: +44 (0) 845 6216 112http://www.pinnaclefreight.com

Roughton InternationalA2 Omega Park Electron Way Chandlers Ford Hampshire SO53 4SE UK

Tel: +44 (0) 23 8027 8600 Fax: +44 (0) 23 8027 8602e-mail: hq@roughton.com http://www.roughton.com/

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VI Useful Links

http://www.afdb.org/en/countries/southern-africa/angola/

African Development Bank country page

http://www.worldbank.org/en/country/angola

World Bank country page

http://siteresources.worldbank.org/ANGOLAEXTN/Resources/AICD-Angola_Country_Report.pdf

Angola Infrastructure overview

http://www.transparency.org/country

Transparency International country pages (click on map location for details)

VII Bibliography

Chêne, M.

‘Overview of Corruption and Anti-Corruption in Angola’ from U4 Anti-corruption Resource(www.u4.no), 2010 (February)

Corkin, L.

‘China and Angola: Strategic Partnership or Marriage of Convenience?’ in Angola Brief, Vol 1, No.1, January 2011

Jover, E., Pinto, A. L., Marchand, A.

African Development Bank – Angola: Private Sector Country Profile, 2012 (October)

Pushak, N., Foster, V.

Angola’s Infrastructure: A Continental Perspective (Africa Infrastructure Country Diagnostic), 2011 (March), World Bank Publication

Soares de Oliveira, R.

‘Business Success, Angola-Style: Postcolonial Politics and the Rise and Rise of Sonangol’ inThe Journal of Modern African Studies, Vol 45, No 4, (Dec., 2007), pp595-619 (CambridgeUniversity Press)

Economist Intelligence Unit (EIU), Country Report: Angola, January 2013

Transparency International Country Profile: www.transparency.org/country

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VIII UKTI Contact Details

UK Trade & Investment Angola

British Embassy

Rua 17 de Setembro

4 Caixa Postal 1244

Luanda

Tel: +244 222396910

John Woodruffe

Head: UKTI Angola

email: john.woodruffe@fco.gov.uk

Mateus Keven

Deputy Head: UKTI Angola

email: mateus.keven@fco.gov.uk

José Damião Manuel Paulo

Trade & Investment Adviser

email: jose.paulo@fco.gov.uk

UK Trade & Investment Headquarters

1 Victoria Street

London, SW1H 0ET

United Kingdom

Tel: +44 (0)20 7215 5000

Carolyne Akers

Head: Africa, Strategic Trade Group

email: carolyne.akers@ukti.gsi.gov.uk

This report was written by Alex Lambeth, Director: Middle East & Africa, British Expertise

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As at May 2012

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