Angola continues to offer companies a cornucopia of opportunities for investment, despite its current crisis due to record-low oil prices and China’s economic downturn.

In recent years, Chinese firms have held a competitive position in Angola. Many are involved in construction and businesses surrounding that nation’s natural raw materials. Angola is Africa’s second-largest oil producer behind Nigeria.

Since the end of Angola’s brutal 27-year civil war in 2002, billions of dollars in oil revenues and associated Chinese loans have bankrolled infrastructure and housing projects in Angola. In 2012, Angola’s economy grew by up to 12%, and the former Portuguese colony secured contracts worth US$7.6 billion with China, the world’s second-largest oil consumer and Angola’s top trading partner.

Chinese firms have found Angola’s low cost of investment attractive – along with the fact businesses are not highly regulated when compared to more developed markets.

“It is a common misunderstanding that the Chinese are primarily in Africa for natural resources; investment is, in fact, primarily channeled into manufacturing, transport, real estate and construction,” said Anna Rosenberg, sub-Saharan Africa analyst at consulting firm Frontier Strategy Group, adding that Chinese companies are hoping to benefit from a rising consumer class in sub-Saharan Africa.

Chinese state-owned CITIC Construction offers a prime example. CITIC is known for building the Kilamba Kiaxi project, a satellite city of Luanda, Angola’s capital city. Last year, CITIC invested US$5 billion in an agricultural project in Angola to “help reduce the insufficient food production in the country,” said Liu Guigen, general manager of CITIC Construction.

And in September, Chinese state news agency Xinhua reported that CITIC was in talks with the Angolan government to be granted 30,000 hectares of land to farm in Bié province. The agency said that the land would be allocated to rice production as part of a project that has the financial support of Chinese banks. CITIC currently manages two major agricultural areas with a total of 20,000 hectares in the provinces of Uíge and Malanje, pilot areas for agricultural development in Angola.

The CITIC farm in Malange, 380 kilometres from Luanda, is considered the most modern and advanced farming unit in Angola, having harvested over 10,000 tons of grain last season. Angola consumes about 4 million tons of grain a year but needs to resort to imports as domestic production is only 1.5 million tons.

Chinese enterprises are consequently increasingly involved in Angola’s logistics and transportation sector. Chinese firms have already helped rehabilitate 2,800 kilometres of railways and thousands of kilometres of highways.

A report by market analysis company Analytiqa indicates that logistics spending in Africa by manufacturers and retailers will increase by almost US$28.8 billion, or 5.19%, in a four-year span, from US$128.5 billion in 2012 to US$157.3 billion in 2016. The report says the size of the outsourced logistics market alone will increase by 38.4% during that period.

According to the 2016 Agility Emerging Market Logistics Index, however, sub-Saharan Africa remains a challenging frontier for many companies. It indicates that only 21.1% of more than 1,100 logistics industry executives surveyed said their companies have companies in the region. Another 12.7% said they are in the planning stages to enter African markets, while more than 43% said they have no plans to set up in Africa.

Agility is among those international logistics firms that have entered the Angola market. In September 2015, Agility announced the opening of a new office in Luanda, where its initial focus is on developing solutions to service the oil and gas sector, as well as general cargo.

“Within 2016, we aim to strengthen our service offering by adding warehousing capabilities and expanding our operations to branches in Cabinda, Lobito, and Soyo,” said Sylvain Kluba, Agility’s COO MEA region.

A handful of local companies, already operating on the ground in Africa, stand ready to grow the logistics infrastructure and are not waiting for the international community. In Angola, Antonio J. Silva Transportes e Logistica (AJS) has grown by nearly 50% in the last two years. In the last year alone, the company saw revenue increase by 10%, which came on top of the previous year’s increase of 35%.

Just recently, AJS broke ground on a facility in the Viana Industrial Zone aimed at the breakbulk sector. The new factory is scheduled to begin production in September, and will produce trailers and flatbeds, including large flatbeds for moving heavy machinery used in Angola’s mining and natural resource sector.

“We are beginning to fulfil the promise of creating a diversified company with a focus on a number of different businesses,” said Luis Silva, CEO and managing director of AJS. “We are leveraging our 40-year expertise in transportation to focus on an immediate need in the industry: availability of dependable, well-made equipment. By building here in Angola, we considerably reduce the costs of importing these items, thus further optimizing the transportation industry in Angola.”

While AJS will be utilizing some of the trucks for its own business, it also expects to see considerable demand for its manufactured products. The primary customers for the trailers and flatbeds produced at the factory will be Angolan transportation companies.

Even with more available flatbeds and trucks, however, the OECD reports that only 27.6% of Africa’s 2 million kilometres of roads are paved (19% in sub-Saharan Africa), and that it will require considerable investment to fix the thousands of kilometres of roads that need attention.

By Karen E. Thuermer

Correspondent | Washington