Angola’s privatisation programme forges ahead

Angola’s privatisation programme has overcome many challenges, and more lie ahead, but the availability of so many large companies on the market is set to provide a big opportunity for international investors.

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Something is happening in Angola, but not many people around the world are familiar with the new dynamic. However, those with an interest in the country have already noticed the measures taken to strengthen and expand the private sector during recent years, as policy continues to focus on reducing Angola’s dependence on the oil and gas sector and diversifying its economy. Evidence of this is revealed by Transparency International’s Corruption Perceptions Index for 2022 – since 2016 Angola has risen by 46 places in the ranking.

This result is based on a series of actions. For example, even if there is still a long way to go, measures have been adopted to strengthen the rights of investors, to offer attractive investment incentives (in particular tax-related ones) and to liberalise the regime for cross-border payments, one of the main constraints felt by those who wish to invest in the country.

We see this reflected in many new statutes, including the private investment law and the amended foreign exchange regulations. Liberalisation of the foreign exchange market has recently had tangible effects in the mining sector, notably through greater flexibility to make payments from bank accounts in foreign currency, permission for investors to keep their revenues in foreign bank accounts and the end of the requirement to obtain a licence from the central bank for foreign credit.

Furthermore, the construction of infrastructure necessary for the country’s development is supported by a new public-private partnership law, the new competition law and the public contracts code.

Privatisation programme

In addition to the changes in the regulatory field, Angola has taken other important steps to increase private sector participation in its economy, such as an ambitious programme for the creation of public-private partnerships. But probably the most significant action to attract private investment (and in particular foreign investment) was the launch in 2019 of the government’s ambitious privatisation programme, known as Propriv.

Propriv aimed to achieve the privatisation of 178 assets directly or indirectly held by the Angolan state by 2022. The assets were of various types and sizes and covered a large number of sectors. They varied from interests in industrial units established in special economic zones to stakes in aviation, brewing, banking, insurance, telecommunications, construction and textiles companies. They also included Angola’s “crown jewels” – Sonangol (oil and gas) and Endiama (diamonds).

It was recognised that the success of the privatisations would depend greatly on the efficiency, clarity and transparency of the various processes. The framework law on privatisations established the legal basis for the privatisation programme and provides that the privatisations are to be conducted by way of public tender (with or without prequalification) or by selling shares through the local stock exchange (auction or initial public offering). The Angolan Debt and Equity Exchange (Bodiva) therefore plays an important role in the privatisation programme.

However, the pandemic and the challenging macroeconomic context that resulted from it, which lasted until late in 2022, posed serious difficulties for the programme. In light of these difficulties, the implementation of the privatisation programme was not as fast as the authorities had anticipated.

As of today, 93 privatisations have been concluded, a result generally perceived as not ideal, but still a positive outcome. This was most likely one of the reasons why the Angolan government decided to extend Propriv for another three-year period, from 2023 to 2026, with a renewed calendar and new assets. The extension of the programme was also motivated by the existence of unfinished privatisation processes and the recovery of new assets by the Angolan government that had become available for privatisation.

Under the renewed plan the privatisation of Unitel, BFA and TV Cabo is due to begin in 2023 and that of Bodiva, Sonangol and Endiama should start in 2024. All of these privatisations will take place through initial public offerings.

Challenges that lie ahead

While the first chapter of the privatisation programme presented great opportunities for international players and investors to enter or further strengthen their presence in the Angolan market, this new phase is likely to be even more attractive, as it will bring public sector heavyweights to the private market.  

There are still a number of challenges on the road ahead. The depreciation of the Angolan currency, the kwanza, has been the biggest concern this year. Foreign exchange shortages and restrictions, although significantly improved in recent times, also continue to be a cause for concern for investors, who want to be able to make offshore payments, including the repatriation of the proceeds of their investments.

Another hurdle is that most of Angola’s larger companies are still struggling to comply with the information and transparency requirements associated with being listed. Private investors must therefore ensure that their investments are properly structured and identify and mitigate potential risks.

Opportunities for international investors

In spite of these challenges, it is clear that the right conditions are being created for increased participation by the private sector in the Angolan economy and that there is a clear political will to support this development. The privatisation programme provides interesting opportunities for foreign investors and this is the time to look out for the big names that will be made available to the private sector.

The companies that are to be privatised operate in a wide variety of sectors. In some cases, state ownership may have affected a company’s growth potential or the scope and nature of its activities. The Angolan privatisation programme is therefore not only of interest to potential investors, but also to service providers that support companies in the privatisation process.

Investors and service providers from all around the world should play an important role in the development of Angola’s private sector.  

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Alberto Galhardo Simões

Alberto Galhardo Simões is partner and head of the Lusophone Africa team of law firm CMS Portugal.