Attracting foreign investment will be crucial for the recovery of the Angolan economy. To this end, the Angolan government is trying to utilise the new Private Investment Law that imposes fewer restrictions on investors than the previous one to attract further investment from abroad.
Commenting on the new Private Investment Law, which was unanimously approved on 17 May 2018, Banco Millennium Atlântico highlighted that the new law no longer requires investments to have a minimum limit of US$1 million and the pre-condition that local Angolan investors must take a minimum 35% stake in each foreign project.
The passing of this new law “reflects the country’s greater openness to private investment, at a time when it is facing financial challenges and reduced savings to finance the economy…removing barriers to entry of new capital, reducing bureaucracy and simplifying procedures may boost the level of private investment, particularly those linked to small and medium-sized enterprises, which could lead to the creation of new jobs and help the process of economic diversification,” said the bank.
However, according to Africa Monitor, there are still reservations among international investors, particularly those from the United States on the country’s political and investment conditions. Despite the introduction of this new less-restrictive investment law, there are still challenges that discourage entrepreneurs, such as the difficulty in transferring profits out of the country and the credibility of Angolan courts when handling disputes.
Angola’s political instability and the financial system’s lack of reliability are the main reasons for cautious investors . These include on-going sanctions imposed on Angola by the Federal Reserve of the United States regarding the ban of the sale of dollars to Angolan banks or branches of foreign banks operating in the country, noted Africa Monitor.
The annual national accounts recently released by the National Statistical Institute (INE) reveal that Angola’s economic growth has slowed since 2013 and then worsened in 2016 before going into recession. In 2016, Angolan GDP growth was -2.58%, affected by the drop in oil export revenues.
In terms of investment in relation to GDP there was a decrease from 2009 to 2013, followed by a slight increase in 2014 and 2015; 27.48% and 28.21% respectively, decreasing again in 2016 by 26.21%, with 2009 having the highest rate with 42.79%.
In May, the Angolan government also approved a new Customs Tariff, which will take effect on 7 August 2018.
Law firm Miranda Alliance explained that the new Customs Tariff will introduce “significant changes in the tax burden on imports of products to Angola, particularly by exempting a considerable number of products, such as certain types of chemicals, paper products, fabrics, metals, tools, equipment, mechanical instruments, engines, vehicles and ships from Customs duties and Consumer Tax.”
Among other changes, the new tariff alters customs duty rates (ranging from 2% to 70%), establishes new regulations on customs schemes, procedures and the fees due, reduces the rates of Consumer Tax (which now applies uniformly to imports and domestic production), and lastly, introduces a new 20% tax on exports of products that have not been produced in Angola.