CREATING MARKETS IN ANGOLA MARKETS IN CREATING Public Disclosure Authorized Public Disclosure Authorized COUNTRY PRIVATE SECTOR DIAGNOSTIC SECTOR PRIVATE COUNTRY COUNTRY PRIVATE SECTOR DIAGNOSTIC Public Disclosure Authorized CREATING MARKETS IN ANGOLA Opportunities for Development Through the Private Sector Public Disclosure Authorized World Bank Group and International Monetary Fund Spring Meetings 2019 edition COUNTRY PRIVATE SECTOR DIAGNOSTIC CREATING MARKETS IN ANGOLA Opportunities for Development Through the Private Sector World Bank Group and International Monetary Fund Spring Meetings 2019 edition About IFC IFC—a sister organization of the World Bank and member of the World Bank Group—is the largest global devel- opment institution focused on the private sector in emerging markets. We work with more than 2,000 businesses worldwide, using our capital, expertise, and influence to create markets and opportunities in the toughest areas of the world. In fiscal year 2018, we delivered more than $23 billion in long-term financing for developing countries, lever- aging the power of the private sector to end extreme poverty and boost shared prosperity. For more information, visit www.ifc.org © International Finance Corporation 2019. All rights reserved. 2121 Pennsylvania Avenue, N.W. Washington, D.C. 20433 www.ifc.org The material in this work is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. IFC does not guarantee the accuracy, reliability or completeness of the content included in this work, or for the conclusions or judgments described herein, and accepts no responsibility or liability for any omissions or errors (including, without limitation, typographical errors and technical errors) in the content whatsoever or for reliance thereon. The findings, interpretations, views, and conclusions expressed herein are those of the authors and do not necessarily reflect the views of the Executive Directors of the International Finance Corporation or of the International Bank for Reconstruction and Development (the World Bank) or the governments they represent. This publication uses U.S. spelling. All mentions of dollars refer to U.S. dollars, unless otherwise indicated. Photos: Cover Andre Silva Pinto/Shuttestock. CONTENTS Acknowledgements vi Abbreviations vii Executive Summary viii PART I OVERVIEW 01 COUNTRY CONTEXT: WHY A PRIVATE SECTOR DIAGNOSTIC NOW? 2 02 AN UNDERDEVELOPED PRIVATE SECTOR 5 The economic boom did not deliver job creation and economic transformation 5 A small private sector dominated by few politically connected firms 8 03 CREATING MARKET OPPORTUNITIES: REBUILDING THE ECONOMY WITH THE PRIVATE SECTOR 13 Sector scan results and constraints 13 Opening markets by rethinking the role of the state 21 Sectors for priority interventions and investments 27 04 THE WAY FORWARD: HOW TO CREATE MARKETS IN ANGOLA? 50 Context 50 Seven good reform process management principles 51 Main recommendations from the CPSD 55 PART II DEEP DIVES FOR MARKET OPPORTUNITIES 05 AGRIBUSINESS 59 Buoyed by strong demand, the agriculture sector is growing 59 Constraints to take off 64 Opportunities for scaling up the Angolan agribusiness sector 67 Actions needed to realize investment opportunities 72 State-owned agroindustrial ventures and infrastructure 74 06 TRANSPORT 77 Overview and prospects for the transport sector 77 Maritime transport 78 Air transport 82 Railways 85 APPENDIXES 90 A Analytical approach of the Country Private Sector Diagnostic 91 B World Bank Group strategy and portfolio in Angola 92 C Enabling sectors detailed scoring 95 D Sector scan detailed results - traded sectors 104 E Detailed sector scan results—non-traded sectors 120 Notes 126 References 134 ANGOLA COUNTRY PRIVATE SECTOR DIAGNOSTICS iii ANGOLA COUNTRY PRIVATE SECTOR DIAGNOSTICS BOXES 2.1 Structural transformation in Angola 10 2.2 The Angolan government’s productive assets 11 3.1 Luanda Medical Center 37 3.2 The challenge of importing medicines in Angola 38 3.3 Instituto Superior Politécnico do Cazenga 40 3.4 Educartis 41 5.1 Angolanita 61 5.2 Horticulture and fruit market leaders 62 5.3 Literature and lessons learned in Africa from large-scale land investments 72 FIGURES 2.1 Structural transformation in Angola 6 2.2 Angola’s exports 6 2.3 Angola’s main suppliers are from Europe 7 2.4 Employment by sector 7 2.5 SOEs assets by sector in IGAPE portfolio 9 3.1 Summary of scoring results 16 3.2 A new compact for market creation 21 4.1 Complementary actions for market creation 51 4.2 Institutional framework for economic policy reform in Angola 52 4.3 Reform implementation steps: where does Angola stand? 53 5.1 Increase in production of selected agriculture products 59 5.2 Yields of maize, beans, and soybeans, Angola and selected countries 60 5.3 Angola reduced undernourishment 60 5.4 Import needs for key food staples 60 5.5 Imports of agriculture and food products 61 5.6 Exports of agriculture and food products 61 5.7 Consumption of Fertilizer for selected countries 67 5.8 Actions necessary to realize opportunities in agribusiness 73 6.1 Angola liner shipping connectivity index 79 6.2 Sea freight rates from Le Havre to various African ports 80 6.3 Airport system passenger traffic 83 6.4 Airport system cargo traffic 83 D.1 Exports of fish and fish products 108 MAPS 6.1 Location of Angola’s main ports 78 6.2 Angola’s existing rail networks—a regional perspective 85 TABLES ES.1 Summary of CPSD main recommendations xxvi 4.1 Main recommendations from the CPSD 56 5.1 Private sector entry points to develop agribusiness value chains with small holders 70 5A.1 State-owned agroindustrial ventures and infrastructure 74 6.1 Angola’s port system cargo volume handling 78 iv 6.2 Financial results of ports SOEs 80 6.3 Published economy-class airfare from Lisbon to Luanda 83 6.4 Financial performance of railways 86 B.1 World Bank lending portfolio in Angola 93 B.2 World Bank Analytics and Advisory Services portfolio in Angola 93 C.1 Desirability scores: Transport 95 C.2 Feasibility scores: Transport 95 C.3 Desirability scores: Electricity 96 C.4 Feasibility scores: Electricity 96 C.5 Desirability scores: ICT 97 C.6 Feasibility scores: ICT 98 C.7 Desirability scores: Health 99 C.8 Feasibility scores: Health 99 C.9 Desirability scores: Education 100 C.10 Feasibility scores: Education 100 C.11 Desirability scores: Financial sector 101 C.12 Feasibility scores: Financial sector 102 C.13 Desirability scores: Water 102 C.14 Feasibility scores: Water 103 D.1 Desirability scores: Agriculture and agribusiness 105 D.2 Feasibility scores: Agriculture and agribusiness 106 D.3 Desirability scores: Fisheries 108 D.4 Feasibility scores: Fisheries 109 D.5 Desirability scores: Oil and Gas 111 D.6 Oil and Gas 111 D.7 Desirability scores: Mining 113 D.8 Feasibility scores: Mining 113 D.9 Desirability scores: Manufacturing 115 D.10 Feasibility scores: Manufacturing 116 D.11 Desirability scores: Tourism 118 D.12 Feasibility scores: Tourism 118 D.13 Desirability scores: Construction and real estate 121 D.14 Feasibility scores: Construction and real estate 122 D.15 Desirability scores: Wholesale and retail trade 124 D.16 Feasibility scores: Wholesale and retail trade 124 v ACKNOWLEDGEMENTS The Angola Private Sector Diagnostic was prepared by a team led by Zenaida Hernandez Uriz, Jean-Christophe Maur, and Stephan Dreyhaupt, and included Francois Caulier, Katia Daude, Luciana Harrington, Lindsey Lim, Delfim Mawate, and Antonio Muhungo. The team gratefully acknowledges the guidance of Mona Haddad, Elisabeth Huybens, Kevin Njiraini, Sebastian Molineus, Jumoke Jagun-Dokunmu, Olivier Lambert, Lisa Kaestner, Rashmi Shankar, Vincent Palmade, Frank Armand D. Douamba, Caroline A. Goldie, and Daria Taglioni. The team is grateful for the comments provided by the peer reviewers: Hans Beck, Gabriel Goddard, Sunita Kikeri, Graciela Miralles Murciego, Daniel Benitez, and the contributions for the deep dives from Vasco Nunes (agribusiness), Pierre Pozzo di Borgo (transport), and Kjetil Hansen (rethinking the role of the state). Administrative support was provided by Magalie Pradel and Lydia Waribo. Benjamim Mutti and Jesus Alberto Lino provided in-country support to the team. The team benefited from suggestions and comments from many, including: Sandra Leila Antunes Boumah, Andre Aquino, Diego Arias, Soumya Banerjee, Rafael Barroso, Ariana Batori, Andreas Blom, Mazen Bouri, Marcel Bruhwiler, Carmen Carpio, Dan Croft, German Cufre Rostan Schwab Issa Diaw, Emily Elaine Gardner, Chijioke Gbolahan Egejuru, Norbert Fiess, Doyle Gallegos, Chabir Hassam, Roberto F. Iunes, Camilo Lombana, Ramatou Magagi, Lais Miachon Silva, Bernard Micallef, Maria Paulina Mogollon, Ricardo Jorge Monteiro Mota, Paul Mukasa, Xavier Muron, Riadh Naouar, Ken Osei, Mariana Petrei, Zaid Safar, Markus Scheuermaier, Leila Celia Serrao, Javier Soriano Tabares, and Melanie Trost. The team would like to express gratitude for the insights shared by Angolan public and private sector representatives met during the preparation of this report. vi ANGOLA COUNTRY PRIVATE SECTOR DIAGNOSTICS ABBREVIATIONS ARSEG Angolan Agency for Regulation and Supervision of Insurance (Agência Angolana de Regulação e Supervisão de Seguros) BCI Banco de Comércio e Indústria BNA National Bank of Angola (Banco Nacional de Angola) BPC Banco de Poupança e Crédito CPSD Country Private Sector Diagnostic CPF Country Partnership Framework EGTI Enterprise Managing State Intrastructured Land (Empresa Gestora dos Terrenos