As the second-largest oil producer in Africa, Angola is a country with vast potential for businesses looking to expand their reach into Africa. While Angola is often associated with its oil industry, it has been diversifying its economy in recent years, opening up opportunities for investors and businesses in other industries.
The World Bank describes Angola as “a country with enormous potential for investors. With its vast natural resources, large and young population, and rapidly developing infrastructure, Angola is poised to become a major player in the global economy." Oxford Business Group identifies that "with a young and growing population, abundant natural resources, and an improving business environment, Angola is an attractive destination for foreign businesses and investors looking to expand their operations in Africa." The US Department of Commerce International Trade Administration’s report points out “It is the sixth largest economy in sub-Saharan Africa, so it is a logical next market for U.S. companies active in other countries in the region.”
While there is big potential, some of the biggest challenges facing businesses in Angola are the country’s bureaucratic system and the country’s recovery from years of civil war, which ended in 2002. According to the World Bank’s Doing Business report, Angola ranked 173rd out of 190 countries in terms of ease of doing business in 2021. This means that navigating the various regulations and procedures required to start a business in Angola can be a difficult and time-consuming process. While this is a low ranking, the country has made progress in recent years, particularly in the areas of starting a business and getting electricity.
Additionally, one of the biggest challenges is corruption, which is widespread in Angola and can make it difficult for businesses to operate. The country ranks 146th out of 180 countries in Transparency International's 2020 Corruption Perceptions Index. While the government is interested and investing in developing more infrastructure for business, currently there is a relatively high cost of doing business in Angola because of logistics and transportation costs. The country's infrastructure is relatively underdeveloped, which can make it difficult and expensive to move goods and people around the country.
Yet despite those challenges, there is a lot of potential for business in Angola. It is an especially attractive market for businesses looking to expand into Africa since one of the biggest advantages of doing business there is its strategic location: with its proximity to Brazil and the United States making it an ideal hub for companies looking to expand into Latin America as well. Additionally, the very fact that the country's infrastructure is relatively underdeveloped means there are huge opportunities for large development contracts to meet logistics and transportation needs.
While Angola has had to recover from a relatively recent civil war, they have experienced significant political and social changes in recent years, including the election of a new president in 2017 and efforts to combat corruption and improve governance. “Under President Lourenco, the Government of Angola has taken steps to engage in economic reform, including privatizing State-Owned Enterprises (SOEs), prioritizing efforts to combat corruption, and increasing engagement with the U.S. government and private sector on commercial issues” (Source). While there are still some challenges and uncertainties, there is a growing sense of optimism about the country's future prospects. As the U.S. Department of State explains, "The government has made significant efforts to improve the business environment and attract foreign investment, including implementing a new investment law and launching a one-stop shop for business registration."
Signs of High Potential and Overview of Growing Markets
Angola's GDP was $101.6 billion in 2020, making it the third-largest economy in sub-Saharan Africa after South Africa and Nigeria (World Bank). Angola's economy is highly dependent on oil exports, which account for around 95% of its export earnings. Despite its reliance on oil, Angola's government has been working to diversify the economy, with a focus on agriculture, manufacturing, and tourism. The government has introduced a range of reforms to improve the business environment and attract foreign investment, including the creation of a one-stop-shop for investors and the simplification of business registration processes.
In addition to its location, Angola’s growing consumer market and increasing middle class are creating opportunities for businesses in a variety of industries. Angola has a population of approximately 32 million people, with a median age of 18.9 years. The country has a young and rapidly growing population, with an estimated population growth rate of 3.5% per year. This presents significant opportunities for businesses looking to expand into Angola's consumer market. The Africa Investment Forum reports "Angola is one of the fastest-growing economies in Africa, with a growing middle class and a large and increasingly urbanized population. As a result, there are many opportunities for businesses to serve the local consumer market, particularly in sectors such as FMCG, retail, and hospitality."
In looking to the future, these numbers and growing markets will only continue to increase. According to a report by the African Development Bank, Angola's middle class is expected to grow from 13% of the population in 2015 to 22% by 2030. This is expected to drive demand for consumer goods and services, including FMCG products, beverages, and household appliances.
Another industry that is seeing growth in Angola is agriculture, as the government looks to reduce the country’s reliance on food imports and promote local food production. The country has vast fertile land that is suitable for farming, and the government is actively seeking foreign investment to help develop the sector. The country’s construction and infrastructure sectors are also seeing significant growth, as the government invests in new roads, ports, and airports to support its economic development plans.
Particular Industries: FMCG
Fast-moving consumer goods (FMCG) is a rapidly growing sector in Angola. The demand for basic food items and household goods is consistently high, making it an attractive market for global FMCG companies. According to a report by Euromonitor International, the FMCG market in Angola is projected to grow by 20.9% annually between 2020 and 2025.
One of the key reasons for this growth is the increasing urbanization of the population, which has led to changes in consumer habits and preferences. As more people move into cities and adopt a modern lifestyle, there is a greater demand for convenience products, such as pre-packaged foods and beverages, personal care items, and cleaning products.
The beverage industry is also thriving in Angola, with both local and international companies investing in the market. Angola has a youthful population, with a median age of 18.8 years, and this demographic is driving demand for soft drinks and energy drinks. Multinational beverage companies like Coca-Cola and PepsiCo have a strong presence in Angola, with local bottlers producing and distributing their products. The beer market is also growing, with Angola's largest brewery, Cuca, producing several popular beer brands.
However, doing business in the FMCG and beverage industries in Angola comes with its challenges. The country's infrastructure is still developing, with limited transport and logistics infrastructure, making it difficult to distribute products efficiently. Additionally, import duties and tariffs can be high, making it challenging for companies to compete with locally produced goods.
Another challenge is the lack of transparency in the business environment. Corruption and bureaucracy can slow down business processes and make it difficult for companies to operate smoothly. It is important for companies to have a strong understanding of local regulations and laws to avoid any legal or financial issues.
Despite these challenges, there are significant rewards for FMCG and beverage companies looking to expand into Angola. The country has a large and growing consumer market, with a population of over 31 million people. Angola's economy is also expected to rebound in the coming years, as the government works to diversify the economy beyond oil and gas. This presents new opportunities for FMCG and beverage companies looking to invest in Angola's non-oil sectors.
Particular Industries: Tourism
Angola's tourism industry is relatively undeveloped but has significant potential for growth. Angola has a rich cultural heritage and diverse natural beauty, including national parks, beaches, and wildlife reserves. The country is also home to several UNESCO World Heritage sites, such as the Mbanza Kongo Historic Site and the Cuito Cuanavale Battlefield. While Angola's tourism industry is still in its early stages, the government has identified tourism as a priority sector for economic development.
According to the World Travel and Tourism Council, Angola's tourism industry contributed $1.1 billion to the country's economy in 2019, accounting for 2.4% of GDP. This is expected to grow as the government continues to invest in the sector and promote Angola as a tourist destination.
Conclusion
Despite its challenges, Angola is a country with significant potential for businesses looking to expand their reach into Africa. The country's growing consumer market and economic diversification make it a market worth considering. Today, the country is considered one of the most promising economies on the African continent, with abundant natural resources, a growing population, and a strategic location. Yet to succeed in this market, companies need to have a strong understanding of local regulations, partner with reliable local distributors, and be prepared to navigate the country's complex business environment.
Overall, with its strategic location, growing consumer market, and investment in key industries, Angola is a market that is ripe for growth and offers opportunities for businesses in a variety of sectors.
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Additional Sources:
World Bank: https://data.worldbank.org/country/angola
United Nations: https://www.un.org/en/development/desa/population/publications/pdf/popfacts/PopFacts_2019-4.pdf
Trading Economics: https://tradingeconomics.com/angola/consumer-price-index-cpi
International Monetary Fund: https://www.imf.org/en/Countries/AGO
Angola Tourism: http://www.angolaturismo.com/
World Travel and Tourism Council: https://wttc.org/
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