In Angola 2007/2008 - (Page 29) place in UNCTAD’s (United Nations Conference on Trade and Development) Foreign Direct Investment (FDI) Index. With total foreign direct investment in 2004 of USD 2.0 billion, Angola came in second in Africa – only slightly behind Nigeria (USD 2.1 billion) and well above South Africa, the continent’s economic powerhouse (USD 0.6 billion). On a cumulative 2002-2004 basis, Angola’s level of USD 7.2 billion in foreign direct investment was the highest on the African continent – almost 15 percent of the total FDI in Africa. The lion’s share (over 93 percent) of FDI in Angola is dedicated to the oil and diamond sectors. To implement its vision of transition to a thriving, diversified economy, the government’s National Agency for Private Investment (ANIP) actively promotes private investment by Angolan and foreign nationals in seven targeted industry sectors and three development zones. Since 2003, ANIP has been involved in the launch of over 1,124 projects representing more than USD 4 billion in investment capital. Channeling Oil Revenues: The National Development Bank According to Sonangol, Angola's oil production is expected to increase from the current level of 1.3 million barrels per day to 2 million barrels per day by 2008. To help address the challenges associated with development outside the oil sector, in 2006 the government established the National Development Bank for the deposit of up to 5 percent of oil revenues. The bank finances projects aiding in the development of infrastructure such as roads, telecommunications, and electricity. Steady Progress in the Banking Sector KPMG Auditores e Consultores Angola SARL, a member of KPMG International, recently published its annual survey of Angola’s banking and financial services sector, Angola Banking Survey 2006. KPMG Angola developed its report from publicly available information on the financial results of the twelve banks operating in the country at year end 2005. Overall, the report paints a picture of steady progress and healthy competition in a sector that is the cornerstone of Angola’s plans for economic development. New Entrants to the Market Continued interest on the part of foreign financial institutions in establishing a presence in Angola is evidence of investor confidence in the government’s ability to implement its ambitious plans for economic development. The BNA is currently reviewing approximately ten applications from foreign banks interested in setting up operations in the country. Bank Assets and Capital Adequacy At the end of 2005, banking activity, measured by asset growth, increased by approximately 57 percent to AKZ 549 billion, compared to 51 percent in the previous period. The capital adequacy ratio, computed for local regulatory purposes and measured by total shareholders’ equity on risk-weighted assets, was 16.5 percent against 19.6 percent in the previous year. The capital adequacy of Angolan banks is notably higher than the 15.5 percent reported by other Sub-Saharan African countries at the end of 2004. Angola’s three largest banks – BFA, BPC, and BAI – represented about 66 percent of the sector's total assets, down from 69 percent in 2004 and 70 percent in 2003. By comparison, this degree of concentration is below the 2003 average of 77 percent in Sub-Saharan African countries. Deposits In 2005, total deposits reached AKZ 382 billion, a nominal increase of 70 percent over the prior year. In 2004, the deposits growth rate was 47 percent. There was a strong decline in the percentage of deposits denominated in foreign currency – from 72 percent in 2003 to 52 percent in 2005. This points to the success of the government’s exchange rate stabilization policy and is indicative of greater confidence in the Kwanza. In 2005, demand deposits were double the level of time deposits – 68 percent of total deposits – representing a continuation of the trend since 2003 to higher levels of demand deposits relative to time deposits. Credit Quality Banks’ credit quality, measured by the ratio of overdue credit to total credit extended, improved in 2005 to 6.65 percent against 8.07 percent in the prior year. According to the BNA, 56 percent of outstanding credit was granted to the private sector (vs. 59 percent in 2004), 4 percent to public enterprises, and 39 percent to government entities. In 2005, credit concentration in the top three banks – BFA, BPC, and BAI – remained high at 77 percent, unchanged from 2004. Performance Angola’s banks continue to turn in significant performance increases from year to year. In aggregate terms, ROE (net profit of the banking system as a percentage of shareholders' equity) increased by approximately 9 percentage points over the previous year. Banks have benefited from a lower average effective tax rate due to the effect of tax exemptions on income earned from the BNA and government debt issues, as well as incentives and exemptions associated with the corporate income tax code. (continued on page 30) 29
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