Africa Biz Construction and Business News
New Angolan Law Removes Barriers to Private Investment, Paves Way to Economic Diversification
September 13, 2018
According to South Africa based HTI Consulting, a new Private Investment Law just approved by the National Assembly in Angola should pave the way to increased investment in tourism and the hospitality sectors -- and diversification from a country too dependent on its oil industry.
“Angola’s growth prospects are set to rise as the country continues to make strides towards a more positive economic course,” says Wayne Troughton of specialist hospitality and real estate consultancy firm, HTI Consulting.
“Higher oil prices and sounder policies under President Joao Lourenco should bring greater stability to Africa’s second largest crude exporter, strengthening the country’s institutions and attracting foreign investment that will spur economic growth and contribute to the diversification of the economy, including sectors such as tourism and hospitality.”
“The breakneck economic growth that Angola enjoyed following the end to decades of civil conflict in 2002 came to a sudden stop when the price of oil crashed in 2014,” says Troughton. “The subsequent vulnerability of the country’s economy due to its reliance on oil was strongly evident over recent years, with decreasing oil prices seeing negative GDP growth in 2016 of -0.7%,” he explains.
“In 2016, hotel room occupancy in Angola fell to just 25%, although the rate in the capital Luanda was higher at 60%. The weakened economic environment, combined with a slow down in the oil sector (a primary driver of hotel room nights), negatively impacted the market, notably in Luanda. A number of new hotel projects, many expected to enter the market in 2015, were put on hold as developers chose to wait out the challenging market conditions,” he says.
“More recently, however, the new government’s Macroeconomic Stabilization Program, along with a resurgence in the oil price currently trading above USD 70 a barrel, has brought a renewed energy to Angola,” he states. Recent findings by the The International Monetary Fund have also commended the government’s efforts to improve the investment climate and revised growth forecasts for 2018 have been moved upwards from 1.6 to 2.2 percent. Comments Troughton, “Whilst the projections are moderate, it is nevertheless an indication the economy is undergoing a mild recovery and that elements to drive further economic growth are being put in place.”
“Ultimately, a restored economic environment will have a positive impact on the country’s tourism and hospitality markets,” he continues. “A series of measures are currently expediting the issuance of tourist and business visas, a historically difficult process that has long been a major complaint from international companies and should help to ease business travel.” In addition to this, construction on the New Luanda International Airport, originally scheduled for opening 2015/2016, has commenced anew after several delays, and the new airport, now forecast to open in 2020, is projected to increase Luanda\'s overall capacity from 3.6 million to 15 million passengers per annum.
The Sonangol Hotel (a 377-room, 24-storey hotel in Luanda) project is back on track after a two-year shutdown. According to information by oil company Sonangol, \"it will be one of the largest and most impressive hotel units in the country\" and \"will be able to see works completed this year.” Park Inn by Radisson Lagos Apapais is also set to open later this year and, according to local Angolan newspaper Valor Econômico, AccorHotels will return to the country. Alka Winter, Vice President of Global Communications AccorHotels Middle East and Africa, wasn’t able to delve into the specifics but did say, “We believe in the long-term potential in the countries that we operate in, and within the context of Angola, we look forward to developing our operations there in the future and providing our management expertise across a range of brands.”
In August this year the Angolan government announced an investment of $20 million to construct a local hospitality training institute, Luanda Hotel School, in a bid to boost the country’s tourism industry. “The $20 million project, which is a both a working hotel and a hospitality school, is expected to open within 12 months and will have a capacity for 500 students will have 50 rooms, 12 classrooms and accommodation for 96 students,” said Angola’s Minister for Hotels and Tourism, Pedro Mutindi. The new Operational Plan for Tourism 2018/2022 should also help leverage tourism in the economy. According to the minister, it is essential to improve basic services, such as access roads and inspection of tourist sites, in order to safeguard their facilities, as well as training human resources to allow Angola to reach world standards in the tourism sector.
Angola is focused on reducing its dependence on oil through the diversification of its economy. Currently oil accounts for around 96% of exports, however the projection by BMI that oil production will decrease annually by 4.3% between 2020 and 2027 heightens the urgent requirement for diversification. A Private Investment Law, recently approved by the National Assembly, removes several entry barriers to foreign direct investment. The government has also launched a program for diversifying exports and substituting imports. The country has a significant base of mineral and agricultural wealth. It is the third largest producer of diamonds in Africa and has gold, cobalt, manganese, and copper, as well as natural gas reserves that have yet to be fully developed. “Prospectively the growth of the hotel demand in Angola will continue as new focus areas potentially increase the flow of travellers to the country.” says Troughton.
“As reforms continue, Angola’s attractiveness as an investment destination will grow. Investors with medium to long term views and with previous experience working in Africa are likely best suited for early entry into this market.”
“The ongoing systematic reforms, coupled with the President’s commitment to promote increased commercial activity, warrant that prospective investors consider opportunities now. Multinationals willing to take a long-term view can exploit the window of opportunity that is opening and get ahead of competitors,” he concludes.