Angola - Market ChallengesAngola - Market Challenges
Foreign Exchange: The leading business challenge in Angola remains the scarcity of foreign exchange, and the resulting inability of foreign companies to repatriate profits and Angolan companies to pay foreign suppliers. The lack of foreign exchange is significantly impeding imports of products to this heavily import dependent market. International and domestic companies operating in Angola face significant delays securing foreign exchange approval for remittances to cover key operational expenses, including imported goods and expatriate salaries. Profit and dividend remittances are even more problematic for most companies. Based on U.S. companies’ experiences in Angola over the past several years, the U.S. Embassy encourages U.S. exporters to structure exports to Angola on cash-in-advance terms. In June 2018, the Angolan Central Bank announced that letters of credit would be the preferred financial instrument for import and export transactions and that letters of credit be mandatory for all international trade transactions above 100,000 euros. While letters of credit provide assurances of payment in foreign currency, importers have expressed frustration with the higher costs and the three to four month lead time required. Many international companies report cancelling export credit terms to their Angolan clients due to outstanding payments on accounts resulting from foreign exchange delays.
Business Environment: Despite its large market size and potential business opportunities, Angola is deemed one of the most difficult business environments in the world. To be successful, significant time and capital commitment is required and a strong, experienced local partner is highly advisable. The World Bank Doing Business Index Report 2019 ranks Angola 173 out of 190 countries in terms of ease of doing business. The report assessed a range of business areas, with Angola ranking lowest in the areas of access to credit, enforcing contracts, registering property, resolving insolvency and trade across borders. The private entity Transparency International also ranks Angola low on its Corruption Perception Index, at 165 of 180 countries in its 2018 assessment.
High Cost Location: Luanda is a high cost location for expatriates and company operations. The local currency devaluation has somewhat improved affordability of restaurants and services, but business class hotels remain expensive (USD 400-500 per night) and quality interpreters run USD 500-800 per day. Western standard housing and office space is extremely expensive, but prices have decreased due to the decline in demand as a result of expatriate staff downsizing in Angola by a number of international oil companies and their service providers. Angolan executive salaries are comparable to U.S. levels. Though salaries are required to be paid in local currency, many international companies tie compensation rates to an international currency as an offset to local currency devaluation.
Portuguese Language: Angolan government officials and most business executives, outside of the oil industry, require some Portuguese-English interpretation support for meetings. Product labeling, marketing materials and most technical level training must also be in Portuguese. Many Angolans are familiar with Spanish due to the historic presence of Cubans in the country and are very open to using this as a bridge language with U.S. companies. U.S. companies can take advantage of written marketing/technical material and training expertise from operations in other Portuguese language countries, such as Portugal or Brazil, to assist their Angola market entry efforts. However, distributors from those countries would not be effective as representatives for the Angolan market because local market expertise and in-country product servicing/training support is essential to business success in Angola.
Nascent Distribution Channels: Angola’s business infrastructure and capacity is just 17 years post-civil war, which means only a limited number of local companies are well positioned to become distributors or representatives for international companies. Many international products are sold through resale channels rather that formal representatives or distributors of international manufacturers. There is a solid and growing entrepreneurial business class in Angola, but the current economic downturn is severely stressing Angolan companies and limiting their access to business credit. The U.S. Commercial Service in Angola offers services to assist U.S. companies to identify qualified Angolan business partners and to promote U.S. products and services in the market.