Angola
- introduction
Angola 's savage civil war ended in 2002 after 27 years and the loss of up to
one and a half million lives. The depredations of the conflict have,
unsurprisingly, caused economic turmoil. The country's infrastructure is
dilapidated and
under-developed; landmines still litter the countryside; and there are still
hundreds of thousands of internal refugees.
Significant oil reserves have been Angola's potential salvation. In 2008 the
country had an estimated 9 billion barrels of reserves, and is the
second-biggest
producer in sub-Saharan Africa after Nigeria. Also, unlike Nigeria, Angola does
not have to tackle a debilitating insurgency in its prime oil-producing region.
However, Angola faces many of the same challenges facing most oil states in
sub-Saharan Africa – corruption, lack of local capacity and skills, political
interference and the dangers of Dutch Disease.
The existing program of 'Angolanisation' has been largely unsuccessful, partly
due to the destabilising effect of the civil war, which the program predated,
and
partly because of the absence of a unified and coherent regulatory framework.
There are a number of legal requirements requiring the inclusion of local
workers
and equipment, particularly a 2003 Petroleum Order which created three regimes
defining the extent to which foreign companies can bid for various tenders.
Contracts tend to require a certain quota of local workers, although this may
vary
from contract to contract.
The lack of skilled labour and technical capacity is arguably the most
significant impediment to Angola's local content policy. In 2003 it was
estimated that
only 15% of the population were employed in industry and services: 85% were
employed in agriculture, illustrating the extent to which Angola remains a
deeply
rural country. To fulfil the government's local content program as the industry
grows over the next few years would require hundreds of skilled workers,
workers
which the country will find it very difficult to produce.
Angola 's poor services, high crime rate, and lack of amenities have caused
another problem for IOCs, as expatriate staff are reluctant to stay in the
country
without substantial financial inducements. Given the requirement to pay local
and
expatriate staff equally, this can lead to a spiral of wage inflation.
Despite these problems, many foreign firms are committing themselves to
Angolanisation, confident that, in the long term, it will result in lower
operating
costs and a better relationship with the government. As the process continues,
local
capacity – in the labour supply and the broader supply chain – will increase,
although it will be an uphill struggle for both the government and for foreign
companies.
One of the success stories of Angola's local content drive has been neither a
state-run nor a commercial enterprise, but a civil society organisation, CAE. A
project of the American NGO Citizens Development Corps, CAE provides business
training, financial and supply chain management, and other services to Angolan
businesses hoping to strike contracts with international oil firms. They also
act as
a provider for IOCs, locating qualified Angolan companies for competitive bids.
According to CDC, almost $50 million in new contracts have been secured as a
result of CAE's services.
The state-run oil company, Sonangol Holdings, is less reliable. It often serves
as joint venture partner, regulator and concessionaire, raising questions about
its intentions and the independence of its operation. On top of this are the
typical problems of a sub-Saharan state oil company – corruption, a lack of
transparency, and murky ties to the executive branch.
Useful Links
Decree on Mandatory Hiring of Angolans by Foreign Oil Companies
Decree on Promotion of Entrepreneurship
UNDP Partnership for Enterprise Development presentation
World Bank report on local content and CSR in Angola's petroleum sector
Sonangol's experience in promoting local content