Peter Fabricius

President Jacob Zuma seen with Angolan President Jose Eduardo Dos Santos at the Presidentila palace in Lunda. Picture: Peter Fabricius

South African businesses are being advised to exploit renewed political ties with Angola to make the most of lucrative investment opportunities in the former war-torn country.

With Angola now sub-Saharan Africa’s third-largest economy, with a rapidly expanding financial sector and huge potential in areas such as agriculture, telecoms and energy, there are no shortages of opportunities for South Africans who have the know-how that conflict-weary Angola so desperately needs.

But despite South Africa’s physical proximity and the improved roads from the south of Angola up to the capital Luanda, South Africa does not make the top 10 in terms of exporting countries.

Fifteen months after President Jacob Zuma went to Angola for his first state visit and put trade at the top of the agenda by taking along with him more than 150 South African business leaders, not one deal related specifically to the trip has been inked. Potential newcomers are finding it hard to make inroads into a market already dominated by China, Portugal and Brazil.

Experts warn that doing business in Angola takes more than money, you need to be patient, risk savvy and above all find the right local partner.

Angola President José Eduardo dos Santos hailed Zuma’s visit as a “new era in bilateral relations” between the two countries and Zuma said the new trade partnerships would “change the economic landscape of southern Africa”.

A number of bilateral agreements were signed in areas such as trade, industry, air services, sports and energy, and there was strong buzz about the start of a new chapter of co-operation following years of strain under Thabo Mbeki’s presidency.

Dos Santos, who rarely leaves his presidential palace in Luanda, made two trips to South Africa during the World Cup, and is now lined up to visit Zuma next year.

The Economist Intelligence Unit’s (EIU’s) Angola specialist Edward George said the renewed relations between the two leaders had “opened a window of opportunity, probably the best one in a generation for South African companies to invest”.

Speaking on the sidelines of an Angola Business and Investment Summit organised by the Economist Group in Cape Town last week, he said: “There are already around 300 South African companies operating in Angola in various sectors, but given the size of the South African economy there should be many more.”

The timing of Zuma’s visit, which coincided with Angola’s economic downturn triggered by the fall in oil prices, was poor, said Roger Ballard-Tremeer, a former South African ambassador in Luanda, who now heads up the Angola and South Africa Chamber of Commerce.

He said there had been strains on liquidity, but added that opening a business in Angola did not happen overnight.

Difficulties in getting entry visas remained a major hurdle, language could be a barrier, accommodation was expensive and hard to find, infrastructure was weak and the legal and regulatory environment was at best complicated and at worst utterly bewildering.

The World Bank puts Angola at 169 out of 183 countries it rated in its latest annual Doing Business Report, a project that weighs countries on such factors as the regulatory framework, ease of doing business and recommends reforms to improve performance. (South Africa comes in at 34th place).

Angola scored particularly badly on contract enforcement, the time taken to start a business (68 days against South Africa’s 22 days) and property registration.

Transparency International’s 2010 Corruption Perceptions Index ranks the Portuguese-speaking nation at 168th out of 178 countries – South Africa by comparison is at 54th.

Ballard-Tremeer said potential investors should be fully aware of the facts like these league tables, but that those who did things right could reap substantial rewards in the long term.

“What is most important though is that you do your homework before going to Angola,” he said. “You can’t as a business person just go into a country without knowing what the risks are and how to mitigate them. There have been several casualties, companies who were ill-prepared and who didn’t inform themselves.”

South African logistics operator Super Group is one high-profile casualty, losing millions of rands after not receiving payment for trucks it sent to Angola. A spokesman for the company, which has had to undergo significant restructuring following the fated deal, told Business Report that it was continuing to “explore all commercial and legal-related angles internationally” in a bid to recover its losses.

But despite these cautionary tales, there is still plenty of appetite for investment and for those who are prepared to take the risks, returns are high, up to 30 percent in some sectors, successful investors say.

Standard Bank has just opened its first full branch in Luanda, Absa and Investec are said to be pursuing an entry next year and brewer SABMiller has invested close to $450 million (R3.2 billion) building and expanding existing facilities there.

SAA, Barloworld, Transhex and De Beers are among many South African companies already well-established in Angola, and Shoprite, which opened its newest store in the central city of Huambo last week and its discount subsidiary USave, are also reporting strong profits.

Erik Smuts, the managing director of Nampak’s Bevcan, which has invested $160m in the first phase of an aluminium can factory, said there were huge opportunities in Angola, but agreed that it had not been an easy place to work.

“The big problem is not that Angola is lawless, but that it almost has too many laws but lacks the engine room to process those rules.

“The high levels of bureaucracy are stifling economic growth – there are so many opportunities in Angola and if they only made it easier to do business there the economy would explode.”

The EIU’s George said: “It takes a certain type of business to make it in Angola. You need to have a long-term vision, plenty of money and have the right partners. More than anything you need to do things the ‘Angolan’ way.” - Louise Redvers