Special Focus: Lusophone Africa
Angola´s currency on firmer footing
Alterations to Angola´s foreign exchange regulations has strengthened the local currency
and helped to improve the country´s economy
Angola is known for its natural
resources, especially petroleum. The
abundance of oil has prompted a wave
of international inward investment into
the country. The Angolan government
has made a concerted effort to reform
regulations so investment may
continue while also helping to bolster
the local economy.
António Vicente Marques, the
Luanda-based Managing Partner
of AVM Advogados, highlights the
alterations to the foreign exchange
rules – which came into force on July
1st, 2013 – as a prime example. “The
effect of the Foreign Exchange Law on
the Petroleum Sector was that it made
it compulsory for companies to pay
staff into Angolan bank accounts,” he
says. “In addition, payments for goods
and services provided by resident
contractors and service providers has to
be made in Kwanzas, the local currency,
rather than US dollars.”
US dollars, the currency in which oil
is priced and purchased, had created a
dual-currency scenario in Angola because
US dollars were also the currency of
choice to pay suppliers. From last July,
companies received US dollars when
selling oil but had to convert them into
Kwanzas to pay local providers.
Fellow AVM Advogados Partner
Claudia Santos Cruz says the policy has
gone some way to improving not only
the local currency but the local economy.
“If we go back 18 months, almost all
activity was priced in US dollars but
the currency shift has pushed people
and businesses towards Kwanzas,”
she explains. “We are now drafting
contracts and commercial agreements
in Kwanzas or at least with currency
conversion terms to Kwanzas. Indeed,
the currency’s exchange rate is also no
longer static, effectively pegged to the
US dollar; it can fluctuate, which is a
positive sign.”
There are signs the currency shift,
as part of wider reforms, is helping
to stabilise the economy – there are
reports that the Kwanza is in informal
use in other countries, including
the Democratic Republic of Congo
and Zambia. The oil-rich influx into
Angola has made Luanda one of the
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most expensive cities in the world,
yet inflation was 7.69 percent in 2013,
according to the National Bank of
Angola, which was the lowest figure on
record.
The much-heralded Angola Stock
Exchange is also back on the agenda,
which would represent another major
step for the economy.
Slow progress
“An Angolan Stock Exchange has been
on the cards for quite a few years
but a growing economy and a robust
currency all help build confidence,”
Marques says. “This year has seen
the government attempt to pass
the secondary legislation needed to
establish a bourse, so we are slowly
moving forward.”
Not all of the reforms in Angola have
been overwhelmingly well-received,
however. There was the proposal to
levy a 0.1 percent charge on the value
of goods imported for oil and gas
exploration and production, while there
has also been an increase in the amount
of red tape for companies in order to
meet regulatory obligations.
Companies now have to make
quarterly submissions to the Angola
National Bank about the various
agreements with FX non-residents and
FX residents, and also face additional
paperwork after the threshold to
export any dividends by a company
was increased to $1 million (up from
$300,000) or $3 million for oil and gas
producers.
Santos Cruz says that the challenge
has been the introduction of additional
contract approval procedures. This has
resulted in another layer of bureaucracy
as companies are subject to new tests
and scrutiny from the authorities,
covering, for example, whether the
goods and services can be obtained
locally before approving a contract and
making payments abroad.
“There have been some delays and
it has taken quite a long time for some
companies to get import or export
licences,” Santos Cruz says. “A company
sometimes has to get a licence for each
individual transaction too, so it can
become a difficult process.”
António Vicente Marques
Claudia Santos Cruz
March / April 2014 • IBERIAN LAWYER • 55