Although fluctuating oil prices have had repercussions for the country, recent investment in Angola, along with changing macroeconomic conditions, has improved the nation’s economic standing and created a stable banking system.
Banks in Angola are expected to grow over the next decade at a faster pace than any of their African counterparts. They are also among the most profitable on the continent thanks to Angola’s new Foreign Exchange Law for the oil sector. Investment in Angola’s oil industry will bring billions into the nations’ banking system. The initial phase of the new law came into effect in May 2012, which obliged oil firms to pay taxes in foreign currency, such as US dollars, through accounts in Angolan banks. This increased investment in Angola is thought to have had a noticeable impact on the banking system as a whole.
Thanks to its ongoing oil boom, Angola has become the second biggest crude producer in Africa. Banks continue to post strong growth and attract foreign investors. Angola’s nominal GDP stood at $100.948bn for 2011, which worked out at about $5,144 per capita. But the most vital factor for banks, corporations and individuals interested in investment in Angola is its high rate of economic growth. The Angolan economy grew by 3.4 percent in 2011, the same as in 2010, with the non-oil sector advancing by nine percent. The non-oil sector’s progress has understandably been seen as providing promising evidence of Angola’s diversification, therefore showcasing the array of opportunities for investment in Angola.
Angola’s economic growth-rate is expected to increase to about 10 percent during 2012, driven by an even better performance of the non-oil sectors – especially energy, agriculture, commerce and construction. Over the past decade, Angola has been the fastest-growing economy in Africa and one of the most rapid in the world, with an average GDP growth between 2005 and 2007 of 20 percent. In long-term growth from 2001 to 2010, Angola enjoyed the world’s highest annual GDP growth, of 11.1 percent.
Oil production, which has been largely responsible for this high rate of growth, was running at about two million barrels per day in 2010, but due to technical problems and oilfield maintenance, production dipped in 2011, even as comparatively low as 1.4m barrels per day. It is now back to about 1.8m barrels per day. Angola has said that with new fields becoming active, it fully expects to have restored daily production to two million barrels per day by 2014. Investment in Angola is therefore inevitably on the rise.
Angola does have some social and economic problems, including poverty and some inequalities in wealth. Yet the economic outlook is promising. Progressively the nation’s wealth is filtering down to the growing middle-class and to the more impoverished parts of the population. Manufacturing in the capital Luanda, includes: processed foods, beverages, textiles, cement and other building materials, plastics, metal-ware, cigarettes, shoes and clothes.
Luanda has a well-positioned harbour; the chief exports that go overseas are coffee, cotton, sugar, diamonds, iron and salt. The capital also has a thriving building industry, a result of the nationwide economic boom experienced since 2002, when political stability returned to Angola after the end of the civil war.
Today, Angola is enjoying significant economic diversification and is considered a prime location for business ventures. Investment in Angola sourced from domestic and foreign investors is funding many economic developments both in Luanda and in other parts of the country.
Meanwhile, the Angolan banking industry seeks to bring banking expertise and insight to its domestic and overseas customers, with the industry focusing especially on developing its investment banking capabilities. The penetration of the banking sector within the lives of families and the small business environment is still underway.
The Angolan investment-banking scene, like the Angolan retail-banking scene and indeed the Angolan economy, is in an exciting state of growth. Some 20 percent of the banks represent about 80 percent of the assets. Despite this concentration being confined to five large banks, significant market share changes have been seen, with these larger banks losing relative market share to the smaller ones.
The energetic expansion of Angola’s banking sector is recognised both in and outside the nation as presenting some challenges, which the current government is attempting to rectify. These challenges affect retail and corporate banking as much as the investment-banking sector.
Firstly, the Angolan banking scene is regarded as needing a comprehensive and readily workable code of Best Practice, and that this will be needed to be updated regularly. Secondly, and related to this first challenge, the banking industry is seen as needing an effective structure for internal governance that allows the continued monitoring, control and regulation of the sector.
To prepare for the influx of investment in Angola the professional services consultancy KPMG believes that Angolan banks are working on tackling effectively all of the following challenges:
• Capturing market potential and growth
• New distributor channels and financial innovation
• Reinforcement of the regulatory and supervision framework
• Credit risk management
• Emergence of investment banking and the capital markets
• Training and retention of human resources
• Tax challenges for the financial sector
• Information security
• Business continuity management
As far as the Angolan investment-banking scene in particular is concerned, KPMG recommends the following measures that must be pursued if investment banking in Angola is to operate to maximum efficiency, and to ensure the greatest impetus to the success of investment in Angola:
• The need to find alternative funding sources to the traditional corporate banks, given the increasing extent and complexity of the investments to be carried out by the different Angolan economic groups.
• The need to raise funds for much longer periods and with reimbursement plans linked to the cash flows of the projects themselves. This also will encourage investment in Angola.
• Investment in Angola can be spurred through the development of public private partnerships (PPP).
• The launch of Angola’s capital market, in which Angola’s investment banks play a vital and fundamental role, both in terms of intermediation and assistance to the issuers, as well as in the assistance with the placement of the different securities being issued.
• Investment in Angola requires the need to design and assemble debt and/or equity instruments that attract foreign investment.
• The growth of the market for Mergers and Acquisitions will attract investment in Angola.
In March 2010, Angola’s first private equity fund raised $28m in capital in its first closing, in what was considered to be an important step forward for the country’s capital markets. The Fundo de Investimento Privado Angola (FIPA) had the aim of linking local capital markets with international sources of finance and to small and medium-sized privately owned businesses.
Many factors contribute to investment in Angola being especially interesting nowadays to foreign organisations and individuals that have become only too aware of the limited opportunities offered by many developed countries in the wake of the current economic climate.
These factors include; Angola’s relative political stability, the nation’s demonstrated ability to achieve unusually high economic-growth, Angola’s hard-working population that is eager to improve living standards, a new appreciation of Angola’s achievements by the international financial community and finally, Angola’s burgeoning non-oil sector whose rapidly increasing economic contribution dramatically shows the Angolan ability to diversify economically.
In early 2011, the African Development Bank (ADB) produced a revealing and insightful report, ‘SSA – The Middle of the Pyramid: Dynamics of the Middle Class in Africa’, which argued that strong economic growth had reduced poverty from 50 percent of the population in the year 2000 to 44 percent in 2011, and that the size of the middle-class had increased in SSA, defining the middle-class as those with a consumption of $2 – $20 per day in 2005.
Today, investment in Angola is by no means restricted to the oil sector. Angola is one of only four African countries in which annual foreign investment totals more than $3bn. Angola’s government has made clear that it will continue to focus on major investment projects that develop infrastructures in areas such as roads, railways, housing and retail developments.
The sheer resilience of the Angolan economy is also seen as offering numerous opportunities to the commercial sector, supported by the domestic market, which clearly has even more growth potential. According to the IMF, the per capita GDP in Angola grew from $585 in 2000 to $5,061 in 2011, and could attain $6,392 by 2016.
In Angola, the commercial sector’s GDP rose from 16.9 percent of overall GDP in 2006 to 21.2 percent in 2011: an increase of 4.3 percent. Elements of infrastructure to which particular developmental impetus is being given include: retail units, wholesale markets, logistics centres, roads, railways, harbours and other maritime access networks, and logistical connections to outside Angola.
In March 2012, Goldman Sachs made Africa the subject of a detailed economic report. This document in effect provided decisive encouragement to any foreign organisation or individual who has a serious interest in investment in Angola. “Is now the time for multi-nationals to be investing in Africa?” the report rhetorically asked. “In short, our conclusion is yes.”
The Goldman Sachs report continued: “Africa’s exceptionally robust growth over the last decade is probably understated but not being able to measure this growth precisely shouldn’t detract from Africa’s potential, which is about much more than resources as it evolves and climbs the consumption, urbanisation and perhaps industrialisation curves that the BRICs have climbed.”
The very fact that Goldman Sachs mentions Africa in, so to speak, the same breath as the BRIC nations (Brazil, Russia, India and China), whose economic growth over the past decade has been a major success story, is itself extremely encouraging for Africa. The report also stated that: “Angola still has to sustainably resolve its political issues, but it has one of the most attractive portfolios of resources (oil, gold, diamonds and copper) which have driven most of its annual double-digit growth over the last decade.”
The National Bank of Angola (BNA) is the central bank of Angola and the principal body that administers regulation in the nation’s banking sector. It is state-owned and the Government of Angola is the sole shareholder. It is generally agreed that there is still much that can be done to bring about a proper system of regulation for the Angolan banking and finance industry.
A Presidential Decree in July 28 2010 publicly recognised the urgency of a timely and adequate implementation of reform measures to ensure an adequate roll-out of the tax reform process in the short and medium term. With tax law clearly vital to the Angolan investment-banking scene both in order to let it operate efficiently and equitably and also to allow Angolan governmental investment in infrastructure to be properly funded, these reforms are of great significance. The specific reforms involve:
• The creation of a sole administrative entity, responsible for tax revenue, that combines the National Tax Directorate and the National Customs Office
• A comprehensive reform of the tax system to implement initiatives that make the tax system fairer, more modern and effective
• Reform of tax justice to project and implement the reformulation of the tax judicial system, increasing the automation of the Fiscal and Customs Litigation Court, and to promote the resolution of pending legislation between the administration and taxpayers
KPMG, in its report points out the huge importance the Angolan banking sector has on the economic life of the nation which has ultimately led to a “higher regulatory intensity” and a reinforcement of supervisory practices, permitting an ever-closer alignment with international standards and market good practice. This is usually perceived as an added advantage to those looking to invest in Angola.
The BNA has therefore developed a set of sensible supervisory initiatives. The overall expectation in the Angolan banking industry is that prudent supervision will gain particular relevance given the increased number of complaints that have been received, as well as the perception of the need to protect the consumers of financial products and services, and the requirement to reinforce financial education campaigns for the Angolan population. The BNA is currently paying particular attention to formulating legislation in the areas of Compliance, Risk and Internal Audit.
Speaking in April 2012, Angola’s State Secretary for Budget, Aristides Safeca, referring to the on-going international financial and economic crisis, said the example that Angola can offer is that of forethought, with the implementation of sensible regulatory standards and structures appropriate to ensure the sustainability of financial intermediation.
Other key legislation brought in over the past few years includes the implementation of the Information and Credit Risk Centre (CiRC) and definition of the operating rules (Notice number 02/2010 and instruction number 05/2010 issued by the BNA). Coupled with this, the Anti Money-Laundering Law and Terrorism Financing Prevention (Law number 12/2010) issued by the BNA.
Banco Privado Atlantico (Atlantic Private Bank) – or ‘Atlantico’ as it is usually known colloquially – was incorporated in 2006 in the Angolan capital Luanda. Atlantico has achieved a fast growth-rate since then and in June 2012, became the sixth largest bank in Angola. Atlantico is a major and knowledgeable ally and powerful resource for any initiative involving domestic and foreign investment in Angola.
Organisations interested in investment in Angola need to be able to ride the wave of the impending changes and make the most of them from the perspective of their own investment aims.
Banco Privado Atlantico believes that Africa and its key economies, like Angola, are shaping themselves at an unprecedented pace. Atlantico emphatically agrees with the conclusion to the rhetorical question posed in the Goldman Sachs report about Africa being a worthwhile investment location.
As a senior source at Atlantico, says: “Today, Angola is getting back on its feet, and its economy and markets are showing signs of an overall recovery. The public sector has been sponsoring several initiatives to rehabilitate the domestic markets and the private sector is showing a notable dynamism in the creation and development of new investment. Angola has also been counting on strong interest from foreign investors, which is supporting the opening of the Angolan economy to the world.”
Atlantico’s overall strategy is trident-like, with the three points being the Atlantico’s aim to become the best bank in Angola for relationship-banking, for investment-banking and to be the world’s best bank who understands Angola.
This last point is, of course, especially important for foreign banks and large corporations that are keen to get to know Angola and to understand the dynamics and factors relating to investment in Angola. Atlantico bases its claims to have a unique positioning in the Angolan banking scene on vital factors such as the expertise and experience of its people, its hands-on knowledge of the Angolan domestic market and on the bank’s recent track record in investment-banking and its assistance and advice to foreign banks and other organisations that are driven by a desire to make the most of the opportunities offered by investment in Angola.
In the 2012 World Finance Banking Awards, Banco Privado Atlantico was recognised as the Best Investment Bank, Angola.
When Banco Privado Atlantico first opened for business in Angola, it focused on establishing the foundations of its banking activity and is now well-advanced for progressing with the objectives of its corporate plan that will take it up to 2015. The bank’s overall focus is on corporate and investment-banking, private-banking and affluent retail.
Atlantico’s investment arm is regarded within the Angolan banking industry as one of its key strengths. Atlantico currently has three investment-banking divisions: Corporate Finance (M&A, valuations, joint ventures, privatisations, restructuring), Structured Finance (project finance, acquisition finance, asset-backed finance, bonds) and Personal Financial Services (including business plans, structuring of start-ups).
A fourth investment-banking division, Capital Markets, resulting from Atlantico’s perceptive understanding of the capital market scene both in Angola and beyond, is being prepared and planned, just as is an asset-management arm that will advance Atlantico’s offering in this crucially important area.
Atlantico’s investment banking team employs highly experienced and talented professionals who are able to combine the highest standards in international investment-banking practices with the intuitive skill of having a wise and deep understanding of the market.
When it comes to corporate banking, Atlantico offers the gamut of corporate-banking services, together with private and affluent banking products and services for its personal clients.
Banco Privado Atlantico places a vital and continual focus on its people and on social responsibility which further aids the development in Angola. Atlantico has a firm commitment to fully assisting with the development in Angola in a variety of ways. Just one example of Atlantico’s pledge to development was the LOGOS (Luanda Organising Games On The Street) project, which benefitted over 1,645 young people. Furthermore, Atlantico has been providing support to INTASA, an institution that encourages children to expand their reading proficiency. Atlantico’s contribution helps children and young adults further their skills and abilities in a variety of areas including education, sports, culture, health and the environment, all of which benefit the next generation and henceforth their contribution to the development in Angola.