ANGOLA: An Introduction to General Business Law: International Firms

1. GENERAL OVERVIEW 

Angola is one of the richest countries in Africa in terms of natural resources (oil and gas, minerals, diamonds, water and agricultural potential), but its economy is still highly dependent on petroleum exports (accounting for roughly 94% of its total exports). As a result, it is highly vulnerable to the fluctuations of the oil-price in the international markets.

Following six years of recession due to the oil price drop, Angola registered a 0.8% economic growth in 2021. In the first quarter of 2022 the Angolan economy expanded by 2.6% and is expected to continue expanding throughout the coming years.

Angola continues to be a vast market, with huge potential in terms of commodities, an increasing demand of diversification of the economy and a need to improve education and healthcare, logistics, transport, energy network, infrastructures, quality services and interconnections between the rural countryside and the major cities.

The country’s policy in recent years has been to diversify the economy and reduce petroleum dependency, while also reforming the petroleum sector both from legal and regulatory perspectives. This generated enormous investment opportunities for local and foreign investors in various fields of activity.

To facilitate private investment and streamline foreign exchange procedures, the Government approved new statutes, which introduced several changes to the private investment and foreign exchange regulations, alongside a new tax benefits code, which came into force on 14 May 2022. The process of negotiating and approving private investment projects is now simpler and tax incentives and benefits are consolidated in a single autonomous piece of legislation and available to all private investors.

Although the country faced a huge problem with the lack of foreign currency in the market in recent years, the situation started to shift with additional revenues arising from higher oil prices and more foreign currency being available locally. Additionally, recent amendments to foreign exchange regulations exempted most foreign exchange operations, including payment of services and transfer of capital or dividends by foreign investors, from prior licensing by the Angolan National Bank ("BNA").

The country benefited from political stability for the last 20 years and governments have made major efforts to align with international standards of transparency in doing business. This was brought about by the effective efforts of President João Lourenço - now in his second term after Angola's fourth post-war elections held on 24 August 2022 - to fight corruption. On this subject, relevant legislation was approved/amended, such as the New Criminal Code, the Competition Law and the Public Contracts Law.

2. LEGAL PROTECTION FOR INVESTMENTS 

The private investment regime is set forth in Law No. 10/18, of 26 August 2018, the Private Investment Law (“PIL”), as amended by Law 10/21 of 26 June.

The PIL sets out the rules applicable to investments made in Angola, investor protections and special rules on repatriation of funds by foreign investors.

Under the PIL private investors are granted rights and guarantees, such as the following:

• Right to repatriate dividends;
• Right to repatriate proceeds resulting from the liquidation of their investments;
• Access to the judicial system;
• Right to compensation in case of expropriation;
• Industrial Property and Intellectual Creation rights;
• Ownership, use and lawful exploitation of the land rights;
• Guarantee of non-intervention by the State;
• Importation and exportation rights;

Private Investors are also entitled to tax incentives and benefits as set out in the Tax Benefits Code. The latter vary depending on the investment's development zone and the respective investment regime (prior declaration, simplified or contractual regime) and may consist in (i) tax deductions; (ii) accelerated depreciation; (iii) tax credits; (iv) exemption and reduction of tax rates and customs duties; and (v) tax deferrals.

Furthermore, Angola is party to several Bilateral Investment Treaties (Italy, Cape Verde, Germany, Portugal, Russia, and Brazil) that grant protection against expropriation or inequitable treatment of foreign investors.

3. KEY RISK FACTORS AND MITIGATION OPTIONS 

3.1. Risk Factors 

Although more foreign currency is available locally due to the additional revenues arising from higher oil prices, payments in foreign currency may still face delay.

Bureaucracy, restrictive local content measures and unclear investment regulations created some constraints over the years for foreign investors.

The Government has made a huge effort over the last few years to improve the level of response of public institutions, the judicial system included. The prospects of improvements are real and many changes have already taken place.

Although much less restrictive than in previous years, with the majority of foreign exchange operations now being exempt from prior licensing, the Angolan foreign exchange regime is still regulated by BNA through the issuance of orders and guidelines. Private Investors should therefore seek local legal advice when structuring operations to avoid unexpected complications.

Delays in dispute resolutions in Angolan Courts should be expected. Contractual arrangements should preferably establish arbitration clauses. Some specific sector regulations may require that the seat of arbitration is in Angola.

Local content regulations, notably in the oil and gas sector, exist and the application is strict. Legislation has been recently amended and applies to a wider supply chain of oil and gas service providers.

Local labour law contains limitations on the hiring of expatriate employees. Companies need to comply with several mandatory administrative and reporting obligations as regards training, recruitment and hiring of employees.

3.2. Mitigating Options 

To address the legal and regulatory risks, it is suggested that investors:

(a) undertake legal due diligence to reduce unexpected outcomes; and

(b) implement adequate anti-bribery and corruption measures.

As mentioned above, the PIL contains several rights and guarantees that help foreign investors conduct business. Investors are guaranteed the right to transfer abroad:

(a) dividends or profits distributed;

(b) proceeds resulting from the liquidation of their investments, including capital gains, upon payment of the taxes due;

(c) proceeds of indemnities;

(d) royalties or other earnings resulting from indirect investments, associated with the transfer of technology.

As a signatory to the New York Convention, Angola is required to recognise (“exequatur”) arbitration awards. Angola made a reciprocity reservation on the application of the New York Convention, which means that it will apply the New York Convention if the relevant award has been rendered in the territory of another state that is also a party to the New York Convention.

4. OPPORTUNITIES TO INVEST 

Renewable Energy Projects– The Angolan Government enacted a “National Strategy for New Renewable Energies”, which provides an in-depth look at the goals that the Angolan State wishes to meet until 2025. This strategy seeks to contribute to the National Energy Security Policy and Strategy (enacted in 2011) and to promote diversification of energy sources, growth and employment.

The target set by the Angolan Government is that by 2025 at least 7.5% of the electricity generated in the country (equivalent to an installation of 800 MW) will be generated from renewable sources (major hydroelectric projects are not included). In order to reach this goal, Angolan authorities identified the following three objectives:

(a) improve access to energy services in rural areas based on renewable energy (eg, “Solar Villages” programme, creation of distribution networks and service providers throughout the territory);
(b) develop the use of new grid-connected renewable technologies (targets and guidelines for each type of renewable energy and the promotion of investment are provided);
(c) promote and accelerate public and private investment (eg, the creation of specific legislation for renewables, a system of tariffs such as “feed-in” for projects up to 10 MW, credit lines to stimulate the private sector initiative in rural areas).

Privatizations – An ambitious privatisation programme is currently preparing to open Angola's economy to private investors. The programme is called PROPRIV and foresees the privatisation of 195 directly or indirectly state-owned participations. Privatisations shall occur through either public tender, limited bidding by pre-qualification procedures or through the Angolan Stock Exchange, BODIVA. This programme includes companies like TAAG, SONANGOL and ENDIAMA together with smaller-sized companies in various industries (construction, textile, banks, insurance companies, etc).

PPPs – As with most African countries, Angola also has a huge infrastructure deficit. In order to build the necessary infrastructures and further increase private sector participation, the country has created a public-private partnerships’ programme. This programme contains the development of several projects across the country, including major infrastructures, energy, railway and logistic projects that will definitely enhance the inland potential and increase the quality of life of the general population.