Transitioning from a prolonged conflict to a peaceful, democratic and politically stable country is an achievement for any nation. In 2002, Angola’s mountain was steep. The new government faced the prospect of rebuilding the country’s infrastructure, which ranged from providing clean water to remote areas to building roads, schools and hospitals, as well as demining of the areas where the conflict occurred. The government was also faced with rebuilding the economy – almost entirely from scratch. Back then in 2002, Angola was unlikely to have featured in many companies expansion plans.

Since then the country has been transformed. Its huge oil reserves present it with a great revenue stream – but they also leave it vulnerable to fluctuating global prices. The increased production during recent years left it with a fiscal surplus of 2% in 2013 and an estimated surplus of 1.1% of GDP in 2014 (KPMG), despite oil prices collapsing towards the end of the year. The drop in oil prices naturally presents Angola with fiscal challenges (as it does for all oil producing nations), but because the government had a clear investment strategy during the boom, it is able to continue to prioritise investment in infrastructure. During those good years, strong oil revenues and a clear political will have resulted in major public investment in infrastructure; infrastructure that specifically supports economic diversification, tourism, transport and education.

That economic future is already starting to take shape. The country’s economic indicators demonstrate that the nation is getting richer and people have more money in their pockets. World Bank figures from its 2013 Angola Economic Outlook show that the Gross National Income has grown by 11.56% between 2007 and 2012 with Gross National Disposable Income rising 27% in the same period. The trend is clear – Angola has a growing middle class with money in their pockets.

The World Bank also shows that GDP per capita grew by 431.42% between 2007 and 2012 and its forecasts are compelling: by 2016, Angola’s growth will overtake that of Nigeria (6.8% vs 6.1%) to become Africa’s fastest growing nation, outpacing all other developing countries in the region including South Africa. The African Development Bank’s Angola Economic Outlook for 2014 suggests that the country’s major public infrastructure investment will drive its GDP growth up from 5.1% in 2013 to above 7% for 2014 and 8.8% in 2015.

If such forecasts bear out in reality, Angola will fast become the go-to place for established western companies to set up shop. And, the Angolan government is keen to attracting foreign companies as part of its drive towards diversification. Foreign companies have good reason to feel confident. The government has already put in place a number of business-friendly policies to make investing in Angola more attractive, including a new foreign exchange currency law for the oil sector and highly attractive tax exemptions.

Companies considering entering this exciting market should know that the government provides special incentives for projects of national interest or projects located in special development zones, which are granted total exemption from corporate income tax from three to five years. Such companies will also receive a reduction of 50% of corporate income tax for up to ten years. Investments in key growth sectors – agriculture, farming, transformative industries, transportation, education and health – are eligible for an eight to fifteen year corporate income tax holiday. (Source: PKF Angola Tax Guide 2013)

What also makes Angola particularly interesting is the government’s hunger for innovation and the transference of skills and knowledge. Angola has a very large number of young entrepreneurs and its young population (around half of its twenty million people are under the age of twenty) is hungry for technology with mobile phone penetration of 70%. Technological innovation is high on the government’s agenda, as is innovation in engineering and manufacturing. Organisations from outside of Angola that can bring new technologies in to the country and transfer knowledge to the local population will be particularly welcomed. The government also stipulates that whilst foreign-owned companies can bring outside talent in to the country, no less than 70% of a company’s workforce should be local. This means that all foreign companies should take seriously their role in the community as a provider of jobs, experience and intellectual property.

Gaining funding to access the market is also becoming easier. Banks are traditionally reluctant to lend to small businesses or start-ups but foreign-owned companies can receive a warmer welcome. Despite that, the banking industry in Angola remains relatively small and is particularly cautious. One of the most exciting developments over recent years has been the establishment of venture capital firms that are actively seeking opportunities to invest in domestic entrepreneurs or assist foreign companies wishing to expand in to Angola. One of the great benefits of choosing to fund through a VC is access to information and guidance on the local business environment. All foreign investments in the country need to go through the country’s National Private Investment Agency (ANIP), which supports the country’s diversification objectives. A VC firm is easily able to work with foreign companies to walk them through regulatory requirements such as this.

One relatively recent addition to Angola’s VC scene is Fundo Activo de Capital de Risco Angolano (FACRA), a public venture capital fund that supports Angolan SME’s and foreign companies in building, innovating and expanding their businesses in the country. Capital investments from venture capital companies such as FACRA are greatly needed in order to stimulate local industry, to provide space for innovation to flourish and succeed. They play an especially important role in a country whose banking practices so often close the door on SMEs. Foreign companies stand to gain a lot by working with a VC, particularly in Sub Saharan African countries. Like any emerging market, local traditions and business practices need to be understood – a local VC that knows which levers to pull can make setting up in Angola much easier and far more cost-effective in the long run.

Angola shows extraordinary promise and its stability – both politically and socially – place it in pole position to become Africa’s most dynamic economy. Building local partnerships and understanding the regulatory and financial requirements are enormously important steps for any external company to take. A local VC is one very good way to take those initial steps.

 Teodoro de Jesus Xavier Poulson is a member of the Investment Committee of FACRA  (Fundo Activo de Capital de Risco Angolano). Poulson leads FACRA’s overall investment strategy and helps to source investment opportunities in Angola and across the Sub-Saharan African region.