João Lourenço, the new Angolan president who was elected in August after the previous president decided to step down from a 38 year-rule, has been making some bold moves in a bid to sever the last president’s influence in the state’s public enterprise and reduce government’s interference on the economy.
The Angolan government plans to privatise 74 state companies over the next few years, predominantly those in the industrial sector. Reuters reports that the government intends to transfer the ownership of these public enterprises to private investors, as contained in the prospectus sent to investors as part of the country’s Eurobond issuance.
Angola’s unfriendly business environment has been described by the World Bank as a harder place to do business than Syria. The country has had laws that required investors to have local partners who owned about a third of their business. The private investment law requires at least a 35 percent domestic stake in Foreign Direct Investments across 6 strategic sectors: electricity and water, tourism and hospitality, transportation and logistics, telecommunications and information technology, construction, and media.
João Lourenço had lifted these private investment laws, embarking on the process to break monopolies. In addition to this, the finance ministry said last month it wanted a deal with the International Monetary Fund (IMF) known as a Policy Coordination Instrument that “will help to improve the external credibility of our country with positive impact on the ability to attract Foreign Direct Investment.”
The private investment law had also given the state exclusive responsibility in the areas of defence, internal public order, state security, banking activities relating to the operations of the Central Bank and the Ministry of Finance, and administration of ports and airports.
“Generally, the government intends to sell its entire interest in these companies, the majority of which operate in the industrial sector,” statements from the Eurobond prospectus read. “The government’s long-term policy is that companies which, in the government’s view, are not required to remain under public ownership as a matter of policy should eventually be privatised.”
In spite of these efforts, the country still needs major private sector reforms. The country’s ranking in the World Bank’s 2018 Doing Business report – 175th out of 190 – is among the lowest in sub-Saharan Africa and same spot as its 2017 ranking. The country has also failed to improve in getting credit and protecting minority investors.
Angola’s economic growth is expected to quicken to 2.25 percent this year from one percent in 2017, as the “new administration is rightly focusing on restoring macroeconomic stability and improving governance,” the IMF said.
But despite the above-mentioned factors, it appears the new president may be going in the right direction.