Angola's untapped potential awaits brave investors

As Angola's peace process begins to take shape, South Africa's business community is beginning to eye the opportunities that could emerge as the mineral-rich neighbour rebuilds after close to three decades of civil war.
"It all depends on what happens in the next few months," Angola researcher Neuma Grobbelaar at the South African Institute of International Affairs said. "Business is certainly looking at Angola with huge interest, but would probably want to see a lot more movement on the political front before committing themselves."

The death of UNITA leader Jonas Savimbi earlier this year cleared the way for the signing of a peace agreement on 4 April between the government and the rebel movement. Under the terms of the accord, UNITA agreed to the demobilisation of its troops as part of a political settlement that would culminate in elections within two years.
"I think we have to be quite cautious over how we proceed, we are working at their pace," Bruce Kolane, director of Africa and Middle East relations at South Africa's Department of Trade and Industry told. He said the first priority would be to help address the significant economic constraints to investment, such as non-existent infrastructure across most of the war-ruined country and poor regulatory frameworks.

A sustainable peace could allow Angola to fulfil its potential as a regional economic powerhouse. But South African business got their fingers burnt in 1992 when they rushed into Angola on the back of a peace deal that collapsed in the wake of UNITA's electoral defeat. This time they are adopting a more wary response. "Angola is not for the faint hearted, so at this point in time we would be talking about trade-consumer goods, food products, basic consumer items," Grobbelaar said.
One-third of Angola's 12 mm population has been displaced by the conflict. Land mines and the fear of banditry limits access to much of the country outside the enclave of the capital. State administration is weak, social indicators are disastrous, and civil society has only just begun to emerge as an alternative voice to the bitter rivalry between the ruling MPLA party and UNITA.

But Angola's long term investment potential is vast. Its oil industry, which supplies the United States with 5 % of its domestic demand, has helped Angola consistently attract the largest slice of foreign direct investment of all southern African countries in recent years.
Exploitation of Angola's diamond wealth has quite literally only scratched the surface. The "real potential" lies with kimberlite, but that would require investor confidence for the necessary long-term capital outlay, Grobbelaar noted. Similarly agro-industries, taking advantage of the country's untapped agricultural wealth, are not short-term commitments.

Although South Africa's economy dominates the region, it would be competing in the Angolan market with Luanda's traditional western trading partners. Pretoria's relationship with the Angolan government has also been strained over its earlier insistence on a peace process that would include Savimbi, and allegations of regional political rivalry.
However, according to economist Tony Twine, Angola's revival would help South Africa and the rest of the Southern African Development Community (SADC). Angola lies at the heart of the region. Resuscitated transport networks such as the Benguela railway corridor linking the Democratic Republic of Congo and Zambia to Angola's ports could act as a spur to SADC growth and integration.

"The area that the corridor traverses is mineral-rich and industry-poor, which means that the minerals have to get somewhere to be beneficiated... so stretching across the northern part of Southern Africa, where there is not a great deal of transport available... this opens up great opportunities for mineral exploitation and the economies of the countries it will traverse," he said.
"The growth of South Africa is inextricably linked to the rest of the continent," Kolane told. "If we help develop the continent it increases the size of the market we sell to and source from."