Angola – Boundless opportunities if you know how to play as its economy opens up

By Mbwana Alliy  |  August 25, 2014



We held our VC course a month ago with the University of Cape Town and Knife Capital and one of the key takeaways for startups seeking venture funding is that VCs will likely look at startups that can go across the continent. There are some exceptions if you are in the B2B space or you originate from the biggest economies such as Nigeria and South Africa. These markets are big enough for an African startup to grow  for a few years or more and support multiple rounds of financing, otherwise many startups seeking venture scale returns for their investors will need to seek other countries for growth, countries that are open markets or part of trading blocks such as the East Africa Community (EAC) with Kenya, Tanzania, Uganda, Rwanda and Burundi are good places to start, but beyond that it gets difficult.
What about the other extreme? Enter Angola- a country so misunderstood that it arouses all the usual stereotypes of Africa but Angola specifically is considered one of the more closed economies on the continent. The country recently recovered from a long civil war, a president ruling for over 30 years and resource curse of oil and diamonds to boot. Angola’s Portuguese colonizers are not exactly among the world’s super powers today- if anything Angolans are now helping Portugal as the tables have now turned.

I had the chance to visit Angola last week in assisting a major African bank research financial services in Angola and to connect with a local Venture Capital fund there. Like most, I was initially hesitant, then intrigued and came out impressed but with way more questions and some surprises. Once again, the media can distort what the country feels like, this Article on Isabel Santos by Forbes paints a very one sided picture. As a former socialist country with strong links to the soviet era whilst being best buddies with China as was evident in my flight out from Nairobi to Luanda, the kind of economic development that is happening in Angola is closer to Russia and China than western countries.


KQ direct Flight to Launda from Nairobi yet there is no Angolan embassy in Kenya!, 98% of the flight were Chinese workers transiting, contributing to the construction boom and reflect China’s strong ties with Angola.

Angolan middle class and wealth is very real
Angola has 5 times the real GDP per capita than Kenya and is the 2nd biggest economy after South Africa and Nigeria in Subsaharan Africa. A large part of this is obviously due to the oil and diamond wealth contributing over 90% of the economy. But is this wealth tricking down? I spoke to drivers, security guards, emerging middle class Angolans, Portuguese expats and returning Diaspora and one thing was clear; Angola is the place to make money, so much so that the Government has put in some of the strictest immigration policies making it difficult for foreigners to work there. Getting my visa for Angola was a serious mission, 2 weeks of visa waiting and paperwork and the only embassy I could use was in Dar es Salaam(there is none in Nairobi, Tanzania has better relations with Angola than Kenya). This doesn’t stop the new working class Portuguese with their historical ties and weak economy from doing everything they can to work there, but I also noticed that many Angolans want to shake their colonial association with Portugal and are interested in integrating more with the global economy. The average Angolan on the street was definitely more well to do than other counterparts in Kenya, and as semi socialist country, I didn’t see much evidence of idle citizens on the streets. Rather, informal entrepreneurship, for those who didn’t have a formal job definitely ruled. Those who did have a job, expressed interest in starting their own business one day with the boundless opportunities that come with being in one of the fastest growing economies in the world and many gaps in products and services post civil war that need to be built . Angola definitely felt like a “consumer” economy-  like say Nigerians, Angolans like to spend money- travel to Dubai and Europe for shopping is very much normal, with many travelling up to 3 times a year to get quality products from top brands- many middle class Angolans I met had 2 iPhones! And Tecno, the low cost Android manufacturer big in Ghana, Nigeria, Tanzania to Kenya was nowhere to be seen. Top brands in Angola command high prices – Launda has a reputation of being one of the most expensive cities on the planet for expats. But interestingly, I found that a KFC meal at the mall was cheaper than in Nairobi or Dar es Salaam- so Angola is not expensive for everyone even for a foreign brand that typically takes the high end road in emerging markets such as KFC.


Luanda only got its first mall last year, Belas Shopping, in 2013. Thriving middle class now fills it with a preference for high quality brands.


You must partner locally to survive, yet alone win
Ok, so the market is real, how does one take advantage and enter Angola? A local partner is an absolute must. This is true for most African countries if you are to win long term, but none more that I have seen than Angola. Take the mega giant Sonangol (made famous at business schools with this Stanford case study [PDF]) , that started as an oil company and has diversified into almost every sector of the economy through investments or starting their own is the classic example, this is quite easy to imagine when the majority of your economy is linked to the oil sector. When I met with a Sonangol Manager, he often referred to Sonangol as a “National Vehicle” and that you need to watch them very carefully before diving into a large market segment in Angola (yes, even tech- they have a stake in Unitel, the leading dominant mobile operator). No surprises we have not seen the likes of Rocket Internet yet to enter this market despite the fact that I know that Rocket Internet has an office in Porto, Portugal and could use that link to enter one of Africa’s major economies.

Beyond companies such as Sonangol- you also can’t stop but notice the influence Jose Santos’ (President) family and close elite circle have on the economy. Most Angolans whilst recognizing this is not ideal nor fully transparent, are quick to point out that as long as they have peace, and very visible infrastructure is being built, they believe they will find opportunities in the trickle down effect of the wealth present in the country. Along with immigration, Angola has one of the strictest capital controls on the continent, with recent move away from “dollarization” of the economy and promotion of the local currency, Kwanza. As you exit Angola via Luanda airport, you are checked carefully if you have any excess cash. There is a strict $15,000/person/year limit to take abroad shopping, and $250,000 total for anything else. Wire transfers are scrutinized making it very painful for those using Angola as a place to tap oil wealth and remit back to (ironically) western countries such as Portugal and even UK. One of the reasons for this was money laundering related issues. I really wonder what the impact of a bitcoin exchange would be in Angola… I would not want to find out but I would not be surprised if one popped up and got shut down very quickly.


A reminder; Puma Energy joint venture with Sonangol as is required with foreign companies present in Angola starting with their oil economy.


Mobile Money- not the near term path for Angola Economic Development
What about those on the lower end of the spectrum? 7M out of 20M Angolans live in the capital, Luanda. There are big shatty towns (often referred to as “musseques”) across the city- do they have access to financial services such as the mobile money boom sweeping through the rest of subsaharan Africa? After spending 2 days, I kind of felt that it was one of the biggest missing ingredients in the Angolan economy given my knowledge of other African countries going through a mobile money revolution- at times I started taking on a very “impact investor/social enterprise” tone- “what about financial inclusion for the poor!? Mobile money is perfect here!”. This was made even more frustrating when you realize that Unitel, the country’s dominant mobile operator, would be perfectly positioned to deliver such a service at scale across country as a near monopoly similar to Safaricom in Kenya. In a meeting with the CEO of Unitel when I asked him about this he replied “Angola has the highest Average Revenue Per User (APRU)s of any African country, why would we need mobile money?”– quizzed further “I am sure mobile money will come to Angola in the future,  but right now that’s not how Angola wants to develop”.


Fishermen of Luanda, 85% of Angola still remains unbanked pointing to a big mobile money opportunity (if the country will allow it).

Indeed, on closer inspection, it made sense, Unitel shops were not like Safaricom, MTN, Tigo or Airtel stores or agents- they looked closer to Apple stores. Unitel is making so much money tapping the emerging middle class in Angola, it sees no need for mobile money which is really a business model to reduce churn, increase stickiness in super low and competitive ARPU environments of less than $6/month(Safaricom makes more money on M-Pesa than Internet data and SMS combined). Finally, politically it would make little sense, the elite own stakes in majority of the banks and so similar to Nigeria, banks are unlikely to let mobile money impact its economy in the same way as Kenya or Tanzania. Make no mistake though, the impact of mobile money or even cryptocurrencies, will eventually make a big dent in decentralizing the financial services sector- its just a matter of timing and yes, who you know or partner with.


Unitel has 65-70% share of the Angola market. I estimate it makes up to 10 times the monthly ARPU ($50-60) of a typical African mobile operator.


A country taking control of its own destiny with its Oil Wealth
I had a great meeting with (Fundo Activo de Capital de Risco Angolan, FACRA), a $250M domestic VC firm to back Angolans in innovative ventures that recently launched. A Government backed VC fund is hard enough to put together politically in Kenya, South Africa or Nigeria, so it was surprising for me to find that in a country that doesn’t even have a capital markets exchange for debt or shares, they would have a venture capital firm backed by the Economic Ministry. When I initially heard of the fund, I assumed that it must be corrupt in line with most Government ventures in Africa, but the fund is professionally managed with top foreign talent where they couldn’t find locals. The fund is set to announce its first deals very soon. But how much is it really needed in Angola? $250M is a huge amount even if you factor in the higher cost of business in Angola.  In places like Kenya, a lack of startup capital narrative is always being debated, especially the role of donor money in the face of perceived lack private investors or banks providing startup risk funding. In Angola, many of the would be entrepreneurs did not report access to capital being a problem- they could easily find the capital by either saving up after working in the oil or banking industry or tap other relatives and connections, they felt little need to go the banks or “funds”- the missing ingredient they all mentioned was the lack of quality and experienced talent to execute their venture ideas. Even then, startups that might grow rapidly into big industries will have to deal with the established elite and giants such as Sanongol which points to a low risk startup culture of  “who you know and what you do matters”- But also, you are left wondering what incentives Angolans have to be entrepreneurs if they can extract a living from the oil sector. One thing that impressed me here is that Angolans feel more in charge of their economy that other African countries such as Kenya and Tanzania where the effects of foreign aid are even starting to creep into the startup sector.. “Social Enterprises” does not compute in Angola (at least in the same way as other parts of Africa).


Belas Business Park in Talatona outside of Luanda points to growing corporate sector employing increasing number Angolan & Portuguese middle class. Top notch infrastructure is obvious everywhere.


As Angola opens up – Luanda will become a viable hub similar to Dubai
Of course, by being a closed economy Angola is often missing out on top external talent as they struggle to stop capital flight resulting from the lucrative oil sector. In the end, the more Angola’s economy diversifies away from oil, the more open it would be willing to become. This could take a while. Right now, it’s next to impossible for foreigners to invest in Angola given a lack of stock market that might not arrive till 2020. Those wanting to tap Angola will need the patience and connections on the ground. But once you are there, the opportunities are boundless for startups- but one needs to stop and look at first principles, so don’t necessarily bring your western clones to Angola- solve real problems.

Luanda being the 3rd biggest Portuguese speaking city in the world after Sao Pauolo and Rio can easily act as a hub for the rest of Portuguese speaking Africa, including Mozambique. The investments being made in infrastructure from roads, ports to residential and office space mean that we can expect Luanda to become the Dubai of Africa once their vision is complete.


Commuter ferry stop connects parts of northern Luanda with the city centre to combat traffic. Example of Government forward thinking infrastructure investments.



Downtown Luanda construction boom, with a brand new waterfront less than 1 year old.

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