Angola Country Profile
General Information
Political Climate
Angola is still recovering from 27 years of devastating civil war which severely ravaged the country's political and social institutions. Since the struggling parties signed a peace agreement in 2002, the political climate in Angola has been increasingly stable, with the national government's monopoly on power now only contested by small rebel groups in the Cabinda province. Angola has managed to consolidate a stable macroeconomic situation in recent years. With vast natural resources, consecutive GDP growth rates among the highest in the world and low inflation, the country has become the second most attractive destination for foreign direct investment flows on the African continent. The government has committed itself to attracting foreign investors by adopting a range of business-friendly measures and investing large amounts of its oil revenues in improving the war-torn infrastructure. However, the substantial revenues from the booming economy have yet to bring economic and social development to the country, and the wealth has not been shared equally with over 40% of the population living under the poverty line. Moreover, corruption remains widespread, including in government bodies, and accountability is limited due to a lack of checks and balances, lack of institutional capacity, and a culture of impunity.
President José Eduardo dos Santos of the Popular Movement for the Liberation of Angola (MPLA) has held the Angolan presidency since 1979. The MPLA effectively centralised and monopolised power during the civil war, leaving oppositional forces fragmented. Even though a lasting peace agreement was reached in 2002, the government has, until recently, shown little interest in holding elections, citing the need for a viable peace process before allowing elections to take place. In the September 2008 parliamentary elections, the MPLA won a landslide victory with over 80% of the votes. The MPLA manifesto identified 'good and transparent governance' as one of the five principal aspirations of Angolans. Although several deficiencies were reported both before and during the elections, such as government intimidation of the opposition and poll-rigging, they were generally deemed as free and fair by international observers. In December 2009, President Dos Santos declared a policy of zero tolerance towards corruption. In 2010, a Public Probity law was passed - criminalising the theft of state resources and forcing state employees to declare their assets. 2010 also saw the adoption of a new constitution that strengthened the the President's grip on power.
According to the US Department of State 2010, petty corruption is widespread in Angola, and public servants frequently demand bribes in return for public services, thus spreading corruption to virtually all sectors and levels of society. The state remains heavily centralised around the executive branch, which allegedly governs through an extensive patronage network of friends, MPLA allies and relatives, popularly known as the Futungo. Members of this network have been provided with attractive positions in the political administration of Angola. High-level figures enjoys virtually unchecked access to state funds and are widely accused of exploiting sources of government income through secret and complex accounting procedures for personal gain. Each year, large amounts of oil revenues disappear from the state budget through clandestine channels to high-ranking figures and top politicians. According to the Human Rights Watch Transparency and Accountability in Angola 2010, while the government has introduced some important reforms in oil sector transparency in recent years, far more needs to be done to curb corruption and give citizens the tools necessary to hold the government accountable for its actions. On a positive note, the government has made significant steps towards greater transparency by publishing financial information and preventing extra-budgetary expenditures, under pressure from the international community. Despite this, several sources, such as the Bertelsmann Foundation 2010, argue that the government's anti-corruption efforts often remain more rhetorical than effective. For instance, the President has used accusations of abuse of office as a political tool against political rivals.
Business and Corruption
According to the US Department of State 2011, the Angolan business environment is one of the most difficult in the world, aggravated by pervasive corruption, cumbersome bureaucratic procedures, and underdeveloped financial system. This perception is supported by the World Economic Forum Global Competitiveness Report 2011-2012, according to which, corruption and inefficient government bureaucracy are among the greatest constraints on foreign companies operating in Angola. The country performs poorly across most institutional indicators covered by the report. Companies investing in most sectors in Angola have to deal with highly corrupt and inefficient government institutions, often favouring local companies through patronage networks. Corruption and maladministration work as a disincentive for foreign investment in sectors outside oil and mining, and the economy thus suffers from low levels of diversification. High levels of corruption and inefficiency keep small Angolan companies in the informal sector. Companies operating in the formal sector risk facing uncompetitive practices, costly bureaucratic procedures and vested interests. In the World Bank & IFC Enterprise Surveys 2010, over 41% of service companies report that they must compete against unregistered or informal companies. The use of petty bribes, locally known as gasosas, penetrates most business activities in both rural and urban areas. Thus, according to the World Bank & IFC Enterprise Surveys 2010, over 49% of the surveyed companies expect to make informal payments to 'get things done', and 76% identify corruption as a major constraint on their business operations in the country.
The government has set up several state credit funds to support small Angolan companies, such as the (now-liquidated) Agricultural and Fisheries Credit Bank (CAP) and the Development Bank of Angola (BDA). However, these institutions have been rife with poor governance and misappropriation of funds. The Economist Intelligence Unit's Angola Country Risk 2007 reports that the financial support offered by these funds allegedly followed a pattern of channelling oil money to favoured companies owned by high-ranking figures or to projects with strong political connections. Public procurement is a corruption-prone area, and it is occasionally reported that high-level government officials receive substantial kickbacks from private companies in exchange for lucrative government contracts, according to the US Department of State 2010. Angola also performs poorly in relation to the ethical behaviour of companies in interactions with public officials, politicians and other companies as well as in favouritism of government officials when deciding upon policies and contracts, as assessed by the World Economic Forum Global Competitiveness Report 2011-2012. According to the report, public funds are commonly diverted to companies, individuals, or groups due to corruption. Due to these reasons, companies are recommended to use a specialised public procurement due diligence tool in order to help mitigate the costs and risks of corruption involving public procurement processes in Angola.
According to Global Witness 2009, it is common for government officials and civil servants to hold positions in private companies alongside their official posts, often resulting in conflicts of interest. This phenomenon is problematic for international companies as foreign investors are often required, or at least encouraged, to partner with Angolan companies, many of which turn out to be front organisations for government officials whose integrity and accountability are frequently questioned by observers. A 2009 report by Africa Files cites the example of Thales-Sadissa joint-venture through which the head of the Angolan state oil company and the country's ambassador to France have entered into a EUR multi-billion partnership with the French defence company Thales to supply communications equipment to the Angolan military, despite the Angolan legislation forbidding any such participation. This example demonstrates the ease with which Western multinationals promote corruption in Angola, as a pre-requisite for entering into business deals with the government. For these reasons, companies are generally advised to consult with experienced attorneys, to develop and implement integrity systems, and to carry out extensive due diligence before committing funds or when already doing business in the country.
Regulatory Environment
Cumbersome bureaucracy is a major constraint on business operations in Angola. This perception is, among others, emphasised by the US Department of State 2011, according to which, low civil-service salaries and a proliferation of bureaucracy and regulations present opportunities for rent-seeking and encourage corruption. Complicated procedures and long bureaucratic delays could eventually tempt companies to seek faster service and approval by paying gratuities and facilitation payments. Companies surveyed in the World Economic Forum Global Competitiveness Report 2011-2012 perceive government administrative requirements to be quite burdensome - with inefficient government bureaucracy identified as the second largest constraint on foreign companies operating in Angola. Moreover, companies also report that government policy-making is fairly opaque and that government officials usually favour well-connected companies and individuals when deciding on policies and contracts. Commercial regulations can be ambiguous and inconsistent, and the lack of transparency increases start-up and overall operational costs. In addition, according to the World Bank & IFC Doing Business 2012, Angola performs poorly in relation to registering property, enforcing contracts and trading across borders. Especially, when importing and exporting goods and registering property, a company can expect to go through much slower procedures than the regional averages for Sub-Saharan Africa.
The government has established the National Private Investment Agency (ANIP), an investment promotion agency mandated to assist investors and facilitate new investment in Angola. The government has also set up the Companies' Portal (in Portuguese), which functions as a one-stop shop for investors with the aim of simplifying the investment process and reducing registration times for companies. According to the World Bank & IFC Doing Business 2007-2008, the portal is directly responsible for reducing the time required to start a company in Angola by two months between 2007 and 2008. However, according to other observers, the effect of these business-friendly measures has been limited in other areas due to the lack of authority over line ministries, which must still approve licences, permits and other requirements. In Luanda, this problem has been overcome by authorising the provincial government to organise and distribute documents to agencies involved in water and electricity inspections of construction projects. Moreover, the World Bank & IFC Doing Business 2008-2009 reports that among the reforms introduced between 2008 and 2009, mandatory electronic filing of social security for companies with more than 20 employees made it easier to pay taxes. The land registry was digitalised, accelerating procedures needed to transfer property. Trade across borders was expedited with a customs improvement programme that streamlined procedures and lowered trade times and costs.
Enforcement of contracts is highly problematic in Angola, as illustrated by the World Bank & IFC Doing Business 2012. The settlement of commercial disputes through Angolan courts is time-consuming and unreliable due to inefficiencies and a highly politicised and corrupt judiciary. As a result, most companies avoid taking commercial disputes to court, according to the US Department of State 2011. Furthermore, court rulings often favour local companies. Companies surveyed in the World Economic Forum Global Competitiveness Report 2011-2012 report that the judiciary is not independent from political influences of members of government, citizens or companies. In relation to legal options for resolving commercial and investment disputes, companies should note that Angola is not a member to some of the largest conventions in that area, such as the New York Convention 1958, the International Centre for Settlement of Investment Disputes (ICSID) and the United Nations Convention on the International Sale of Goods (CISG). However, the government has approved the Voluntary Arbitration Law that provides the legal framework for non-judicial resolution of commercial disputes and is a member of the Multilateral Investment Guarantee Agency (MIGA), which provides dispute settlement assistance. Access the Lexadin World Law Guide for a collection of legislation in Angola.
