Imara African Cement Report Africa, the last cement frontier Angola ...

Angola
Imara African
Country
Cement
Report
Report
Africa’s Africa, the emerging last cement market’s frontier giant
October February 2011
Analyst
Anthony Lopes Pinto
+244 939 328 724
anthonyl@imara-angola.com
www.imara.co

Table of Contents
Angola Country Map .......................................................................................................................... 2
Appendix to Abbreviations ................................................................................................................ 3
Executive Summary ........................................................................................................................... 4
Table 1: Timeline for major policy changes............................................................................................... 6
Macro-economic Overview ................................................................................................................ 7
Monetary Policy ................................................................................................................................ 8
Angola’s Diplomatic relations: A balancing act ‘Par excellence’ ......................................................... 11
Geopolitical review .......................................................................................................................... 11
China: The dragon digs in its claws ......................................................................................................... 11
EU 27 and Portugal Trade links with Europe dominated by Portugal ..................................................... 12
United States of America: Energy sector remains priority for US government ...................................... 13
India: Spicing up the Indo-Angolan relationship ..................................................................................... 14
South Africa: SA’s rainbow find’s a new end in Angola........................................................................... 14
Brazil: Leading the way ............................................................................................................................ 15
Political landscape – A foregone conclusion ...................................................................................... 17
SONANGOL: Angola’s de facto Sovereign Wealth Fund ..................................................................... 18
Overview of financial Results for FY2010 ................................................................................................ 19
Oil Majors in Angola´s Petroleum Sector – The scramble intensifies .................................................. 20
Chevron Corporation ............................................................................................................................... 20
BP PLC ...................................................................................................................................................... 21
Total SA’s operations in Angola ............................................................................................................... 21
ENI SpA’s operations in Angola ............................................................................................................... 21
Angola LNG; The next big money spinner ............................................................................................... 22
Sonangol Refinery - Still on the cards ..................................................................................................... 22
Banking Sector – Mandatory domestic banking for Oil Majors on the cards ....................................... 23
Banking Sector Charts (Including relative charts) ................................................................................... 24
The Stock and Derivatives Exchange of Angola ................................................................................. 27
Back on the drawing board post the financial market crash .................................................................. 27
Arguments for and against the development of a domestic capital market .......................................... 28
BVDA potential – Top down approach .................................................................................................... 28
Bottom up Approach ............................................................................................................................... 28
Telecommunications Sector: Lucrative and still rapidly expanding .................................................... 30
Unitel ....................................................................................................................................................... 30
Movicel .................................................................................................................................................... 31
Angola Telecom ....................................................................................................................................... 31
Telephonic listings of Angola (ELTA Angola) ........................................................................................... 32
Multitel .................................................................................................................................................... 32
Breweries and Beverages Sector – A thirsty lot ................................................................................. 33
The booming beverages sector opens up to new players ...................................................................... 33
Companhia União de Cervejas de Angola (CUCA):Living up to the nickname ‘Ferrari’ .......................... 33
SABMiller: Enter the big guns .................................................................................................................. 33
Unicer: Import substitution to improve group margins .......................................................................... 34
Refriango: Leaving the competition Blue with envy ............................................................................... 35
Hotels, Tourism and Construction .................................................................................................... 36
Sigma Group ............................................................................................................................................ 37
Mota Engil SGPS SA ................................................................................................................................. 37
Soares da Costa SGPS SA ......................................................................................................................... 37
Teixeira Duarte SA ................................................................................................................................... 38
Edifer ....................................................................................................................................................... 38
Somague .................................................................................................................................................. 39
Odebrecht ............................................................................................................................................... 39
1

Angola Country Map
11a
1
9a
a
8
5
2
9
6
10
13
12
9c
9b
7
4
9d
9e
3
Major projects underway
1. Angola LNG – US$9bn LNG gas plant in Soyo
2. US$2bn pipeline of new hotels in Luanda
3. Ondjiva – new city emerging
4. Railway link connecting Huambo to Lobito Port and restoring link to
Zambian Copper belt and DRC
5. New port at Barra do Dande
6. New international airport in Viana and new Industrial hub
7. New US$8bn oil refinery in Lobito
8. 11 new oil blocks licensed in January 2011
9. New Agricultural Hubs: Caxito, Uíge (9a), Wako Kungo (9b),
Kwanza Sul (9c), Lubango (9d) and Huíla (9e)
10. New city: Kilamba Kiaxi opened to public on August 2011 (0.5m
people capacity). Other new cities planned for Zaire, Malange,
Kuando Kubango, Namibe, Huíla, Benguela and Lunda Sul.
11. Special Industrial Hub: Fútila (Cabinda), Soyo, Zaire, Catumbela,
Benguela, Matalala.
12. New Steel Factory in Kwanza Sul (100k tpa)
2

Appendix to Abbreviations
AKZ Angolan Currency – Kwanza (AKZ94.90 : US$1- at 26/10/11)
ANIP Agência Nacional para o Investimento Privado/National Private Investment Agency
ARPU Average Revenue Per User
BAI Banco Áfricano de Investimentos/African Investment Bank
BDA Banco de Desenvolvimento de Angola/Development Bank of Angola
BPD Barrels per day
BESA Banco Espírito Santo de Angola
BFA Banco Fomento de Angola
bn Billion
BNA Banco Nacional de Angola/Angolan Central Bank
BPC Banco de Poupança e Crédito/Savings and Credit Bank
bpd Barrels per day
BRICS Brazil, Russia, India, China, South Africa
BVDA Bolsa de Valores e Derivativos de Angola/Stock and Derivatives exchange of Angola
CFM Caminhos de Ferro de Moçâmedes / Moçâmedes Railways
CMC Comissão do Mercado de Capitais/Capital Markets Commission
CPLP Comunidade de países de Língua Portuguesa/Community of Portuguese speaking countries
CSIH China Sonangol Investment Holdings (Hong Kong)
CSD Carbonated Soft Drinks
ENCTA Empresa Nacional de Correios e Telégrafos de Angola/National mail and telegraphs company
ENDIAMA Empresa Nacionale de diamante de Angola/National Diamond Company of Angola
EU European Union
FLEC Frente de Libertação do Enclave de Cabinda/Front for the Freedom of the Cabinda Enclave
FPSO Floating Production Storage and Offloading unit
G8 Group of eight major developed economies
GDP Gross Domestic Product
GNI Gross National Income
GOI Government of India
HL Hecto-litre (100 litres)
IMF International Monetary Fund
IOC Indian Oil Corporation
ISA Imara Securities Angola SCVM Limitada
JBIC Japan Bank for International Co-operation
LDC Least Developed Country
LIBOR London Inter-Bank Offered Rate
LNG Liquefied Natural Gas
m Million
MNC Multi-National Company
MOU Minutes of use per month
MPLA Movimento Popular de Libertação de Angola/Peoples Movement for the Freedom of Angola
MT Metric tonnes
NATO North Atlantic Treaty Organisation
OECD Organisation of Economic Co-operation and Development
OPEC Organisation of the Petroleum Exporting Countries
PETROSA Petroleum, Oil and Gas Corporation of South Africa
PPP Private, Public Partnerships
RITES Rail India Technical and Economic Consultancy Services
SADC Southern African Development Community
SBI State Bank of India
SCVM Sociedade Corretora de Valores Mobiliários/Stock Broking Company
SINOPEC SINOPEC Shanghai Petrochemical Co Ltd
SIR Societée Ivoirienne de Raffinage/Ivorian Refining Company
Sonangol Sociedade Nacional de Combutíveis de Angola/National Fuel Company of Angola
SSI Sonangol Sinopec International
tn Trillion
UNITA União Nacional para a Independência Total de Angola/National Union for the Total independence
of Angola
WIP Work in Progress
WTO World Trade Organisation
3

Executive Summary
Comeback post 2010 slump
Angola has emerged much stronger from its first economic slump since the cessation of civil hostilities in 2002.
August 2012 will mark the country‟s first decade as a post war country, on a defined path towards controlled
capitalism, very similar to that adopted by modern day China. A rebound in oil fortunes has propelled foreign
currency reserves to an all-time high of over US$22.6bn as at the end of July 2011, making Angola one of the
richest developing countries in sub-Saharan Africa. Post the commodities and financial markets crash of
2008/9 Angola is once again the centre of attention, and the scramble for energy assets has intensified, at a
more determined tempo, pumping life into the rest of the economy.
Wiser post the crash, the body politic is strategically positioning the country for regional and international
prominence, looking to boost foreign investment and open up previously closed sectors to external players,
while maintaining a focus on ensuring Angolan control. While the development of the economy during the first
decade has been impressive, the next decade promises to be even greater, with a defined focus on reducing
the correlation of economic activity to the crude oil price. A larger pie should also enhance the trickle-down
effect of wealth to the poverty stricken masses, which remains one of the lingering short comings. Significant
changes have been made to the regulatory, administrative and legal frameworks in 2010, setting the
foundations for further growth in the oil (still), gas, banking, capital markets, insurance, agriculture,
manufacturing and mining sectors. In our opinion, Angola remains one of the surest growth plays in sub-
Saharan Africa, albeit, the most challenging, bar none.
Highlights of the crash
The oil price crash and subsequent capital flight had a dramatic impact on Angola plc. Lower crude prices saw
the fiscal position going into the red in 2009 (US$8.6bn deficit; figure 3) for the first time since 2003 and the
government being unable to pay its creditors. The private construction sector, comprised of mainly
Portuguese and Brazilian firms took the hardest hit, which led to mass layoffs and an outflow of expatriate
workers in this industry. At the height of the crisis arrears to the private sector amounted to some US$6.8bn.
Low liquidity levels exacerbated by capital flight precipitated a devaluation of the kwanza from AKZ75/US$1
to the circa AKZ90/US$1 level (Figure 6) in the last quarter of 2009.
Combined with a tightened fiscal policy and the imposition of foreign exchange controls, relations with the IMF
were hastily rekindled. In November 2009 the fund extended a US$1.4bn stand by facility to curb the impact of
the crisis, improve liquidity and dissolve pressure on the local currency. Two new lines of credit with the
Portuguese and Spanish governments to the tune of US$1.5bn were also signed to lessen the impact of the
crunch. Some of the more important policy changes are highlighted in Table 1 overleaf and have improved
checks and balances, reinforcing macro-economic stability in the years ahead.
Systemic weaknesses addressed post the crash
While firm oil prices in 2011 have refilled the coffers, measures have been taken to circumvent the blatant
structural weaknesses and multiple systemic shortcomings. Significantly, new procedures regarding the
procurement of goods and services by government departments were introduced in April 2010 in order to stem
transfer pricing and expropriations. Following the appointment of a new central bank governor and finance
minister in 2010, a new audit committee was put in place at the Central Bank and Ernst and Young were
appointed as external auditors to enhance reporting and accountability. Systematic reform has been extended
to the financial sector, which for the most part, now publish regular audited financial statements. Sonangol,
Angola Telecom and the Central Bank, among others, are some of the public institutions that now publish their
annual results online, all indicative of a higher commitment towards greater transparency and accountability.
The evolving legislative framework is a precursor to liberalisation
With the agenda to promote the development of the non-energy sector back on the table, the deepening of
the country‟s capital markets is underway, and recently the debate on developing Private, Public partnerships
(PPP‟s) to augment the government‟s efforts in stimulating the non-oil economy has been prioritised. The new
Private Investment law was promulgated into law in May 2011 and the restructuring of the Capital Markets
Commission has now been completed. The new private investment law sets the minimum protected entry
investment at US$1m, with stringent repatriation criteria. This is unlikely to phase the flood of investors
looking for exposure to the Angolan market, as key sectors for foreign investors, viz. cement, banking,
beverages and telecoms, remain firmly shut for the time being.
The country´s sovereign credit rating has recently been edged a notch higher with a positive outlook, from B1
to Ba3 by Moody‟s (Fitch and S&P equivalent of BB-). Angola is now a notch higher than Nigeria (B+) and two
notches ahead of Ghana and Kenya (B-) and on par with Portugal (which was recently downgraded by Moody‟s).
4

Improving sovereign credit risk will pave the way for the issuance of international bonds in the near future, and
eventually the creation of a local equities market.
Banking sector set to expand with new Energy sector legislation
The licensing of South Africa‟s Standard Bank in December 2010 marked the first steps towards the deepening of
the banking sector and the development of a more competitive environment in order to improve the product
offering, efficiency and quality of service. Standard Bank is the first Anglophone bank licensed to operate in
the country, and as Africa‟s largest bank (with a significant Chinese shareholder), access to international capital
markets should lower the cost of debt funding for Angolan companies.
New legislation requiring all international oil majors to process all receipts and payments through the domestic
banking sector is on the cards and has the potential to at least double the size of the banking assets, currently
at circa US$45bn. This will boost revenues for players in the local banking sector and increase tradability of the
Kwanza, which is in line with stated policy initiatives.
Other areas that will grow in the financial sector include retail banking (with market penetration at a mere
10%), micro-finance, for which new legislation has just been published, short term insurance, which is now
compulsory for vehicles, and the long awaited launch of the equities market.
Stable political outlook and increasing international influence
Following the changes made to the constitution in January 2010, with a current parliamentary majority of 82%
and a weak and fragmented opposition, the MPLA is assured of victory in the forthcoming 2012 general
elections. According to the new constitution, voters are now required to vote for a political party rather than a
presidential candidate. Consequently, no changes are envisaged to the status quo and political stability should
be maintained.
Through the African Union, CPLP and SADC, Angola was particularly critical of NATO‟s role in the deposition of
Libya‟s Muamar Gadaffi and is playing an increasingly important role in regional conflict resolution. Cote
d‟Ivoire, DRC, Madagascar and Zimbabwe are hot political spots in which Angola is playing a diplomatic role.
More spatially Angola‟s oil diplomacy has been extended to Cameroon, South Sudan, East Timor, Namibia,
Equatorial Guinea, Cape Verde, Liberia and Iraq among others. Coincidentally and unsurprisingly, the large
majority of these countries are known to have petroleum reserves and there is no doubting, Angola‟s continued
increasing stature in global geopolitics.
Commencement of gas production in 2012 will see US taking China over as the largest trade partner
The commencement of gas exports to the US and Europe 2012, will further buttress the country‟s balance
sheet. Enhanced gas export revenues should tilt the scales in favour of the United States, which should
overtake China as the largest trade partner (US$11.2bn in 2009, WTO).
With proven technology enhancements in Blocks 18, Angola possesses one of the most sophisticated ultra-deep
water petroleum extraction industries in the world, after Brazil. With the licensing of 11 new oil blocks in the
eastern Atlantic waters, to the south of existing extraction activities (Figure 15), the focus on developing the
country‟s deep water pre-salt oil deposits has been intensified.
Conclusion: Poised for yet another decade of growth
Already one of Africa‟s richest developing countries, the stage has been set to usher in yet another decade of
aggressive growth, from a high base (in an African context). The preponderant focus continues to be on the
energy sector, where Sonangol runs a very tight ship. The non-oil sector is growing at a faster rate, however,
from a lower base, it will take a while to reduce the country‟s dependence on the energy sector.
Obstacles to the strategic thrust are numerous and varied and include the poor legislative environment, poor
infrastructure, a weak human resources base, water and power problems, which all contribute to making Angola
one of the most expensive and inefficient places in which to do business. Not least is the legacy (and culture)
of vested interests, nepotism and hegemony structures which pervade virtually every aspect of Angolan life,
and ensure a less than level playing field. There is a growing acceptance that the private sector needs to play a
greater role if the growth momentum is to be maintained, however, and Angola is now on its way to opening up
to foreign investors. Certainly, this will go a long way in job creation and the improvement in living standards
for the lower echelons of the society, who have yet to benefit from the country‟s wealth. Angola remains one
of the most dynamic of Africa‟s emerging markets, and the most credible candidate to deliver on the abundant,
pent up potential, to the benefit of Angolans and Africa as a whole.
5

Table 1: Timeline for major policy changes
Jan-09 Feb-09 Mar-09 Apr-09
AKZ75 :US$1 AKZ75 :US$1 AKZ75 :US$1 AKZ75 :US$1
Car insurance is made compulsory
2008 Budget statement approved
2008 Budget surplus of US$6.4bn recorded
May-09 Jun-09 Jul-09 Aug-09
AKZ75 :US$1 AKZ75 :US$1 AKZ76 :US$1 AKZ77 :US$1
Gvt approves revised 2009 budget
Circulation tax introduced in luanda
AKZ4,971bn (22% contraction)
Council of Ministers approves €1bn line of
credit from Portugal
IMF team invited to review current
economic situation
Payment of civil service salaries extended
to other banks
Sep-09 Oct-09 Nov-09 Dec-09
AKZ78 :US$1 AKZ78 :US$1 AKZ85 :US$1 AKZ88 :US$1
€500m line of credit signed with Spain US and Angola sign a technical assistance
agreement
US$1.4bn Stand by facility signed with the
IMF
US$137m fraud unveiled at BNA and Ministry
of Finance implicated
Jan-10 Feb-10 Mar-10 Apr-10
AKZ89 :US$1 AKZ90 :US$1 AKZ91 :US$1 AKZ93 :US$1
New Minister of Finance appointed
New rules governing procurement of goods
and services implemented
New Angolan Constitution approved by the
National Assembly
Portuguese Finance minister visits and
agrees payment plan for arrears
Sonangol´s 2008 Results published,
US$3.5bn profit
May-10 Jun-10 Jul-10 Aug-10
AKZ93 :US$1 AKZ92 :US$1 AKZ93 :US$1 AKZ93 :US$1
Fitch and S&P award Angola B+ rating on par
with Nigeria and Kenya
Japan Bank for International Cooperation
(JBIC) visits
2010 Budget revised up by 37.1% to
US$43bn
New Angolan constitution ratified
Sep-10 Oct-10 Nov-10 Dec-10
AKZ93 :US$1 AKZ93 :US$1 AKZ93 :US$1 AKZ93 :US$1
Fuel subsidies reduced by 20% to circa
US$3.8bn
8 other commercal banks allowed to pay
government salaries
Petrol and diesel prices increased to 65USc
and 43USc per litre respectively
BPA, BAI, BANC, BIC, BFA, BESA, BCA, SOL
JBIC invests US$270m in textile factory.
This is their first investment into Angola
Jan-11 Feb-11 Mar-11 Apr-11
AKZ 93 :US$ 1 AKZ 93 :US$ 2 AKZ 93 :US$ 1 AKZ 93 :US$ 1
Capital Markets Commission undergoes
Tax reform process started
New Private investment law passed;
restructuring
BNA appoints audit council Investment threshold increased to US$1m
Russian Banks sign US$280m deal to finance BNA defines new parameters banning the
Angolan comms satellite
issuance of short term loans in US$
May-11 Jun-11 Jul-11 Aug-11
AKZ 93 :US$ 1 AKZ 93 :US$ 1 AKZ 93 :US$ 1 AKZ 93 :US$ 1
Civil servants salaries increased by 40% for
lower ranks and 25% for skilled personnel
S&P raises Angola's credit rating to BB- from
B+
US$500m extended to small and medium
scale farmers by BDA
Angola assumes chairmanship of
Afeximbank
New Micro-Finance law published by BNA
Sep-11 Oct-11 Nov-11 Dec-11
AKZ94.10 :US$1 AKZ94.90 :US$1 AKZ94.90 :US$1 AKZ94.90 :US$1
New Mining law passed published by the
National Assembly
2012 National budget presented to National
Assembly - total income and expenses
amount of AKZ4.42bn (US$46.6bn)
President announces that Parliamentary
elections will be held in Q3 2012
Micro, Small and Medium Businesses law
published
6

US$ Billions
Millions of Barrels per day
BPD millions
Table 2: Angola in Figures
Selected Economic Indicators 2005 2006 2007 2008 2009 2010 2011F 2012F
National Accounts and prices Annual Percentage change
Real GDP 20.6 20.7 22.6 13.8 2.4 3.4 3.7 10.8
Oil Sector 26.0 13.1 20.4 12.3 (5.1) (1.3) 3.8 2.6
Non-oil Sector 14.1 27.5 24.4 15.0 8.1 4.7 8.1 9.0
CPI inflation (annual average) 23.0 13.3 12.2 12.5 13.7 14.5 15.0 13.9
Real effective exchange rate 25.0 6.4 7.9 21.7 (14.0) 0.0 0.0 0.0
Money and Credit
Annual Percentage change
Broad money, M3 60.0 60.0 49.3 93.7 27.5 22.4 21.0 18.0
Interest rates
(90 day central bank bills) 11.0 6.0 15.0 15.0 21.0 24.0 9.4 10.0
Fiscal Accounts
Percentage of GDP
Total Revenue 40.7 46.4 45.8 50.5 30.9 42.2 40.1 41.1
Of which, Oil Revenue 32.3 37.2 37.1 40.8 19.4 31.9 30.3 30.9
Grants 0.2 0.0 0.0 0.0 0.0 0.0 0.1 0.1
Total Expenditure 33.3 31.6 34.5 41.6 39.5 34.7 35.6 34.1
Overall balance 7.3 14.8 11.3 8.8 (8.6) 7.5 4.5 7.1
External Sector
Current account balance 18.2 25.6 15.7 8.5 (10.0) 8.9 12.0 7.3
External Debt (US$bn) 12.2 7.4 11.2 17.9 13.2 16.2 21.5 20.6
External Debt to GDP ratio (%) 39.9 16.4 15.8 16.5 36.3 35.0 29.9 24.7
Public debt service to
exports ratio (%) 10.9 8.7 9.5 4.3 12.3 12.0 11.9 8.4
Memorandum items
GDP (Current prices,US$bn) 30.6 45.2 60.4 84.2 75.5 82.5 99.3 109.0
GDP per capita (US$) 1,728.0 2,489.0 3,443.0 4,671.0 4,081.1 4,328.5 5,061.3 5,390.5
Oil production (bpd m) 1.2 1.4 1.7 1.9 1.8 1.9 2.0 2.1
Price of Angola´s oil
(US$ per barrel) 50.0 61.4 72.4 93.9 60.9 75.1 72.6 73.0
Gross Foreign reserves
(end of period) 4.1 8.6 11.2 17.9 13.2 16.2 17.9 22.3
Equivalent in months
of imports 4.5 7.1 6.8 15.3 11.3 13.9 15.4 19.1
Figure 1: Real GDP growth (y-o-y - %)
30.0
25.0
20.0
15.0
10.0
5.0
0.0
(5.0)
2005 2006 2007 2008 2009 2010 2011F 2012F
(10.0)
Real GDP Oil Sector Non-oil Sector
Source: IMF
Figure 2: Interest rates, Money supply & Inflation
100.0
90.0
80.0
70.0
60.0
50.0
40.0
30.0
20.0
10.0
0.0
2006 2007 2008 2009 2010 2011F 2012F
Broad money, M3
90 day interest rates
CPI inflation (annual average)
Source: IMF
Figure 3: Fiscal Accounts
50.0
40.0
30.0
20.0
10.0
0.0
2007 2008 2009 2010 2011F 2012F
(10.0)
Oil Revenue Total Expenditure Overall balance Source: IMF
Figure 4: Memorandum Items
120
2.5
Source: IMF
Macro-economic Overview
By many accounts, Angola‟s emerging market credentials are indisputable.
Record high international oil prices and growing output from new oilfields
has helped sustain average double digit GDP growth since 2004 - reaching
18.6% in 2006, 20.2% in 2007, and 14.8% in 2008. This makes Angola one of
the world‟s fastest growing economies and suggests that the country is now
solidly in the midst of economic recovery following its bloody 27-year civil
war. The oil windfall has also paved the way for increased fiscal expansion
and a subsequent outward shift in domestic demand that is propelling the
real sectors of the economy.
Continued heavy reliance on the extractive industry renders the Angolan
economy vulnerable to commodity cycles. Lower oil prices in 2009 took a
toll on government revenues and reduced GDP growth to less than 1%.
Following a recovery in 2010 and 2011, 2012 promises to see the economy
shift into overdrive bringing back heady double-digit growth, from a high
base. The national budget for 2010 forecasts growth of 6.2%, against a
revised target of 6.7% by the IMF. Growth is recovering on the back of rising
production, a higher average oil export price, a recovery in the construction
sector and on-going expansion into agriculture, manufacturing and
construction.
GDP is projected to rise by some 6½% in 2011, with oil sector growth (from
temporarily deflated levels in 2010) amounting to 3.8% and non-oil sector
activity set to rise by some 8.1%, much closer to trend growth rates.
100
80
60
40
20
0
2007 2008 2009 2010 2011F 2012F
GDP (US$bn -LHS)
Oil Production (BPDm - RHS)
40
35
30
25
20
15
10
-
5
US$ 100
US$ 95
US$ 90
US$ 85
US$ 80
US$ 75
US$ 70
US$ 65
Figure 5: OPEC Capacity vs Supply
2.0
1.5
1.0
0.5
0.0
Foreign Reserves (US$bn -LHS)
Source: IMF
2008 2009 2010 2011 2012 2013
Capacity (mb/d)
Supply (mb/d)
Figure 6: Exchange rate AKZ : US$
Spare Capacity
US$ 60
Aug-06 Aug-07 Aug-08 Aug-09 Aug-10
AKZ : US$
Source: Opec
Source: OANDA
7

Table 3: 2011 Budget and Q1 income/expenditure outcome
2011 2010
Original budget
AKZm
Original Budget
US$m
Original budget
AKZm
Original Budget
US$m % change
Total revenue AKZ 4,172,418 US$ 45,352 AKZ 3,075,200 US$ 33,067 -27%
Total expenses (AKZ 4,172,418) (US$ 45,352) (AKZ 3,075,200) (US$ 33,067) -27%
Budget surplus/(deficit AKZ 0 US$ 0 AKZ 0 US$ 0
Revenue Overview Budget 2011 Revenues realised for Q1 2011 % realised
Recurrent Revenues A B B/A
Petroleum Sector AKZ 2,403,340 US$ 26,123 AKZ 666,446 $7,244 28%
Diamond sector AKZ 11,045 US$ 120 AKZ 1,856 $20 17%
Other recurrent revenues AKZ 986,800 US$ 10,726 AKZ 170,813 $1,857 17%
Capital revenues
Disposals AKZ 3,176 US$ 35 AKZ 321 $3 10%
Financing AKZ 765,225 US$ 8,318 AKZ 100,237 $1,090 13%
Capital transfers AKZ 2,833 US$ 31 AKZ 0 $0 0%
Total Revenues AKZ 4,172,418 US$ 45,352 AKZ 939,672 US$ 10,214 23%
Expenses Overview Budget 2011 Expenses for Q1 2011
% realised
Recurrent Revenues A B B/A
Salaries and Wages AKZ 923,649 US$ 10,040 AKZ 178,459 US$ 1,940 19%
Goods AKZ 207,033 US$ 2,250 AKZ 24,050 US$ 261 12%
Services AKZ 507,744 US$ 5,519 AKZ 57,644 US$ 627 11%
Interest on debt AKZ 72,436 US$ 787 AKZ 24,774 US$ 269 34%
Subsidies and other Transfers AKZ 557,494 US$ 6,060 AKZ 41,889 US$ 455 8%
Repayments AKZ 0 US$ 0 AKZ 0 US$ 0
Capital revenues
Investments AKZ 823,706 US$ 8,953 AKZ 101,014 US$ 1,098 12%
Transfers of capital AKZ 11,591 US$ 126 AKZ 4,380 US$ 48 38%
Capital transfers AKZ 46,282 US$ 503 AKZ 4,071 US$ 44 9%
Repayment of financial liabilities AKZ 1,002,479 US$ 10,897 AKZ 44,524 US$ 484 4%
Other capital expenses AKZ 4 US$ 0 AKZ 0 US$ 0 0%
Budgetary reserve AKZ 20,000 US$ 217 AKZ 0 US$ 0 0%
Total Revenues AKZ 4,172,418 US$ 45,352 AKZ 480,805 US$ 5,226 12%
Budget Surplus/(Deficit) AKZ 0 US$ 0 AKZ 458,867 US$ 4,988
Source: Ministry of Finance
Monetary Policy
In recent years, The BNA has maintained a “strong kwanza” policy, involving intervention in the foreign exchange
market to keep the currency stable against the US dollar. Since 2006 a managed float of the currency saw the
exchange rate oscillating in a tight band, around AKZ75: US$1 mark. This reduced inflation significantly from nearly
430% in mid-2000 to the low double digit figures. With the demise of oil revenues during the 2008 commodities
crash, panic struck the market, resulting in a massive externalisation of hard currencies. In a bid to maintain their
„strong Kwanza‟ policy, the central bank spent in excess of US$ 6bn trying to maintain the local currency.
Inevitably, in Q4 2009 the Kwanza lost about a quarter of its value, significantly impacting confidence in the local
currency, and causing a liquidity crunch in the local banking sector. With the banks heavily invested into an illiquid
real estate market, several players suffered a contraction in net assets. The tighter environment also unveiled
several regulatory weaknesses and a massive internal fraud was unveiled at the central bank and finance ministries,
which resulted in the replacement of the central bank governor and finance minister in 2010.
Post the crunch, oil prices have rebounded and liquidity is beginning to return to the market. The BNA has rebuilt its
foreign reserve buffer to an all-time high of over US$22b.6n, from a low of some US$12bn at the height of the crash.
In line with the rebound in oil fortunes, a fiscal surplus of US$5bn was recorded for the first quarter of 2011.
The currency has found a new mean at circa AKZ93: US$1 and stability has returned to the market. Of the US$6.8bn
in arrears to the private sector (mostly construction related), the government had still to pay just over US$2.7bn by
July 2011. Weaknesses in the control environment were revealed where transfer pricing and fictitious invoicing was
widely being used to expropriate revenues from the state, and an intensive exercise was carried out by the ministry
of finance to audit all payments and assess their creditworthiness. New procurement and payment systems have
now been rolled out across all ministries and quarterly expenditure ceilings have now been imposed to ensure that
there is greater control of the expenditure cycle.
8

On public financial management, a debt management unit is being staffed, and it is expected that a debt
management strategy will be finalized, with assistance from an IMF resident advisor. The AfDB-assisted
project to strengthen project appraisal capacity and monitoring has not yet been approved by the AfDB Board
but nevertheless the authorities expect it to be underway by the beginning of February 2011, delivering usable
analysis and input into the 2012 budget formulation process.
Legislation to establish a framework for Public Private Partnerships is to be passed in the coming months, and
internal capacity to manage such engagements is being built. The authorities are also developing a new
framework for enhancing oversight of public enterprises, with the draft legislation already submitted to the
National Assembly by end-March 2011.
Inflation seemingly under control
Despite the upward revision of fuel prices by 50% in AKZ terms and 20% in dollar terms in September 2010, cost
push inflationary pressures have been somewhat diluted by the continued tight monetary policy and active
sterilisation by the BNA. Inflation has been sticky at around the 15% level on an annualised basis and it is a
stated policy intention to reduce this to single digit levels. In the run up to parliamentary elections in 2012, it
is likely that fiscal expenditures will be pushed into overdrive. Already in June 2011, the National Assembly
approved an across the board increase in civil servant salaries by 15%, while some of the lower ranking
employees were awarded increases of up to 40%.
Taxation reform underway to cut down widespread tax evasion
With abundant oil revenues providing more than enough to satisfy the fiscal requirements, the taxman has not
been too concerned with loopholes in the non-oil corporate tax environment. The pervasive nonaccountability
and lack of the appropriate checks and balances, together with weak corporate governance
structures makes the task even more difficult. A good example of the wide spread tax evasion/avoidance is
clearly seen in the banking sector, where the average effective tax rate for the top six banks in 2010 was
12.1% versus a corporate tax rate of 35%. New legislation is currently being reviewed by the National
Assembly and the finance minister has already stated the intention to tighten up on tax collection and
reporting requirements.
The authorities have commenced a multi-year overhaul of the tax system (both policies and administration).
Draft legislation modernizing the legal framework is with the National Assembly. An international management
consultancy has been engaged to help design a reform program and a road-map for implementation; a timebound
action plan was submitted to the cabinet at the end of June 2011.
New Private investment law to drive inward investment agenda
The National Agency for Private Investment (ANIP) was created in 2003, with a specific mandate to support the
development of the private sector. In the same vein, in 2006 the Angola Development Bank (Banco de
Desenvolvimento de Angola, BDA) was created to help finance the country‟s reconstruction and development
needs. The BDA manages a state sponsored investment fund - where 3% of annual oil revenues and 2% of
diamond revenues are channelled into the non-oil economy.
The new Private investment law was enacted into law in April 2011 and while it is not one of the most investor
friendly laws, is light years ahead of the previous legislation. The main tenets of the new law include a
minimum investment threshold of US$ 1m and a minimum investment period of 3 years before which
repatriations of capital and dividends are permissible through official channels.
With a backlog of licence applications in virtually every segment of the economy, Angola remains in a
privileged position to cherry pick new entrants into the economy. Due to their recent establishment and
immature structure, this deliberate protectionist strategy has been implemented, primarily to ensure that
Angolan control is maintained, but also that locally owned companies are not disadvantaged and squeezed out
of the market by leaner and more competitive international groups. The banking and retail sectors are slowly
opening up to foreign competition, however vast swathes of the economy continue to be characterised by
oligopolistic leanings, with telecommunications, cement, brewing and insurance being most notable.
9

Constraints to the growth story
Angola continues to rank at the bottom of the World Bank‟s Doing Business
ranking, which tracks reforms aimed at simplifying business regulations,
strengthening property rights, opening up access to credit and enforcing
contracts. In „Starting a new business‟ category Angola ranked 164 out of the 183
economies analysed, unchanged from 2010. Deterioration was also recorded for
the registration of properties, obtaining credit locally, the payment of taxes and
closing a business. Undoubtedly, Angola remains one of the most difficult
countries in which to do business.
On the positive side, dealing with construction permits became easier, as did the
protection of investors and cross border trade.
Though progress has been made in rehabilitating Angola‟s war-torn
infrastructure, must has still to be done. It seems ironic that a country with the
capability to pump oil from wells 3 000 metres deep, cannot supply its largest
city with running water and electricity.
Commuting problems continue to harm businesses in the city and major problems
also persist in the port of Luanda, which cannot keep pace with the rapid
development of the economy and the huge volume of cargo entering the country.
Delays at the port prevent the entrance of goods, which helps to inflate prices
for goods and services. Initial start-up costs for businesses are prohibitively high,
hampering local participation in the economy and power outages are common,
especially in Luanda. Less than 20% of Angola's population has access to
electricity and 68% of businesses generate their own power. An acute shortage of
skilled staff also undermines private sector growth.
Angola needs to do even more to improve the ease of establishing a business
within its borders. To this end, priority should be given to creating a healthy
business environment for domestic and foreign investors; implementing structural
reforms, continuing to rehabilitate infrastructure, increasing transparency in
government procurement, and reforming the legal system.
Table 4: 2011 Doing Business Survey Rankings (out of 183 countries)
Still one of the hardest places in the world to do business
FY2010
FY2011
Starting a business 164 164
Dealing with construction permits 128 119
Registering property 173 174
Getting credit 109 116
Protecting investors 57 59
Paying taxes 135 142
Trading across borders 167 166
Enforcing contracts 181 181
Closing a business 144 147
Investing in Angola – SWOT
Analysis
Strengths
• Strong Oil revenues
• Resultant solid foreign
reserve position
• Political stability
• Strong GDP growth
• High capital inflows (FDI)
• Bottom-heavy
demographics; supports
organic growth in
consumption
Weaknesses
• Poor skills base; High level
of expat dependency
• Exorbitant operating costs
• High unemployment
• Poor infrastructure
• Low productive capacity
• Weak legal framework
(particularly property
rights)
• Bureaucracy and red tape
• Centrist government, overregulation
• Operational inefficiencies;
power/water shortages;
clogged ports
• High levels of corruption
Opportunities
• Agricultural growth
potential
• Expansion of oil sector
• Tourism potential
• Deepening of the financial
sector and capital pool
• Infrastructural
rehabilitation and
expansion
Threats
• Oil price shocks
• Exchange losses arising
from the US$:Euro cross
rate; Oil revenues in US$;
Imports from Portugal and
Europe in €
• Local currency weakness
• Temporary shortage of US$
and hedging/speculation
• Lack of political will to
implement needed reforms
Angola
Sub-Saharan
Africa
OECD
Procedures (number) 8 8.9 5.6
Time (days) 68 45.2 13.8
10

Euro Millions
China
United States
EU27
India
South Africa
Canada
Peru
Brazil
Hong Kong
South Korea
Euro Millions
EU27
China
United States
Brazil
South Africa
India
Singapore
South Korea
Japan
Argentina
Angola’s Diplomatic relations: A balancing act ‘Par excellence’
In the area of diplomatic relations, Angola‟s balancing act is a true work of art. The country has managed to
strike a delicate balance on all sides of the political spectrum, forging a complicated web of relations with
erstwhile foes, all the while being a charming courtier, and more often than not, reaping a handsome reward.
Testimony to the country‟s elevated status has seen it receiving international recognition in several
international forums. Angola was accepted into the OPEC cartel in 2006 (and was 2009 president) and
participated in the 2009 G8 summit. Following Jacob Zuma‟s assumption of presidency, Angola‟s regional clout
and importance, both economically and in matters political, is on the rise too. In 2011 Angola assumed the
presidency of the 15 member regional economic group SADC, that represents about a quarter of the continent‟s
population, at some 258 million people with a combined GDP of US$471bn. Angola has been particularly active
in the intermediation efforts in the Zimbabwe and Madagascar political crises. Further afield and of equally
significant importance has been the intermediary role in Cote d‟Ivoire‟s political stalemate and the Angolan
government was particularly vocal regarding NATO‟s military deposition of Muamar Gadaffi‟s dictatorial regime,
a plight that fell on deaf ears, so it turns out.
Undoubtedly, as the country‟s oil fuelled providence increases, so too does its‟ eminence in all matters political
and economic. Having significant scope to increase the „economic pie‟, we believe the country to still be on an
ascendant tangent, in matters economic as well as diplomatic. In humble acknowledgement, even South Africa
whose growth options have been all but exhausted, are looking towards the Lusophone country, hoping to
benefit from the certain boom times ahead. Below we take a look at Angola‟s international relations in order
of decreasing economic significance.
Geopolitical review
China: The dragon digs in its claws
Having embarked on the most aggressive growth agenda known to mankind, China‟s dedication, discipline and
progress have been nothing short of miraculous. The global recession presented an excellent buy opportunity,
and China‟s burgeoning reserves were used to snap up cheap assets the world over. Having re-engaged the
growth gear, the domestic economy is pumping ahead, and their positive trade balance has pushed foreign
crude
currency and gold reserves to over US$ 3tn, while the western world grapples with austerity measures, sticky
unemployment levels and an overriding sense of doom and gloom.
Angola‟s strong relationship with China has proved to be mutually beneficial and the „Angola Mode‟ as was
dubbed by the World Bank has led to growth for both China and Angola. Under this model long term oil backed
infrastructure loans have propelled Angola‟s infrastructural development to an extent that would not have been
possible using traditional means of financing. Since 2004, it is estimated that in the region of some US$ 11bn in
long term loans at concessional rates has been advanced to the Angolan government and in return Angola has
pledged 220 000 bpd (about 12% of daily production and 5% of China‟s international crude imports in 2009) to
service the debt commitment. Also as part of the financing agreement, it was agreed that Chinese companies
would be used in the infrastructure projects, however there is an Angolan staffing requirement of 30% in order
to ensure at least some employment creation in the process. In total over 150 projects across the length and
breadth of the country have been awarded to Chinese firms in the provision of roads, bridges, dams, housing,
schools, hospitals, the list goes on. Over the past eight years there has been a 35-fold increase in the value of
Sino-Angolan trade, with especially strong growth since 2004 following the award of US$4.5bn in Chinese oil
backed loans and credit lines to finance infrastructural development. In 2009, according to Chinese officials,
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
-
Figure 7: Angola's top 10 Export partners FY2009
Historically, Brazil has
enjoyed a trade surplus
of over US$1bn, linked to
lines of credit and strong
cultural/lusofone ties.
6,000
5,000
4,000
3,000
2,000
1,000
-
Figure 8: Angola's top 10 Import partners FY2009
Improved bilateral
relations should see
SA/Angola trade
increasing significantly
in the coming years.
Source: WTO
Source: WTO
11

US$ Millions
US$ per barrel
over 100 Chinese firms were operating in Angola (over 50 of them of significant size) and many of these
companies use Chinese workers. Officially some 40,000 Chinese work on official infrastructure projects.
According to a statement by the Ministry of Finance in January 2009, the second phase of disbursements under
the existing second US$ 2.5bn credit line of China‟s Exim Bank started, with a total of US$1.6bn in funds
available for projects in infrastructure, transport and agriculture.
During the 1990s, bilateral trade ranged between US$ 150m and US$ 700m per year. In 2000, it exceeded US$
1.8bn, and by the end of 2005 it had increased fourfold to US$6.9bn. Within a year it had nearly doubled to US$
12bn, making Angola China‟s largest trading partner in Africa (with South Africa now second). China expanded
at its fastest ever rate in 2008, with total bilateral trade reaching an estimated US$25.3bn. This represented a
79% increase on the level of total trade in 2007 and was primarily driven by high oil prices. In 2008 Angola was
the second largest source of crude oil to China (after Saudi Arabia), providing 28.89m MT (594,533 bpd) –
although in 2009 there was a decline in the imports of Angolan oil to China associated with the global crash.
According to the World Trade Organisation, in FY2009 China accounted for 38% of all Angola‟s exports (mostly
oil), a sum of US$9.4bn. Total trade with China amounted to US$ 11.3bn and accounted for 30% of the
country‟s total trade in FY2009. In his outgoing speech as Chinese ambassador to Angola in June 2011,
Ambassador Zhang Bolun, quoted the trade between China and Angola for FY2010 at US$ 24.8bn, more than
double the preceding year, and in line with expectations, following the recovery of the oil price. There is no
doubt that this relationship will continue to be of primary importance.
China‟s principal economic relations with Angola have been forged between state enterprises Sinopec, Unipec,
China International Fund (CIF) and Angola‟s MNC, Sonangol. China has been much more aggressive in their
conquest for African raw materials, and this is particularly evident in Angola, where they are miles ahead of any
of their contemporaries in the BRICS grouping.
40,000
35,000
30,000
25,000
20,000
Figure 9: Total Sino-Angolan trade
120
100
80
60
Iraq, 225 , 6%
Sudan, 253 , 7%
Figure 10: China Crude imports breakdown 2010
Kuwait, 197 , 5% Brazil, 162 , 4%
Kazakhstan, 202 ,
5%
Saudi Arabia, 896
, 24%
15,000
10,000
5,000
-
2003 2004 2005 2006 2007 2008 2009 2010 2011F
40
20
-
Russia, 306 , 8%
Oman, 319 , 9%
Iran, 428 , 11%
Angola, 791 , 21%
Country, 000's bpd, %
Total trade (LHS) Ave Oil price (RHS)
EU 27 and Portugal Trade links with Europe dominated by Portugal
The European Union (EU), made up of 27 member states is Angola‟s second most important economic partner
and Portugal remains the dominant European country with which trade is conducted. In fact Angola ran a trade
deficit with EU27 of €1.2bn with Portugal supplying the bulk of imports. With continued economic contraction
at home, Portuguese investment into Angola has continued to accelerate. Renowned for their superior
workmanship, although more expensive than their Chinese counterparts, Portuguese contractors continue to
win new tenders. Somague, Texeira Duarte, Mota-Engil (EGL:PL), Edifer, Soares da Costa (SCOAE:PL) et al,
have bill boards all over Luanda for new construction projects. Their influence extends to the banking sector,
where Banco Espirito Santo de Angola (through BES: PL), Banco BIC, Banco de Fomento de Angola among others
all have Portuguese shareholdings. In telecoms Portugal Telecom (PTC: PL) owns a 25% stake in Unitel and the
hotels sector has several hotels jointly owned with Portuguese firms. Alvalade Hotel, Tropico Hotel and the
brand new five star, Epic Sana Luanda are all hotels with Portuguese partners. A low level of tertiary and
specialist skills has also seen the continued dependence on Portuguese expatriates who are also amply
encouraged by Portugal‟s economic woes. The absence of a well-developed agricultural industry continues to
necessitate a significant import requirement, which contributes to Angola‟s excessively high prices. The food
import bill from EU27 amounts to some €480m (10% of total EU exports) with everything from olives to bottled
water being imported. The Portuguese cultural roots run deep and due to decades of net immigration during
the civil war there are a large number of Angolan descendants living permanently in Portugal.
12

Figure 11: EU27 exports to Angola breakdown
2009
Machinery &
Transport Equip,
1,971 , 44%
Manufactured
Goods, 1,021 ,
23%
Type, Amount €m's, %
Food, Live animals,
480 , 11%
Misc Manufactured
items, 442 , 10%
Beverages and
tobacco, 221 , 5%
Other, 305 , 7%
Source: WTO
Chart 12: Angola Net trade surplus/(deficit) 2009
China
USA
India
Canada
South Africa
Peru
Japan
South Korea
Singapore
Brazil
EU27
-2,000 - 2,000 4,000 6,000 8,000
€ Millions
Source: WTO
Galp Energia started its activities in Angola in 1982, in the Safueiro field and is currently involved in exploration
and production in four offshore oil blocks: Block 14, Block A-14K-IMI (Lianzi), Block 32 and Block 33. They are
also involved in the multibillion dollar Sonagas project in which they have a 10% shareholding. Currently, the
bulk of Galp Energia's oil production comes from its activities in Angola‟s Block 14, with Angola, Equatorial
Guinea and Nigeria contributing 32% of total crude pumped in 2010.
Sonangol indirectly owns 15% of GALP through Sonangol Esperanza‟s 45% shareholding in Amorim Energia, which
in turn has a 33.34% in GALP. In recent months, Sonangol‟s president, Manuel Vicente has expressed the
intention of converting the indirect holding into a direct one, and official notifications have been made to the
Portuguese authorities. ENI has expressed an interest in disposing of their 33.34% stake in GALP and there has
been speculation that Sonangol would be agreeable to increasing their stake in the Portuguese NOC, which they
have not ruled out, much to Portugal‟s chagrin. How the tables have turned.
United States of America: Energy sector remains priority for US government
America‟s significant interest in Angola‟s oil sector is similarly interesting in that it too supported UNITA during
the civil war. While the credit crunch seems to have knocked the wind out of the American economy, and
quite particularly, the sizeable consumer driven market, the strategic focus for the United States has remained
intact. Apart from being a source of crude, America‟s presence in Angola dilutes somewhat the increasing
Chinese influence on the continent. This is especially pertinent given the country‟s rising prominence as oil
and gas exports increase and the disruptions that political violence has caused for other oil producers such as
Nigeria and countries in North Africa and the Middle East.
Underlining the strategic importance of Angolan oil to America‟s energy security policy was the state visit by
the US Secretary of State, Hillary Clinton in August 2009. Also noteworthy was President Dos Santos‟ reception
by President Obama at the White House in Washington DC earlier in 2010.
Total trade between Angola and the US in 2009 amounted to US$ 7.5bn and ranked third after total trade with
China (US$11.3bn) and with EU27 (US$ 10.2bn). Chevron, the largest American oil major in Angola has an
interest in four concessions: 39.2% in Block 0 off the coast of Cabinda province, 31% in Block 14 farther west in
deep water, a 20% stake in Block 2 offshore northwest Angola and the onshore block Fina Sonangol Texaco.
They also have a 36.4% interest in the US$ 9bn Angola Liquefied Natural Gas Limited, an onshore liquefied
natural gas (LNG) joint venture in Soyo which is expected to start production in 2012.
EU27, € 10,178,
28%
Figure 13: US/Angola Net trade 2009
USA, € 7,456, 21%
India, € 2,631, 7%
Figure 14: Chevron Investments and Advances
2010
Caspian Pipeline
Consortium , $974 ,
8%
Petropiar/Hamaca ,
$973 , 7%
Petroboscan , $937
, 7% Angola LNG Limited
, $2,481 , 19%
South Africa, €
1,551, 4%
Brazil, € 1,197, 3%
Other , $1,922 ,
15%
China, € 11,291,
31%
Country, Amount €m's, %
Other, € 915, 3%
Canada, € 862, 3%
Source: WTO
Tengizchevroil,
$5,789 , 44%
Project, Amount $m's, %
Source: Chevron 2010
Annual Report
13

Chevron also holds a 38.1% interest in a proposed pipeline designed to transport up to 250 million cubic feet
per day of natural gas from Angola's Blocks 0 and 14 to the Angola LNG plant in Soyo. The development plans
include 87 miles (140 km) of pipeline routed under the Congo River canyon. Project construction is scheduled
to begin in the second half of 2011 and be completed in 2013. As at the end of F Y2010, Chevron had invested
US$ 2.5bn in the Sonagas LNG project. The commencement of gas production in 2012 will introduce a
significant new flow to Angola‟s revenue stream and will likely see the US overtaking China in terms of total
trade.
The preponderant focus for US investment has been on the oil sector, and while there is significant interest
from non-oil US companies to invest in Angola, the task has been rather uphill. In 2009 the US Ex-Im bank
availed a US$ 120m credit facility for Angolan companies looking to import mechanical agricultural equipment
from American companies. The facility remains unused due to the overly stringent requirements needed to
access the facility. Other bumps that have strained the US/Angola relationship in recent times included HSBC‟s
American subsidiary closing all the Angolan government‟s bank accounts due to alleged money laundering
activities by high profile public officers.
Some of the bigger names that have made their mark in the Angolan market include Baker Hughes (Oil and
Gas), Cameron (Oil services), Coca Cola (through the Kenya hub), Chevron (Oil and Gas), Cobalt International
Energy, and General Electric (Oil and Gas division). Cummins and John Deere have recently opened subsidiary
offices to take advantage of the next wave of growth, doing away with their previous agency relationships.
India: Spicing up the Indo-Angolan relationship
India‟s exports to and investments in Angola have shown perceptible increase after cessation of the civil war in
2002. Bilateral trade between the two countries which, was only a few million dollars five years ago reached
US$450m in 2007 and US$1.8bn in 2009. The principal export items to Angola include tractors, vehicles,
agricultural machinery and implements, pharmaceuticals and cosmetics, tea, Basmati rice, food, spirits and
beverages, finished leather, paper and wood products and petroleum products. India‟s main import from
Angola is crude oil and in FY2009 the state-run oil refiner, Indian Oil Corporation (IOC) purchased an average of
63,000 bpd from Angola, compared to about 30,000 bpd in FY2008.
While Indian companies such as Tata, Mahindra & Mahindra and others have had business interests in Angola for
some years, the Indian community in Angola is still relatively small, numbering some 1 000. As part of India‟s
oil diplomacy, in August 2004 its Export Ministry extended a US$ 40m loan to the Angolan government for the
Moçamedes Railway (CFM) Rehabilitation Project. Rail India Technical and Economic Consultancy Services
(RITES, an Indian government enterprise) started the project in 2005 and handed it over at completion in
August 2007. India‟s EximBank then extended three credit lines of US$5m, US$10m and US$13m for agricultural
equipment and Indian tractors. The State Bank of India (SBI), which opened offices in Luanda in 2005, has
subsequently also extended commercial lines of credit for more tractors and the importation of capital
equipment from India. Another term loan of US$10.8m has been approved by SBI and the GOI has recently
approved US$30m for setting up an Industrial park and US$ 15m for setting up a cotton ginning and spinning
plant. These increased efforts are petty cash in comparison to the multi-billion dollar loans extended by
China‟s EximBank during the same period and to date, India has been excluded from all oil extraction
activities.
India‟s diamond diplomacy seems more successful though and the Angolan state diamond company, Endiama,
has agreed to do business directly with the large Indian diamond industry, while India is looking at opening an
institute for jewelry manufacturing in Luanda.
South Africa: SA’s rainbow find’s a new end in Angola
A meeting of like minds has seen Presidents Jacob Zuma and Eduardo Dos Santos usher in a new era that, like
the Chinese one, is pragmatic and mutually beneficial. On the one hand the Angolans are cognisant that South
Africa‟s indusrialised economy could offer much in the way of skills transfer, raw materials as well as financial
muscle to bankroll their redevelopment. For South Africa, a shift in the trade balance would create a massive
new market, creating an opportunity for their underutilized industrial capacity. Through SADC and bi-laterally,
the two economic giants are now working closer and having China as a mutual ally and trading partner is
similarly facilitating cross pollination.
14

Having recently being invited into the BRIC economic grouping, South Africa has proven that Africa will provide
the next wave of growth for the global economy. Waking up to this reality, MNC‟s are investing heavily into
the „turn around‟ markets. In Angola SABMiller (Ahead of Portugal‟s Unicer) and Shoprite are the two notable
success stories. Standard Bank‟s entry into the retail banking market in December 2010, has raised hopes for
some of the other South African heavy weights, and Nedbank, Investec, ABSA are all queuing up to enter the
US$ 45bn dollar banking sector.
In the all-important oil sector there have been talks of a tie up between PetroSA and Sonangol to synergise in
the construction of the 200 000 bpd Sonaref Lobito oil refinery project, estimated to cost in the region of US$
8bn. Petro SA has plans of its own to build a 360 000 bpd, US$ 9bn crude refinery in Coega, Port Elizabeth, to
help ensure security of supply of liquid fuels in the country. Project Mthombo, as it has been dubbed, will be
one of the country‟s mega projects.
In 2009 South Africa was Angola‟s fifth largest trading partner (overtaking Brazil) and total trade amounted to
US$ 1.5bn, with a net trade surplus of US$ 448mn in Angola‟s favour. The continued opening up of Angola to
South African trade makes sense and should gather momentum.
Brazil: Leading the way
As per their national motto Ordem e Progresso, Brazil is leading the way in Angola‟s reconstruction and has
completed many of the largest infrastructural projects in Angola. Former president Luiz Inacio Lula da Silva
laid a solid foundation reinforcing economic ties, and Dilma Rousseff, the incumbent, has received the baton
already at full throttle. While she has yet to pay an official state visit, the Brazilian/Angolan alliance remains
strong and continued transatlantic trade flows (currently in favour of Brazil) are guaranteed.
The Brazilians have been one of the largest players active in the rehabilitation of Angola through their MNC
Odebrecht which singlehandedly employed over 17 000 Angolan‟s, 14% of their total workforce in 2009.
Angola is the largest recipient of Brazilian investment in Africa with dozens of companies operating in the
country. Their influence is seemingly unlimited and they have been active in building roads, condominium
estates, Electricity plants, Water purification plants, airport refurbishments and several other projects, too
many to mention individually. One of their biggest projects at the moment is the US$2bn renewal of the bay
of Luanda which includes a massive land reclamation, dredging and coastal expansion exercise.
The biggest chunk of Brazilian investment in Angola has been directed to the petroleum industry with statecontrolled
oil company Petrobras being one of the major players with equity states in several oil blocks.
There has been speculation regarding the creation of a Super Oil company through the Lusophone triumvirate
of Petrobras, GALP and Sonangol, which in 2010 had a combined turnover of US$ 81bn.
Other notable relationships
United Kingdom
The United Kingdom‟s relationship with Angola has a bi-focal nature. The first priority is in the energy sector
where BP dominates as one of the major NOC‟s in the country with equity in blocks 15, 17, 18 and 31
(Operator in blocks 18 and 31) and a 13.6% stake in the Sonagas LNG refinery. The second arm of interest is in
banking, where Standard Chartered has significant exposure to Sonangol Finance Limited, having granted
medium term facilities of over US$ 6.5bn. Standard Chartered has set up a representative office and are
waiting for a banking license which will see them gaining further ground in Angola‟s significant trade finance
flows. Making inroads into the aviation sector is LSE listed Lonrho, which has recently obtained a license to
service Angola‟s underserved and lucrative domestic air routes, through its subsidiary, Fly 540. LonAgro,
exclusive representative of John Deere of the US, has also opened up shop in the Bengo province, which is
rapidly being developed as a new agricultural hub.
France
The Franco-Angolan, relationship is usually associated with the infamous Angolagate scandal that exposed
shady dealings between French and Angolan government officials. Nicolas Sarkozy did his part to rekindle
relationships when he embarked on a state visit in 2008 and since then the partnership has grown from
strength to strength. The French remain very low key, however their participation in Angola‟s oil sector and,
indeed, the gulf of Guinea, remains of significant importance. Total‟s oil production was 163kboe/d in 2010
and is growing. In the non-oil sector, Castel is a major shareholder in the brewing monopoly Cuca, which in
this report, we value at in the region of US$2.4 bn. SABMiller‟s recent entry into the Angolan brewing space
will pose a medium term threat to Cuca‟s dominance though. Also of interest is a US$1.5bn, three year loan
which was advanced to Sonangol Finance by France‟s Calyon Bank in July 2009.
15

Italy
Although Italy‟s oil interests are predominantly concentrated in North Africa (mostly Algeria, Egypt and Libya),
through their six legged dog (ENI), they also have a notable paw print in West Africa where they have
significant stakes in Mali, Nigeria and Congo. ENI‟s interests in Angola are sizeable in relation to other NOC‟s,
with interests in Block 0 (9.8% interest), block 14 (20% interest) and block 15/06 (35% interest). In January
2011 ENI was awarded rights to explore and the operatorship of block 35, with a 30% interest. There has also
been speculation regarding the acquisition of ENI‟s 33% stake in Portuguese NOC, GALP, by Sonangol. In his
latest remarks on the subject, the Angolan oil Minister, Manuel Vicente expressed an interest in acquiring the
parcel. This would make Sonangol the largest shareholder in GALP, increasing their stake to 48.33%.
Table 5: Bilateral Credit Lines
Credit Lines US$m Objective Date
Germany 1,700 Rehabilitation of infrastructure Mar-09
Brazil 1,500 Purchase of Brazilian construction equipment 2008
Ex-Im Bank / China 1,000 Agriculture Jul-09
Portugal 1,000 Support for imports
Canada 1,000 To facilitate bilateral trade Jun-09
Portugal 700 To fund public investment in infrastructure Jun-09
Spain 600 Construction 2008
Brazil 250 To fund new projects 2008
Spain 200 To fund new projects
Ex-Im Bank / US 120 To support for imports Jun-09
UK 70 diversification of the economy Mar-09
Total $8,140
16

Political landscape – A foregone conclusion
The Movimento Popular de Libertação de Angola (MPLA) has dominated Angola's politics since independence in 1975
and it has further consolidated its political hegemony since the end of Angola‟s 27-year civil war in 2002. Power is
centralised in the office of the presidency, which has been held for the past three decades by Mr José Eduardo dos
Santos. Following the success of the 2008 legislative elections, the next legislative elections are expected to take
place in 2012, and with the adoption of a new constitution, Mr Dos Santos is sure to win again.
Angola's motto is Virtus Unita Fortior, a Latin phrase meaning "Virtue is stronger when united." The executive
branch of the government is composed of the President, the Vice-Presidents and the Council of Ministers. For
decades, political power has been concentrated in the Presidency.
Governors of the 18 provinces are appointed by and serve at the pleasure of the president. The Constitutional Law
of 1992 establishes the broad outlines of government structure and delineates the rights and duties of citizens. The
legal system is based on Portuguese and customary law but is weak and fragmented, and courts operate in only 12 of
more than 140 municipalities. A Supreme Court serves as the appellate tribunal; a Constitutional Court with powers
of judicial review was only constituted in 2010, despite statutory authorization.
The first legislative election in 16 years took place in September 2008. The MPLA won by a landslide with 81% of the
vote. The elections were contested by 14 political parties, but only four opposition parties were able to secure
representation in parliament, where the MPLA‟s landslide translated into 191 of the 220 seats. 16 seats went to
UNITA, 8 to the Partido de Renovação Social (PRS), 3 to the Frente Nacional para a Libertação de Angola (FNLA), and
2 to Nova Democracia. International observers pronounced satisfaction that the elections had been „free and fair‟
but, for the most part, the MPLA had a monopoly of the media and campaign financing that placed other parties at a
clear disadvantage.
Suspected electoral irregularities notwithstanding, however, the outcome was accepted by the opposition, and gave
the MPLA the strong democratic mandate that it previously lacked. Having won two-thirds of the National Assembly
seats, the MPLA now has the majority needed to push through changes to the constitution.
In contrast with the success enjoyed by the MPLA, the main opposition party, União Nacional para a Independência
Total de Angola (UNITA) polled just 10.4% of the vote, and went from having 70 to just 16 seats in parliament.
UNITA‟s poor showing has cast serious doubt over its future as the main opposition party, and its leader, Isaias
Samakuva, has indicated that his current term will be his last.
Judiciary antiquated and in need of overhaul
According to its Constitution, Angola is a parliamentary democracy. It operates through executive, legislative and
judicial branches whose separate powers allow for checks and balances among all three. However, in practice, there
are still many shortcomings. The Angolan legal system is antiquated, complex and grossly inefficient (cases can drag
on for years). The judicial branch remains weak and subordinated to central authorities. Courts are hindered by a
lack of qualified personnel, with apparently only around 40% of magistrates holding a law degree.
Adoption of new Constitution in January 2010 ensures status quo
The new constitution, adopted in 2010, further sharpened the authoritarian character of the regime. In the future,
there will be no presidential elections: the president and the vice-president of the political party which comes out
strongest in the parliamentary elections automatically become president and vice-president of Angola. Through a
variety of mechanisms, the state president controls all the other organs of the state, so that the principle of the
division of power is not maintained.
17

SONANGOL: Angola’s de facto Sovereign Wealth Fund
Sonangol China
This subsidiary was c reated in 2004
and has its head office in Hong Kong.
The company's mandate is to procure
contracts in the petroleum sector in
Asia.
Sonangol Cape Verde
Owns 36% of Enacol (Empresa Nacional
de Combustíveis) that sells petroleum
products and gas, and has a network
of petrol stations.
Financial Sector
Millenium BPC (9.9%)
Banco BAI (17.5%)
Banco BPA (20%)
Banco BCI
Banco Millenium Angola (49.9%)
AAA
A financial services firm that offers
insurance packages to the petroleum
sector. The company also sells short
and long term insurance products in
Angola.
Sonangol Congo
Dedicated to down stream services in
the oil sector including sales, storage
transport and importation of refined
petroleum products and has been
operating since 1998
Sonangol Ltd UK
With offices in London, this office
acts as an agency to buy and sell
crude and refined petroleum products
Sonangol
Sonangol Shipping
Primarily specialises in the
transportation of Crude oil servicing
routes between national ports and
some African countries including:
South Africa, Cape Verde, Camores,
DRC, Cote d'Ivoire and São Tomé e
Príncipe
Sonair
Air transport business servicing
operators in the petroleum sector;
Offers international flights to African
destinations and also direct flights for
passengers and cargo to the US
(Houston express)
Sonangol USA
Headquatered in Houston Texas,
dedicated to the purchase and sale of
crude and refined oil products
ESSA
A services company dedicated to the
oil sector offering, training, industrial
safety and
Food Industry
Sonangol owns stakes in Sodispal and
WAPO in Angola of 51% and 35%
respectively
Sonangol Distribution
Produces and distributes fuel and
lubricants in Angola.
Sonasia
Headquartered in Singapore and was
created in 2004. Deals with the
commercialisation of crude oil
produced in Asia.
MS Telecom
Responsible for all telecommunication
for Sonangol. The company also owns
25% of Unitel, the largest mobile phone
company with over 6m subscribers.
Civil Construction
Owns a 12.5% stake in Bricomill
International Operations
GALP Energia - 15%
JV with Cuba Petroleo in Blocs N23
and N33
Venezuela - JV with PDVSA (Migas
and Melone)
Brazil - JV with Petrobras (Campos
and Santos bays)
About Sonangol
Sonangol (Sociedade Nacional de Petróleos de Angola) is, by a sizeable margin, the largest conglomerate in
Angola and indeed one of the largest corporate entities in sub-Saharan Africa. Sonangol came into being in 1976
as the company that took over Angola‟s oil assets following their nationalisation on independence and is entirely
owned by the Angolan government. The principal activities of the group remain vested in the energy sector
where the group is fully vertically integrated in the areas of prospecting, research, development and production
in the up-steam activities. Over the years the group has invested heavily in the ancillary down-stream activities
which encompass storage, transportation/distribution and refining. In 2008, Sonangol acquired the petroleum
refinery, Sonangol Refinaria de Luanda from Total for a reported consideration of US$ 783m. The capacity of
the refinery is 30 000 bpd which falls far short of the country´s daily fuel consumption. About 80 000 bpd of
refined fuel products are consumed in Luanda on a daily basis, and at roughly US$0.60 per litre, petrol and
diesel fuels are some of the cheapest in SSA, and still heavily subsidised by the fiscus. In 2010, we calculate
that between US$ 2.5bn and US$ 3bn was spent on fuel subsidies and this remains a point of contention with the
IMF. With inadequate and intermittent power delivery in the country, the government is of the opinion that,
while they are in favour of a complete removal of subsidies, a short term cut could lead to civil unrest.
Certainly, not while the price of oil remains above US$100/barrel ensuring surplus liquidity levels and more so
heading into an election year in 2012, even if the outcome is predictable.
Sonangol in the energy industry
Angola‟s oil production is in the region of 1.7m bpd presently and Sonangol plays a significant role as the
country´s concessionary and licensing authority. On average, Sonangol holds at least a 20% stake in each oil
block. In January 2011 11 new oil blocks were auctioned (See page 18) and over the next five years, it is
anticipated that Angola‟s oil production is expected to increase to between 2.5m bpd and 3.0m bpd, while
Sonangol‟s share is expected to increase to some 13% of total output. As the main driver for the multinationals‟
revenues, earnings growth momentum is expected to be driven by enhanced production and higher
prices.
International diversification
In recent years Sonangol expanded their international presence by opening, primarily oil trading offices in
Houston, London, Paris, Singapore and Shanghai. This has been complemented by the acquisition of oil assets in
Cuba, Venezuela, Iraq, Brazil and the United States. Sonangol also owns a 15% stake in the Portuguese NOC,
GALP Energia, via a 45% shareholdings in Amorim Energia, which owns 33.34% of GALP. There is speculation
that Sonangol is looking to increase its stake in GALP by purchasing ENI Spa´s 33% shareholding in its ambitions
of becoming a super heavy weight MNC. Sonangol continues to be the pre-eminent body through which Angola‟s
oil and political agenda is furthered, constantly crossing the business/political divide and effectively acting as a
sovereign wealth fund.
18

Increasing diversification into non-oil sectors
Abnormal profits in the boom years of the mid 2000s accelerated Sonangol‟s efforts to diversify its exposure to
the non-oil segments of the economy. According to the audited financial statements for 2009, the total
portfolio of non-oil interests amounts to some US$ 5.2bn, with specific exposures to the following sectors:
Insurance: AAA Seguros – Monopoly insurer to the petroleum sector with a total market share of about 45% in
the non-oil insurance sector with annual gross premiums in the region of some US$ 250m according to players
in the industry.
Banking: Sonangol has direct and indirect shareholdings in the large bulk of Angola‟s banking sector. Direct
shareholdings include the following:
• Banco Áfricano de Investimentos (BAI) (17.5% shareholding) – Angola‟s largest bank with a 21% market
share of total assets in 2010 (US$ 8.3bn).
• Banco de Fomento de Angola (indirect stake of 12.5% held via Unitel‟s 49.9% shareholding in the former) –
Angola‟s second largest bank with total assets of US$ 6.4bn in 2010 representing a market share of 16%;
• Millennium BCP Portugal (10% shareholding) – Quoted on Euronext (BCP:PL) with a current market
capitalisation of € 1.2bn (at 28 th October 2011);
• Banco Privado Atlantico (9.5% shareholding) – Now the second largest bank with total assets of US$ 7.9bn
at the end of 2009;
• Millennium Angola (49.9% shareholding) – Total assets of US$ 1bn at the end of 2009;
• Banco de Comércio e Indústria – 8th largest bank with total assets of US$ 771m.
Telecommunications: Sonangol owns 25% of the country‟s largest mobile phone operator, Unitel. With the
highest Average Revenues Per User (ARPU) in Africa of around US$21/month and EBITDA margins of 58%. Unitel
is as profitable as it is cash generative and with 6m subscribers we conservatively value the company at US$
1.4bn, and Sonangol‟s shareholding at circa US$ 342m.
Overview of financial Results for FY2010
• Group turnover increased from US$13.1bn to
US$22.1bn, driven by a 27% price recovery
after crashing by 35% in FY2009. We have
used the ytd 2011 OPEC basket price to
estimate our 2011 forecasts.
• EBITDA ended the year at US$3.3bn for a 15%
EBITDA margin compared to EBITDA margins of
25% and 26% for Petrobras and ENI
respectively.
• Net profits after tax of US$3.0bn were
reported, 8% lower than the prior year largely
owing to a drop in financial income and a
significant spike in the effective tax rate from
13% to 31%. RoAE was constant at 21%
compared to ENI at 13% and Petrobras at 11%.
• Net debt levels ended the year at US$7.5bn,
which translates into a debt to equity ratio of
57%. Compared to the net debt figure for
FY2009, this corresponds to a decrease of
some 5% y-o-y.
• The gross debt figure of US$11bn consists of
facilities from Standard Chartered bank which
make up about $7bn of the total sum with the
balance being owed to China Development
Bank, China Investment Bank and Industrial
and commercial bank of China. These loans
are secured against future oil revenues.
• We estimate annual capital and interest
repayments in the region of US$1.7bn, and net
gearing levels of 57% at the end of FY2010.
• Should oil prices remain above US$100/barrel
for the rest of 2011, we anticipate FY2011
turnover to grow by 36% to at least US$30bn.
Table 6: Sonangol Relative Valuation and Financials
Equivalent Market Cap.
using peer ave PER (US$m) 42,998
Equivalent Market Cap.
using peer ave PBV (US$m) 25,904
Sole shareholder
Website
www.sonangol.co.ao
FINANCIAL SUMMARY 2009 2010 2011F
Income Statement (US$m)
Government of Angola
Turnover 13,086.8 22,118.6 30,097.2
Gross Profit 4,067.9 5,356.8 7,289.2
EBITDA 2,514.4 3,305.7 6,019.4
Operating profits 2,121.8 2,846.6 5,514.4
Finacing costs 597.3 350.2 385.2
Profit before tax 3,721.4 3,621.4 6,270.2
Attributable earnings 3,249.6 3,000.0 4,355.9
Balance Sheet (US$m) 2009 2010 2011F
Cash 3,138.0 3,621.8 5,096.0
Investments in subsidiaries 5,507.2 4,796.8 4,796.8
Investments in Mining assets 2,569.5 2,675.1 2,942.6
Other non current investments 6,653.6 9,285.5 9,285.5
Fixed assets 1,416.3 1,189.9 1,308.9
Other assets 4,232.3 4,026.1 5,272.2
Total Assets 23,516.9 25,595.2 28,701.9
Short term debt 5,191.6 5,275.0 4,747.5
Long term debt 5,868.9 5,856.7 5,153.9
Other liabilities 952.6 1,350.3 1,921.2
Shareholders' equity 11,503.8 13,113.1 16,879.3
Total liabilities & Equity 23,516.9 25,595.2 28,701.9
RATIOS 2009 2010 2011F
Net debt/shareholders' equity 68.9% 57.3% 28.5%
Turnover growth -51.1% 69.0% 36.1%
Operating profit growth -69.2% 34.2% 93.7%
Interest costs/Op profits -28.1% -12.3% -7.0%
Effective tax rate 12.7% 30.5% 30.5%
RoAE 20.9% 20.9% 24.9%
19

Oil Majors in Angola´s Petroleum Sector – The scramble intensifies
The start of a new wave of oil driven prosperity
Figure 15: New Oil blocs licensed
In January 2011 Sonangol, Angola´s oil
concessionary, auctioned 11 new blocks in Angola´s
deep Atlantic waters. Crude production has
declined to about 1.65 mbpd in 2011 due primarily
to a drop in production in block 18, one of the most
prolific blocks, held by BP. Angola´s new oil blocs
are said to be geologically similar to the pre-salt
deposits that have been found off the cost of
Brazil, in the Santo, Campos and Espirito Santos
basins which have increased Brazil´s proven
reserves by in the region of 100bn barrels of oil and
gas reserves. It is widely anticipated that Angola´s
deep water blocks will prove to be as prolific and
medium term expectations are that Angola´s
production will increase to 2.5 - 3m bpd by about
2015.
Angola´s proven oil reserves increased from 4bn
barrels in 1998 to 13.5bn barrels in 2010. At
current prices these reserves would be valued in
the region of US$ 1.35tn, which translates to about
18 years of future production at 2m bpd. Due to
new fields coming on stream as well as ongoing
exploration activities, this remains a moving target.
Chevron Corporation
Bloomberg ticker: CVX:US
Market Cap:
US$ 210bn
PER: 7.9x
Figure 16: Chevron 1 yr price chart vs MXEF:IND
Chevron is ranked among Angola's top petroleum
producers. In 2010, Chevron's operations in Angola
had a total daily production of 580,000 barrels of
liquids (152,000 net barrels). Chevron has an
interest in four concessions: Block 0 (39.2%) off the
coast of Cabinda province. The block is divided into
Areas A and B. Together they contain 21 fields
whose total production in 2010 was 365,000 barrels
of liquids per day (116,000 net). Drilling within
Block 0 remains a priority. Major infrastructure
projects are expected to help eliminate routine
flaring of natural gas, handle increasing production
and renew older facilities. Block 14 farther west in
deep water, Block 2 offshore northwest Angola and
the onshore block Fina Sonangol Texaco. Some of
the most important investments include the
following:
• Benguela Belize–Lobito Tomboco project
• US$ 3.8bn Tombua-Landana project
• The first phase of the Mafumeira Norte project
completed development drilling and reached
maximum total daily production of 57k bpd in
the fourth quarter of 2010. First oil was
announced in 2009.
• 5.2 mmTPA LNG plant in Soyo (36% interest).
• Chevron has interests in four concessions in
Angola, two of which they operate employing
over 3,100 Angolans.
Source: Bloomberg
20

BP PLC
Bloomberg ticker: BP/:LN
Market Cap:
£87.4bn
PER: 6.0x
Figure 17: Chevron 1 yr price chart vs MXEF:IND
BP is present in four major deep-water licences offshore Angola
(Blocks 15, 17, 18 and 31) and is operator in Blocks 18 and 31. In
addition, BP holds a 13.6% equity stake in Angola´s first LNG
project. In August 2010, Total, as operator of Block 17 (BP
16.67%), announced the development of the Cravo Lirio Orquidea
Violeta (CLOV) project and the award of the principal contracts.
This project is the fourth development in Angola‟s deep-water offshore Block 17, after Girassol, Dalia and
Pazflor, and is located approximately 140 kilometres from Luanda and 40 kilometres north-west of Dalia in
water depths ranging from 1 100 to 1 400 metres. The CLOV development will lead to four fields coming on
stream.
Drilling is expected to start in 2012 and first oil is expected in 2014. A total of 34 subsea wells are planned to
be tied back to the CLOV FPSO unit, which will have a processing capacity of 160k bpd and a storage capacity
of approximately 1.8 million barrels. Sanctioned in 2008, PSVM comprises the development of the Plutão,
Saturno, Vênus and Marte fields, in a water depth of approximately 2 000 metres, some 400 kilometres northwest
of Luanda. In 2010, BP commenced the offshore stage of this major project with the arrival of several
vessels into Angola waters. Pile installation has been completed and installation of the production flow lines
started.
Figure 18: Total 1 yr price chart vs MXEF:IND
Total SA’s operations in Angola
Bloomberg ticker: FP:FP
Market Cap:
€89.4bn
PER: 7.1x
Total´s Production comes mainly from Blocks 17, 0 and 14.
Highlights of the period 2008 to 2010 included several discoveries
on Blocks 15/06 and 17/06, and progress on the major Pazflor and
CLOV projects. Deep-offshore Block 17 (40%, operator) is Total‟s
principal asset.
Source: Bloomberg
Source: Bloomberg
It is composed of four major zones: Girassol and Dalia producing, Pazflor (production is scheduled to begin in
late 2011) and CLOV (based on Cravo, Lirio, Orquidea and Violeta discoveries) which was launched in 2010
(start-up of production is expected in 2014). Total is also one of the partners in the Angola LNG project (13.6%
- see below). On Block 15/06 (15%), four major discoveries were announced in 2010. Studies are underway to
demonstrate the feasibility of a first development area that would include the discoveries located on the
northwest portion of the block.
ENI SpA’s operations in Angola
Bloomberg ticker: ENI:IM
Market Cap:
€64.0bn
PER: 9.2x
Figure 19: ENI SpA 1 yr price chart vs MXEF:IND
ENI´s exploration activities yielded positive results in:
• Block 0 (9.8% interest) with the liquids and gas discovery
located in the Vanza area;
• Development Areas in former Block 14 (20% interest) with the
Lucapa 6 appraisal oil well. Activities are underway for
assessing its possible development opportunities following the
Source: Bloomberg
area‟s mineral potential revaluation;
• Operated Block 15/06 (35% interest) with the appraisal wells of the Cinguvu (Cinguvu-1), Cabaca (Cabaca
South East-2) and Mpungi (Mpungi 1 e 2) oil discoveries.
The appraisal activities were completed ahead of schedule with commitments increasing the initial resource
estimate to develop the East Hub and West Hub projects. In February 2010, the West Hub concept definition
(FEED) was approved while the final investment decision was sanctioned at year end. Start-up is expected in
2013 with peaking production at 22k bpd.
21

In January 2011, Eni was awarded rights to explore
and the operatorship of deep offshore Block 35,
with a 30% interest. The agreement foresees the
drilling of 2 commitment wells to be carried out in
the first 5 years of exploration phase. This deal is
subject to the approval of the relevant authorities.
Within the activities for reducing gas flaring in
Block 0, activity progressed at the Nemba field in
Area B. Completion is expected in 2013 reducing
flared gas by approximately 85%.
Figure 20: Map showing underwater gas pipeline
Main projects underway in the Development Areas
of former Block 15 (20% interest) included:
• the satellites of Kizomba Phase 1, with start-up
expected before mid-2012 and peaking
production at 100k bpd (21k bpd net to Eni) in
2013;
• Drilling activity at the Mondo and Saxi/Batuque
fields to finalize their development plan.
• Eni holds a 13.6% interest in the Angola LNG
Limited (A-LNG) consortium responsible for the
construction of the LNG plant in Soyo.
Angola LNG; The next big money spinner
Angola has proven gas resources to supply a nominal 5.2m tonnes/year (6.8bn m 3 /y) Liquefied Natural Gas
(LNG) plant for over 20 years. According to the Angola LNG website (www.angolalng.com), it is estimated
that the country has natural gas reserves of 10.5 trillion cubic feet (297bn m 3 ). About 80% of all gas that is
pumped is flared due to the limited storage and processing capacity. The plant will be supplied by the gas
associated with production from Blocks 0, 14, 15, 17 and 18.
The LNG plant will have a processing capacity of approximately 1b cubic feet per day of natural gas and
produce 5.2 million tonnes per year of LNG, condensates and LPG. It is envisaged that the plant will yield
10.6 trillion cubic feet of gas over a period of 30 years. The project is currently on schedule to start
production in the first quarter of 2012. LNG is expected to be delivered to the United States market at the
re-gasification plant in Pascagoula, which currently under construction in Mississippi.
Sonangol Refinery - Still on the cards
In late 2008 the technical execution of the project was awarded to an American company Kellogg Brown &
Root (KBR) having the cost of the project increased to US$8bn with production (240k bpd) projected to start
in 2011. Investors for this project are still being finalised and this project remains of strategic significance for
the country.
22

Banking Sector – Mandatory domestic banking for Oil Majors on the cards
The shareholding structure of the Angolan banking sector is a complex web of interrelations with still a very
strong presence of Portuguese players in the fray. The diagram above is not a complete representation of the
banking structure and excludes most of the smaller banks which are less transparent, and some of the latest
developments in the banking sector. The chart does, however, amply demonstrate Sonangol‟s dominance in the
banking sector, having as it does, an interest in more or less all of the largest banks in the country, directly or
indirectly. The Portuguese, being the largest source of imports into Angola, still have an active presence, in
the banking sector, and from current indications, this is likely to grow further. Sonangol‟s banking interests
have also been reinvested into Europe to improve funding options for the country and deepen the existing lines
of credit available thereto. Interestingly there are no Brazilian Banks yet, however Russia and India are set to
open up banks in Angola. Significantly, South Africa‟s Standard Bank received a full retail banking license
towards the end of 2009, whilst ABSA pulled the plug on their representative branch in the same year.
In total there are 23 banks in the Angolan Banking sector including recently opened Banco Quantum, Fini Banco
and Caixa Geral de Depósitos Totta. The following are some of the aggregate banking statistics for the top 17
Banks as at the end of December 2008, the latest available date. We expect the current statistics to be higher,
however, primarily arising from the increase in M3 in 2009 of 28% and the multiplier effect on loans and
advances. It is also noteworthy that in aggregate, the profitability of the banking sector, especially for 2008,
would have been muted by the large number of start-ups; three of the banks covered were yet to break even.
Banking Sector Overview
Angolan banks have not been severely impaired by the financial instability of the past two years and the sector
maintains an adequate capital buffer. Non-performing loans (NPLs) increased during 2010 from 2.6% at end-
2009 to 7.1% by end-September 2010, in part reflecting the liquidity difficulties of companies affected by
government payment arrears. Settlement of these payments arrears should, indirectly, help improve the NPL
situation, but the evolution of NPLs will need to be kept under close review. New prudential measures to
contain risks to the banking system were prescribed by the IMF, which now plays an active role in monetary
policy implementation.
Table 7: Angolan Banks - Aggregate data
Total Assets Total
Advances
Total Deposits Total Equity Total PBT Total PAT Number of
employees
Number of
Branches
Number
of ATMs
AKZ Million
2009 AKZ 3,756,413 AKZ 363,577 AKZ 118,457 AKZ 353,711 AKZ 125,592 AKZ 118,457 10,041 699 526
2008 AKZ 2,605,691 AKZ 798,675 AKZ 1,355,216 AKZ 193,546 AKZ 73,271 AKZ 65,658 9,128 635 478
% ch 44% -54% -91% 83% 71% 80% 10% 10% 10%
US$ millions RoAE RoAA
2009 US$ 41,914 US$ 4,057 US$ 1,322 US$ 3,947 US$ 1,401 US$ 1,322 35.6% 3.2%
2008 US$ 39,684 US$ 14,946 US$ 25,846 US$ 3,483 US$ 1,268 US$ 1,163 33.4% 2.9%
% ch 6% -73% -95% 13% 11% 14%
Source: Imara Securities Angola SCVM
23

BAI
BFA
BESA
BPC
Banco BIC
BESA
Banco BIC
BESA
BPC
BPA
Banco BIC
BPA
BESA
BFA
BPA
Banco BIC
BFA
BPC
BPC
BAI
BPA
BAI
BAI
BFA
Ghana
Morocco
Ghana
South Africa
Kenya
South Africa
Kenya
Morocco
Nigeria
Kenya
Angola
Botswana
Cote d'Ivoire
Nigeria
Botswana
Mauritius
Angola
Ghana
Mauritius
Cote d'Ivoire
Botswana
Cote d'Ivoire
Nigeria
Angola
Mauritius
Botswana
Cote d'Ivoire
Kenya
Morocco
Mauritius
Morocco
Nigeria
South Africa
Angola
South Africa
Ghana
BPC
BESA
BPA
Kenya
BAI
BFA
BPC
BFA
BPA
BESA
Botswana
BPA
Banco BIC
Banco BIC
BESA
BPC
BFA
Nigeria
Banco BIC
BAI
BAI
Cote d'Ivoire
Cote d'Ivoire
Angola
Angola
Nigeria
Ghana
Ghana
South Africa
South Africa
Botswana
Morocco
Kenya
Kenya
Mauritius
Mauritius
Morocco
Mauritius
Botswana
Ghana
South Africa
South Africa
Mauritius
Morocco
Morocco
Nigeria
Botswana
Nigeria
Cote d'Ivoire
Angola
Angola
Cote d'Ivoire
Kenya
Banking Sector Charts (Including relative charts)
14%
Figure 21: Net Interest Margin (%)
80%
Figure 22: Cost to income ratio (%)
12%
70%
10%
8%
6%
4%
2%
0%
Weighted Avg ex SA
Weighted Avg inc SA
60%
50%
40%
30%
20%
10%
0%
Weighted Avg inc SA
Weighted Avg ex SA
Source: Imara Securities Angola SCVM
Source: Imara Securities Angola SVCM
40%
35%
Figure 23: Effective Tax Rate (%)
80%
70%
Figure 24: Return on Average Equity - RoAE (%)
30%
Weighted Avg inc SA
60%
25%
20%
Weighted Avg ex SA
50%
40%
15%
30%
Weighted Avg ex SA
10%
20%
Weighted Avg inc SA
5%
10%
0%
0%
Source: Imara Securities Angola SCVM
Source: Imara Securities Angola SCVM
6.0%
Figure 25: Return on Average Assets - RoAA (%)
7.0%
Figure 26: Dividend Yields (%)
5.0%
6.0%
4.0%
5.0%
3.0%
2.0%
1.0%
WeightedAvg
ex SA
Weighted Avg
inc SA
4.0%
3.0%
2.0%
1.0%
Weighted Avg inc SA
Weighted Avg ex SA
0.0%
0.0%
Source: Imara Securities Angola SCVM
Source: Imara Securities Angola SCVM
120%
Figure 28: Loan Growth y-o-y (%)
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
-
Figure 27: Loans/Equity (x)
Weighted Avg inc SA
Weighted Avg ex SA
100%
80%
60%
40%
20%
0%
Weighted Avg ex SA
Weighted Avg inc SA
-20%
Source: Imara Securities Angola SCVM
-40%
Source: Imara Securities Angola SCVM
24

Table 8: Regional Banking Comparatives
Year
Market Cap Weighting Weighting
Earnings Growth
Loan
Growth
Deposit
Growth PER (x) Dividend yield (%) PBV (x)
Bank end Price (US$m) inc SA ex SA T + 1 T + 2 T + 1 T + 1 T + 1 T + 2 T + 1 T + 2 T + 1
Angola 8,294 NB: Angola Market capitalisation assuming 9.5x earnings
Banco BAI Dec-10 n/a 2,158 2.0% 4.9% 32% 28% 20% 20% n/a n/a n/a n/a n/a
Banco BIC Dec-10 n/a 1,358 1.3% 3.1% 19% 20% 20% 20% n/a n/a n/a n/a n/a
Banco BPA Dec-10 n/a 351 0.3% 0.8% 7% 28% 20% 20% n/a n/a n/a n/a n/a
Banco BPC Dec-10 n/a 1,135 1.1% 2.6% 54% 44% 30% 30% n/a n/a n/a n/a n/a
Banco Millennium Dec-10 n/a 1,135 1.1% 2.6% 49% 41% 30% 30% n/a n/a n/a n/a n/a
BESA Dec-10 n/a 2,158 2.0% 4.9% 20% 20% 60% 20% n/a n/a n/a n/a n/a
Nigeria 9,224 48% 29% 14% 13% 9.2 7.0 5.2% 6.7% 1.1
Access Bank Nigeria Dec-10 ₦ 5.77 607 0.6% 1.4% -17% 42% 11% 15% 10.1 7.1 2.9% 4.1% 0.5
First Bank Dec-10 ₦ 10.01 1,858 1.7% 4.2% 18% 12% 10% 10% 7.4 6.6 6.8% 7.6% 0.7
First City Merchant Bank Dec-10 ₦ 4.00 416 0.4% 0.9% 52% 50% 20% 20% 5.4 3.6 13.3% 19.9% 0.4
Guaranty Trust Bank Dec-10 ₦ 14.57 2,174 2.0% 4.9% 1% 7% 15% 15% 8.6 8.0 7.1% 7.7% 1.5
Stanbic IBTC Dec-10 ₦ 8.77 1,052 1.0% 2.4% 106% 51% 20% 15% 8.5 5.6 9.2% 13.8% 1.9
UBA Dec-10 ₦ 3.18 523 0.5% 1.2% 420% 92% 10% 2% 23.6 12.3 2.7% 5.1% 0.5
Zenith Bank Dec-10 ₦ 12.91 2,594 2.4% 5.9% 25% 32% 15% 12% 8.7 6.6 0.7% 1.3% 1.0
Cote d'Ivoire 1,350 5% 1% 0% 0% 11.4 11.2 4.3% 4.4% 1.2
Ecobank Transnational Inc. Dec-10 ₦ 45.00 1,350 1.3% 3.1% 5% 1% 0% 0% 11.4 11.2 4.3% 4.4% 1.2
Ghana 573 30% 32% 16% 32% 8.8 6.7 3.8% 5.0% 4.1
Cal Bank Dec-10 GH¢ 0.26 39 0% 0% 10% 10% 40% 40% 6.0 5.4 4.3% 4.4% 0.7
Stanchart Ghana Jun-11 GH¢ 44.30 534 1% 1% 32% 33% 14% 31% 9.0 6.7 3.8% 5.0% 4.4
Botswana 2,436 6% 8% 7% 11% 10.5 9.7 6.7% 7.3% 4.5
BancABC Dec-10 BWP 5.24 118 0.1% 0.3% 21% 20% 30% 30% 9.2 7.7 2.3% 2.8% 1.7
Barclays Botswana Dec-10 BWP 6.91 903 0.8% 2.0% 5% 5% 5% 5% 9.8 9.3 5.1% 5.4% 3.8
First National Bank of Bots. Jun-11 BWP 2.53 995 0.9% 2.3% 7% 5% 10% 8% 10.6 10.1 8.4% 8.8% 5.7
Stanchart Botswana Dec-10 BWP 9.50 420 0.4% 0.9% 2% 18% 0% 27% 12.0 10.2 7.5% 8.8% 4.3
South Africa 62,385 4.8% 12.5% 6.4% 7.1% 10.8 9.6 4.0% 4.2% 2.2
ABSA Dec-10 ZAR 142.95 14,517 13.6% n/a 22% 1% 5% 8% 10.4 10.3 3.8% 3.8% 1.6
First Rand Jun-11 ZAR 19.80 15,785 14.8% n/a -30% 8% 8% 8% 7.8 7.2 5.4% 5.8% 1.6
Nedbank Dec-10 ZAR 142.20 10,009 9.4% n/a 11% 14% 0% 0% 13.3 11.7 3.8% 4.4% 1.6
Standard Bank Dec-10 ZAR 98.35 22,073 20.7% n/a 16% 22% 9% 9% 12.1 9.9 3.2% 3.1% 3.4
Zambia 307 28% 18% 20% 16% 8.4 7.3 8.1% 9.9% 3.8
Stanchart Zambia Dec-10 ZMK 80.10 68 0.1% 0.2% 28% 26% 20% 20% 3.3 2.6 24.2% 30.6% 1.4
ZANACO Dec-10 ZMK 1,000.00 239 0.2% 0.5% 28% 15% 20% 15% 9.9 8.6 3.5% 4.1% 4.4
Zimbabwe 283 -29% 102% 40% 38% 94.0 29.5 0.0% 0.0% 2.9
Barclays Bank Zimbabwe Dec-10 US$ 0.06 118 0.1% 0.3% -286% 178% 30% 30% 49.8 17.9 0.0% 0.0% 3.7
CBZ Holdings Dec-10 US$ 0.14 109 0.1% 0.2% 211% -8% 50% 50% 5.3 5.8 0.0% 0.0% 1.9
FBC Holdings Dec-10 US$ 0.07 24 0.0% 0.1% -188% 268% 20% 20% 821.2 223.0 0.0% 0.0% 1.0
NMBZ Dec-10 US$ 0.70 11 0.0% 0.0% 613% -1% 20% 20% 10.2 10.3 0.0% 0.0% 10.2
ZBFH Dec-10 US$ 12.00 19 0.0% 0.0% 0% 115% 87% 50% 6.9 3.2 0.0% 0.0% 1.3
Malawi 426 44% 32% 26% 25% 3.4 2.6 12.9% 17.0% 1.3
First Merchant Bank Dec-10 MWK 7.00 112 0.1% 0.3% 59% 16% 27% 25% 3.7 3.2 12.4% 14.3% 1.5
National Bank of Malawi Dec-10 MWK 50.00 160 0.2% 0.4% 36% 36% 25% 25% 2.9 2.1 17.1% 23.3% 1.0
Standard Bank Malawi Dec-10 MWK 105.00 154 0.1% 0.3% 41% 40% 25% 25% 3.5 2.5 8.8% 12.4% 1.4
Rwanda 68 27% 27% 25% 25% 23.1 18.2 1.3% 1.6% 5.7
Bank of Kigali Dec-10 MWK 134.00 68 0.1% 0.2% 27% 27% 25% 25% 23.1 18.2 1.3% 1.6% 5.7
Kenya 3,651 25% 34% 112% 93% 7.3 5.7 12.9% 16.4% 1.6
Barclays Bank Kenya Dec-10 KES 14.75 910 0.9% 2.1% -11% 21% 9% 277% 8.5 7.0 32.8% 39.7% 1.6
Co-operative Bank of Kenya Dec-10 KES 14.45 597 0.6% 1.3% 33% 18% 604% 35% 8.7 7.4 3.7% 4.3% 1.8
Equity Bank Dec-10 KES 19.75 830 0.8% 1.9% 74% 81% 24% 50% 5.9 3.3 5.9% 10.7% 2.0
Kenya Commercial Bank Dec-10 KES 18.05 605 0.6% 1.4% 20% 28% 21% 21% 6.2 4.8 8.3% 10.6% 1.2
National Bank of Kenya Dec-10 KES 24.50 56 0.1% 0.1% 3% 2% 30% 30% 3.6 3.6 0.0% 0.0% 0.7
National Industrial Credit Bank Dec-10 KES 30.00 101 0.1% 0.2% 17% 17% 15% 15% 6.0 5.1 2.3% 2.7% 1.1
Stanchart Kenya Dec-10 KES 179.00 553 0.5% 1.3% 15% 15% 9% 16% 7.9 6.8 8.7% 10.0% 1.4
Mauritius 2,387 10% 12% 13% 11% 9.5 9.0 3.9% 4.4% 1.6
Mauritius Commercial Bank Jun-11 MUR 165.00 1,486 1.4% 3.4% 11% 11% 11% 8% 8.3 7.5 3.9% 4.3% 1.7
State Bank of Mauritius Jun-11 MUR 82.50 901 0.8% 2.0% 9% 14% 15% 15% 11.4 11.4 4.0% 4.5% 1.3
Uganda 451 30% 29% 38% 24% 5.1 3.9 13.4% 17.2% 2.5
DFCU Bank Ltd Dec-10 UGX 1,000.00 56 0.1% 0.1% 42% 40% 23% 56% 6.3 4.5 6.4% 8.9% 2.7
Stanbic Uganda Dec-10 UGX 140.00 395 0.4% 0.9% 28% 27% 40% 20% 4.9 3.8 14.4% 18.4% 2.5
Egypt 5,088 41% 0% 16% 14% 7.8 9.7 4.4% 5.1% 1.3
CIB Dec-10 EGP 26.66 2,636 2.5% 6.0% 49% 12% 28% 16% 5.3 4.7 5.6% 6.3% 1.7
EFG Hermes Dec-10 EGP 12.80 821 0.8% 1.9% 210% 26% 0% 0% 2.3 1.8 8.5% 10.8% 0.4
National Société Génerale Banque Dec-10 EGP 26.57 1,632 1.5% 3.7% -55% -33% 5% 19% 14.8 21.9 0.5% 0.3% 1.2
Morocco 15,745 -7% 1% 32% 195% 26.7 23.7 1.8% 2.0% 1.6
Attijariwafa Bank Dec-10 MUR 365 8,311 7.8% 18.8% 11% 5% 29% 16% 17.9 17.2 1.9% 2.0% 1.1
Banque Comercial Populaire Dec-10 MUR 394 3,072 2.9% 6.9% -62% 67% 19% 903% 24.5 14.7 2.1% 2.2% 1.1
BMCE Dec-10 MUR 215 4,361 4.1% 9.9% -3% -54% 45% 38% 45.1 42.4 1.5% 1.8% 2.8
Tunisia 2,232 15% 14% 2% 0% 16.7 14.6 2.6% 3.0% 2.0
Attijari Bank Dec-10 TND 17.75 420 0.4% 0.9% 25% 14% 10% 0% 5.8 5.1 0.0% 0.0% 1.1
BIAT Dec-10 TND 61.80 956 0.9% 2.2% 15% 18% 0% 0% 19.2 16.3 3.7% 4.4% 2.1
Banque de Tunisie Dec-10 TND 10.95 856 0.8% 1.9% 10% 11% 0% 0% 19.3 17.4 2.5% 2.8% 2.3
Weighted Average inc SA 106,607 100% 10% 13% 15% 39% 13.0 11.4 4.2% 4.7% 2.0
Weighted Average ex SA 44,222 100% 17% 13% 28% 84% 16.1 14.0 4.5% 5.4% 1.7
25

Table 9: Regional Banking Comparatives (cont.)
Total
Assets
(US$m)
Gross
Income
(US$m)
Attr.
Income
(US$m)
Net
interest
margin
Cost/
income
ratio
Effective
tax rate
Loans/
Deposits
NPL/ Prov exp/
Advances Advances
Debt/
Equity
RoAE
RoAA
Loans/
Equity
Rough
CAR
Bank
29,010 2,857 975 7.4% 35.2% 4.3% 66.4% 0.0% 3.2% 10.2% 2103.8% 129.4% 4.5 12.8% Angola
8,341 741 227 9.0% 32.1% 0.8% 41.1% 6.1% 4.5% 30.9% 2.6% 3.2 13.6% Banco BAI
4,151 479 143 7.8% 20.7% 18.6% 54.4% 1.9% 54.5% 31.5% 3.7% 4.0 16.0% Banco BIC
1,472 135 37 6.3% 58.9% 0.0% 68.2% 2.9% 0.0% 102.6% 2.3% 5.8 16.0% Banco BPA
5,857 722 119 9.0% 44.5% 3.3% 67.6% 5.0% 0.0% 32.5% 2.7% 5.1 12.1% Banco BPC
1,329 86 119 4.4% 61.6% 2.7% 71.9% 2.2% 0.0% 17.1% 2.2% 3.9 18.7% Banco Millennium
7,862 694 329 6.4% 25.0% 0.7% 95.4% 0.7% 0.5% 7993.5% 489.4% 6.0 6.8% BESA
55,761 5,586 892 8.4% 61.1% 22.9% 71.7% 7.3% 1.2% 22.9% 17.3% 3.0% 2.0 18.8% Nigeria
5,150 491 72 6.0% 70.0% 31.2% 88.3% 8.8% 1.1% 14.3% 6.6% 1.5% 2.9 19.2% Access Bank Nigeria
14,751 1,485 214 7.1% 64.9% 23.7% 78.8% 8.2% 1.9% 36.0% 10.3% 1.5% 3.8 16.6% First Bank
3,446 401 51 5.9% 76.8% 12.1% 97.6% 5.5% -0.1% -17.2% 6.0% 1.6% 2.5 34.1% First City Merchant Bank
7,474 785 252 11.6% 51.5% 17.3% 80.2% 6.8% 1.8% 31.2% 19.3% 3.5% 0.5 20.6% Guaranty Trust Bank
2,461 363 61 12.5% 70.2% 30.1% 95.2% 8.7% 0.4% 28.9% 11.5% 2.6% 2.4 23.2% Stanbic IBTC
10,352 859 4 7.5% 75.3% 16.5% 49.6% 9.5% 2.9% 46.5% 0.4% 0.0% 3.8 12.8% UBA
12,126 1,202 239 6.1% 55.3% 25.2% 46.5% 5.9% 0.6% 7.7% 30.7% 5.1% 1.0 15.6% Zenith Bank
9,047 826 94 6.6% 65.9% 31.6% 64.7% 8.0% 3.0% 49.0% 9.9% 1.3% 4.4 16.0% Cote d'Ivoire
9,047 826 94 6.6% 65.9% 31.6% 64.7% 8.0% 3.0% 49.0% 9.9% 1.3% 4.4 16.0% Ecobank Transnational Inc.
1,365 230 51 7.8% 47.5% 28.6% 48.6% 5.4% 3.0% 26.7% 38.8% 4.5% 2.8 14.1% Ghana
320 55 6 7.8% 52.0% 24.9% 77.1% 5.2% 5.0% 123.6% 13.8% 2.0% 3.5 19.1% Cal Bank
1,045 175 45 7.8% 47.2% 28.9% 46.5% 5.4% 2.9% 19.6% 40.6% 4.7% 2.7 13.7% Stanchart Ghana
5,881 756 225 6.8% 43.3% 18.0% 60.5% 4.4% 1.7% 46.3% 53.0% 3.8% 6.2 15.4% Botswana
922 137 11 14.7% 80.3% 27.6% 62.7% 5.5% 0.5% 150.6% 16.7% 1.3% 7.3 7.0% BancABC
1,790 275 88 8.7% 39.0% 24.0% 62.3% 1.5% 2.8% 47.9% 45.3% 4.9% 4.6 20.4% Barclays Botswana
2,018 245 88 4.9% 40.3% 10.0% 67.7% 2.5% 0.8% 21.3% 49.8% 3.3% 6.2 15.1% First National Bank of Bots.
1,151 98 39 5.0% 49.2% 21.1% 39.1% 14.8% 1.5% 72.7% 87.2% 3.2% 9.3 7.8% Stanchart Botswana
465,598 38,057 6,472 2.9% 58.6% 28.8% 101.3% 5.3% 1.0% 95.1% 15.6% 1.0% 8.6 8.8% South Africa
101,310 10,714 1,148 4.0% 58.3% 27.5% 124.4% 7.7% 1.2% 316.6% 15.2% 1.1% 8.9 11.0% ABSA
98,688 10,031 2,880 2.8% 53.7% 26.7% 83.9% 4.3% 0.8% 10.9% 19.3% 1.2% 7.6 9.3% First Rand
76,643 3,759 866 2.9% 55.8% 24.2% 95.5% 3.9% 1.1% 61.3% 17.4% 1.1% 11.8 8.6% Nedbank
188,956 13,554 1,578 2.1% 63.7% 33.2% 101.3% 5.1% 1.1% 25.0% 12.3% 0.8% 7.7 7.1% Standard Bank
943 164 25 15.1% 60.0% 42.6% 56.3% 6.9% 3.5% 55.0% 23.5% 2.2% 4.7 12.5% Zambia
507 81 14 11.3% 62.5% 53.3% 43.7% 5.3% 3.8% 11.8% 14.4% 1.3% 4.2 10.9% Stanchart Zambia
436 83 11 16.2% 59.3% 39.6% 59.9% 7.4% 3.4% 67.2% 26.1% 2.5% 4.8 13.0% ZANACO
414 30 (14) 2.2% 64.9% 29.1% 19.9% 0.0% 0.0% 0.0% 21.3% 0.6% 0.2 109.6% Zimbabwe
166 6 3 1.4% 73.1% 35.0% 2.4% 0.0% 0.0% 0.0% 14.6% 1.2% 0.1 123.4% Barclays Bank Zimbabwe
146 17 2 2.6% 57.5% 28.5% 26.5% 0.0% 0.0% 0.0% 39.1% 3.7% 0.2 91.2% CBZ Holdings
15 1 1 1.2% 46.4% 16.8% 76.2% 0.0% 0.0% 0.0% 0.0% 0.0% 0.3 112.8% FBC Holdings
12 0 (0) 11.1% 73.8% 16.4% 4.3% 0.0% 0.0% 0.0% 14.6% 1.2% 0.0 167.8% NMBZ
75 7 (19) 1.2% 75.2% 19.5% 28.5% 0.0% 0.0% 0.0% -7.9% -21.0% 0.1 89.8% ZBFH
1,019 137 46 11.1% 43.2% 30.3% 69.2% 3.1% 0.7% 0.0% 39.5% 7.2% 3.1 18.7% Malawi
199 27 9 13.3% 43.0% 26.6% 61.5% 7.0% 0.5% 0.0% 36.0% 8.2% 2.2 23.4% First Merchant Bank
496 65 22 11.1% 43.1% 31.0% 65.8% 0.0% 0.9% 0.0% 37.6% 6.3% 3.1 17.4% National Bank of Malawi
323 46 14 9.3% 43.4% 32.4% 78.4% 3.6% 0.5% 0.0% 43.9% 7.4% 3.6 16.6% Standard Bank Malawi
332 42 10 8.3% 66.0% 28.8% 74.7% 8.4% 2.4% 0.0% 24.5% 3.5% 3.2 24.6% Rwanda
332 42 10 8.3% 66.0% 28.8% 74.7% 8.4% 2.4% 0.0% 24.5% 3.5% 3.2 24.6% Bank of Kigali
9,622 1,331 133 11.0% 57.3% 32.4% 80.1% 8.3% 2.8% 10.2% 24.7% 3.9% 4.0 18.8% Kenya
1,875 334 (33) 10.8% 68.2% 46.2% 99.7% 5.9% 1.2% 8.8% 16.5% 1.8% 6.2 11.9% Barclays Bank Kenya
1,257 159 (9) 8.9% 58.9% 29.3% 78.9% 12.4% 1.0% 1.3% 25.0% 3.5% 3.9 17.4% Co-operative Bank of Kenya
1,145 197 48 17.8% 52.2% 22.1% 88.6% 5.3% 4.7% 33.2% 26.2% 7.4% 1.5 36.3% Equity Bank
2,212 300 46 9.7% 55.7% 30.3% 68.1% 16.5% 5.8% 0.0% 31.7% 3.5% 4.9 12.5% Kenya Commercial Bank
1,186 111 14 7.9% 52.9% 30.5% 29.0% 10.0% 7.6% 0.0% 22.5% 2.7% 1.6 13.2% National Bank of Kenya
540 67 12 5.6% 47.4% 30.1% 78.3% 3.7% 0.9% 8.9% 21.9% 3.3% 4.7 18.5% National Industrial Credit Bank
1,407 162 54 6.2% 49.4% 31.1% 54.9% 4.0% 1.0% 0.0% 28.3% 3.3% 3.8 12.5% Stanchart Kenya
9,655 736 234 4.9% 38.9% 16.9% 85.7% 2.6% 0.4% 33.7% 19.3% 2.5% 5.0 16.3% Mauritius
6,212 497 162 4.7% 41.1% 15.9% 89.1% 3.4% 0.3% 27.1% 23.1% 2.7% 5.9 14.7% Mauritius Commercial Bank
3,443 239 72 5.2% 35.3% 18.6% 80.0% 1.4% 0.6% 44.6% 13.2% 2.3% 3.6 18.8% State Bank of Mauritius
903 58 11 11.6% 53.0% 27.9% 68.8% 2.6% -1.3% 30.5% 46.5% 5.3% 7.1 14.4% Uganda
199 23 4 8.6% 74.7% 31.6% 107.8% 8.0% -0.7% 244.5% 16.0% 2.2% 3.8 19.8% DFCU Bank Ltd
703 35 7 12.0% 49.9% 27.3% 63.2% 1.8% -1.4% 0.0% 50.8% 5.8% 7.5 13.6% Stanbic Uganda
19,740 2,081 1,740 5.5% 42.1% 8.8% 50.1% 3.5% 1.6% 2.5% 21.2% 2.7% 4.1 26.3% Egypt
8,695 546 250 5.4% 40.2% 15.5% 55.4% 2.7% 2.0% 4.0% 25.7% 2.9% 4.5 13.2% CIB
2,397 414 181 8.7% 52.0% 9.3% 0.0% 0.0% 1.6% 0.0% 9.3% 2.8% 1.1 93.7% EFG Hermes
8,648 1,120 1,309 3.9% 40.1% -2.3% 66.8% 6.5% 1.1% 1.3% 19.8% 2.4% 5.0 13.4% National Société Génerale Banque
56,964 2,471 756 3.5% 43.8% 31.0% 83.8% 3.7% 0.4% 22.9% 16.9% 1.2% 8.3 8.2% Morocco
26,915 1,416 417 3.4% 43.5% 32.9% 78.5% 5.4% 0.5% 43.5% 19.4% 1.6% 9.1 8.9% Attijariwafa
10,938 281 156 3.8% 22.1% 24.8% 105.4% 0.0% 0.4% 0.0% 22.5% 1.4% 2.4 8.8% BCP
19,110 775 183 3.7% 59.6% 31.9% 78.6% 3.1% 0.1% 0.0% 8.4% 0.5% 11.0 6.5% BMCE
10,254 345 93 3.2% 44.6% 23.0% 94.4% 5.7% 0.7% 51.1% 13.2% 1.6% 8.5 11.8% Tunisia
2,909 120 23 2.6% 47.9% 22.4% 80.1% 7.4% 1.0% 113.8% 16.6% 1.2% 13.8 9.8% Attijari Bank
4,703 134 24 2.8% 56.3% 29.7% 80.7% 10.2% 0.5% 35.1% 9.5% 0.7% 8.9 9.1% BIAT
2,643 91 45 3.9% 29.9% 15.7% 116.7% 0.0% 0.8% 38.4% 15.6% 2.6% 5.6 15.8% Banque de Tunisie
4.2% 4.7% 203% 4.2% 54.7% 27.2% 90.2% 5.2% 1.1% 65.4% 17.7% 1.6% 7.3 11.6% Weighted Average inc SA
4.5% 5.4% 172% 6.0% 49.2% 25.0% 74.5% 5.0% 1.1% 23.6% 20.7% 2.4% 5.5 15.6% Weighted Average ex SA
26

The Stock and Derivatives Exchange of Angola
Back on the drawing board post the financial market crash
Undoubtedly one of the most exciting developments in Angola is the intended launch of the new Stock
Exchange. This has been on the cards for several years now, and the authorities have long invested into
creating a strong foundation upon which the country‟s capital markets will be built. Although plans to launch
a stock market date back to 2005, preparations were negatively affected by the financial crisis, which had a
significant negative effect on the macroeconomic stability. Post the 25% devaluation in 2010 and the recovery
of oil prices, the budget deficit has been plugged, arrears to the private sector have been cleared and the
accumulation of foreign currency reserves has recommenced.
Importantly, the financial crisis exposed severe weaknesses in the financial sector, exposing multi-million
dollar cases of fraud perpetrated by officials at the central bank in collusion with Ministry of Finance officials.
Consequently, high level changes were effected at the Finance ministry and central bank. In January 2011, a
presidential decree was published, ruling out the opening of the securities exchange in 2011 and instigating a
restructuring of the Capital Markets Commission, which is now complete. While still in a state of flux, the dust
is beginning to settle.
In June 2011, the CMC sponsored a seminar in conjunction with Sérvulo & Associates, a Portuguese law firm
that specializes in legislation relating to financial markets. The main topics of discussion included:
• Mergers and acquisitions
• Guarantees in the acquisition process
• Corporate governance and state owned enterprises
• Public offerings
While it still seems some way off, the debate regarding the creation of a domestic capital market is back on
the table. The state remains the predominant investor and the powers that be are cognisant that a capital
market needs to be introduced so that new international capital flows can be increased, leading to greater
economic stability, enhanced diversification and ability to withstand exogenous shocks.
In their 2009 annual report, the CMC published a list of license applications as follows:
Table 10: CMC License applications at Dec 2009
Date Company Type Licensing stage
2008 Novação SCVM Stock Broker Licensed
2008 Old Mutual Angola Stock Broker Being Processed
11/02/09 Growth SCVM Stock Broker Licensed
25/11/09 RS Capital Real Estate Asset manager Special registration
25/02/09 Imara SCVM Stock Broker Being processed
18/05/09 BPAGest SGFI Real Estate Asset manager Being processed
29/06/09 BESA Valorização Closed end Real Estate Investment Being processed
Fund
08/07/09 Saving SCVM Stock Broker Being processed
08/07/09 Saving SDVM Transfer Secretary Being processed
08/07/09 Saving SI Investment company Being processed
17/07/09 Angola Capital Partners Private Equity Fund Licensed
21/07/09 Fin Personalité FII Real Estate Investment Fund Being processed
03/09/09 BESA SCVM Stock Broker Being Processed
17/11/09 Golden Broker SCVM Stock Broker Being Processed
30/10/09 BAI-Private Placement Placement Being Processed
The above list is clearly outdated, and despite the hangover effect that resulted from the commodities price
crash in 2008, we expect there to have been other applications which will be highlighted in the 2010 CMC
annual report when it is published.
27

Arguments for and against the development of a domestic capital market
Arguments in favour of domestic capital markets
• A stock market will pave the way for the Central Bank (BNA) to float money market instruments, tradable
in international financial circles. This will create an alternative source of financing for the many long term
infrastructural projects creating a yield curve for the country and enhancing the sovereign risk profile.
• Stimulation of local savings with listed equities being an alternative investment for the pension and
insurance industries. Currently players in the short term insurance industry maintain significant cash
balances and are not able to diversify their risk.
• The provision of an alternative financing source for Angolan companies looking for growth capital. The
implications for job creation and poverty reduction are significant. Currently private companies only
recourse is to expensive bank lending which is difficult to access.
• Improved corporate governance and reporting structures, two areas that are particularly weak.
• Increased transparency and corporate governance will reduce tax evasion which is wide spread.
• Creation of an avenue for privatisation of state owned entities that would be better managed as private
entities. Not only would this lessen the strain on the fiscus, and in fact provide additional funding for
other public investments, but this will also facilitate training, skills and technological transfers into the
country. Zambia has been particularly successful in this regard.
• Liberalizing capital markets will attract foreign capital, which is relatively cheaper and longer term in
nature.
• Capital inflows will buttress foreign exchange reserves and facilitate the „Kwanzarisation’ of the economy
which remains highly dollarized, which dilutes the impact of monetary policy.
• Apart from creating employment in the main services/tertiary industry, the downstream or ripple effect in
the financial sector is significant. This creates employment opportunities for not only resident citizens,
but will act as a magnet to attract Angolans from the diaspora.
• The added benefit for the government is the concomitant increase in income tax revenues.
Cons: Arguments against the opening of a stock exchange
• In times of extreme financial duress, and the recent global credit crunch is a case in point, capital outflows
are exacerbated by weak export revenue flows and a flight to „safer‟ currencies.
• Open financial markets reduce control over the exchange rate, making the country more vulnerable to
commodity price shocks and the exportation of foreign exchange. Nigeria‟s banking nightmare is a case in
point where an inadequate regulatory framework has prolonged the effects of the banking crisis.
Investigating the potential valuation of a stock market in Angola
As the launch of the stock market in Angola is certain to make a profound impact, adding potentially
significantly to the liquidity in Africa, it is a natural consequence for us to beg the question regarding the
potential for the market. Our analysis looks at the market from both a top down and bottom up approach,
using GDP as a guideline in the first instance and some of the larger companies in the second. Our findings are
outlined below:
BVDA potential – Top down approach
Based on the country‟s GDP, we estimate that Angola has the potential to support a stock market, ranking at
least third in sub-Saharan Africa after South Africa and Nigeria, by way of market capitalisation. The size of
the market will ultimately be a function of the number and size of the floated companies, however this proxy
gives us a good feeling for the country‟s medium term potential.
Like most African stock markets we expect that the banking sector would dominate the market. Based on our
company visits and discussions, we believe that the large majority of the banks have the corporate governance
and reporting frameworks that would qualify them for listing - bear in mind that a large portion of them are
already affiliated to Euronext listed Portuguese banks. Apart from banking, there is a handful or more of
companies in Telecoms, Beer brewing, cement, food and retail that are of listable quality. Our calculations
supporting the top down approach are shown in Table 6 below.
Bottom up Approach
Our bottom up analysis (Table 7) provides an introduction to some of the largest corporate entities in the
Angolan economy, which, in terms of sophistication, reporting and corporate governance, compare easily with
any of their pan-African peers. We believe this to be the tip of the ice berg and we understand that up to 50
companies have been identified as IPO candidates. This will give local Angolan companies an alternative for
their expansion capital needs, but will also have a domino effect in deepening the country‟s financial sector.
28

Table 11: Top Down analysis of Bolsa de Valores e Derivativos de Angola (BVDA)
Country
Stock
Exchange
Number of
companies
listed
Population
(m)
GDP
(US$m)
Market
Capitalisation
(US$m)
Market
Cap
Weighting
Market
Cap/GDP
Weighted
PER
2011F
Weighted
Div Yield
2011F
South Africa JSE 331 49.1 287,200 847,304 n/a* 295.0% 16.0 4.0%
Egypt CASE 211 83.1 188,000 69,542 26.3% 37.0% 9.1 4.2%
Morocco CSE 74 31.9 91,700 70,555 26.7% 76.9% 16.2 3.7%
Nigeria NSE 195 156.0 173,400 53,770 20.3% 31.0% 12.5 5.3%
Kenya NSE 57 40.0 32,720 13,123 5.0% 40.1% 10.3 4.3%
Ghana GSE 34 23.8 15,510 11,639 4.4% 75.0% 33.9 6.5%
Tunisia BDT 38 10.5 43,520 7,208 2.7% 16.6% 12.6 6.7%
Zambia LuSE 21 12.9 15,230 7,167 2.7% 47.1% 21.9 1.9%
Cote d'Ivoire BRVM 38 20.6 23,780 7,596 2.9% 31.9% 9.8 7.3%
Mauritius MSE 41 1.3 8,128 4,699 1.8% 57.8% 11.0 3.6%
Zimbabwe ZSE 97 12.5 8,000 4,571 1.7% 57.1% 11.9 1.5%
Botswana BSE 21 2.0 13,810 4,334 1.6% 31.4% 16.0 2.0%
Uganda USE 10 32.4 15,740 5,030 1.9% 32.0% 11.9 0.8%
Tanzania TSE 10 41.0 20,630 3,860 1.5% 18.7% 10.2 5.2%
Malawi MSE 14 14.3 4,082 1,390 0.5% 34.1% 8.9 4.2%
Weighted Average 264,485 48.1% 7.2 2.0%
Angola BVDA 18.3 84,179 40,473.4 48.1%
* South Africa excluded from weighted average Source: Imara Securities Angola
Table 12: Bottom up analysis of the BVDA
Sector Company
2010 Total
Assets (US$m)
2010 Profit
(US$m)
Equivalent
Market
Cap. at 9.5x
(US$m)
Banking BAI 8,341 227.1 2,158
Banking BPA 7,947 222.1 2,110
Banking BFA 6,426 213.8 2,031
Banking BESA 4,951 152.0 1,444
Banking Banco BIC 4,151 142.9 1,358
Banking BPC 4,986 119.5 1,135
Banking Millennium 1,329 119.5 1,135
Banking BNI 1,148 32.4 308
Banking Banco Sol 1,115 31.6 301
40,392 1,261 11,979
Equivalent
Market
Capacity (HL)
Valuation per
HL
Capitalisation
(US$m)
Breweries Cuca 6,000,000 US$ 395 2,370
Breweries Cerveja N'gola (SABMiller) 1,420,000 US$ 395 561
2,931
# of
subscribers
Average value
per subscriber
Equivalent
Market
Capitalisation
Telecoms Unitel 6,000,000 US$ 228 1,367
Telecoms Movicel 3,000,000 US$ 228 683
(US$m)
Minimum Market Capitalisation (US$m) 16,960
Source: Imara Securities Angola
2,050
SCVM
29

Orascom
Mobinil
TNM
Safaricom
Econet
Sonatel
MTN
Telecom
Egypt
Unitel
Telecommunications Sector: Lucrative and still rapidly expanding
Overview of the Telecoms sector
Like many other sectors of Angola‟s economy, Angola‟s telecoms
industry has more than a few tales to tell. The destruction that
resulted from three decades of war severely damaged the country‟s
fixed line network, which is still far from its potential. The breakneck
pace of technological advancement in mobile telephony however has
had a more definitive impact on the local market, and leads the fixed
line network by a significant margin, in volumes as well as revenues.
The importation of technology and skills transfer can also be
attributed to Unitel‟s partnership with Portugal Telecom (PTC:PL), an
international mobile telecoms operator, capitalized at € 5,1bn that
has operations in Brazil, Africa and Asia.
Figure 29: Angola International traffic by Service
provider 2009
Mundo Startel
Infrasat
Nexus
MSTelecom
Movicel
Angola Telecom
Unitel
The four other Telecoms operators are hardly off
the mark still and not likely to change the
hierarchy any time soon with a combined 0.4% of
international traffic
14%
25%
- 20,000,000 40,000,000
Traffic in minutes
60%
Source: Angola Telecom
Annual Report 2009
The numbers are not small, and with over 9.8m mobile phone subscribers in total, Angola has one of the larger
mobile telecoms markets in Sub Saharan Africa. Penetration levels, at about 70% of the addressable population,
point to further upside, and the duopoly comprised of Unitel and Movicel have embarked on multi-million dollar
expansion projects over the next five years to satisfy demand and expand coverage to areas that are still
lacking. Similarly, there is significant scope in the growth of data services, and following the very recent
launch of 3G services and video conferencing, data services are rapidly growing.
Telecommunications Operators
Unitel
Unitel is the leader in the Angolan mobile telecoms market by a wide margin. With over 6.5m subscribers now,
Unitel is roughly twice the size of Movicel and offers the full spectrum of mobile telephony products, including
GPRS, EDGE, UMTS, international roaming. 3G services, launched in 2009 have grown rapidly, and although
small, data revenues are on an ascending trajectory. This is particularly impressive considering that Unitel
started operations in March 2001. The mobile group is owned by Mercury (a subsidiary of Sonangol), Group
GENI, Vidatel and Portugal Telecom, each with a 25% shareholding.
2009 First half results overview
Turnover and EBITDA for Unitel increased by 38.1% and 50.2% in the first half of 2009, reaching US$ 362m and
US$ 236m respectively sustained by strong subscriber base growth in Luanda and in the country‟s other main
cities. Net additions of 383 000 were recorded in H109, increasing the number of clients to 4 955 000,
representing an increase in the subscriber base of 37% y-o-y. During the first half of 2009, the average number
of minutes of use (MOU) increased marginally from 104 minutes per subscriber at an average ARPU of US$24,50,
which is the highest in Africa and more than twice the regional weighted average of US$11.84. The nearest
peer is Maroc Telecom, but Unitel‟s ARPU is still about US$10 higher!
Planned infrastructure Capex
Unitel has recently announced a massive US$ 1.7bn network expansion and upgrade programme over the next
four years. This will see it extending its reach to areas not yet covered, as well as the laying of a fibre optic
network across the country to improve bandwidth. Currently Unitel‟s network covers 138 of the country‟s 168
municipalities and it expects to reach all of them by 2012. Unitel will also be involved in a project to build the
country‟s first satellite by 2011 having recently signed an agreement with Russia to borrow as much as US$
300m from Vnesheconombank, VTB Group and Roseximbank for its satellite program.
Relative Valuation of Unitel
Extrapolating the dividend received by PT, Unitel paid out €244m for
FY2008 (≈US$360m). We have valued Unitel using two relative valuation
metrics: EV/EBITDA and the dividend yield basis and derived the following
approximate valuations:
UNITEL EBITDA
2010
Weighted
Average
EV/EBITDA
Equivalent
valuation
Figure 30: ARPU vs GDP per capita
7,000
6,000
5,000
4,000
3,000
2,000
1,000
-
25
20
15
10
5
-
EV/EBITDA
Basis
US$865m 4.0x US$3.4bn
GDP per capita (US$) LHS
ARPU (US$) RHS
Source: ISA
30

UNITEL EBITDA
2010
Portugal Telecom
EV/EBITDA
Equivalent
valuation
TV Cabo (50%)
EV/EBITDA
Basis
US$865m 10.6x US$9.2bn
Angola Telecom
Angola Telecom is a Public Company which resulted from the merger of two former
parastatals, ENATEL and EPTEL. EPTEL (Public Telecommunications Company) was
established by Decree no 95/76, dated 23 December 1976, as result of the
acquisition by the State of the Portuguese company Rádio Marconi, which operated
the international traffic to and from Angola. ENATEL (National Telecommunications
Company), was established by Decree no 17/80 on 13 February 1980, by separation
from the previously mentioned Directorate of Post and Telecommunications, which
also led to the establishment of the Angola Post Office.
Angola Telecom has one subsidiary, TV Cabo, three associate companies and several
minor shareholdings in related companies.
Angola Telecom
Multitel (30%)
Elta (20%)
Movicel (18%)
Sat 3 Submarine
Cable (3.76%)
Rascom (1.14%)
BCI (1%)
Columbus III
(0.27%)
TV Cabo
TVCABO is one of the pioneers in the distribution of cable
television and internet services on the African continent and is a
joint venture between Angola Telecom and Visabeira Group of
Portugal, recognized experts in the field of
telecommunications.
TVCABO started laying its fibre optic network in Angola
in 2002 and marketing services in 2005, and currently
has a modern infrastructure network and a rapidly expanding
cable television and internet user base, which competes directly
with DSTV and other internet providers. Apart from an
extensive presence in Luanda and Talatona, TVCabo services
have now expanded to Benguela and Lobito.
Revenues for 2010 increased by 32% to €22.6m, on EBITDA
margins of 27%. Operating cash flows increased by 77% to
€5.3m, and the customer base increased to 13,200.
Movicel
In 2003 Movicel was created as the mobile telephony arm of the
national telecoms company, Angola Telecom. The company
currently has a subscriber base of 3.3m, and in most respects
seems to be lagging its larger rival, Unitel. The absence of an
experienced technical partner is probably partly to blame.
Nonetheless, Movicel is not resting on its laurels and the recent
restructuring of the group may see them win back some market
share. Movicel has targeted the lower end of the market,
offering entry level mobile handsets retailing at about US$30. In
a country with ARPU‟s of over US$20, this is an attractive
proposal. We estimate penetration levels to be around the 63%
mark and whilst we don‟t expect Movicel to take pole position
from Unitel, we envisage a more equitable sharing of the mobile
market in the future.
Recent privatisation of Movicel
On the 30 of July 2009 The Council of Ministers approved the
partial privatisation of Movicel whereby 80% of the company was
sold for a price of US$200m to a consortium of Angolan
businesses. Post the transaction the shareholding in the group
was as per figure 34.
Table 13: Angola Telecom Relative Valuation and Financials
Equivalent Market Cap.
using peer ave EV/EBITDA (US$m) 173
Equivalent Market Cap.
using peer ave PBV (US$m) 956
Sole shareholder
Website
Government of Angola
www.angolatelecom.co.ao
FINANCIAL SUMMARY 2008 2009 2010F
Income Statement (US$m)
Turnover 115.1 128.1 134.5
Gross Profit 113.6 126.6 133.0
EBITDA 15.3 41.4 43.4
Operating profits 0.0 25.0 26.3
Finacing income/(costs) 1.2 (2.8) (2.7)
Extraordinary items 1.0 (18.6) #REF!
Profit before tax 6.3 7.2 23.8
Attributable earnings 4.1 4.7 15.5
Balance Sheet (US$m) 2008 2009 2010F
Fixed assets 288.9 407.4 407.4
Other assets 26.2 31.7 31.7
Debtors 308.9 347.7 365.1
Other assets 1.3 2.5 2.7
Cash 22.9 20.9 58.1
Total Assets 648.2 810.2 864.9
Shareholders' equity 355.7 355.9 371.3
Long and short term debt 194.1 284.7 298.0
Creditors 91.5 142.8 149.9
Other creditors 6.9 26.8 45.6
Total liabilities & Equity 648.2 810.2 864.9
RATIOS
Net debt/shareholders' equity 48.1% 74.1% 64.6%
Turnover growth 11.3% 5.0%
Operating profit growth 52304.2% 5.0%
Interest costs/Op profits 11.3% 10.3%
Effective tax rate 35.0% 35.0%
RoAE 1.3% 4.3%
Figure 31: Movicel Shareholdings Structure
Modus Comunicare
19%
Portmil
Investments
40%
Angola Telecom
18%
ENCTA
2%
IPANG
10%
LAMBDA
Investments
6%
Novatel
5%
Source: Movicel
31

Telephonic listings of Angola (ELTA Angola)
ELTA was founded in 1998 and publishes the ELTA Phonebook, as Golden Pages, fax and e-mail listings and the
official tourism guide for Angola. The National Phone Book - Yellow pages and a larger business directory listing
is also available. ELTA‟s mandate is to promote business by increasing transparency and facilitating
communications in the business sector. Angola Telecom owns 18% of ELTA.
Multitel
Multitel has been present in the Angolan market since 1999. Its main activity involves the exploitation and
provision of national and international telecommunication and data services. It is licensed through a concession
contract awarded by Inacom to provide data communication services for public use.
Multitel is a private limited company under Angolan law with capital stock of US$ 500,000. Its main partners
are PT Ventures SGPS (40%), Angola Telecom (30%) and BCI – Banco de Comércio e Indústria (20%).
Multitel's activity is focused on the corporate market, a sector in which it has in-depth knowledge and
experience. Aware of the challenges to which companies and organizations are always subjected, and in order
to respond to their increasingly more demanding requirements, Multitel positions itself as an “Operator and
Integrator”, in a model that is based on the convergence of telecommunications and information technologies
founded on the constant search for innovative and personalised solutions for its Clients.
Table 14: Regional Comparatives for African Mobile Phone Operators
Unitel Orascom Mobinil
Telecom
Egypt Safaricom
TNM
Maroc
Telecom Sonatel Starcomms MTN Econet Ave
Country Angola Egypt Egypt Egypt Kenya Malawi Morocco Senegal Nigeria SA Zimbabwe
Addressable Population 18.3 517.0 a 83.1 83.1 40.0 14.3 65.0 b 39.0 c 156.0 552.0 d 12.5
Penetration (%) 70.3 92.0 92.0 92.0 60.0 23.0 94.8 70.0 50.0 86.0 68.0 72.8
Market Cap (US$) 1,367 3,734.3 2,377.1 4,478.8 1,794.2 93.7 16,863.0 2,896.8 24.6 38,706.8 835.4
Active Subscribers (m) 6.0 101.0 29.7 9.3 17.2 1.1 23.7 11.3 2.6 141.6 5.5
Enterprise Value/Subscriber (US$) n/a 76.7 116.5 407.7 118.4 95.3 651.9 249.2 100.3 272.4 189.4 227.8
GDP per capita (US$) 4,549.2 2,262.8 2,262.8 2,262.8 818.0 4,150.2 2,874.6 929.1 1,111.5 5,855.0 640.0 2,316.7
ARPU (US$) 20.9 3.2 5.0 15.6 5.2 5.0 12.8 9.4 7.2 10.0 7.5 8.1
Revenues (US$) 1,502 3,826 1,780 1,736 1,077 66 3,635 1,281 226 16,990 494
EBITDA (US$m) 865.0 1,584.1 1,022.7 753.3 405.7 42.4 2,137.5 668.3 48.3 7,037.8 242.7
EBITDA margin (%) 57.6 41.4 57.5 43.4 37.7 64.1 58.8 52.2 21.4 41.4 49.2 46.7
Net Income (US$m) n/a 718.6 229.7 342.7 149.3 7.1 1,095.2 329.8 (50.8) 2,118.5 140.5
PER (X)
Hist n/a 5.2 10.3 13.1 12.0 13.3 13.6 8.4 (0.5) 18.3 5.9 10.0
T + 1 n/a 14.8 10.3 11.3 10.7 9.9 13.0 7.0 (1.4) 17.1 4.1 9.7
T + 2 n/a 8.9 10.2 9.9 9.3 7.5 12.4 5.6 (1.0) 16.2 3.4 8.3
PBV (X)
Hist n/a 1.4 3.4 1.0 2.3 1.9 6.8 2.3 0.1 3.6 2.9 2.6
T + 1 n/a 1.3 2.1 0.9 2.0 1.6 6.7 2.1 0.1 3.0 3.4 2.3
T + 2 n/a 1.1 10.2 0.8 1.8 1.3 6.6 2.0 0.1 2.5 2.7 2.9
EV/EBITDA (x) n/a 2.4 2.3 5.9 4.4 2.2 7.9 4.3 0.5 5.5 4.3 4.0
DIV YIELD (x)
Hist n/a 9.0% 8.7% 5.5% 3.2% 4.3% 7.1% 9.4% - 2.5% 2.6% 5.2%
T + 1 n/a 3.2% 8.8% 6.4% 3.5% 5.8% 7.5% 11.3% - 2.7% 3.7% 5.3%
T + 2 n/a 5.3% 8.9% 7.2% 4.1% 7.5% 7.9% 14.0% - 2.8% 4.5% 6.2%
a Includes Egypt (80.5m), Algeria (35m), Bangladesh (156m), Namibia (2.1m), Central African Republic (4.8m), Burundi (9.9m) North Korea (22.8m) and Zimbabwe (11.7m);
Excludes Canada and Lebanon.
b Includes: Morocco (31.9m), Mauritania (3.2m), Burkina Faso (14.7m), Gabon (1.5m) and Mali (14m).
c Includes: Senegal (13.7), Mali (13.4m), Guinea (10.1m), Guinea Bissau (1.53m).
d Includes: SEA (111.1m), WECA (248.8m), MENA (192.4m), Nigeria (153.5m), RSA, 50.3m), Ghana (24.5m), Syria (21.8m) and Iran (73.2m)
Source: Annual reports, Imara Securities Angola SCVM
32

Breweries and Beverages Sector – A thirsty lot
The booming beverages sector opens up to new players
Angola has the third largest domestic market for alcoholic beverages in sub-Saharan Africa after South Africa and
Nigeria, yet despite this it still has significant growth potential. Nigeria, which is second only to South Africa, has
immense potential, however, installed capacity is currently meeting demand. Angola‟s market is undersupplied, and
the dominant duopoly brewer, Cuca, has grown exponentially in the six years since privatisation. With stabilization
and growing domestic demand, the beverages sector is opening up. In 2010 SABMiller opened a new US$135m
brewery and soft drinks plant in Luanda and their Castle and N’gola brands are gaining traction. Portugal‟s Unicer is
still being held at bay, however, through imports they supply the bulk of the country‟s production deficit. Angola‟s
higher than average per capita consumption, at over 59 litres per capita per annum Angola has one of the highest per
capita consumption levels in Africa, only surpassed by Botswana, Namibia and South Africa. Bear in mind that Angola
is virtually a cash economy with a still underdeveloped consumer credit industry. Consequently, domestic
consumption is funded by disposable cash flows, which indicates a large and growing middle class. The strong beer
consumption statistics are also indicative of the long established Lusophone cultural influence.
A bullish outlook for consumer industries is supported by a bottom heavy population distribution where an estimated
43% of the population is under 14 years of age, with over 60% of Angolans living in urban areas. The re-emergence of
the agricultural sector, together with rising employment and continued expansion of the non-oil economy buttresses a
strong case for Angola‟s beverage sector.
In 2010 SABMiller and Unicer entered the fray, and the breweries they are building will boost installed lager capacity
to somewhere in the region of 7.5 m HL, however, compared to current demand of 8.9m hl. We use regional proxies
as an approximation of size, and would approximate a minimum value for Cuca in the region of US$ 2.4bn (EV/hl of
US$395). Having higher growth potential than most other SSA countries, we would not be against using Nigerian
Breweries as a specific peer, in which case a ball park valuation, factoring in strong growth characteristics, would be
in the region of US$2.6bn (EV/hl of US$432). The details are provided per table 11.
Companhia União de Cervejas de Angola (CUCA): Living up to the nickname ‘Ferrari’
Cuca is Angola‟s largest beer and beverages manufacturer, boasting a 68% share of the local beer market, distributed
country wide under the brands Cuca, Nokal and Eka. The company is owned by the French beverages giant Group BGI
(Castel), who have a partnership with the MPLA‟s financial investment company, GEFI.
The group consists of 7 factories and 4 000 employees; in 2002 the Cuca factory in Luanda was privatized, then in
2003 the Nokal (Luanda) brewery was acquired, quickly followed by the acquisition of Eka (in Dondo – Cuanza Norte)
in the same year. In 2004 the Soba brewery in Catumbela was opened in the Benguela province that started
production with an installed capacity of 600 000 HL per year. In 2005, yet another brewery was opened in the
Cabinda province, and the latest development was the construction of a new plant called Cobeje (Bom Jesus in
Bengo), which started production in under five months. In less than a year, the brewery‟s production reached 1,3m
HL per year, taking the total group capacity to 6m HL.
The biggest constraint for the brewery sector is the sourcing of raw materials which are mostly imported. The
resuscitation of the agricultural sector will, with time, improve local availability of raw materials.
SABMiller: Enter the big guns
SABMiller, the world‟s second largest brewer, is growing their presence in Angola from scratch and their operational
presence and activities have been stepped up considerably. SABMiller invested in a new brewery increasing capacity
to 1m HL and in their 2011 annual report they reported that lager volumes had increased by 26% following the
successful commissioning of the new Luanda plant. The group is currently operating in both the CSD bottling and
beer brewing markets, with an installed capacity of 2,5m HL for soft drinks and 0,82m HL for lager. The group
operates through the following companies and has the following shareholdings, with the remainder being owned by
local Angolan shareholders:
Company Name
Effective
interest
Coca Cola Bottling Luanda SARL 28%
Coca Cola Bottling Sul de Angola SARL 37%
Empresa de Cervejas N‟Gola SARL 28%
The brands marketed in Angola include Castle, Carling Black Label, and Redd‟s. The group also has a partnership
agreement with the BGI group to distribute Cuca products in the Malanje region.
SABMiller has commenced the construction of a brewery in North Luanda which will allow them to compete in the fast
growing beer market in that part of the country. The group has announced plans to invest US$125m to set up a
33

Millions of Hectolitres
NB
Delta
Cuca
EABL
Guinness NG
Nambrew
Sechaba
Solibra
Natbrew
Zambrew
SBM
Guinness GN
Bralirwa
Per capita income US$
Sechaba
SABMiller
Cuca
Nambrew
SBM
Natbrew
Zambrew
Solibra
NB
Guinness NG
EABL
Guiness GH
Delta
Bralirwa
Consumption in litres
brewery employing 500 people and with a capacity to produce 600k HL per year. The commissioning of this brewery
commenced in late 2009.
Unicer: Import substitution to improve group margins
Unicer is the market leader in Portugal with a market share of over half of the Portuguese market. In Africa, Unicer‟s
strategy is to consolidate its position in Lusophone countries (Angola, Cape Verde, Mozambique, and Guinea Bissau),
where it has a marked legacy/language advantage.
On the 29th of January 2009 Unicer announced plans that it would commence the construction of a 1m HL brewery in
Angola with an initial €120m investment. The group‟s application to open up a factory was initially presented in
2005, however, the pre-requisite of a local partner had not been met. Three Angolan partners have since been
shortlisted for this project and the brewery is expected to commence production in 2011 and is expected to reach
full production by 2013/14.
Table 15: Comparison of Cuca with African Peers
Unicer is the largest Portuguese beverages exporter to Angola, representing 70% of the total beer imports into
Weighted
Angola. In 2009, Unicer imports into Guinness Angola Guinness reached a figure of 1.33m HL, (≈1 500 containers/month), Average of which
Bralirwa Cuca Delta EABL GH NG Nambrew NB Natbrew SABMiller Sechaba SBM Solibra Zambrew (Excl. SA)
1.25m HL was beer in the guise of Super Bock, Cristal and Carlsberg and the balance, was fizzy and still water under
the Country„Caramulo’ Rwanda brand. Angola Zimbabwe Kenya Ghana Nigeria Namibia Nigeria Zambia South Africa Botswana Morocco Cote d'Ivoire Zambia
Parent Heineken Castel SABMiller Diageo Diageo Diageo Heineken Heineken SABMiller SABMiller SABMiller Castel SABMiller
Population (m) 10.1 18.3 12.5 40.0 23.8 78.0 b 2.1 78.0 b 12.9 49.1 2.0 31.9 20.6 12.9
Capacity (mhl) 0.9 6.0 8.5 a 5.8 1.1 4.5 3.0 10.0 1.5 50.0
c
2.5 1.1 2.0 1.3
Production (mhl) 0.9 8.9 5.8 a 4.7 0.9 4.2 2.0 5.0 1.5 45.3
c
2.4 1.1 1.8 1.0
Per capita capacity (litres) 8.9 32.8 68.0 14.5 4.6 5.8 142.3 12.8 11.6 101.9 125.6 3.4 9.7 9.7 21.1
Per capita cons. (litres) 8.9 59.4 46.2 11.8 3.8 5.4 94.8 6.4 11.2 92.4 119.2 3.4 8.9 7.8 14.8
Per capita GDP (US$) 519.3 4,549 640.0 818 651 1,112 3,690 1,112 1,181 5,855 6,937 2,875 1,153 1,181 1,258.0
Capacity Utilisation 100% 148% 68% 81% 83% 93% 67% 50% 97% 91% 95% 100% 92% 80% 71%
Market Cap (LCUm) 69,942.8 n/a 944 164,481 214 360,619 1,687 698,403 437,976 57,084
d
1,533 3,076 127,272 964,964
Market Cap (US$m) 117.4 n/a 944 1,868 134 2,308 250 4,469 91 57,084
d
235 363 275 200
Enterprise Value/hl ($) 124 n/a 114 358 131 547 90 432 92 239
d
88 316 146 266 381.2
Enterprise Value/EBITDA
Hist 3.9 n/a 11.8 12.4 5.9 14.1 4.7 13.3 7.9 14.4 5.3 11.3 4.1 10.7 12.3
T + 1 3.3 n/a 10.0 9.9 6.4 13.3 4.7 13.4 6.6 13.9 4.8 6.8 4.4 8.9 11.5
T + 2 2.6 n/a 8.5 9.4 6.0 10.6 4.2 14.4 5.6 13.1 4.1 6.8 4.4 7.5 11.0
Sales Growth (%)
Hist 16.1 35.0 25.7 10.3 2.8 22.7 10.4 13.2 21.2 7.7 7.6 0.9 12.7 24.4 15.3
T + 1 21.0 30.0 20.0 10.0 5.0 15.0 10.4 23.8 20.0 5.0 5.0 0.9 12.7 20.0 17.3
T + 2 21.0 30.0 20.0 8.0 8.0 15.0 10.4 10.0 20.0 5.0 5.0 0.9 1.1 20.0 11.2
PBV
Hist 5.7 n/a 4.4 7.9 3.6 10.6 2.4 15.0 16.3 2.6 8.0 - 2.1 4.6 10.4
T + 1 3.4 n/a 3.4 7.7 4.5 10.1 2.1 15.0 13.6 2.8 5.4 - 1.9 5.0 10.1
T + 2 2.7 n/a 2.7 7.4 6.1 9.6 1.9 15.0 11.3 2.5 4.1 - 1.7 4.7 9.9
Dividend Yield
Hist 0.0% n/a 1.9% 3.9% 0.0% 3.1% 4.8% 4.3% 7.1% 2.3% 7.7% 0.0% 6.5% 1.9% 3.7%
T + 1 1.3% n/a 1.9% 4.9% 4.5% 4.3% 5.5% 5.6% 8.5% 2.3% 8.1% 0.0% 6.6% -0.1% 4.7%
T + 2 1.6% n/a 2.3% 5.1% 4.9% 5.0% 6.0% 6.1% 10.2% 2.4% 8.5% 0.0% 6.7% 1.6% 5.2%
EBITDA margin (%)
Hist 32.6% n/a 20.0% 34.8% 18.7% 22.7% 20.5% 29.2% 24.7% 23.0% 23.1% 27.3% 29.8% 14.8% 27.2%
T + 1 33.9% n/a 19.7% 39.7% 17.9% 21.0% 20.5% 28.7% 24.5% 23.7% 23.0% 44.8% 29.6% 14.8% 28.0%
T + 2 35.2% n/a 19.4% 38.7% 18.0% 22.6% 20.5% 28.6% 24.3% 24.4% 22.8% 44.8% 29.4% 14.8% 28.1%
a Capacity: Lager beer: 2m HL; Sorghum/Opaque beer: 5.1m HL. Production: Beer 1.6m HL; Sorghum/Opaque 3.0m HL
b Addressable population halved to reflect strong Muslim influence that has a negative effect on alcohol consumption levels
c Capacity and Production figures for SA only give a feel for the potential consumption stats for the rest of Africa
d Based on total total SABMiller Group. Production of 270.1m HL for FY 2011; Capacity figure not available
12.00
10.00
8.00
6.00
4.00
2.00
-
Figure 32: African Breweries Capacity/Production
Angola's monopoly brewer Cuca (CGI/Castel sub) is
operating at full capacity. SABMiller is expanding
and Unicer is due to build a brewery 4m HL to the
sector's capacity, currently being met by imports.
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
-
Figure 33: Per capita income vs consumption
As a cash economy per capita incomes in
Angola have significnat upside.
Zimbabwean GDP seems understated due
to a large informal market and diaspora
inflows.
140
120
100
80
60
40
20
0
Capacity (mhl) Production (mhl)
Source: ISA
Per capita GDP (US$)
Per capita consumption (litres)
Source: ISA
34

Refriango: Leaving the competition Blue with envy
Refriango is one of the most successful and fastest growing Angolan entrepreneurial companies, which has a
commanding presence in the local non beer beverages sector. The company commenced operations in 1992,
a decade before the war ended, as an importer of wines, beers and water into Angola from Portugal as local
production growth was disrupted during the war years. On cessation of the war in 2002 a new production
subsidiary was created to substitute imports and take advantage of low domestic production capacity. Their
first mover advantage has significantly paid off and today Refriango is one of the largest beverage
companies, with 17 well established brands and over 80 individual products that cover the full range of cold
beverages. The group continues to expand their product offering of fruit juices, wines, carbonated soft
drinks, energy drinks and water that compete directly against Coca-cola, their single largest domestic
competitor and international imports. Having conquered the local market, Refriango has started reversing
the flow, and now exports to Portugal, which is a testimony of their products international quality standards.
In anticipation of further growth domestically and with regional ambitions, Refriango continues to add to
capacity and currently has between 6-7m HL liters of production capacity per year, through 19 production
lines employing over 1,600 workers. Ongoing plans are to expand capacity to 9m HL to meet constantly
growing demand.
In 2009 the group produced 3m HL of which 1.5m HL comprised of carbonated soft drinks in the „Blue‟ range,
0.6m HL to bottled still water (Pura) and the balance was accounted for by fruit juices, other CSD products,
Energy drinks, table wines and sangrias. 75% of the group‟s sales are through informal market channels,
however the group has noted that the distribution channels are changing with the formalisation of retail
markets, with the expansion of Shoprite and other bulk suppliers.
35

Hotels, Tourism and Construction
Overview of the hotels sector in Luanda
The hotels sector is one of the fast growing sectors in the economy with no less than 1 500 new hotel rooms to
be added to the current supply, at the top end (4 and 5 star hotels). Currently, Texeira Duarte is one of the
largest investors/players in the hotel sector, while the rest of the sector is rather fragmented. Angola room
rates are some of the highest in Africa, (as are occupancies) with room rates averaging US$ 400 for a 4 star
offering, a result of inadequate local capacity coupled with a large and growing expatriate business community.
Competition in the sector is heating up, however, with at least 1 500 rooms to be added to the high-end of the
market by the end of 2012. The pipeline for new hotels on which work has yet to start is extensive, and we are
aware of at least 15 new hotel projects in Luanda alone. International branding will become more important as
competition heats up. The Intercontinental will be the first truly international brand to make a mark in Luanda
with their 389 room 5-star casino hotel, however we are aware that Rezidor (Radisson Blue and Park Inn) are in
negotiations to expand their franchise to Angola.
Out of Luanda, the story is much the same with Cabinda, Soyo, Viana, Caxito Huambo, Lobito, Benguela and
Ondjiva all having full order books. The predominant focus is on developing hotels catering to the business
community and most of the growth is targeting the growing demand from the business community with the
focus on the following sectors: Agriculture, mining, oil and gas and industrial.
International Tourism sector still a way off
Angola has one of the longest and most beautiful stretches of white sand beaches in Africa (1,600km), and the
country´s potential as a major tourist destination remains untapped and constrained by the many, mostly
logistical shortcomings. Currently, Mussulo, an island off the coast of Luanda, serves as a popular leisure
destination for Luandan's looking for a quick break from the city and with improvements in the road
infrastructure and out of town hotels sprouting up, long weekends away are gaining popularity.
Much of the country‟s middle classes still prefer to holiday in Europe, America, Brazil, Namibia and South
Africa, which offer a more exciting and cheaper holiday alternatives. Pure international non-business visitors
(e.g. „fly and flop‟ tourists) remain few and far between and it will take some time to develop Angola as a
competitive tourism destination. As infrastructural constraints are addressed, the country will continue to
develop its tourism offering to compete more aggressively for the regional and international tourism market.
Apart from beaches, the country has significant potential for safari tourism and several other places of interest,
including the Calandula Falls, Pedras Negras and game reserves that are home to the beautiful, albeit
endangered, Palanca Negra, which serves as the country symbolic animal.
Table 16: Luanda's Hotels Statistics
Hotel Rating Number of
rooms
Room rate
US$
Average
Occupancy
Conference
Capacity
Restaurants Bars Fitness
Centre
Spa and
Health
Club
Swimming
Pool
Garage
Talatona Convention Hotel 5 Stars 201 575 90% 300 2 3 a a a a
Tropico Hotel 4 Stars 280 391 90% 300 2 2 a a a a
Presidente Hotel 4 Stars 197 344 100% 30 1 1 r r r r
Skyna Hotel 4 Stars 237 390 100% 160 1 3 a a r a
Alvalade Hotel 4 Stars 202 382 100% 180 1 2 a a a r
Bahia Hotel 4 Stars 138 400 n/a 100 1 1 a a a a
Continental Hotel 3 Stars 83 285 100% 35 2 2 a r r r
Tivoli Hotel 3 Stars 54 280 90% 20 1 1 r r r r
Praiamar Hotel 3 Stars 57 380 100% 30 1 1 r r r r
Hotel Vila Alice 3 Stars 126 300 n/a 15 1 1 a r r r
Costa Hotel 3 Stars 32 300 n/a n/a 1 1 a r r r
Grand Hotel Universo 3 Stars 74 300 n/a n/a 1 1 a a r r
Kudissanga Hotel 3 Stars 40 200 n/a n/a 1 1 r r r r
Relaxe Hotel 3 Stars 40 280 n/a a 1 1 a r r a
Hotels under construction Rating Number of
rooms
Room rate Opening date Conference
US$
Capacity
Restaurants Bars Fitness
Centre
Spa and
Health
Club
Swimming
Pool
Garage
Epic Sana Hotel 5 Stars 238 +/-500 Sep-11 300 4 4 a a a a
Intercontinental Hotel 5 Stars 389 +/-500 Dec-14 300+ 4 4 a a a a
36

Construction Sector Overview
Post the 2008 oil price crash the slump in revenues negatively affected the construction sector as the
government was unable to service their repayment commitments. At their peak in 2010, arrears, mainly to
the construction sector amounted to US$6.8bn. This prompted a rapid shrinkage in construction activity,
with several of the main contractors laying off expatriate staff en masse. The Portuguese president, Cavaco
Silva, visited Luanda in 2010 to engage with the Angolan authorities, and expedite disbursement. Since
then, the arrears have largely been cleared or rescheduled and a new wave of construction has
recommenced.
Overview of the largest construction companies in Angola
Sigma Group
Sigma Group is an Angolan company based in Luanda, providing a wide range of consultancy and other
management services, which integrates and supports various individual specialist partners from around the
world. Members of the group have been providing architectural and engineering solutions for over 50 years
and it is from this uniquely balanced group of experts that Sigma group draws its strength.
One of Sigma‟s strategic partnerships is with Namkwang of South Korea who have participated in the projects
below:
• Angola Convention Centre and 20 Villas
• Three Towers project (3 x 16 storey towers in Miramar, 79 311m 2 , Work in progress)
• Sonangol Research and Production Building (10 stories, 16 448m 2 )
• Sonangol Headquarters (20 storeys, inaugurated in June 2008)
• Intercontinental Hotel and Casino (20 storeys + 4 underground, 389 rooms, 55 658m 2 , Work in progress)
• 5 star Talatona Convention Hotel (6 storeys, 202 rooms, 28 486m 2 )
Other projects that Sigma Group is working on include:
• Hotel Turismo
• Viana Township Shopping Centre
• Barra do Kwanza Resort Village
• Sonangol Cabinda Office Building
• AAA main Office
• Kinaxixi Complex (Shopping Mall (38%), Residential (12%), Office, 11% and Parking (37%) complex, gross
floor area 132 984m 2 , WIP)
Portuguese Construction Companies in Angola
Mota Engil SGPS SA
Bloomberg ticker: EGL:PL
Market Cap: €220m
PER: 6.1x
Mota-Engil‟s presence in Angola dates back over 64 years and
continues to be one of their growth markets. The Angolan
entity is a partnership between the Portuguese company that
owns 51% of the capital, and an Angolan trust led by
Sonangol, with 49% of the capital. The group‟s engineering
and construction activities in Angola contributed €452m to
group revenues, growth of 12% over 2009 (€403m). Angola
represents 23% of group revenues (2009: 20%) and enjoys
EBITDA margins of 16.1% (2009: 14.6%). As at the end of 2010,
the order book for Angola amounted to €443m.
Figure 34: Mota Engil SGPS SA Share price
Source: Bloomberg
Soares da Costa SGPS SA
Bloomberg ticker: SCOAE:PL
Market Cap: €58m
PER: 3.9x
Soares da Costa is one of the longest established and most active building contractors active in Angola with
that market contributing 39% to turnover in FY2010 (€166m). Currently, the company is engaged in some of
the largest and most ambitious projects in the country including:
37

• Kinaxixi Shopping Center and Office/Residence Block
• LNG Project in Soyo in conjunction with Bechtel
• Largo do Ambiente Office/Residential Tower (23 floors)
• Construção do Edifício Torres Dipanda
• Bayview – TTA – Office building
• Baía de Luanda – Rehabilitation of the Bay of Luanda
• Sana Luanda Royal Hotel;
• UNITEL – Technical building at FILDA
• GOE – Science and Technology Museum.
Portugal, € 190,
45%
Figure 35: Soares da Costa Turnover breakdown 2010
Other, € 21, 5%
Romania, € 14, 3%
USA, € 35, 8%
Projects on the order book for 2011 and beyond amounted to €515m which includes the following projects:
• Angolan National statistics institute
• Towers Dipanda building – Phase II
• Island Hotel – addendum 1 finishing and specific works;
• SONILS – maintenance area of the base;
• SONILS – Franks facilities.
Angola, € 166, 39%
Country, Turnover (€m's), % Source: Soares Costa 2010
Annual Report
Teixeira Duarte SA
Bloomberg ticker: TDSA:PL
Market Cap: €84m
PER: 1.4x
Texeira Duarte (TD) is one of the largest Portuguese companies
operating in Angola with the four main segments of the group
being concentrated in Construction, Hotels, Motor vehicle
retail and Food retail. Some of the most recently completed
construction projects include the 310m Kwanza River Bridge
which was destroyed during the war. In the hotels space TD
own Tropico and Alvalade hotels, and has recently opened its
third 4-star hotel, Hotel Bahia, in Luanda‟s Nova marginal
district, which is emerging as a new business hub.
Portugal, € 593,
43%
Figure 36: Texeira Duarte Turnover breakdown 2010
Other, € 92, 7%
Algeria, € 73, 5%
Angola, € 449, 33%
Brazil, € 173, 12%
Country, Turnover (€m's), % Source: Texeira Duarte 2010
Annual Report
The motor retail arm owns the franchises for the distribution of Chevrolet, Honda, Nissan, Mahindra, Renault
and Peugeot light and heavy vehicles. Maxi is the name of the wholesale food retail operations, under which
the group has recently introduced a white goods retail arm.
The group is listed on Euronext and apart from Portugal, Angola is the most important international market
for the group, contributing one third of Group Revenues in 2010. Some of the more significant projects that
the group is working on include the following:
• Cabinda Gulf Oil Company (CABGOC) Headquarters
• Saint Francis of Assisi College in Talatona
• Completion of the National Directorate of Roads and Traffic in Luanda
• Head office for EMIS (Interbank Company Services).
• Construction of the new National Assembly buildings
Edifer
Edifer is one of Portugal‟s privately owned construction conglomerates that has partnered with one of
Angola‟s pre-eminent conglomerates, Grupo GEMA. The Angolan entity operates through Edifer Angola (main
construction business), Construções Fortaleza (Concrete structures), Edigema, Edimetal Angola
(metalworking) and Tecnasol Angola (Geotechnical and foundations). Two of the more prominent high rise
projects that the group is working on are the Luanda Towers (25 floors) and Kianda Towers (27 floors) which
are two multi-use buildings that are under construction in downtown Luanda. At the end of 2010 the order
book for Edifer group amounted to €1,128m, of which 31% (€350m) relates to contracts in Angola.
38

Somague
Somague is an international company specializing in construction,
road concessions, property management, real estate and services
in primarily in Lusophone markets.
Figure 37: Somague Revenue by country 2010
Angola, € 183 , 23%
Some of the projects the group worked on in 2010 included the
following:
• International Airport of Luanda – Phase 2
• Rehabilitation and expansion of the Sonangol building
• Construction of the 19 storey Fénix residential/office tower
in Mutamba, Luanda
• Construction of the Marina Baía building
• Construction of the Luanda Medical Centre
• Construction of the BPA Head office
• Construction of Teatro Avenida building
• Construction of a maternity clinic in Huambo
• Construction of municipal hospitals in Cazenga and
Sambizanga
• Construction of the Futungo Municipal Hospital.
For 2011 the group has projected revenue amounting to €330m.
Brazilian Companies in Angola
Portugal , € 477 ,
60%
Ireland, € 66 , 8%
Others, € 74 , 9%
Odebrecht
Odebrecht is one of the longest established and largest companies in Angola, with over 25 years of experience
in the market and employing over 17 000 Angolans in 2010. As well as being a provider of construction and
engineering services the company acts as an investor in infrastructure projects, the diamonds sector, biofuels
and real estate, in partnership with Angolan companies. Some of the projects that the company has
successfully worked on include the following:
• Renovation and expansion of 4 de Fevereiro International airport
• Renovation and expansion of Catumbela airport
• Expansion of Damer Gráfica, the national printing press
• Construction of Cinfotec – IT training college
• Construction of the Arte Yetu Condominium project in Talatona
• Construction of the Cajueiro Condominium project in Malange
• Construction of the Mansões do Vale Condominium project
• Construction of the Morada dos Reis Condominium project
• Construction of the Noblesse Residence Condominium project
• Construction of the Terraços Condominium project in Lobito
• Construction of the Belas Garden Villas project
• CSRT – Otimização de Transmissão de Energia Elétrica
• Construction of Hotel Royal Century
• Benguela II Water Project
• Capanda-Dondo Highway
• Ekunha – Cusse Highway
• Biocom Ethanol project in Malange (30m litres of Ethanol and 260 000 tonnes of sugar)
• South west Marginal road rehabilitation
This is not an exhaustive list of projects that Odebrecht has been involved with, however, this amply
demonstrates the depth of the Brazilian-Angolan alliance.
Portugal
63%
Country, Turnover (€m's), %
Source: Somague Annual
Report 2010
Figure 38: Somague workforce by country 2010
Other
1%
Angola
28%
Spain
2%
Cape Verde
6%
Source: Somague Annual
Report 2010
39

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of companies referred to in this report (or in related investments); (ii)have a consulting, investment banking or broking relationship with a company referred
to in this report; and (iii)to the extent permitted under applicable law, have acted upon or used the information contained or referred to in this report
including effecting transactions for their own account in an investment (or related investment) in respect of any company referred to in this report, prior to or
immediately following its publication. This report may not have been distributed to all recipients at the same time. This report is issued only for the
information of and may only be distributed to professional investors (or, in the case of the United States, major US institutional investors as defined in Rule
15a-6 of the US Securities Exchange Act of 1934) and dealers in securities and must not be copied, published or reproduced or redistributed (in whole or in
part) by any recipient for any purpose.
© Imara Capital 2011
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