AFRICA ANALYSIS OF ANGOLA

GROUP 6

Atulya Agarwal (14B)Ayush Saraf (15A)Devansh Doshi (16A)

o Official name – Republic of Angolao Population – 12,799,293o Official Languages – Portugueseo Currency – kwanza (AOA)o Capital city – Luandao GDP – purchasing power parity $110.3 billiono GDP Per Capita – purchasing power parity $8,800

FACT FILE

Brief History and Timeline

Failed State Data 2013

At present Angola ranks 43rd in the failed state country list but ….

The situation is not that bleak …

•The Republic of Angola is the second largest oil producer in Africa•It joined OPEC in 2007•Angola first produced oil from the Benfica oilfield in the Cuanza Basin in 1955•Its proven crude oil reserves as of 2011 is 10470 mB•Its proven natural gas reserves as of 2011 is 366 billion standard cu m•Till 2011 it had produced 9,408,940 (1,000b) of oil in total

Oil and Gas Industry: Past

Value of exports (billion $) 65.69

Value of petroleum exports (billion $) 64.43

Current account balance (billion $) 8.18

Proven crude oil reserves (billion barrels) 10.47

Proven natural gas reserves (billion cu. m.) 366

Crude oil production (1,000 b/d) 1,618

Marketed production of natural gas (billion cu. m.)0.75

Refinery capacity (1,000 b/d) 38

Output of petroleum products (1,000 b/d) 39.4

Oil Consumption (1,000 b/d) 90

Crude oil exports (1,000 b/d) 1,543

Exports of petroleum products (1,000 b/d) 26.4

•Angola’s impressive economic growth rate is being driven by its oil sector•Oil production and its supporting activities contribute about half of the nation’s gross domestic product and 90 per cent of exports

Oil and Gas Industry – Present(1/2)

Crude oil and natural gas production data

Value of petroleum exports data

Oil and Gas Industry: Present(2/2)

Successful exploration in Angola's pre-salt formations continues to drive optimistic oil production forecasts for the country, and the Angolan government is targeting 2 million barrel per day production levels by 2014.

Project

Output Estimated

Block Operator('000 bbl/d) StartupKizomba Satellites* 140+ 2012 15 ExxonMobil

PSVM 150 2012 31 BP

Palas, Ceres, Juno, Astrea, Hebe, Urano, Titania

150 2012+ 31 BP

Platino, Chimbo, Cesio 150 2013 18W BP

Sangos/N'goma 85 2013 15 ExxonMobil

SE PAJ 150 2013 31 BP

AB 32 Southeast Hub 2,10,000 2013+ 32 Total

CNPC/PetroChina Pengzhou 2,00,000 2012 Q3 Construction

CLOV 160 2014 17 Total

Cabaca Norte-1 40-200 2014 15 ExxonMobil

Terra Miranda, Cordelia, Porti 150 2014 31 BP

Mafumeira Sul 120 2014+ 0 Chevron

Negage 50+ 2014+ 14 Chevron

Lucapa 100 2014+ 14 Chevron

Oil and Gas Industry: Future

AgricultureOnce upon a time:•Before independence, Portuguese farmers dominated agriculture. Self sufficient in all areas except wheat•Post independence, departure of Portuguese farmers undermined this sector. Government’s response with nationalized farming was met with little success•The civil war snowballed to a import dependent economy; most farmers turned to subsistence farming•Since then, this sector is recuperating

And now:•Great FDI inflows in this sector, providing necessary technology. •4 out 5 people are employed in agriculture•Climate supports a wide variety of crops•Major internal demand met through imports•Lack of availability of credit to develop modern facilities for artisan fishers. This is primarily due to high interest rates and lack of collateral The road ahead:•3.5% of 3.7 million ha. cultivable land is used•Long coast line implies great opportunities in sea food•Increasing technical assistance in artisanal fishing is giving boost to fisheries•Advanced technology in seeds, irrigation, storage, pesticides, and, fertilizers to drive growth•Companies developing the agribusiness sector•Increase in penetration of microfinance•Forward integration into food processing

Tourism• A very long civil war devastated the entire tourism industry • After civil war ended, the tourism sector saw a huge boostCurrent Scenario: the Positives• Angola is a giant jigsaw puzzle of different climates, landscapes,

cultures and colours• Angola has 6 internationally recognized National Parks, and 6

Nature Reserves• Angola has 1,650 kilometres of beautiful coastline offering

fantastic opportunities various water sports and bathing• In Luanda, beautiful colonial architecture and spectacular

churches and cathedrals blend in with modern skyscrapers• Luanda international airport is opening up to new flight routes to

other countries in Africa and further afieldHotels:•There were 136 hotels in Angola in 2010, 60 in Luanda•Business travel feeds the demand for hotels•Hotel prices are very high, this reduces the tourism crowdInternational Arrivals:•Large proportion of leisure arrivals is the diaspora returning for vacation•86% arrivals are males mostly searching for employment•Visas are difficult to getThe Future:•Hunting and mining during the civil war largely depleted the animal diversity; the government is committed to repopulating these parks•Huge investments in tourism infrastructure to boost domestic tourism•Closer links with Cuba and Brazil are encouraging Angolan emigrates to return to their land of birth for cultural visits

Political Risks •According to the UNDP report the political risk levels in Angola at present are very high as shown in the diagram •The MPLA government of Angola has been accused of human rights violations such as arbitrary arrest and detention and torture by international organisations, including Amnesty International and Human Rights Watch •Its leader Dos Santos has been in power for 33 years and speculation about his plans remains rife. •The MPLA won 72 percent of the vote in an election in August last year, but the poll was criticised as not credible and one-sided by political opponents and civil society activists•The election, only the third since independence from Portugal in 1975, took place peacefully. But analysts say a 10-percentage-point drop in MPLA support and the abstention of almost 40 percent of Angolans may signal dissatisfaction with policies.•The run-up to the vote was marked by several protests organised by a youth movement urging Dos Santos to resign, and by civil war veterans demanding payment of overdue pensions. The protests were small, but led to authorities using gunshots and teargas to disperse them and to several arrests.

Political instability and risk

HDI and Social Risks•Angola’s incumbent government has long been accused of mismanaging oil revenues, avoiding public scrutiny and doing too little to fight graft. Transparency International ranks Angola among the most corrupt countries in the world. Its ranks a dismal 157/176 in the corruption perception index 2012.•Angola lacks a pool of skilled labour (nearly half the population is under fifteen years old); a functioning health-care system (its infant mortality rate is among the highest in the world); and enough schools for its children (45 percent of school-age children are not reached by the education system). It ranks 162 of 177 countries on the UN's Human Development Index.•Angola has had problems with military activity, armies have been accused of misbehaviour, extrajudicial executions, force enlistment, and child soldiering. Some reports have confirmed extreme human rights abuses, known as torture. •Thefts are increasing, witchcraft is increasing by people as a problem addressed by politiicans, the police and judiciary. Children has also been accused to be witches and have been abandoned by parents.•Angola is ranked 104th in the World Press Freedom Index 2010 with a score of 28.50 which indicates that media in Angola is restricted

Financial Risks •Portugal remains heavily embedded in Angola, given their long historical and cultural ties, and shared language. Investors from other markets often cite the language barrier and lack of understanding of Angolan culture and operating environment as a challenge to investing. As a result, it is often seen as an opaque market that they are reluctant to enter.•While local participation is not mandatory outside the oil sector, it is strongly encouraged, and significantly helps to understand local context and navigate the operating environment•Another challenge raised by potential investors is the regulatory environment and excessive bureaucracy. Here, an understanding of the strategic objectives of government and aligning investor’s commercial interests to those objectives can go a long way to mitigating these challenges.•Perceived high levels of Angolan corruption is another risk factor often cited as a reason for potential investors to shy away. •While there is undoubtedly substance to these concerns, the situation continues to improve. Over the last 18 months, a significant effort has been put in place by Angolan society to rescue the social and moral values lost during the 40 years of violence that ended in 2002. The associated rescue of business values initiative being led by the Chamber of Commerce and Industry of Angola (CCIA) is hopefully providing investors with confidence that this risk is being addressed.

Indicators: SocialAngola’s HDI is 0.508 ranking 147( total 187) Angola (Year 2011)•Population (millions): 20.2•Population growth (annual %) : 3.2•Life expectancy at birth, total (years) :51.1•Mortality rate (per 1,000 live births): 96.4•Literacy Rate: Male (83%) Female (54%)•Malnutrition dropped from 35% to 23% of the population •Prevalence of underweight children reduced from 37% to 16% •With an estimated 2.5 percent of the adult population HIV positive, Angola has the lowest rate of HIV prevalence in continental southern Africa•Gini Index: 58.6

HDI as compared with World

Indicators: Economic (1/2)

•Decades of internal strife have resulted in the destruction or deterioration of the physical infrastructure, compromising the country’s social and economic cohesion, and its regional integration agenda•GDP (current US$) (billions) : 104.1•GDP per capita (current US$ ): 5,159•GDP growth (annual %): 3.9

Agency Rating OutlookS&P B+ StableFitch B+ PositiveMoody's B1 Neutral

Indicators: Economic (2/2)

FDI

Culture

Source: NHH and Hofstede's Center

PDI (Power Distance Indicator)Higher PDI means:•Centralized companies•Strong hierarchies•Large gaps in compensation, authority, and respect•Tip: Be aware that you may need to go to the top for answersIDV (Individualism)Lower IDV means:•Emphasis on building skills and becoming masters of something•Work for intrinsic rewards•Harmony more important than honesty•Tip: Respect age, wisdom, and traditionsMAS (Masculinity )Moderate MAS means:•Males are fairly preferred over females•Faint distinction between men’s and women’s work•Tip: More women at the helm can lead to ego clashes UAI (Uncertainty/Avoidance Index)Higher UAI score means:•Very formal business conduct with lots of rules and policies.•Need and expect structure•Sense of nervousness spurns high levels of emotion and expression•Differences are avoided•Tip: Express your emotions through hand gestures and raised voices.

Overall work culture:Need for a proper structure, plan, and, hierarchy to avoid uncertainty to have work done. Expect less proactive and leadership oriented behaviour. Ideal for mechanical jobs. Culture supports manufacturing and production industry.

India and Angola: Trade Relations•Angola export 11% of its total export to India•Angola imports 2.5 % of its total import from India•Angola has a trade benefit of USD 4.4 bn with India

•Angola–India relations refers to the bilateral ties between India and the Angola. Both nations are part of the Non-Aligned Movement. •Being a member of the African Union, Angola supports India's candidature for a permanent seat in a reformed Security Council.•India has an embassy in Luanda, Angola. Angola has an embassy in New Delhi, India.

The two countries have not signed any agreements. However, decisions have been taken, in principle, to sign Agreements for the Promotion and Protection of Investments and Creation of Bilateral Commission for Cultural, Technical, Scientific, and Economic Cooperation.•A MOU between the Ministry of Petroleum, Government of Angola and the Ministry of Petroleum and Natural Gas, Government of India was signed in New Delhi on October 2010.• GoI has extended a LoC of US$40 mn to the Angolan government for a project to rehabilitate Railway Company of Moçâmedes (CFM), to be implemented by RITES Ltd.• India’s EXIM bank has extended 3 LoC’s of US$ 5 million, US$ 10 million and US$ 13.8 million for agricultural equipment and Indian tractors. •The state-owned oil company of Angola SONANGOL and India’s ONGC signed a memorandum of understanding for collaboration in 2010.•GOI has in July 2010 approved US$30 million for setting up an Industrial park and US$15 million for setting up a cotton ginning and spinning plant.

Indian Companies with presence in Angola1.Diamond India Limited2.Mahindra & Mahindra3.ONGC Videsh Limited4.State Bank of India5.Rail India Technical 6.Economic Consultancy Services

India and Angola: Economic Ties

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