Oil and gas fuel economic diversification
Transcrição
Oil and gas fuel economic diversification
#AngolaTheWorldfolio #TheWorldfolio Our World Friday, April 17, 2015 ANGOLA This supplement to USA TODAY was produced by United World Ltd., Suite 179, 34 Buckingham Palace Road, London SW1W 0RH – Tel: +44 (0)20 7305 5678 – [email protected] – www.unitedworld-usa.com Oil and gas fuel economic diversification Revenues from the sector are driving the efforts to advance alternative sectors such as manufacturing and agro-industry T he Angolan government is working hard to keep the country on track, leverage its successes, and prepare for positive, sustainable growth in the future. A vital part of that process requires economic diversification with a view to reducing dependence on oil, and reinforcing other sectors, such as fisheries, construction, agriculture and energy – all of which are growing as a result of strategic investments and increasing their contribution to GDP. The government has used the oil windfall to develop the services sector, while also attracting considerable foreign direct investment for real estate projects. Fiscal policy is expansive and focused on boosting employment and growth, as well as on macroeconomic stability. Meanwhile, public investment is being allocated to telecommunications, agriculture and hydroelectric power. A major challenge Angola faces is the so-called “resource curse”. Well-known economists such as Jeffrey Sachs and Joseph Stiglitz have shown that countries that are overly dependent on natural resources, like oil, often underperform others with fewer resources in areas such as long-term economic growth, human development, and governance. Countries affected by the curse suffer from more acute inequality, more conflict, more corruption and deeper poverty. This situation is the result of “Dutch Disease”, which is where an inflow of foreign aid or increased revenues from natural resources leads the national currency to appreciate, making the country’s exports more expensive and, therefore, less competitive. Oftentimes the dominant sector also pays much better wages, drawing talent out of other potential sectors, while crowding out the rest of the economy. Angola is working to combat the curse, but it is no easy task. The civil war ended years ago and the government is focused on reducing its dependence on oil; however, it is still the main export and contributor to GDP. Proper resource allo- cation and appropriation of funds into key catalyst programs, such as educational facilities, is vital. According to Augusto Da Silva Tomás, Minister of Transport, Angola is “an imbroglio of necessities and contradictions. We have to work hard to strike the right balance among all variables in a positive and proactive way.” The country lacks financial resources and equipment, technology, and skilled workers. Nevertheless, it is plowing ahead, determined to make use of its strategic location as much as possible. With that in mind, notable efforts and funds have been allocated to overhauling every segment of the transport sector, the ultimate goal being to create a network that connects the whole country, from north to south and east to west. According to Mr. Da Silva, it is very important to leverage Angola’s strategic location vis-à-vis central and southern Africa. To this end, many short, medium and long-term actions, projects and programs have been rolled out targeting roads, airports, ports and railways. In terms of roads, the goal is to refurbish the main highways and secondary roads in cities and villages, connecting the entire country. The government has also financed trucks, taxis and bikes for citizens with a view to promoting mobility. The national aviation sector is being restructured, first with the reformulation of the sector’s legislative and regulatory framework, and also with the modernization of airports. Ports are being refurbished and modernized, starting with the Port of Namibe, and there are projects for an additional three ports. Several passenger terminals are being built in Luanda to facilitate transportation by sea and alleviate congestion in the city, and there are plans to build additional ones along Angola’s coastline. The railways have also been expanded, and there are new trains to transport both people and cargo. According to Mr. Da Silva, “By investing in this infrastructure, the government is paving the way for economic diversification. Linking ports, airports, railways, and fundamental road networks will drive development in areas such as energy, water, agriculture, fishing, and mining”. The next step would be to link those platforms to Congo, Zambia, Namibia, and other nearby countries. “We are working so that Angola becomes a leader not only in central Africa, but also on the rest of the continent and in the world,” says Mr. Da Silva. “We want to benefit from our privileged geostrategic location to become a transit platform for passengers and merchandise to the rest of Africa, Central America, South America, and Asia. We are at an advantage compared with landlocked countries, and with our refurbishment and investment plans, we can enhance production not only in Angola, but also in the region as a whole.” Mining is another sector going through important changes. Although the focus remains on diamonds, this industry is also looking to diversify. Serious efforts began in 2014 to identify, measure and locate the country’s vast geological resources using the latest technology. Francisco Queiróz, Minister of Geology and Mines, emphasizes the importance of mapping out the republic’s resources underground in order to attract investment in the exploration of other prolific minerals, such as gold, manganese, coal, iron, copper and phosphates. In the meantime, another focus is to better distribute the benefits from diamond mining activities to the general population. Mining companies currently pay taxes that are used to develop the areas where the mines are located. Additionally, the sector has previously created many jobs and the goal is to boost employment going forward. Lastly, there is a focus on corporate social responsibility, with the result that sector companies “are investing in projects with positive impacts on the local population”, and more rigorous CSR standards are in the pipeline. Angola is not without challenges, but it is determined to rise to the occasion and address its shortcomings, replicate its successes and leverage its advantages. Our World Insert is produced by United World. USA Today did not participate in its preparation and is not responsible for its content 2 ANGOLA Friday, April 17, 2015 Distributed by USA TODAY Macroeconomic consolidation, foreign investment, and support for SMEs to stimulate greater diversity Economic development is being driven by structured public capital investment programs, widespread investment, easier access to capital and a united push for diversification T he U.S.-Africa Summit, held in Washington in 2014, sought to shift dialogue onto aspects about Africa that are often overlooked. The event aimed to shine a light on the continent’s new class of businesspeople and consumers, on the important role the U.S. can play to boost jobs and mobilize capital, and on Africa’s potential as a driver of global economic growth in particular. Angola is in a good position to play a key role in this scenario, as the fifth-largest economy in Africa (according to The Economist ) and one of the fastest-growing economies in the world. Finance Minister Armando Manuel recently highlighted Angola’s “economic viability” in the Angolan press, but surely that is an understatement. The country is committed to consolidating its macroeconomic situation, and projections are promising. GDP expanded by 4.4% in 2014, according to World Bank estimates, and is expected to grow by 5.3% in 2015, while inflation continues to decline to single digits. Economic diversification To remain on the path toward growth, it is imperative that Angola continues to diversify its economy. At present it is the secondlargest oil producer in Africa, after Nigeria, and oil production and related activities account for 45% of GDP and 80% of government revenues. Moreover, mineral product exports account for 95% of the total. This situation has negative implications for the general population, offering few job opportunities and leading to higher inequality. In fact, the oil industry employs just 1% of Angolan workers, and unemployment stands at 26%, according to UN magazine Africa Renewal. As João Júlio Fernandes, CEO of the Fundo de Garantia de Crédito (FGC), points out, “We all know about the volatility of oil prices, and we can no longer depend on this type of asset.” In view of this panorama, Angola has developed other contributors to GDP, including energy, construction, and agriculture. The latter, for example, contributes 11% but accounts for 70% of total jobs, plus it is a sector that is “growing impressively” and is the “fastest-growing on the continent”, according to Africa Renewal. Economic development is being driven in large part by public capital investment programs focused on a wide range of objectives, including building new irrigation systems, improving roads, adding energy distribution and generation capacity, and achieving goals related to growth and additional poverty reduction. Public investment spending is also being used to upgrade infrastructure and shore-up employment. And as the government works to make the public capital investment process more efficient, it comes closer to realizing its longer-term development goals. Hugo Teles, Manager of Banco BIC, believes there is still a lot to do and many areas in which to invest, “but the government is trying to propel the economy so we can develop the manufacturing sector, the productive sector, fisheries, etc, as well as energy and water.” Angola is in a good position to diversify. It has very fertile soils where almost anything can be grown, abundant water, other “enviable resources few countries in the world have”, and others that have yet to be explored, according to Mr. ANGOLA IN NUMBERS 4.4% GDP growth in 2014 (est.) 5.3% World Bank forecast for 2015 $130bn GDP 2014 (est.) 60% of the 2013 GDP came from the non-hydrocarbon sector 7.5% inflation in 2014 down from 14.5% in 2010 Ba3 credit rating from Moody’s B+ from Standard & Poor’s BB- from Fitch Ratings $26.2bn 7% of GDP, in foreign currency reserves average budget surplus since 2010 41.6% $8,200 GDP government total expenditure as % of GDP in 2014 per capital in 2014 55% exports as percentage of GDP Total exports: $68.25bn Total imports: $26.34bn Sources: National Bank of Angola, African Development Bank, and Energy Information Administration “The National Bank of Angola has implemented a large number of new regulatory rules for the system that have helped to balance overall activity of the economy” Amílcar dos Santos Azevedo da Silva, President of ABANC Fernandes, who also believes that diversification will “make Angola a regional, and perhaps a continental, power”. Moreover, “The country has solid macroeconomic foundations, sound institutions and a banking sector that is small but well capitalized,” says Rick Angiuoni, Regional Director for Africa and Global Business Development with the ExportImport Bank of the United States (Ex-Im Bank). That financial institution is working closely with Angola to help provide funding for key sectors such as infrastructure, transportation and industry. “We plan on financing many other sectors, such as aviation, telecoms, etc.,” adds Mr. Angiuoni. “Financing these key industries will make Angola more competitive and will attract FDI to other areas.” According to Fred Hochberg, Ex-Im Bank’s Chairman and President, the bank is “working closely with Angola’s expansion plan to diversify the economy in oil and gas, but also in transportation, infrastructure, power, mining and agriculture.” U.S. companies are already showing interest in Angola’s assets beyond oil and gas. In fact, “interest has increased significantly, given the current landscape,” says Mr. Angiuoni, and the fact that it is a politically stable country. Large non-oil companies, such as Cummins and Kentucky Fried Chicken, among others, are already investing in the country. Amílcar dos Santos Azevedo da Silva, President of the Angolan bank association ABANC, highlights: “There are great opportunities here for American companies.” Infrastructure is attracting the bulk of FDI at the moment – specifically roads, bridges, ports, railways, and factories. There is also private and public investment in hospitals and healthcare, along with universities and schools, and the government is offering tax exemptions to further develop Angola’s hospitality sector. To attract additional FDI, the government has been working to enhance transparency and efficiency, while also offering incentives to foreign companies. Angola is particularly attractive for U.S. investment because it is a middle-income economy with good prospects for growth and the possibility of becoming a regional hub for trade and exports from southwestern Africa. Working with the ExIm Bank has certainly improved Angola’s credibility, as has its leadership of the Executive Council of the World Bank and its relations with the African Development Bank (AfDB). As regards the latter, its President Donald Kaberuka recently underscored “the bank’s interest in strengthening its ‘strategic relationship’ with Angola given the growing role and importance of the country on the African continent.” AfDB has also congratulated Angola on its achievements in reducing poverty levels from 60% to 38%, and on its efforts to develop transport and energy infrastructure. The financial sector For its part, Banco BIC is definitely going all out to support diversification, firstly in terms of its geographic reach. The financial institution operates in all 18 provinces of Angola, and even has a presence in areas where it is the only bank. Moreover, Mr. Teles says that BIC “supports the productive sector, cattle breeding and fisheries. In fact, we support all business sectors, from construction to industry, as long as they are credible, well-structured projects for which growth is feasible. We have so far supported all business directions in which we think the country will advance.” Another financial sector player that is doing its part to drive employment and development is BANC, Banco Angolano de Negócios e Comércio, a small financial institution with 23 branches nationwide, but which is dedicated to reaching all segments of the population, even opening offices in towns with no electricity. According to Chairman of the Board of Directors José Aires, financial inclusion is important for BANC, and there has been “considerable investment in the consumer credit portfolio”, mainly among people with relatively stable incomes, which will in turn provide the funding the bank needs to create products to further develop the banking industry. He adds that BANC has been playing an important role in supporting SMEs and companies in construction and commerce. Despite its small size, efforts are motivated by lofty aspirations. Mr. Aires wants just one thing: “To be able to help significantly reduce poverty in Angola” and, to that end, it “will continue to support credible initiatives that can truly help create a better country.” Meanwhile, the banking sector continues to expand, in terms of the number of employees, which exceeded 18,000 in 2013, and branches, which grew by 14.2% in 2013, with 164 new branches opening in the year. Assets under management also increased, and positive developments were seen in payment means and electronic channels. The government is dedicated to transparency in banking, and has set up IT systems that detect any actions that aim to undermine the proper functioning of commercial banks. According to João Fernando Quiúma, Director for Information Technology of the National Bank of Angola (BNA), “No issues related to security and computing crimes have been recorded to date, and we have installed mechanisms to respond as necessary.” Moreover, the Central Bank is focused on A UNITED WORLD SUPPLEMENT PRODUCED BY: Mark Cassidy, Laia Marsal, Fátima Ruiz-Moreno, Ramón Valbuena, Jackie Vines and Agustina Bellsola Our World Insert is produced by United World. USA Today did not participate in its preparation and is not responsible for its content ANGOLA Distributed by USA TODAY avoiding the risk of fraud by keeping its technology up-to-date and in line with other countries’ systems. ABANC’s Mr. dos Santos Azevedo also confirms that “the National Bank of Angola has implemented a large number of new regulatory rules for the system that have helped to balance overall activity of the economy.” As for lending practices, he notes the large number of companies with potential that request loans, but whose needs are not met because they are unable to comply with bank requirements – a situation which must be remedied. The scenario is similar for individuals. Loans are the most profitable assets for banks and the largest component of their business, as banks are interested in improving the financial conditions of their customers, adds Mr. dos Santo Azevedo. Lending must be more inclusive, and especially include small businesses, which are a very important part of the economy. Overall, the financial sector is getting a major makeover, working hard to implement world-class operating and governance standards with a view to driving progress, expanding capital markets, and modernizing the economy. Developments on this front include the establishment of financial market regulations and a new stock exchange (expected to be operational in 2016), as well as efforts to approve a securities code and financial futures regulations. The government is also focused on attracting new investors to diverse sectors of the economy, implementing solid regulatory systems, and promoting best practices in corporate governance. According to the National Bank of Angola and the Capital Markets Commission, “Within the context of Africa’s buoyant economic prospects, Angola’s rapidly changing financial system constitutes a critical component in the continent’s economic narrative.” There is no denying that Angola is becoming a powerhouse in Africa. The country is looking to issue a Eurobond this year, “a milestone achievement,” according Ex-Im Bank’s Mr. Angiuoni. This will enhance credibility and confidence in the African nation and reflects its efforts to diversify sources of capital. Analysts expect the bond to be well received, “given Angola’s positive economic growth and geopolitical situation”, says Anthony Lopes Pinto, CEO of local brokerage firm Imara Securities. “Angola Investe” Support for microenterprises, SMEs and the entrepreneurial spirit of Angolans through lending and other measures is a top priority for the government, as visible in the “We support all business sectors, from construction to industry, as long as they are credible, well-structured projects for which growth is feasible. We have so far supported all business directions in which we think the country will advance” Hugo Teles, Manager at Banco BIC federal “Angola Investe” program. The project aims to facilitate lending to new businesses and provide support for future business owners. However, says Carlos Rosado de Carvalho, Editorial Director at financial daily Expansão, “After two years, the plan has not yielded very positive results, despite low interest rates and government guarantees. The truth is that Angolan entrepreneurs are not taking advantage of the credit available, and the banks say that projects are not well presented. We must analyze the plan, identify its shortfalls, and make appropriate changes.” Of the total funding available, just 10% was allocated to projects. Halfway through the program, just 362 projects had been approved and fewer than 55,000 jobs created, representing less than 20% of the established target, according to Portal de Angola. Moreover, the program sought – and failed – to rank Angola among the top 10 most competitive economies in sub-Saharan Africa. Nevertheless, Mr. Rosado de Carvalho believes the program is a step in the right direction, as it addressed concerns by entrepreneurs and responded with initiatives and detailed actions. “The objectives are clearly defined and implementation can be monitored. Now we must be patient. Rome wasn’t built in a day. The results will eventually appear,” he says. Another proponent of “Angola Investe” is the country’s Minister of Economy, Abraão Gourgel, who expects the program to bear fruit in 2015, with a notable impact on direct and indirect job creation. “With everyone’s support, we can strengthen this program and foster economic activity, which will lead to more employment and wealth for the country,” he says. In addition to low-interest funding, “Angola Investe” also offers training and consulting, capacity building, and tax benefits. It aims to ease the administrative burden that comes with starting a business. As an additional plus for future business owners, the Guarantee Fund was created to provide companies with guarantees vis-à-vis banks and, in the case of default by the entrepreneur, the fund repays the loan. In this regard, the FGC – Credit Guarantee Fund – plays an important role, “uniting two parties interested in working together but which couldn’t, due to a lack of guarantees,” says Mr. Fernandes. “We offer banks more security and we facilitate access to loans for companies. We make business happen.” Although the program has fallen somewhat short of expectations at the moment, it appears to be on the right track, and there is every indication that if the government, banks and entrepreneurs are able to coordinate and work together, Angola and its citizens will reap the rewards in the future. These great strides and aspirations aside, it is important to note that Angola is a relatively new democracy, and that the country has grown considerably in a short period of time. “It is normal that we still have weaknesses, but it is important to allow the country time to grow,” says Mr. dos Santos Azevedo. And grow it does. Moreover, the economic diversification Angola needs will slowly take shape if it is able to maintain its macroeconomic stability, further improve the business environment, and make additional strides with its infrastructure plan. In the words of Carlos Alberto Masseca, Angola’s State Secretary for Health: “Angola is on the verge of a new dawn.” Friday, April 17, 2015 AO&PT Messages BANC Who's there? We’re BANC – Banco Angolano de Negócios e Comércio, one of the most highly regarded retail banks in Angola. Where are you? We are located in 21 branches in seven provinces across Angola and we have a representative office in Portugal (Lisbon), but our objective is to continue growing in order to respond to the demands of over 15 thousand customers. What is your purpose? To continue to expand our network of agencies, to enhance training, to develop the academic and professional skills of our 165 employees, while investing in the safety of customer operations and supporting entrepreneurship. Should I visit you? Of course, our team of qualified and motivated professionals are waiting for you in Angola and Portugal. “The FGC unites two parties interested in working together but which couldn’t, due to a lack of guarantees We offer banks more security and we facilitate access to loans for companies. We make business happen” How can I contact you? Please visit our website: www.banc.co.ao Our head office at: Travessa da sorte nº12 Maianga, Luanda - Angola or at any of our branches. João Júlio Fernandes, CEO of the Fundo de Garantia de Crédito Have a look into our QRcode: Send A BANC for life... Our World Insert is produced by United World. USA Today did not participate in its preparation and is not responsible for its content 3 4 ANGOLA Friday, April 17, 2015 D iamond mining began in Angola more than a century ago, but during the 27-year civil war between 1975 and 2002, mineral exploration and extraction, like much else in the country, largely ground to a halt. Since 2003, development of the mining industry, and particularly diamonds, has been a main priority for the government as it seeks to generate revenues from its mineral resources and diversify the economy away from oils. “We have moved beyond oil to exporting diamonds and other minerals,” explains Angola’s Minister of Trade, Rosa Escorcio Pacaviria de Matos. “And we think that with the liberalization of the market and the increase in domestic production, we can move towards expanding our export balance.” With less than half of the country having been explored so far, the country still holds big prospects for foreign investors. “We have an enormous diamond potential,” says Dr. Antonio Carlos Sumbula, CEO of Endiama, Angola’s national diamond company. “Ninety percent of kimberlite diamonds remain to be discovered and I think that this alone should be a factor that will make any investor wish to come to Angola.” Growing at an average rate of 5.3% a year, Angola’s mining industry is expected to be worth $7.5 billion in 2018. There has been increasing international interest from investors in new areas of mining, including iron ore, copper and phosphates, but diamonds have and will continue to be the main contributor to growth. The country is the world’s fourth largest diamond producer by quantity and value. Investment in diamond mining dipped during the financial crisis of 2008-2009 as demand for precious gems fell. Big mining firms such as South Africa’s De Beers cut back operations, after a large investment in prospecting Distributed by USA TODAY Mining industry to be worth $7.5bn by 2018 Angola is seeking to not only add more variety to the minerals that are mined commercially, but also to add value to its natural resources and build up a thriving industrial sector failed to bring results. “During that period the diamond price lowered beyond the breakeven and led to the shutting down of many mines,” explains Mr. Sumbula. But the industry has since recovered. In 2014 production of diamonds reached a record 10 million carats, generating $1.6 billion in revenue. This figure includes production by both industrial and small-scale artisanal miners, whose output reached 8.75 million carats and 934,500 carats respectively. Revenues from diamonds helped to offset the impact of the rapid drop in oil prices in the second half of 2014. Last year De Beers returned to the country and was granted a new diamond exploration license in April, while the country’s largest mining company Sociedade Mineira de Catoca (SMC) has stepped up production and continues to explore new areas. A joint venture of Endiama, Alursa of Russia, Odebrecht of Brazil, and Israel’s Leviev Group, SMC is responsible for more than 75% of all diamond production in Angola. It operates the Catoca mine in the province of Lunda Sul, which is world’s fourthlargest diamond mine by reserves. While production at Catoca is expected to expand 6% this year, SMC is also exploring for gems at other sites, including the Tchiuzo project, which is expected to begin production in two years. The company also has a majority stake in concessions in Luemba, Gango, Quitúbia, Luangue, Vulege, Tcháfua and Luaxe. Kiala Ngone Gabriel, Secretary of Industry Aside from SMC, Endiama is also a partner in the Sociedade Mineira de Chitotolo, which operates the Chitotolo mine in Lunda Norte Province. While cheaper kimberlite diamonds are mined at Catoca, the Chitotolo Mining Company (in which local companies ITM and Lumanhe are the other shareholders) extracts diamonds from alluvial deposits that fetch a much higher price. According to the Minister of Geology and Mines, Francisco Queiróz, Catoca’s diamonds are valued at around $80 per carat, while diamonds from other alluvial mines such as Chitotolo are worth between $250 and $300. Chitotolo currently produces around 240,000 carats a year. The company aims to increase production by investing in further mineral exploration. Endiama, ITM and Lumanhe are also behind another joint venture, the Sociedade Mineira de Cuango, which produces around 400,000 carats from alluvial deposits every year. Up to now, both the government and investors have focused on the exploitation of diamond resources, but the Minister of Geology and Mines admits that there has been too much attention paid to these gems, while other mineral resources and diversification of the mining industry itself has been forsaken. “In Angola the mining industry is still too heavily concentrated around diamonds,” he says. “This must change not so much for political reasons but rather objectively because the country has many more natural resources and minerals that can be explored. “We need to map all those available resources, undertake a strong campaign to attract investment and invest in other minerals such as gold, iron, manganese, coal and still others such as phosphate and copper that the country has in abundance.” Interest in Angola’s mineral potential has heightened since the introduction of the new Mining Code in 2011, which was established to attract foreign investment and boost exploration for diamonds and other minerals. The new law ensures more protection for investors, with exploration and commercialization rights now granted under one license. State participation has been reduced from 50% to 10%, while royalties and taxes to be paid to the government have also been cut. “Our mining code stipulates that 5% of the revenues collected by the state should go towards directly benefiting the zones where mines are operating,” Mr. Queiróz comments. While utilization of mineral resources has helped to lower Angola’s dependency on oil, the mining industry still only accounts for 5% of GDP. The government is aware that a truly diversified and dynamic economy cannot rely solely on oil and raw minerals such as diamonds, iron and copper. It knows it must also build a thriving industrial sector. “I know of no rich country that is not industrialized,” states Secretary of Industry, Kiala Ngone Gabriel. “We understand that by exporting unfinished products, we miss out on great opportunities of employment. In the last four years our manufacturing sector has been contributing to our budget with a percentage of 6.25%. This is unsatisfactory because we would like to have a share of around 15-20% since we do have the ability to transform and therefore add value to our product.” Adding value to mineral resources by setting up local processing facilities is a key pillar in the government’s economic diversification agenda and an interesting prospect for foreign investors. Diamond processing and jewelry production are obvious opportunities highlighted by both Endiama CEO Mr. Sumbula and Minister Queiróz. “It is not Angola that retains value, but rather those that perform the transformation abroad, which is why our policy foresees the opening of many diamond lapidating factories, and that is a domain where the American investor is very much welcome,” explains the geology and mines minister, while Mr. Sumbula says that establishing partnerships with companies in diamond cutting and jewelry production is part of Endiama’s medium to long-term plan. Value addition through the processing of minerals such as iron ore and copper could also help to boost industry and create more jobs. However, inefficiency and the lack of skilled and capable local workforce holds the industrial sector back, says General Kundi Paihama, current Governor of Huambo and former Minister of War Veterans. He stresses that education development and investment in the youth will be key to economic diversification and tackling the lack of capability in the industrial sector. “We are opening up more schools, universities, colleges, and always seeking to expand education,” he says. Inefficiency is being addressed through investment in infrastructure. Roads, railways, ports and airports that were severely damaged during the civil war have been rebuilt, upgraded or newly constructed. Industrial de- velopment hubs are being built and connected to the upgraded power and transport networks. The manufacturing sector is – slowly but surely – beginning to take off. Companies producing items such as cement, processed metals, detergents, gases for hospitals, foodstuffs, and beverages, are expanding and providing jobs for local communities. One such company is France’s Grupo Castel, a beverage producer that has been operating in Angola since 1994. “At that time, in 1994, the capacity of production at the local level was limited,” explains Grupo Castel’s General Director in Angola, Philippe Frederic. “Pierre Castel (the company’s founder) was one of the first investors willing to invest outside the oil industry. This is probably the basis of his success; he believed in Angola earlier than many others that came much later. The beverage industry gives a lot of employment. We have got many local employees, and we train lots of people.” Angola is hoping more foreign investors will share Pierre Castel’s belief in the country and come to invest in industry, be it in beverages or mineral processing. By doing so, investors could potentially enjoy the success that Castel has had in the country for more than 20 years. “We need to map all those available resources, undertake a strong campaign to attract investment and invest in other minerals such as gold, iron, manganese, coal and still others such as phosphate and copper that the country has in abundance” francisco Queiróz, Minister of Geology and Mines “It is our concern for the future of the country and its youth that underlies the decision to diversify the economy and rely to a lesser extent on the extractive industries” General kundi paihama, Governor of Huambo Our World Insert is produced by United World. USA Today did not participate in its preparation and is not responsible for its content ANGOLA Distributed by USA TODAY Friday, April 17, 2015 5 A plan to precisely map out mineral resources In its efforts to diversify beyond gems, under Planageo, Angola is conducting geophysical surveys to improve precision and certainty in locating mineral resources F or years Angola’s mining industry, which currently contributes around 5% to GDP, has focused on the exploration and extraction of diamonds. The government aims to attract investment in the exploitation of other mineral resources in order to diversify an economy heavily dependent on oil and diamond exports and to create more jobs. “We want to make Angola a mining country,” says Minister for Geology and Mines Francisco Queiróz. “We have the natural set of circumstances to compete with the oil sector in terms of collectable revenue, and of actually surpassing the oil sector with regards to job creation, for which mining has a greater potential.” Aside from diamonds, Angola currently produces cement, granite, gypsum, marble and salt. The cement market has enjoyed four years of double-digit growth on the back of the country’s construction boom. In January, the government banned the import of cement as it claims that local production was now adequate to meet national demand. Gypsum production, which was around 200,000 tons a year in 2011 (latest figures available), also supports the local construction industry, as well as agriculture, since it used to make cement and fertilizer. The country has several other undeveloped mineral resources. These include copper, gold, iron ore, lead, nickel, phosphate rock, quartz, and silver. In 2011 a new Mining Code was established to attract foreign investment and boost exploration for diamonds and these other undeveloped minerals. There is no doubt that the country has a rich and vast Special planes, fitted out with radiography equipment that can gather information about mineral resources up to a depth of nearly 1,000 feet, are carrying out geophysical surveys “We want to make Angola a mining country. We have the natural set of circumstances to compete with the oil sector in terms of collectable revenue, and of actually surpassing the oil sector with regards to job creation, for which mining has a greater potential” Francisco Queiróz, Minister of Geology and Mines territory, with attractive mining potential. But what has held investors back in the exploitation of these undeveloped mineral resources is lack of adequate geological information, which makes exploration too high-risk. To address this, the Geological Institute of Angola (IGEO) established the National Geology Plan (Planageo). Launched in 2013, Planageo will conduct geo- physical analysis that will give a better understanding of the location and quantities of mineral deposits. The information collected by Planageo will be available, in addition to state agencies, to potential investors, academics and other interested parties. Aside from encouraging investment by facilitating prospecting, the geological data will be used to manage the rational and sustainable exploitation of minerals. The plan will take five years to conclude at a cost of $410 million. It is envisioned that this investment will help to boost revenues in the mining, encourage private investments and create more jobs. “This survey will be carried out with the latest technology. It will be a thorough radiography of the location of all the geological resources available to us. This will provide potential investors with well-founded information they can use when it comes time to decide whether they would like to invest,” says Mr. Queiróz, while Diogo do Carvalho of the Diamonds Association of African Countries (ADPA) explains that Planageo will allow investors “to better apply their financial resources with greater precision and certainty of an expected profit.” Under Planageo, aero-geophysical surveys will be conducted using special planes fitted out with radiography equipment that can gather information about mineral resources up to a depth of 300 meters. In order to carry out the surveys, Angola has been split into three areas. Planes have been provided by three private service providers, CITIC (China), Impulso (Spain) and Costa Negócios (Brazil), each of whom are concessionaires and will be responsible for surveying one of the three areas. Planageo will take five years to conclude at a cost of $410 million. It is envisioned that this investment will help to boost revenues in the mining, encourage private investments, and create more jobs The inaugural flight took off in May 2014 in Luanda province, which is under the responsibility of CITIC. In June, Costa Negocio began flights in Area 2, which comprises the diamond-producing provinces of Lunda Norte and Lunda Sul. June also saw Impulso’s two planes take off in the southern region. Following the aerial surveys, rock and soil samples will be taken from potential deposit sites. However, geological data collection is only one part of this comprehensive plan. Planageo also covers the building of centers for analysis and the hiring and training of high-skilled local staff to perform data collection and analysis. In Luanda, new geochemistry laboratories and a new headquarters and central laboratory for the IGEO are being built, along with regional IGEO departments in Huíla and Lunda Sul provinces. These laboratories will be responsible for evaluating the data gathered by CITIC, Impulso and Costa Negocios, and samples taken from geologists on the ground in order to form a detailed mineral map of each region. Planageo is training hundreds of Angolan nationals to work in laboratories and on data collection. According to Mr. Queiróz, 276 senior staff will be hired by 2018, 148 of which under contract with Planageo service providers. There are also initiatives to strengthen the capacity of the IGEO, with the Japan International Cooperation Agency providing training for personnel of the institute in a two-year programme in 2012-2013. Angola’s vast mineral potential is certain, but lack of extensive geological data has deterred mining companies from exploring this unknown frontier. Once Planageo is completed in 2017, investors will be given a clear picture of Angola’s mineral landscape, which should lead to an influx of investment that will put Angola on course to becoming one of the world’s mining superpowers. The Kimberley Process returns to its roots The 2003 UN resolution to stop the blood diamond trade, known as the Kimberley Process, has come full circle, as Angola – the birthplace of the concept – has now taken chairmanship for 2015 T he issue of conflict diamonds was brought to the attention of the general American public back in 2006, with the release of the Hollywood blockbuster Blood Diamond. Starring Leonardo DiCaprio, who received an Oscar nomination for his performance, the movie is set during the Sierra Leone Civil War 1996–2006 and deals with the issue of diamonds sold by armed groups to finance conflicts. During the 1990s and height of the civil war, Angola was another hotspot for the blood diamond trade. Between 1992 and 1998, the rebel group UNITA illegally sold more than $3 billion worth of diamonds to fund its war against the government. Aside from Sierra Leone and Angola, blood diamonds have been used to finance conflicts in the Democratic Republic of Congo, Liberia, and also Zimbabwe. The end of the Leonardo DiCaprio movie depicts a historic conference that took place in Kimberley, South Africa in 2000, when several diamond-producing countries, including Angola, came together to discuss measures to stop the blood diamond trade. This led to the establishment of the Kimberley Process Certification System (KPCS) by the United Nations in 2003. The main aim of the KPCS is to certify diamonds as “conflict-free”, thus to prevent conflict diamonds from entering the mainstream rough diamond market and to ensure that diamond pur- chases are not financing violence by rebel groups. The Kimberly Process (KP) now has 54 participants representing 81 countries, which together are responsible for 99% of world diamond production. Aside from committing to trade in diamonds that are certified “conflictfree”, participating states must put in place national legislation and institutions; export, import and internal controls; and also commit to transparency and the exchange of statistical data. “Angola sits at the very birth of the Kimberley Process and played an important role working with the United Nations to normalize the certification system for diamond trade” Francisco Queiróz, Minister of Geology and Mines The concept of combating conflict diamonds that would give rise to the certificate of the Kimberly Process began in Angola. “It sits at the very birth of the Kimberly Process and played an important role working with the United Nations to normalize the certification system for diamond trade,” says Minister of Geology and Mines Francisco Queiróz. “We created a system that was then adopted internationally as the Kimberly Process, but that originated in Angola. The country now wishes to have a larger impact and play a more active role. It is in our best interest to position ourselves actively within those processes and not be mere observers.” Angola now has a unique opportunity to make a larger impact. In January the country assumed the presidency of KP. During its one-year term as president, its agenda will focus on issues related to the international sale of diamonds, as well as to use its own experience to support diamond-producing counties affected by conflict in order to bring them to the certification process. As chair, Angola has also pledged to strengthen the unity of the three pillars of the KP: governments, industry, and civil society. “The presidency will enable Angola to contribute towards a continuation of diamonds as a force for peace and development. As vice-president (in 2014) we had the responsibility, given our vast conflict resolution experience, to positively influence the way the institution operates,” says former general manager of the Catoca Mining Company Dr. José Ganga Junior, who was recently replaced by Russian Sergei Mitiukhin in March. Speaking on Angola’s presidency, Avi Paz, President of the World Diamond Council, said, “It is a proud moment for the Kimberly Process that a country which, once afflicted by civil conflict, has now regained political and economic stability and, as a consequence, is able to assume a position of leadership in the very institution that helped set it on its way to recovery.” RESPONSIBLE MINING The Sociedade Mineira do Cuango – a crucial diamond producer in Angola – is a partnership between the mining companies ITM, ENDIAMA and LUMANHE, in which ITM holds 38% equity capital, ENDIAMA 41% and LUMANHE 21%. As a key actor in the Kimberley Process, the Sociedade Mineira do Cuango cares a lot for its corporate social responsibility. Investing in areas such as local education and infrastructure development, the organization looks to empower the communities of the Cuango River region and better the lives of the people who live there. SOCIEDADE MINEIRA DO CUANGO LDA SOCIEDADE MINEIRA DO CUANGO LDA Our World Insert is produced by United World. USA Today did not participate in its preparation and is not responsible for its content 6 ANGOLA Friday, April 17, 2015 Distributed by USA TODAY ‘We want to make Angola a mining country’ Our contribution to the general state budget, although not as significant as the oil sector’s, is extremely important if we take into consideration that our activity is mostly focused on eastern Angola. We want to believe that, with the IGEO plan (Planageo) and with the ongoing efforts by the Ministry of Geology and Mines, other projects will be implemented so that the contribution of the diamond industry and the mining industry itself will be greater. H ere in this roundtable discussion on the mining industry, United World brings together the opinions of Artur Gonçalves of the Sociedade Mineira do Cuango, Antonio Carlos Sumbula of Endiama, the former head of the Chitotolo Mining Company Dr. Wola N’toni-aMambu, Minister of Geology and Mines Francisco Queiróz, Diogo do Carvalho of the Diamonds Association African Countries (ADPA), Carlos Silva Aguincha of explosives company Maxam CPEA, and former general manager of the Catoca Mining Company Dr. José Ganga Junior. How do you assess the contribution of the diamond sector to the development of Angola’s economy? Francisco Queiróz: The diamond sector will for some time continue to be the core of Angola’s mining industry. Five to 10 years could be enough time to set the country on course to being a mining player at a global level. For now, revenue from the sector comes only from diamonds, “It’s always better, economically speaking, to count on local labor. To this end, Catoca has created an academy to bring out the full professional potential of the local human capital, thereby also facilitating future recruitment.” Dr. José Ganga Junior, Former General Director of Catoca Mining Company which is not enough, as we are just at 5% of GDP, and therefore we need to aggressively increase the sector’s contribution to the general state budget. We want to make Angola a mining country, one that goes beyond just oil. Artur Gonçalves: The diamond subsector plays a very important and strategic role in the development of Angola, because we are extremely important for what amounts to the development of the country. We contribute by providing jobs in communities where there are few other industries capable of generating formal employment opportunities. Dr. José Ganga Junior: Diamond production is nothing new in Angola – it’s been going on for 100 years, with Diamang being the first company to explore alluvial diamonds. Catoca is one of the main players in the diamond subsector today. In 1997 it first experimented with the exploration of kimberlite, and did very well. Although its prices are relatively low, production volume is significant, thereby allowing for a certain degree of stability in production. Catoca today represents around 80% of Angolan total diamond production in terms of quantity or carats, and about 50% in terms of value and employment. Dr. Wola N’toni-a-Mambu: Regarding diamonds, the extraction process is relatively simple and the returns are high and fast. In my view, those two factors explain the historical growth and prioritization of the industry. Diamonds represent the secondgreatest source of revenue for the state, obviously trailing behind the oil industry. This will not always be the case, because as other mineral re- sources are mined, there are some that will surely become more important. As we continue to work, we gain more knowledge. In Angola, we have experienced technical personnel who know all there is to know about diamonds. But let me tell you that the diamond market is complex, and increasing production is not what it is all about. Nor is it always the ideal solution. We have to strike a balance between demand and supply. What are the prospects for developing other mineral resources? Carlos Silva Aguincha: Angola has other mineral resources beyond oil and diamonds, such as copper, iron, uranium phosphate, and many others. At the moment, we have the conditions to meet the demands of the market, but the truth is that if there is a boom in the mining of other mineral resources, we will have to quickly reinforce our capacities. Obviously, it will all depend on private investments, especially from abroad, and on lifting the current restrictions to oil and diamond extraction at a time when the country has plenty more mineral resources to explore. But as I said, this requires a lot more money and a lot more technology that Angola does not yet have – and that is why it must collaborate with foreign companies. Dr. José Ganga Junior: Angola has enormous potential in geological mining and is a country that is mainly still untouched with pockets of all sorts of minerals. As such, it represents a sizable op- portunity for investors. I do not see any likelihood that a company investing here in prospecting should leave empty-handed, because there will always be some minerals to extract. I therefore urge investors to come, because Angola is certainly a land of opportunity. Francisco Queiróz: We are pursuing mining diversification, so long as the expansion of exploration does not have negative consequences for the environment and future generations do not directly have to pay the price of our potential irresponsibility. In fact, we are creating a new directorate at the Ministry of Geology and Mines to work directly with the Ministry of the Environment, to address environmental protection in the area of mining exploration. How can Angola add value to mining, particularly in relation to processing diamonds? Antonio Carlos Sumbula: We are fully aware that selling uncut diamonds is quite lucrative. But if we sold cut diamonds this would be much more lucrative. And if we sold them designed as jewelry it would be even more lucrative. We have never worked with jewelry and we need to develop a plan for the medium to long term, which implies that if we wish for more lucrative options, Endiama will have to establish partnerships with companies that have already worked in this area for a long time. Dr. José Ganga Junior: Within the scope of expanding the diamond value chain, certainly adding value would be positive. But we prefer to take things slowly, to consolidate what we have achieved and then expand out into other areas. Within that value chain we are more concerned with perfecting our sales system, A SHINING EXAMPLE Sociedade Mineira de Catoca Lda is the largest company in the diamond sub-sector in Angola and the operator of the country’s largest diamond mine (the fourth largest in the world). Responsible for the extraction of more than 75% of Angolan diamonds, Catoca aims to be one of the top three companies in the world for diamond production using innovative technology and techniques, not only to produce diamonds that are internationally distinguished by high value and quality, but ensuring environmental responsibility and sustainable development based on safe, ethical values and practices. www.catoca.com Our World Insert is produced by United World. USA Today did not participate in its preparation and is not responsible for its content ANGOLA Distributed by USA TODAY Friday, April 17, 2015 7 primary to vocational to higher education, and promoting entrepreneurship at the heart of communities. Catoca’s intention is to always employ best practices in the domains of social responsibility, safety and environmental responsibility. It is important to mention that the nature of the business entails direct and indirect risks. The safety aspect should be present every day. On the other hand, mining activity can be quite aggressive. Catoca adheres to a strong philosophy of sustainability. The company is mindful of risks that it causes, and this is why it works on prevention to mitigate risks across all areas. What would be your final words on Angola itself as a country? since that is where we still have deficiencies – selling more and selling better, through our actions in the external market and being closer to the consumer. We have been considering diamond cutting, but this is already a very narrow and specific business, and naturally our recommendation is to take one step at a time. Preferable, we should first specialize with a company from that business segment so that we can do it right. Just as diamond cutting may emerge, so too could other additional activities. Artur Gonçalves: With regard to cutting and polishing, those are projects that, in due time, may be given further thought. What I mean is that each step and each stage must be completed, because I do not believe that they can be all done at the same time. My understanding is that we are still at a stage of production and consolidation, of studying our reserves and production capacities. In due time, I think the government authorities will address the issue of adding value that would go beyond the sale of uncut diamonds. Dr. Wola N’toni-a-Mambu: It is possible that we have the capacity to do it. The question is: what do we have to gain from it? That has to be taken into account. We must study if this is of interest for our market, specifically for the consumers, and what can be gained from it. At the moment I would not suggest setting up a cutting and polishing factory without first conducting a study to learn more about who will buy the product. Can we speak about local human capacity and how the mining industry is working to develop it? mining. How is this industry being supported today and can it coexist with industrial-scale mining? Carlos Silva Aguincha: At Maxam, our staff is 100% Angolan. Our policy is to transform and train Angolan workers. I can even add that the salaries we pay our employees are among the highest in the local market. In addition, we provide them with education, incentives and continued training. Artur Gonçalves: As a principle, we support artisanal production because it represents a way of creating income on a small scale for certain tiers of the population that live in specific areas. So far, we see that it is, in fact, possible for the two to coexist. The areas are clearly defined and the type of equipment used by artisanal extraction is quite different from the one we use. We can even say that we have a peaceful coexistence. Dr. José Ganga Junior: Catoca has always had a professional training center and the company pays close attention to training because it is of the opinion that people with the right qualifications, specifically for Catoca’s needs, are becoming increasingly hard to find. In Angola, regarding the mines and their locations, we have to make tremendous efforts to find such a highly skilled workforce. It’s always better, economically speaking, to count on local labor. To this end, Catoca has created an academy to bring out the full professional potential of the local human capital, thereby also facilitating future recruitment. We placed great emphasis on the training center because for a long time, the state was the source of employment. That is what inspired us to prioritize training the people who work in Catoca today. Around 70% of the company’s employees have participated in internal training and, over time, Catoca will continue to improve its training scheme. Angola has a long history of informal and artisanal Diogo do Carvalho: With regard to artisanal diamond exploration, we give permission to the local inhabitants to explore their land, and not to newcomers who have no history in that area. Today we have a large number of permits granted for artisanal exploration, and this goes beyond our 10% quota established by the government. Angolans must benefit from their own resources; this is a fact. How important is corporate social responsibility? What are you doing to give back to the communities where you work? Artur Gonçalves: Sociedad Mineira do Cuango is focused on satisfying the basic needs of local communities through the development of social projects. We contribute by building roads, equipping or supporting hospitals, and providing electricity, running water, ambulances and school lunches. Dr. Wola N’toni-a-Mambu: Although my message will be published in an American newspaper, I would not narrow that message only to Americans. I would address my message to the entire world, since today’s world is truly global. Our arms are open wide and this is a good country to live in. We are an extremely welcoming, pleasant and understanding people. We have no problems related to tribalism, ethnicities and religions, as happens in many African countries. We are also committed to the rehabilitation of roads that are outside the government program, including earthmoving works, repairing potholes, etc. But, fundamentally, the cornerstones of our community outreach are education and health. We have clinics that were built to help the workers and their families, as well as some members of the community. In terms of infrastructure, we complement the action of the Angolan state, providing our support where we can. We never act in place of the state, but always in cooperation with local and provincial authorities. Dr. Wola N’toni-a-Mambu: The Chitotolo Mining Company contributes to improving the living conditions for the people around the mine. Generosity is part of the intrinsic nature of the Angolan people, and it is no different here. As a locally based company, it sees that the needs of the population are many, but cannot always satisfy them the way it would like to. So Chitotolo systematically contributes wherever possible, in the construction “Diamonds represent the second-greatest source of revenue for the state, obviously trailing behind the oil industry. This will not always be the case, because as other mineral resources are mined, there are some that will surely become more important” Dr. Wola N’toni-a-Mambu, Former Chairman of the Board, Chitotolo Mining Company of schools, hospitals, etc. The company also contributes by ensuring healthcare for its employees and their families, which tend to be very large. Dr. José Ganga Junior: We do not feel completely contented yet because in Angola the needs of the people are still great and poverty levels are still too high. The Catoca Mining Company is focusing its energy on reducing the impact of such deficiencies by setting up means for people to have dignified employment and be able to self-sufficiently acquire their own wealth. The company has been working in education on all levels, from Artur Gonçalves: There is this idea that Angola is a world of corruption. The first thing I would like to say is that Angolans are capable of being honest and of having money at the same time. The second thing would be what is best about us: kindness, humility and the way we welcome those who visit us. Lastly, I would take our culture as a whole, because it is unique and very beautiful. We are the most Westernized of all Africans; we are very similar to the Europeans, yet we never forget our roots. We have a great cultural strength, and that can be seen in the way we have been capable of bringing our music and our dance to the world. Dr. José Ganga Junior: I would inform Americans – and indeed the world – that in our opinion Angola possesses the necessary conditions for secure investment, given its political, social and legal environment, which ensures that investors can enjoy their earnings and repatriate their dividends. As the main diamond consumer in the world, the United States should be interested in joining us and contributing to the development of the entire value chain of natural resources, that is: prospecting, exploration, production, and all the way through to retail. Our World Insert is produced by United World. USA Today did not participate in its preparation and is not responsible for its content 8 ANGOLA Friday, April 17, 2015 Distributed by USA TODAY Oil price slide adds fuel to the diversification fire Despite the challenges it faces, the republic has weathered the oil price storm and has big plans for its vital energy sector that include raising output, tapping LNG and more than doubling electricity production by 2017 “We feel Egypt is ready for a big campaign; we are ready to welcome tourists with open arms, like we have been doing for thousand of years” Hisham Zaazou, Minister of Tourism S ince oil was initially discovered in Angola, the industry has grown notably, and almost all production comes from offshore fields off the coast of Cabinda and from deepwater fields in the Lower Congo basin. Onshore production remains limited at the moment. According to January 2015 estimates from the Oil & Gas Journal, the country is home to 9 billion barrels of proved crude oil reserves. Angola also produces natural gas, and is working on developing the infrastructure required to boost this segment. Although oil production boomed from 2002 to 2008, with Angola’s GDP expanding by on average 15% per year, according to the World Bank, the country suffered when the effects of the global crisis hit in 2009. Oil is the primary component of the nation’s economy, accounting for almost half of GDP, 80% of tax revenues, and 90% of export earnings, according to The African Report. Therefore, it comes as no surprise that falling oil prices, together with a slowdown in production, have had a notably negative impact. Oil prices have essentially halved in the past six months, and “income has already been impacted by the drop in oil prices, [with the result that] we need to create measures to mitigate the impact of falling oil revenue on public spending”, said Angola’s President José Eduardo dos Santos in a state-of-the-nation speech in October 2014. Although the economy expanded in 2014, growth did not offset slides in oil revenue. Tumbling oil prices will have widespread effects on the country, and has already led to budget cuts of 1.8 trillion kwanzas ($16.5 billion). This scenario will indubitably have an impact on Angola’s ability to fully grow its GDP. Other effects include a rise in inflation, a weaker currently, a budget deficit, and a possible current account deficit. This will, of course, affect the government’s efforts to diversify the economy, and public spending will have to continue to be cut. A large number of programs are expected to be postponed, and future projects will most likely be cancelled, such as those to build roads, provide access to drinking water, and increase electricity coverage. Investments in education, including teacher training and classroom construction, have already been scaled back. The Finance Ministry had originally projected 9% growth for 2015, but that was before they were forced to slash the budget. Angela Bragança, the Secretary of State for Cooperation of the Angolan Ministry of Foreign Affairs, says these measures aim “to preserve currency and price stability and economic and social growth.” According to analysts at NCK Research, while the budget revision “is certainly positive and will allow authorities to contain the impact of the oil price shock to an extent, the budget deficit [is expected to] be significantly wider than what authorities predict.” In the past, lower oil prices in 2008 posed a problem for Angola in the form of delayed payments to construction firms. However, in recent years the country has had better relations with the World Bank and the IMF, and its banking system is more sophisticated. Moreover, in spite of the situation, “Angola is in a better position to finance itself in the external markets,” says AECOPS, a Portuguese construction lobby group. As for future oil prices, that is the biggest guessing game. They could plunge or they could soar; the truth is that predicting something so vola- force in Angola’s economy in the near future. However, the country has successfully reduced its dependence on that resource and other sectors have emerged which are now contributing more to the economy, thanks to proactive policies by the government. Revenues from oil as a percentage of the total have declined, and its share of GDP has also been reduced. Oil and diamonds account for a very high percentage of exports, around 98%, but there are notable efforts to increase the contribution from other minerals. Meanwhile, Angola’s oil sector continues to evolve. Although it has, to date, been dominated by international players, small local companies are finally getting in on the action. According to Mr. Botelho de Vasconcelos, tenders are being organized for onshore concessions, with a view to increasing the participation tile is nearly impossible. But analysts try anyway, and most mainstream forecasters expect prices to “remain more or less where they are, which is around $52 per barrel,” according to Yahoo! Finance. One of Angola’s objectives for combating this situation is economic diversification. “Our economy should not be permanently held hostage to oil sector revenues, and so we must take advantage of other resources to re-launch our economy,” says Petroleum Minister José María Botelho de Vasconcelos. He adds that other sectors, such as agriculture and energy, are starting to increase their contributions to the economy, with the result that there is redistribution in the production of wealth. “This is contributing to the diversification and socio-economic development of Angola,” the minister says, with improvements becoming visible. The benefits of oil need to extend throughout the social strata of Angolan society, with a view to further reducing poverty. This is a priority, and the UN has already made positive assessments in this area in Angola. The country has also made strides in increasing life expectancy and in reducing infant mortality and malariarelated deaths. Despite this long-term objective, petroleum is likely to be the dominant driving “Our economy should not be permanently held hostage to oil sector revenues, and so we must take advantage of other resources to relaunch our economy” José María Botelho de Vasconcelos, Minister of Petroleum of local firms and fostering the creation of partnerships with companies abroad – the goal being to provide support in terms of financial resources and also expertise. Additionally, given the industry’s complexity, there have primarily been three or four national companies operating as services providers; however, local companies are also stepping up to participate in this area. The U.S. continues to be a very important strategic partner for Angola, and the two nations have a history of cooperating in this area. Exxon, Halliburton and Chevron, among others, have successfully worked with Angola in mutually beneficial partnerships, and Angola has a reputation for having coordinated and participated in initiatives promoted by both countries. Compared with other African countries, Angola is one of the most competitive in oil and gas, mainly due to the “mechanisms used in contrac- tual relations, which attract investments to the country,” says the petroleum minister. The country takes great pride in rigorous relations with partners, which it believes sets it apart from other nations on the continent. There have also been efforts to develop human capital within Angola’s oil industry, with the National Eastern Petroleum Institute in Sumbe, among other higher education institutions. A small portion of revenues from each barrel of oil goes toward training for future oil sector workers and to fund scholarships. A major focus is also to funnel proceeds to the rest of the population. Domingos Francisco, Director of the National Petroleum Institute (INP), states the best way to use the proceeds from oil is to invest in health and education programs for Angolans, which is another government priority. Angola also has strict oil and gas sector requirements vis-à-vis international oil companies that seek to increase the number of Angolans hired and in management positions, known as its Angolanization policy. A threshold in this regard has been created. Additionally, those companies must contribute to training programs in Angola and use local banks for their business. Despite the challenges it faces, Angola has big plans going forward, setting a target of pumping 2 million barrels per day in 2015, up from 1.87 million, and aiming to more than double electricity production to 5,000MW by 2017, as new hydroelectric dams are built. The country’s $10 billion Angola LNG project aims to process, sell and deliver 5.2 million tons of liquefied natural gas per year from one of the most modern facilities in the world, a plant in Soyo, some 215 miles north of Luanda. It includes seven LNG vessels and three loading jetties, and the project has several shareholders, among them Chevron, BP, Eni, Total and Sonagol. This venture uses solutions that reduce emissions and its mission “is to eliminate flaring of gas, provide clean and reliable energy to customers, and maximize the return on investment”, according to Angola LNG. The plant has been temporarily closed to resolve a series of pending issues, but is expected to be operational again in 2015. There are also many crude oil projects slated to begin in 2015, 2016 and 2017, among them Mafumeira Sul, the East Hub Project, Greater Plutonio Phase III, and Kaombo. Angola may be able weather the storm and ride out volatility in oil prices, but it is imperative that the focus be placed on diversifying the economy, as overdependence leaves it very vulnerable. The government must find new engines of growth to ensure a more stable situation for the economy, the people and the future. Our World Insert is produced by United World. USA Today did not participate in its preparation and is not responsible for its content ANGOLA Distributed by USA TODAY Friday, April 17, 2015 9 Goal: 2 million barrels per day By reaching output of 2 million barrels of oil per day by 2017, Angola will overtake Nigeria as the number one oil producer in Africa Sonangol is the stateowned corporation responsible for overseeing oil and gas exploration and production within Angola, including offshore. The nation’s hydrocarbons reserves represent its major natural resource, with revenues from oil and gas sales being key to national development. From Sonangol’s revenues, 86% goes to the national treasury to fund the government’s revenue and capital spending. Sonangol thus plays a critical role in Angola as an agent of economic and social change and in transforming resources into national well-being. Since the early 1990s, Angola has focused increasingly on deepwater wells, which now provide the bulk of the country’s production. Output more than doubled between 2003 and 2008 with the coming on-stream of several new deepwater wells, but has stagnated since then because of persistent technical problems. Programs to resolve these challenges, in such areas as water injection systems, gas cooling and floating, production, storage, and offloading units, are in progress with the international companies who operate the concessions. In addition, the U.S. Energy Information Administration lists 10 new projects scheduled to start production within the next four years. Sonangol’s ambition is to boost production from the average of 1.73 million barrels per day achieved in 2013 to 2 million bpd in 2017. Besides Sonangol EP itself, the group’s own exploration and production unit, international companies that have announced major new investments to increase output include BP from Britain, Total from France, and Chevron from the U.S. Bidding in respect of up to 15 new exploration blocks is also due to take place this year. Longerterm, tremendous potential exists to harness or sell Angola’s natural gas reserves, Client-centric focus Excellence in performance Teamwork Quality, health, safety and environment Ethical conduct Effective communication at present mostly vented, flared or re-injected since the country lacks the infrastructure to commercialize the gas. Achieving this target of 2 million barrels per day would enable Angola to leapfrog Nigeria and become Africa’s top producer, a fittingly ambitious goal for an ambitious nation. However, for Sonangol, it represents rather more, it is a target with a purpose, one of broadening further the contribution the company can then make to fulfilling national goals and to generating economic and social development opportunities for the country’s citizens. Growth with a purpose is the clear aim. “Transforming national resources into social progress and opportunity by raising production and enhanced efficiency, along with far-reaching CSR initiatives, form the core of operations at Angola’s national oil guardian, Sonangol” Sonangol’s ‘no-spills’ policy Sonangol has never suffered a major oil spill accident Sonangol is proud of never having suffered a major oil spill accident. The company’s policy is to integrate QHSE (Quality, Health, Safety, Environment) thinking into every aspect of its operations. For Sonangol, QHSE programs are not seen as burdensome and costly obligations, but instead as opportunities to involve all staff in taking ownership of aspects of their work that protect them and their colleagues and the environment around them. Daniela Matos, Director of Sonangol’s QHSE Department, goes even further, adding, “QHSE should translate instinctively into productivity, quality and benefits to the environment”. For Ms. Matos, the aim of Sonangol’s QHSE program is that “all company personnel will have greater knowledge and a better perception of how to best perform their roles”. The approach is clearly one of QHSE thinking adding value, not only through the prevention of accidents but also through the development of safer and better operating procedures. Meticulous analysis and understanding of work methods are followed by intensive training to inculcate safety awareness. They also provide metrics to continuously judge performance, individually and collectively, twith the aim of achieving best practice by a process of continuous monitoring and improvement. Ms. Matos amplifies Sonangol’s holistic QHSE philosophy. She says, “Quality, safety and environment have the same origin. The same causes which lead to problems in quality also lead to problems in safety and environment. As such, creating a culture of QHSE in the organization is important because doing so also allows you to solve problems at their origin.” It is a mature corporate management approach recognizing the risk of human error and emphasizing prevention. Sonangol is determined to maintain its proud no-spills record way into the future. Attention to detail benefits productivity, quality, health, and the environment Comprehensive program to resolve Angola’s housing crisis takes shape Government acts vigorously to transform housing availability and accessibility Angola’s rapid growth since the turn of the century has inevitably put tremendous pressure on both the availability of housing and its cost. Nowhere is this more evident than in the capital, Luanda, where rents rival those in Paris, New York and Tokyo. Add to that issues of land tenure in a country coming out of a long civil war and an inadequate housing credit system and it becomes clear why resolving the housing crisis is one of the government’s major priorities. Angola’s burgeoning middle class is ever more eager to get on to the housing ladder as they aspire to a lifestyle in line with their ambitions and aspirations. Therefore, since 2008 the government has been promoting a comprehensive program to both increase the stock of housing and improve its accessibility to ordinary citizens. This program covers all corners of the market, including public and private housing developments, cooperatives, and self-builds, the latter being the biggest sector. Public funding has been injected into housing projects across the whole country, including several developments around Luanda which will become the nuclei for new towns and thus go some way toward providing a longterm solution to the overcrowding and congestion in the capital. Among these is Kilamba, around 12 miles from Luanda and described by President José Eduardo dos Santos as “the largest housing development ever undertaken in Angola and an outstanding example of social policy carried out in the country to solve the housing deficit.” The government’s program has radically overhauled the country’s land legislation process and made mortgages more accessible. Income tax relief is also available for people building homes. The housing crisis is a consequence of Angola’s economic success and the government’s program aims to respond to the challenge. Education comes first: natural resources powering human potential Sonangol invests in education and in the growth of knowledge assets to empower Angola’s ambitious youth Sonangol is an oil company with a difference. Entrusted with overseeing the development of Angola’s major natural resource, the company consistently demonstrates its commitment to effectively employing the revenues from its oil and gas activities to enhance the knowledge and skills of the country’s citizens. This link between the use of natural resources and the enhancement of the well-being of Angolans guides the company’s corporate social responsibility (CSR) policy and is very clearly evident in the areas of education, arts and culture. Sonangol, like many companies, finances educational programs for staff members, however the scope of the company’s commitment far exceeds what would be needed simply to fulfill its own operational requirements. The company supports education at all levels of Angolan society, from building schools and kindergartens in the most remote parts of the country to providing hundreds of grants for study overseas each year. For Sonangol, however, education goes beyond simply training for work, with the company’s website proudly stating: “We believe in the power of ideas”. Thus, the group also invests in the creativity of artists, supports numerous cultural projects as well as the Paz Flor Cultural Center, and sponsors the prestigious Sonangol Literature Award. Neither is the scope of this commitment limited to Angola itself, with Sonangol having also sponsored schools in other less well-endowed African countries, such as São Tome e Principe. One outstanding example of the group’s commitment to building the nation’s knowledge assets base is the $80 million investment in the Angola Maritime Training Center (AMTC), opened in February 2014 and operated in collaboration with the City of Glasgow College in Scotland. Providing a world-class training facility not only for Angolans but also the maritime industry in the wider region, the center will provide complete training for maritime ratings, as well as the first year of training for deep-sea deck and engineer officer cadets. The second academic year for the officer cadets will continue to be provided by the College in Glasgow while the ATMC develops its own capability in this area. The initial intake was of 14 students, eight being deck cadets and six engineer cadets. Cadet numbers are expected to double this year with the center eventually offering courses for 192 students. All the courses boast international accreditation and approval from the UK Coast and Maritime Agency or the South African Maritime Safety Authority. Four of the initial intake of students are female, perhaps destined in time to join the 20 women, one officer and 19 cadets already working on Sonangol vessels, such as Arlete Jandira Ginga Fastudo, a marine engineer who emphasizes the determination and ambition of Angolan women and the opportunities open to them within Sonangol. The investment in AMTC is only part of Sonangol’s commitment to higher education. Last year, more than 500 students received grants for study overseas, principally (but not only) in the areas of geo-sciences, engineering and technology. Sonangol takes its commitments to the nation and its people seriously, seeking to ensure that the benefits of necessarily finite natural resources are carried through to future generations. What better way to achieve this than through education. Sonangol’s 2015 target of being an integrated and competitive oil company with international projection is to be met through a high level of performance using the best practices of corporate governance. It has recently reaffirmed its commitment to promote sustainability and growth of the national petroleum sector, increase revenues for the state, and develop the industry’s indigenous human resources. More intense exploration and production of crude oil and natural gas in 2015 Gradual increase in crude oil production Development of resources Increase in domestic LNG use A liberal fuel market and competition Promote investment, protect employment and stimulate productivity The expanding middle class is increasingly eager to get on the housing ladder Our World Insert is produced by United World. USA Today did not participate in its preparation and is not responsible for its content 10 ANGOLA Friday, April 17, 2015 Distributed by USA TODAY Agro-processing to give rise to a new, more competitive agriculture sector Sodepac is helping to transform agriculture in Angola as it strives to create a sector that is more productive, environmentally sustainable, socially inclusive and competitive “We have a social development plan that covers three main areas: the issue linked to the income of the population through agricultural production, treatment of health issues and living conditions, and finally the aspect related to citizenship – the organization of communities and the creation of cooperatives and associations” Carlos Fernandes, Chairman of the Board of Directors of Sodepac B efore the civil war, Angola’s agriculture sector flourished. Fully selfsufficient for food, Angola was also the world’s third-largest producer of coffee and sisal. When the war ended in 2002, things looked radically different. Not only did Angola’s agriculture sector lie in ruins, but Angola was now heavily reliant on both costly international food imports and on revenues from its main export – oil. The return of peace and political stability has since provided the ideal circumstances to change this situation. Recognizing the need to end oil dependency, reduce food imports and diversify the economy, the government has focused on transforming the country’s agriculture sector. With ambitions of full food self-sufficiency and a revived agricultural export industry, the country has embraced a brave new rural development model. Sustainable, economically viable, socially inclusive and environmentally sound, it aims to release the largely untapped potential of the agricultural sector in Angola, helped greatly through the work and stewardship of the Sodepac Company. Sodepac (the Society for the Development of Capanda Agro-Industrial Unit) is charged with the important task of organizing, managing and developing the Capanda Agro-Industrial Growth Point (PAC) Zone in northern Malanje. The 411,000-hectare facility produces corn, soya beans, cassava, cotton and dairy, and includes the farms of Pedras Negras, Biocom, Pungo Andongo, and the Food Company of Malanje. A publicly funded limited company, Sodepac’s work is a key part of the Angolan National Development Plan for 2013-2017 and is crucial to the realization of the rural development model that promises to transform agriculture sector and make the republic more competitive and self-sufficient. Earlier this year, Carlos Fernandes, Chairman of the Board of Directors, announced plans to convert 186 villages into 12 agro-towns as part of the company’s social betterment program in rural areas. The aim is to combine the villages and create better housing, sanitation, cultivation and drinking water conditions for the population. Six foundational principles underpin Sodepac’s mission, which include the establishment of supply chains of production and leadership by anchor companies. As Mr. Fernandes notes: “More than 70% of current production in the country is in the hands of family farms.” Presently, these family farms or small to medium-sized enterprises (SMEs) are not successfully integrated into the agricultural supply chain. To remedy this, largescale, publicly funded, longterm investment is needed. Anchor companies can perform this role. “The country needed to start large companies with public capital, as you can see in Cuando Cubango province and in Pungo Andongo located in the Pedras Negras area,” Mr. Fernandes says. “The intention is for these companies to manage and complete the production chain.” The use of advanced technology and increased competitiveness are intrinsic to Sodepac’s work and are, Mr. Fernandes notes, interconnected. “The key to competiveness is precisely the technologies used,” he says. “Without these technologies adapted to the tropical climate, the cost structure of firms may be very high and the final price will not be in any way competitive with the international market.” Preservation of the environment as well as social development and inclusion complete the list of the company’s foundational principles. As Mr. Fernandes explains, “We have a social development plan that covers three main areas: the issue linked to the income of the population through agricultural production, treatment of health issues and living conditions, and finally the aspect related to citizenship – the organization of communities and the creation of cooperatives and associations.” Sodepac is already starting to deliver results. Productivity at Biocom, one of the farms located in Cacuso, has so far proved successful. Run by the Angola Bio-energy Company – a partnership between Odebrecht, the Angolan company Damer Industria, and the state-run petroleum company Sonangol Holding – it covers over 162 square miles. Focused on the production of sugar and ethanol, Biocom has so far produced over 18,000 tons of sugar and over 3,000 cubic meters of ethanol. This success can be attributed to the completion of supply chains through anchor companies, according to Mr. Fernandes. “Biocom for example, in Capanda, is coordinating the sugar production chain,” he says. “Biocom is building capacities to assist small businesses and country workers. It is providing technical asThe ‘Kukula Ku Moxi’ family farming program has improved living standards for more than 2,500 farmers sistance, ensuring the market, transforming the product, and putting it in the market.” The Pedras Negras farm has successfully demonstrated how new technologies can be developed in agricultural production by showing the technological potential for producing, harvesting, drying and storing maize and soya. The 24,700-acre farm currently has a stock capacity of 10,000 tons of grain. Another success story for Sodepac has been social development and inclusion. The family farming program ‘Kukula Ku Moxi’ at Pedras Negras was launched in 2010 and has since delivered a number of positive impacts for Pungo Andongo’s rural communities. As a result of this program, a substantial rise in family income for local families has led to living standards improving for at least 2,500 country farmers. In addition, more than 11,000 people gained access to drinking water and another 3,500 people benefited from improved diets. There was also a drop in infant mortality from 118 to 33 deaths a year. Results are therefore very promising. As Sodepac continues to transform Angolan agriculture, the investment opportunities opening up are not only huge but also very welcome. “Angola is a stable country both politically and socially,” Mr. Fernandes states. “We have favorable legal instruments for private investment, particularly foreign. My message is that investors should come and focus their attention on Angola and particularly its agri-business.” Our World Insert is produced by United World. USA Today did not participate in its preparation and is not responsible for its content ANGOLA Distributed by USA TODAY Friday, April 17, 2015 11 Wireless penetration rate of 65% means huge growth potential for ICT By extending and upgrading telecom networks, the government expects businesses to become more efficient and for e-commerce to become a more prominent feature of economic growth A ngola is banking on the ICT sector becoming one of its new chief engines of growth. Aside from increased sales of smart phones, digital TV and broadband, it is anticipated that modern ICT services will improve the efficiency of companies and organizations across the entire economy, create a thriving e-commerce industry, and significantly improve access to health and education. There has been substantial public and private investment in telecommunications infrastructure in recent years, and Angola, like in many other parts of Africa, has witnessed tremendous growth in the telecoms segment. Angola’s wireless market is one of the fastest growing in the world. The number of cell phone users has doubled in five years to 14 million, translating to a penetration rate of 65%. Internet penetration is much lower at 20%, leaving significant room for expansion. The mobile market consists of two players: Unitel and Movicel. Unitel is the dominant player with a 70% market share and around 10 million customers. The company has been one of the main investors in the expansion of the country’s fiberoptic cable network. “We are continuing to expand both our coverage and our technology, which includes building a national fiber network across the country. Nine thousand kilometers (5,600 miles) of fiber have been deployed not only with the intention of supporting our own networks, but also to provide support to the national infrastructure and improve broad- band communications across Angola,” explains Unitel CEO, Tony Dolton. “We are also deploying metropolitan fiber networks in the capitals of the major provinces that are going to provide high quality and high-speed broadband and Internet connectivity to areas that are currently starved from this sort of technology, or rely on slower, more expensive technologies for these services.” Unitel has helped to put Angola at the forefront of telecoms in Africa by establishing its 4G LTE-A services. While the service is quite limited at the moment, Mr. Dolton expects speeds will eventually reach 60-70MB thanks to this new technology. “At the moment there are limited affordable LTE-A devices in the market so we are not planning a full network roll-out of LTE-A until that situation improves,” he says. “Our focus today is to expand our overall network coverage across the country, as well as expanding the LTE network.” However, it was the smaller player in the mobile duopoly, Movicel, in partnership with Chinese phone giant ZTE, that first introduced fourth generation LTE technology to Angola in 2012, putting the country ahead of many parts of the United States, Britain, and most countries on mainland Europe in the rollout of 4G wireless services. “Movicel was the first operator to release 4G technology in Africa,” says the company’s General Director, José Paulo Dias Henriques. “Today all the Luanda metropolitan area benefits from this technology. Providing this important data Tony Dolton, CEO of Unitel service is one of the main contributions of Movicel. At the moment we have 4G in greater Luanda, in Cabinda and in Benguela, and we are also looking at changing our networks in the rest of the country.” Angola’s fixed-line market is dominated by the state-owned enterprise and former parent company of Movicel, Angola Telecoms (AT). Like Unitel, AT has invested in the telecommunications network to bring coverage to once-unreachable parts of the country. CEO João Adolfo Martins points out: “With this expansion in coverage we are raising the social standards of Angolan citizens across the whole country.” AT has been undergoing an enormous restructuring process that will eventually lead to the privatization of the company. As João Adolfo Martins, CEO of Angola Telecom part of the process, the government injected more than $300 million in 2012 to pay off debts, increase revenue collection, boost sales, and extend and repair fiber-optic cables. Mr. Martins says that restructuring has allowed the company “to become self-sustainable and take its place as one of the main players in the market.” “This restructuring process has been a success and we know we are on the right path. We had advisors that have helped us in this process and we aim to see positive results at the end of 2015,” he adds. The state-owned telecom company is also behind one of the industry’s landmark projects. AngoSat, the country’s very first satellite, is due to be in orbit by November 2016 and will help to bring down prices, improve services and extend broadband Internet to places that are not connected to the fiber-optic network. “We will be able to achieve one of our goals, which is to give universal access to our services,” remarks Angola Telecom’s CEO. The establishment of improved services at lower prices will also be supported by the monumental South Atlantic Cable System (SACS), a multibillion-dollar project which will establish a cable that will stretch more than 3,700 miles across the Southern Atlantic from Luanda to Fortaleza, Brazil. SACS will have an enormous impact in Africa, South America and Asia. With data traffic no longer having to pass through Europe and the U.S., it is expected that costs could come down as much as 80%, and that cheaper services will lead to increased mobile penetration of around 85% in Angola within two years. The new trans-Atlantic cable will also provide the shortest distance between the São Paulo and Hong Kong stock markets, as well as providing a faster route from Europe to South America. Unitel CEO Mr. Dolton says that with SACS, Angola “has the potential to become a connectivity hub for West Africa”, adding that in preparation “Unitel is extending the fiber network to the borders of neighboring countries.” The project was made possible thanks to successful collaboration between Unitel, Movicel and AT. The three companies are shareholders in Angola Cables, which is covering the total costs of the SACS’ construction. Our World Insert is produced by United World. USA Today did not participate in its preparation and is not responsible for its content 12 ANGOLA Friday, April 17, 2015 Distributed by USA TODAY Aviation upgraded to first class With a brand-new international ariport to be unveiled in 2017, and the overhaul of national carrier TAAG, Angola is on course to become a regional, if not international, centre for aviation A ngola is in a hurry and in almost no other place in the country is this quite as evident as at the vast construction site some 25 miles southeast of Luanda, where thousands of workers are busily putting the finishing touches to the brand-new Angola International Airport, scheduled to open in 2017. Designed to handle 15 million passengers and 35,000 metric tons of cargo a year, the facility will channel flights to and from such far-flung destinations as Houston and Beijing, reflecting Angola’s bid to become a major regional and even international aviation transport center. In its efforts to ensure that dream takes off, the government of President José Eduardo Dos Santos has carried out a series of measures such as reaching the necessary agreements with international aviation agencies to guarantee air safety and other concerns, launching a multi-billiondollar campaign to upgrade airports around the country and overhauling Angola’s once poorly-run flag carrier, TAAG. “Our national aviation sector needed to be completely restructured and after careful study the first thing we did was to reformulate its whole legislative and regulatory framework,” explains Transport Minister Augusto Da Silva Tomás. This involved hammering out more than 3,500 pages of comprehensive agreements and accords with such bodies as the European Union, the International Civil Aviation Organization and the International Air Transport Association. “Our entity for regulating and supervising the sector, the Instituto Nacional de Aviação (or National Aviation Institute) has also been restructured,” the minister says. In another move, airport infrastructure, equipment and staff training were modernized at well over a dozen airports from major cities such as Luanda, Cabina and Soyo, to provincial capitals. “And then there is the new Angola International Airport which will be among the largest ones in Africa and the largest in Central Africa,” explains Mr. Da Silva. “As is known in the aviation sector, TAAG was blacklisted and forbidden to fly to Europe,” he continues. “So we started with what we called the ‘Turnaround’, the program to rebuild TAAG, aimed at thoroughly reorganizing the company at the technical, organizational, financial, economic and social levels with the ultimate aim that the airline could be taken off the European Union blacklist.” Instrumental in putting TAAG right is the agreement the flag carrier signed with highly-successful Emirates Airline of Dubai under which the Middle Eastern company is to manage the Angolan partner for a period of 10 years. Under the terms of the accord, Emirates is to name a new CEO, appoint four senior staff members to work for TAAG, review operations, design a business plan, seek synergies between the two airlines, train TAAG staff and carry out other tasks, but without taking an equity stake. According to analysts, these measures would help the Angolan carrier eventually compete on routes with foreign airlines currently serving Luanda such as British Airways, Lufthansa, KLM, Air France, Iberia and others. Airline industry analysts said that while TAAG certainly benefits from the arrangement, it can also be good for Emirates as Angola is a restricted, but high-yielding market and will strengthen the United Arab Emirates’ trade ties to Africa and especially, of course, Angola with which it shares an oil-based economy. The Arab carrier began flights to Angola in 2009 and last year increased its flights from three times a week to daily, while most intercontinental airlines are restricted to two or three flights a week. “Emirates is a worldwide reference company that can bring us huge benefits,” argues TAAG Chairman, Dr. Joaquim Teixeira da Cunha. “With this agreement, we expect our airline to become more capable and, at the same time, it will support our government’s intention to transform the new Angola International Airport into a regional aviation hub.” “Over the next several years,” he adds, “we expect TAAG to grow 14%, but from 2017, when the new airport begins operations, we predict larger growth due to the increase in traffic from regional flights to Luanda connecting with international flights to Latin Amer- ica, Europe and probably Asia and the Middle East.” One of the key steps in transforming the Angolan airline was the purchase of new, more fuel-efficient passenger jets from Boeing, the giant U.S. aircraft manufacturing company with which Dr. Teixeira says the country has been working since it bought its first new, one-source aircraft fleet following independence. “For so many years, TAAG operated with very old airplanes and all kinds of aircraft from different sources,” recalls João Miguel Santos, Boeing International’s Vice President for Africa. “Finally, the president made a decision that TAAG needed to grow and after an intense competition, we were fortunately selected as the preferred airplane supplier and it was an honor.” Just over 10 years ago, Boeing delivered the first two 777s and three 737s and about five months later, another 737. “The airline continued flying a couple of small airplanes because there were some little airports that couldn’t cope with larger airplanes like the 737,” says Mr. Santos. “But under the leadership of the transport minister, they have improved the majority of An- golan airports and the 737s can now land there.” Since then, the U.S. manufacturer has delivered more 777s, which the executive maintains are just right for TAAG’s non-stop routes with full passenger and cargo loads. And it is air cargo capacity which will go towards helping the Angolan government in its ambitious drive to diversify the economy away from the heavy dependence on hydrocarbons and other extractive resources, according to the executive. Says Mr. Santos: “Agricultural products are best shipped to long-distance foreign markets by cargo jet and you just have to look at the example of another African country, Kenya. You go to a supermarket in London and all the green beans are from Kenya which need to be air freighted from source to market in two or three days. “Angola could export cut flowers from the province of Huambo to Europe but you need an airport that can handle such products. Right now, airports there can’t do that but the minister has a plan to develop Huambo into an international airport.” Mr. Santos boasts that he is proud of his company’s long-term relationship with Angola. “Angola is my home country and I think we at Boeing have established ourselves very well as a partner to both TAAG and the country. We don’t just sell airplanes; we work with the ENANA airport authority and with the civil aviation authority, or National Aviation Institute (INAVIC),” he says. This latter agency has undergone what Secretary of Civil Aviation Mário Miguel Domingues describes as an “enhancement process” since 2008 to improve its functions as a regulatory body that provides airports and airlines with the required certifications. “This means,” explains Mr. Domingues, “that it controls all activities in the aviation sector, guarantees operational safety and strictly applies all the rules and practices of the International Civil Aviation Organization (ICAO).” “And even though the modernization program and technical empowerment that the INAVIC has gone through is constantly maintained, it remains permanently audited by the ICAO to correct occasional problems and to improve its international credibility,” he adds. Among INAVIC’s other important tasks are overseeing air traffic control, carrying out medical checks of aviation personnel, ensuring the rights of passengers traveling to and from Angola and licensing flight instructors. Angola’s second big step to ensure its international “air worthiness” was the overhaul of TAAG to get it off the European blacklist. “We made all the efforts to bridge the gaps detected during the audit by the ICAO and the International Air Transport Association and we worked intensely to bring TAAG back to sufficient civil aviation safety levels,” boasts Mr. Domingues. Now off the blacklist, Angola’s flag carrier flies to a number of European cities, especially in Portugal, as well “Our national aviation sector needed to be completely restructured and after careful study the first thing we did was to reformulate its whole legislative and regulatory framework” Augusto Da Silva Tomás, Minister of Transport Our World Insert is produced by United World. USA Today did not participate in its preparation and is not responsible for its content ANGOLA Distributed by USA TODAY as to Beijing, Dubai, Havana, São Paulo, Rio de Janeiro, Johannesburg, Cape Town, Kinshasa, Harare, and other African cities. “It now has all the qualifications required to fly anywhere, including to the United States,” says the secretary of civil aviation. “Service quality has been raised across the board and we’ve ordered new aircraft and other equipment which will make TAAG even better.” Mr. Domingues maintains that with Angola’s economy booming thanks to oil and gas revenue, the country sorely needed to radically upgrade its air links, infrastructure and state-run carrier. And the country is not only attracting the international business community but foreign tourists as well, drawn by Angola’s stunning natural beauty, wildlife, rich culture and adventure destinations. Angola’s Kissama National Park, just 43 miles from the capital, covers 3 million acres of jungle, savanna and grasslands and counts among its denizens zebra, antelope, buffalo, elephants, and the many exotically colored birds native to Africa. In the southwest of the country, the province of Huila offers visitors stunning mountain views, thundering waterfalls, volcanic landscapes and fascinating tribal cultures, while those seeking adventure can travel to the southern coastline for deepsea shark fishing, diving, hiking, parasailing, and whalewatching cruises. And for surfers, Cabo Ledo, one of the longest point breaks in the world, is just an hour south of Luanda and perfect not only for veteran wave riders but beginners as well. Beachfront cafes serve up icecold beer and giant lobsters. “Given this country’s amazing potential, we couldn’t just sit on our hands so we did all this, plus we began building the new Angola International Airport, which will be a reference in Africa,” says Mr. Domingues. “In fact, we are in a more central location than South Africa for becoming a regional hub, for example.” According to the secretary, all the African countries are working hard to develop and better integrate their transportation infrastructure through increased cooperation. In recent years, African air transport has grown strongly and it is not true anymore that the quickest and most convenient way to get from the east to the west of the continent, or vice versa, was to fly via Europe. New passenger services are satisfying the demand by the increasing number of tourists heading to Africa, while more freight services are helping boost those exports vital for earning badly needed foreign exchange. However, analysts say challenges for African aviation remain, such as the expense due to the until-recently high fuel prices, a lack of convenient connections and safety issues. And for the airlines themselves, landing fees are higher than most of the rest of the world and there needs to be more regulatory oversight as well as more “open skies” policies which would reduce airfares. Mr. Domingues says he hopes these obstacles can be reduced as African nations up their aviation game for the benefit of all and that was the reason that Angola has put such resources into getting its own house in order. “Our intention has been to create a civil aviation sector in line with the economic development taking place in everything else in the country by making tremendous investments in human capital, technology and the environment,” he remarks. While many foreign governments and companies are helping Angola in this endeavor, the secretary notes that the United States is “without a doubt, the best strategic partner for us”, highlighting the country’s long reliance on the Boeing corporation to supply the state airline’s passenger jets. “All in all,” he concludes, “I would say that for Angola our aviation sector is going to be one of the best, if not the best, in all of Africa. We have the resources, will and determination to see this through. As they say: ‘The sky’s the limit!’” “Over the next several years, we expect TAAG to grow 14%, but from 2017, when the new airport begins operations, we predict larger growth due to the increase in traffic from regional flights to Luanda connecting with international flights” DR. Joaquim Teixeira da Cunha, Chairman of TAAG “Given this country’s amazing potential, we couldn’t just sit on our hands so we... began building the new Angola International Airport, which will be a reference in Africa” Mário Miguel Domingues, Secretary of Civil Aviation Friday, April 17, 2015 13 Insight from the aviation industry As a native Angolan and businessman with long experience in the region, the Boeing Corporation’s Vice President for Africa, João Miguel Santos shares his unique insight into where his country is now and where it is heading, its agricultural potential, and its relations with the U.S. What is your vision about the economic climate in Angola and its future potential? Angola is a country with enormous potential. When people think of Angola today, they think of a rich country which has some challenges but there is so much more to the place. After 27 years of civil war, the reconstruction task was huge and it has taken a while to get the economy working and we see major improvements. Inflation has dropped to single digits, the government is collecting taxes in a more regular manner, and it is to the government’s credit that those policies took hold and continue. In my opinion one of the chief challenges facing the country is reversing the massive influx of people to Luanda, which does not have the infrastructure for 6 million inhabitants. So we have to ask ourselves how to give these people the reason and the wherewithal to return to their villages where we must provide them with a good standard of education, housing and health care, and a way to make a living by developing the rural agricultural sector. So along with its mineral resources, Angola also has agricultural potential? Very much so. Not many people know this but Angola was a net exporter of agricultural goods years ago and João Miguel Santos, Vice President for Africa at the Boeing Corporation now it is a net importer. We have to import coffee these days whereas in the past we were one of the largest coffee producers in the world. The Plateau of Huíla, for example, has a Mediterranean climate and you can produce two crops a year. Where else could you do that except in the Mediterranean? But we can do that in Africa. And not far from Luanda, there are vast areas ideal for cattle ranching. We have the human resources for this kind of thing, projects to generate the right results for the economy. The government is doing everything it can, from my point of view, but it takes time. It takes a lot of effort and a lot of hard work. 2013 marked the 20th anniversary of diplomatic rela- tions between Washington and Luanda. How has the United States helped Angola in foreign investment, which is key to creating jobs for the African nation’s citizens? Speaking from my experience with Boeing, the U.S. ExportImport Bank has been key in securing financing for Angola’s purchase of our passenger jets which will do so much to boost the economy. What the bank does is provide a loan guarantee for airlines so they can go to a bank and get financing. Without that guarantee backed by the U.S. government, the airline would not be able to get the loan. The Export-Import Bank is critical for foreign companies to be able to acquire American products, thereby also helping to create jobs in the U.S. Our World Insert is produced by United World. USA Today did not participate in its preparation and is not responsible for its content ANGOLA $22.6bn for land transport infrastructure through 2025 14 Friday, April 17, 2015 Distributed by USA TODAY Angola is developing a modernized intermodal transport system that will connect with the rest of the region, the continent, and indeed the world A ny modernizing economy needs state-of-the-art transport, and Angola – with its reliance on natural resources, sheer size, ambitions to improve the lot of the people, and aspirations to play a leading role in Africa and the world – is no exception. Another reason that it is imperative that the country rebuild its transport infrastructure is because this was shattered over the course of 40 years; decades in which Angolans first struggled for their independence and then subsequently fought one another in a long civil war. “Connectivity” is the buzz word heard around the halls of government, whether officials are speaking of linking Angola’s far-flung provinces or connecting with neighboring countries and beyond. “Our main objective is to create a transportation network that would articulate the whole country, from north to south and from the sea to the east,” explains Transport Minister Augusto Da Silva Tomás. “Moreover, we’d like to increase our geostrategic situation in Central and Southern Africa and in the continent in general, and all of this through projects and programs over the short, mid and long terms for highways and roads, railways, the maritime sector and the ports, and the airways.” It’s a big job. Angola measures almost half a million square miles or twice the size of Texas, and its varied terrain includes dense rain forest, rugged hills and mountains, sand dunes, coastal lowlands and high plateau. In short, all of Africa’s landscape in one country. And according to the minister, there are other challenges. “The greatest hurdle is the lack of human capital, financial resources, equipment and technology,” he notes. “We finance our projects with our own funds and with foreign capital through foreign investment.” “First of all, I would say that ground transport is perhaps the most important so we can move people and goods throughout the whole country and this includes main highways, secondary roads between cities and villages, links between areas of production and those of consumption so farmers can bring their crops to market, for example,” the minister says. By land and by sea Over the past decade, the Angolan government has spent transport routes between the Atlantic and Indian Oceans. $12.7 billion on refurbishing, building and maintaining highways, road and bridges, and officials say they expect to allocate another $22.6 billion between now and 2025. Add billions more for overhauling the country’s railroads, sea ports and airports, plus the money to be spent on transport conveyances such as locomotives, rolling stock, airliners, ferries and ships. Many foreign companies are involved in these projects, whether supplying materials, equipment or expertise to rehabilitating all aspects of Angola’s transport infrastructure. “We are also achieving great success with our railroads,” Mr. Da Silva explains. “Just two examples are the 300-mile Caminho de Ferro de Luanda that passes through Luanda, Bengo, Kwanza Norte and Malanje, and the Caminho de Ferro de Benguela linking Lobito, Humabo, Bié and Moxico over a route of 850 miles. “We also bought new locomotives, passenger cars and freight cars to move people and cargo.” With its long Atlantic coast, modernizing sea transport is also a priority for the government. The country’s four main harbors – Luanda, Cabinda, Lobito and Namibe – “We’d like to increase our geostrategic situation in Central and Southern Africa and in the continent in general, and all of this through projects and programs over the short, mid and long terms for highways and roads, railways, the maritime sector and the ports, and the airways” Augusto Da Silva Tomás, Minister of Transport “With these 44 logistics platforms around the country, the business sector will be able to distribute cargo throughout the network no matter how far away they are from each other, even in places where no railways exist” Dr. Francisco Agostinho M. Itembo, Director of the National Council of Shippers (CNC) have all been rehabilitated and enlarged, while small ports are being upgraded. “On a small scale, we would like to develop a passenger ferry system in Luanda using catamaran vessels being built in Spain, and in the next phase we’ll work on passenger transport along the coast from Cabinda in the north to Namibe in the south,” the minister says. The National Network of Logistic Platforms and the Lobito Corridor All these transport sectors come together, literally, in the government’s almost $4 billion National Network of Logistic Platforms (NNLP) which is aimed at driving regional and national growth through the development of an integrated transport web. “With these 44 logistics platforms around the country, the business sector will be able to distribute cargo throughout the network no matter how far away they are from each other, even in places where no railways exist,” says Dr. Francisco Agostinho M. Itembo, the director of Angola’s National Council of Shippers (CNC). “There is a real need to have this intermodal system being implemented to reach a desirable level of development and ensure that everyone in the country will have access to whatever service or product they need.” At the NNLP conference, Finance Minister Armando Manuel said: “Creating accessibility of transport networks and services, along with construction of strategically located infrastructure also creates a window for macroeconomic and social inclusion, as well as a foundation for achieving regional economic diversification, creation of wealth, competitiveness, and greater economic stability.” And, of course, the new transport networks will connect Angola’s 18 provinces in a way never before accomplished, bringing its 21 million people closer together and providing them ready access to all the new economic opportunities being created. And along with the domestic benefits for Angola, the logistics platforms project will boost the country’s regional cohesion across Southern Africa, advancing stability and social and economic development throughout the region. “We’ll take advantage of these smart logistics networks not only to serve Angola but neighboring countries as well,” claims Dr. Joaquim Teixeira da Cunha, the administrator of state-owned airline TAAG. “Regarding railroads, for example, we have agreements with the Democratic Republic of Congo (DRC) and Zambia with the transport link through the port of Lobito so they can ship their mineral exports, primarily copper, to world markets.” Known as the “Lobito Corridor”, this link is one of Angola’s most ambitious and most promising transport projects and replaced the once-famous Benguela Railway which was destroyed during the civil war. Running between Lobito, through Benguela and across central Angola to the DRC (formerly Zaire), the route will also have a spur to the border post of Jimbe in the northwest corner of Zambia. It is to include roads, airports and logistic platforms. According to researchers, around 40% of Angolans live within the catchment area of the corridor and the project is expected to create a significant number of jobs at all levels. “The Lobito Corridor has the potential to drive development not only in Angola but also for the whole southern region of Africa” José João Kuvíngua, Secretary of State for Transport “The Lobito Corridor has the potential to drive development not only in Angola but also for the whole southern region of Africa,” explains Secretary of State for Transport José João Kuvíngua. “And it is a prime example of intermodality.” “By linking our port in Lobito with the DRC and Zambia, the corridor cuts by a third the distance that exporters in those countries would have to transport their goods to the sea, eliminating the need to go all the way to Durban in South Africa or Walvis Bay in Namibia,” he adds. Planners say that the corridor could be a stepping stone to connecting other countries such as Tanzania, Zimbabwe, the Central African Republic, Rwanda, Burundi and others, and eventually establish direct Private investment opportunities Mr. Kuvíngua is quick to point out that while the government is taking the lead in the corridor project and others, there is room for private players. “Infrastructure capital investments require a large outlay, and obviously, while the government shoulders the burden of financial obligation on most projects, we can only extend ourselves so far and thus there will be a big role for the private sector.” Of particular interest to the central government is for private investors to establish partnerships with the provinces and the transport secretary highlights how private concerns are carrying out operations through concession contracts at the country’s main maritime ports. Different forms of project financing, public-private partnerships and build-operatetransfer, were used for some building and improvements of several seaports. “We have recently instituted and approved the necessary legislation changes that open the same opportunities to the private sector in the provision of our railway system and airport management structures and there is more room for the private sector in building the logistic platforms,” says Mr. Kuvíngua. “In short, the opportunities for successful public-private partnerships are vast.” U.S. investors are particularly welcome, he says. “My message to Americans and indeed, investors around the world is that the time to participate in the development of Angola is now; in fact you may even be arriving late to the party.” “But there is still much scope for investment as the country is in many cases a greenfield site with many projects available for the private sector,” continues Mr. Kuvíngua. “The sooner you come and join the efforts of the Angolan people towards creating sustainable development, the better. The time to invest is now!” Meanwhile, Dr. Itembo of the CNC predicts that American companies will soon move beyond their focus on the oil and gas industries. “At the recent U.S.-Africa Summit, the U.S. Secretary of Transportation said there was a desire and need for the United States to reinforce its relationship with Angola and that it should be based on balance and respect from both sides.” Our World Insert is produced by United World. USA Today did not participate in its preparation and is not responsible for its content ANGOLA Distributed by USA TODAY $1bn AfDB loan to light up more of Angola With better access to electricity and clean water, Angola will be able to spur development across more sectors and provinces P ower and water are two key elements to Angola’s ambitious plans to not only prosper and spread the country’s wealth and well-being among its citizens, but also to diversify the economy from its heavy reliance on petroleum and deliver these essential amenities to the business sector. Although officials have initiated programs to increase electrical power and ensure the reliable supply of water, much still has to be done in these areas before the country can meet its goals, explains Minister of Energy and Water João Baptista Borges. “Our government approved a national development plan for the current five-year period in which energy and water are to be the top priorities and their development will have significant cross-over effects on the other economic sectors,” he says. “So we established an ambitious program to increase power generation from 1 gigawatt of installed capacity to 5 gigawatts, and to improve and expand the power transport and distribution system throughout the country to create conditions conducive to not only economic development, but social development as well.” Last year, the African Development Bank (AfDB) signed a $1 billion agreement to support financial and institutional reform in the Angolan energy sector and encourage private investment. Under the accord, the bank is to focus its efforts on supporting Angola’s reforms for improving the operational efficiency, competitiveness and sustainability of the energy sector and ensure greater transparency and efficiency of public finance management. According to the AfDB, Angola needs to invest some $23 billion through 2017 to implement the necessary reforms in the energy and water sectors alone. In the electrical power sector, major improvements are already underway with the expansion from 180 to 960 megawatts from the Cambabe Dam, the construction of the 2,067-megawatt producing Lauca Dam, and the building of the combined cycle power plant dam at Soyo turning out 750 megawatts. “In order to accomplish all that needs to be done, we will not privatize assets but rather create public- private partnerships (PPPs) for specific projects,” Mr. Baptista says. “But we’re not interested in establishing these PPPs for large generation projects because the risk is higher and the negotiation process more complex. So for the large projects, the state will finance the investment, but for small hydroelectric projects, the state will seek private capital.” However, there are several challenges to overcome before Angola’s energy sector can fulfill all the government’s plans. One is the lack of highly-skilled local staff. “We definitely must improve the qualifications for Angolan employees and to train people to cover the needs of the short and medium terms. For our longterm requirements, we will have to raise the level to provide deeper and more specific training,” Mr. Baptista argues. “Angola has an energy production cost of around $220 per megawatt/ hour when the average in our region is $160 per megawatt/hour. To improve this situation we will have to generate more clean energy, reduce the use of diesel in our generators, and build more dams as we are doing” João Baptista Borges, Minister of Energy and Water Also needed is a concerted effort to reduce government energy subsidies by establishing a pricing policy so that costs and tariffs will eventually be matched by the planned date of 2022, but with safeguards for the poor. “Angola has an energy production cost of around $220 per megawatt/hour when the average in our region is $160 per megawatt/hour. To improve this situation we will have to generate more clean energy, reduce the use of diesel in our generators, and build more dams as we are doing,” the minister says. “We also have to improve the commercial performance of companies by investing in accounting systems and accounting and business management. With commercial success, we will be able to improve salaries and wages for those working in the sector.” Along with benefitting industry, the country’s electrical power program is also aimed at providing electricity for Angola’s vast rural areas where the electrification rate is only 6%, according to the latest available data. Indeed, an estimate by the International Energy Agency indicates that only around 30% of Angolans have access to electrical power, leaving some 15 million people literally in the dark. Another plan envisages linking the government’s three independent systems that supply electricity to different regions of the country into a national grid which could eventually connect with the Southern African Power Pool (SAPP). Composed of 11 member nations, SAAP promotes regional cooperation in the power sector and is designed to create a common market providing reliable and cheap electricity for its members. Angola is fortunately blessed with the water resources needed to run its massive hydroelectric projects and the water is also needed to not only irrigate the country’s expanding agricultural sector, but to also meet the daily drinking, bathing and cleaning demands of its citizens. “Water is a more difficult task because, first of all, it is as – or more – important than energy in many regards and the sector is less developed from an institutional and governmental point of view,” Mr. Baptista claims. “However, it is a very abundant resource and its development requires less investment.” In a bid to provide clean water to around 80% of the population by 2017 through collective systems, the government in 2007 launched the “Water for All” initiative with a planned investment of $5 billion. “This is especially aimed at boosting the quantity and quality of water for the rural areas of the country and I am pleased to say we now have a 67% coverage rate,” the minister boasts. But whether powering the nation so it can fulfill its lofty economic ambitions or supplying electric light to tiny villages in the hinterlands so school children can study at night, these projects will take time, Mr. Baptista cautions. “What is needed is for people to have the patience to see the results and even more important is for us to have a clear direction and focus so all of us together – the government, the private sector and the Angolan people – can pursue these vital goals.” Our World Insert is produced by United World. USA Today did not participate in its preparation and is not responsible for its content Friday, April 17, 2015 15 -