May / June 2011 • IBERIAN LAWYER • www.iberianlawyer.com

IBERIAN LAWYER

SPECIAL FOCUS: LUSOPHONE AFRICA 2011Angola: fishing for new investment

An abstract from Iberian LawyerMay / June 2011

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May / June 2011 • IBERIAN LAWYER • www.iberianlawyer.com 51

Special FocuS: luSophone aFrica

Angola: fishing for new investmentAngola is entering a new phase of development and seeking to attract larger and longer-term investorsAs Iberian businesses search for new market opportunities Angola is an increasingly attractive draw. GDP is expected to grow 7.5 percent this year and 11.1 percent in 2012. Since the end of the 30 year civil war in 2002, the Government has embarked on a major rebuilding process, in many regards starting again in terms of roads, railway, port and airport facilities, say lawyers.

But that is not to say the country is without its challenges. All foreign investment must be undertaken with a local partner, and in the most strategic sectors – notably oil and mining, which still fund the country’s development – the State inevitably plays a major role. Recent amendments to the Private Investment Law have also raised the minimum foreign investment thresholds to US$1m.

But the Government is now looking to clarify many aspects of the regulatory framework that surrounds foreign investment, in an attempt to attract larger-scale and longer-term investment from what it terms “qualified investors”. Infrastructure development remains a major focus but

there is also greater emphasis on diversifying the economy.

Angola is inevitably a major target for Portugal’s leading law firms, but which operate in association with local firms as only Angolan citizens can join the local Bar.

The longest-established is Miranda, which operates in association with Fátima Freitas Advogados, but other prominent players include F Castelo Branco & Associados, which operates alongside Eduardo Vera Cruz Advogados, Abreu Advogados (through FBL Advogados), and PLMJ (now aligned to GLA-Gabinete Legal Angola). Among the more recent arrivals is SRS Advogados (in association with Legal Counsel Firm) and Vieira de Almeida, which last year brought Luanda firm Paulo Antunes Advogados into its VDAtlas international platform.

Other firms with growing local ties include Franco Caiado Guerreiro & Associados, Raposo Bernardo and Sérvulo. While Luanda-based AVM Advogados is the only Angolan firm in Portugal, where it now has offices in Lisbon and Porto.

Angola es una apuesta cada vez más atractiva

para las empresas de la Península en busca de nuevos mercados y

oportunidades. El país está entrando en una nueva

fase de crecimiento y ahora se centra en atraer a inversores de mayor peso

y a más largo plazo.

Entering a new project phaseAngola and Mozambique may be on opposite sides of Africa but they are experiencing similar types of project development, with the predominant focus on transport and communication infrastructure, says Nelson Raposo, Managing Partner of Lisbon-based Raposo Bernardo which is active in both countries.

“Angolan projects are almost always self-financed with a large degree of State intervention and also of Sonangol, which works almost as a sovereign fund, but there is increasing interest within the expanding banking sector to look at project funding.”

This is in direct comparison to Mozambique where most projects are still financed by international aid and support programmes, he explains. In neither country is there yet much PPP/PFI experience as known in Europe.

“The usual scenario is that the State launches a bid, a private company executes the project, receives payment and remains completely outside the subsequent exploitation. Neither Angola or Mozambique generally looks to share the

risk in the conception, construction and exploitation of projects, in part because of the limited need for private finance.”

Construction opportunities clearly exist but challenges remain for operators, while he also emphasises the need for in-depth market knowledge and a trusted local operating partner, which may be the State. “Each country has its own priorities and development rhythms but it is essential to understand how the State works and if necessary to engage with it.”

In Angola, obtaining visas may be problematic, operating and staff costs can be high and it is common to experience approval delays. In Mozambique, the major issue remains transport and communication but which also present ongoing opportunities, says Raposo.

“Mozambique still needs to focus on basic infrastructure to better connect the country. Angola is however experiencing a ‘second’ phase of development, with a greater focus on housing, schools and hospitals, which is drawing in new operators and investors.”

Angola y Mozambique están experimentando

un desarrollo similar en cuanto a obras y

proyectos, con un énfasis en las infraestructuras

de transporte y comunicaciones, dice

Nelson Raposo de Raposo Bernardo.

Nelson Raposo

• IBERIAN LAWYER • May / June 2011 www.iberianlawyer.com52

Special FocuS: luSophone aFrica

The amendment of Angola’s Private Investment Law indicates a desire by the Government to increase both the scale and depth of expertise of the international investment coming to the country, says António Vicente Marques, Founding Partner of Luanda-based AVM Advogados.

“There is no doubt that Angola presents a lot of opportunities, but there is an evident desire to encourage longer-term investment to the country and to ensure that the wealth and employment opportunities being created are shared with its own citizens.”

The most obvious change to the investment regime, which is in its final phases of approval, is that foreign or private investors will only now be able to benefit from certain tax advantages and to repatriate profits from their Angolan business activities if they have a minimum initial investment of US$1m. This applies to investments or commercial activities which occur in Angolan territory, to the establishment of new companies, or the acquisition of operating entities.

“It represents quite a significant change to the existing regime, which stipulated an investment threshold of US$100,000, but in reality was often higher. The threshold also now applies to all commercial entities, there is no exemption for those with a 50 percent shareholding by the State or other public legal entity,” says Vicente Marques.

The National Private Investment Agency (ANIP – Agência Nacional para o Investimento Privado) is the Government body that issues investment approvals, and the changes impacting on the investment regime will also affect it, he says. “There is a desire to formalise some of the procedural functions that ANIP performs and to give it more authority in specific instances.”

Certain areas of activity will therefore remain outside the scope of the new law and remain subject to individual scrutiny. Among them private investment programmes relating to oil exploration and diamond mining, including the rights, guarantees and incentives associated with them, and the operation of financial institutions.

“The predictions are that Angola will continue to see dramatic growth for at least the next decade, and the Government wants to ensure that this is done in a more transparent and predictable way,” adds

Claudia Santos Cruz, Managing Partner of the firm’s Lisbon office.

“Obviously the new thresholds will not present a barrier to multinationals’ investments or for investments in the continued project infrastructure development programs, where companies are already committing very large sums, but it may impact on the attraction of Angola to smaller investors.”

The return to health of the Angolan economy, in line with rising oil prices and Government revenues, continues to attract considerable international interest they say. Portuguese companies are obviously already high profile across most sectors, while there is also major Chinese investment – Angola is China’s main oil supplier – and US companies are dominant in the oil sector, but there is growing South African, UK and German activity.

Alongside the obvious need to continue to develop the country’s road, rail, air and communication infrastructure, the new investment rules will also help further open up other areas of economic activity. Among them, energy and water, housing, health and education and tourism, they say.

“The Government wants to benefit from international expertise and to bring in new technologies but it also wants to create a balance with the expectations of the domestic population. It wants to reduce the clear desire of some investors to ‘get rich quick’ and then take all their profits out of the country. It wants companies to put something back.”

Such developments are accompanied by changes to the tax regime, notably affecting sales tax, imports and real estate transactions, as well as the creation and promotion of development hubs and special investment economic zones. The raising of the investment threshold barrier may reduce the ability of smaller companies to begin operations in the country, at least on their own, but it does not diminish the underlying attraction of the country which has one of the fastest development rates in Africa.

“Companies still face challenges when doing business in Angola, but there is now movement to remove some of the opaqueness that surrounded new investments and to put what were perhaps unwritten rules on a more formal setting,” says Vicente Marques.

Clarifying Angola’s investment rulesA rise in the thresholds applicable to foreign investment in Angola is aimed at encouraging investors with longer-term horizons as well as to better formalise the rules

El aumento de la cantidad mínima exigida para que las inversiones extranjeras puedan recibir beneficios fiscales en Angola tiene como objetivo el fomento de la inversión a largo plazo así como una mayor transparencia normativa, explican António Vicente Marques y Claudia Santos Cruz de AVM Advogados en Luanda.

António Vicente Marques

Claudia Santos Cruz

May / June 2011 • IBERIAN LAWYER • www.iberianlawyer.com 53

Special FocuS: luSophone aFrica

A virtuous investment triangleThe rapid economic expansion of Angola and Brazil is bringing inbound and outbound investment opportunities for Portugal

Angola, Brasil y Portugal están cada vez más

interconectados y forman un nuevo triángulo de

inversión en el Atlántico, opina Miguel de Avillez

Pereira, de Abreu Advogados, que opera

en Luanda desde 2007 a través de FBL Advogados.

Miguel de Avillez Pereira

Finding a better revenue balance Angola may be seeing significant change in the amounts foreign investors must bring to the country in order to establish operations but this is fundamentally intended to manage the liquidity of the local economy, and to prevent companies taking out more than they bring in, says João Robles, the Head of the Angola desk at F Castelo Branco & Associados.

“The country may be rich but it is investing enormous sums in rebuilding its infrastructure, effectively from nothing. This has meant the Government and National Bank of Angola (NBA) placing significant emphasis on managing the flow of capital into and out of the country.”

The new Private Investment Law has raised the minimum investment threshold from $100,000 to $1m, as the National Private Investment Agency (ANIP) was no longer approving such investments precisely because, considering the specificities of the market, an investment would hardly be considered sustainable.

“Much of the major industrial and construction activity in Angola is

performed by foreign companies, who establish offshore consortia agreements which include a local Angolan partner. This means that a significant amount of the country’s oil and diamond revenues are not retained within the country.”

The new threshold may be nominal, relative to the scale of investment the country still requires, but the Government is trying to stop even small and medium-size companies repatriating the majority of their revenues as dividends.

“Depending on the relative cash flow of the country the NBA has also put limits on the ability of the banks to transfer funds internationally. The annual limit has recently been increased from $100,000 to $300,000 but previously it was $500,000.”

If an entity wants to transfer more than this it requires special permission, says Robles. “The Government’s focus towards what it calls ´qualified investors´ – able to commit to longer-term investment – is a way of encouraging more business revenues to be retained locally.”

Un reto constante para los inversores extranjeros

en Angola es encontrar modos de sacar el mayor

partido de los ingresos generados en el país,

afirma João Robles, de F Castelo Branco en

Luanda.

João Robles

Angola, Brazil and Portugal increasingly form an Atlantic investment triangle, says Miguel de Avillez Pereira, Head of Corporate at Abreu Advogados in Lisbon, which since 2007 has operated in Luanda through FBL Advogados.

“Businesses from each country are finding new opportunities in the other. Companies are expanding to find new markets, financing and project opportunities, and capitalising on the obvious cultural and language similarities.”

Angola’s economy growth rate is among the fastest in Africa. GDP is expected to grow by 7.5 percent this year and 11.1 percent in 2012. The Government is however now looking to attract larger-scale investment, with the focus on infrastructure development alongside the mining and services sectors.

“But Angola is also emerging as an investment corridor into sub-Saharan Africa. It echoes Brazil, which is now the South American super power, and both countries are home to a growing tier of ambitious, and capital rich, businesses that

are already active in their neighbouring markets and ready to expand further.”

Portugal’s economy may not be as dynamic as its former trade colonies but it does still offer blue chip investment opportunities in the energy and banking sectors and full access to the European Union. Portugal’s two largest takeover battles of recent years both involved Brazilian investors or targets.

“We have already seen Angolan investment in companies like Galp and BCP, but there has also been considerable activity in the media and communication sectors. The Brazilians have been active in the construction sector while Portuguese telecoms, energy companies and banks are focusing on Brazil.”

The Portuguese Government’s planned privatisation programme offers new opportunities, he adds. “There is a sense that Brazilian and Angolan investors are already exploring options, and collaboration, and are among the few with ready access to the capital required.”

• IBERIAN LAWYER • May / June 2011 www.iberianlawyer.com

IBERIAN LAWYER

An abstract from Iberian LawyerMay / June 2011

For further information please contactmaricruz.taboada@iberianlegalgroup.com

www.iberianlawyer.com