Thursday, April 18, 2024

Partners and friends

Ricardo David Lopes, Prémio

The Public-Private Partnerships Operational Plan (PPP), presented in September last year by Angola’s government, singles out 41 investment projects to be launched on the public-private partnership (PPP) model, in sectors ranging from transport to energy through environment and logistics, agribusiness, industry, tourism, infrastructure and management of new urban centres.

The building and operation of the Luanda Surface Metro is one of the flagship PPPs in this document, but we should also mention particularly prominent projects –- without downplaying the merit or importance of any of the remaining projects – such as the building and operation of the Mulenvos Solid Waste Recovery Unit, the Soyo II Combined Cycle Power Plant, the Chicapa II Hydroelectric Plant and the building of the New Bridge over the River Kwanza.

Still in the transport sector – and given its future impact on the country’s connections with its neighbours and on cross-border trade and regional integration – it is worth mentioning the planned construction of Luanda Railway (CFL) link with the Democratic Republic of Congo, connecting Kananga-Northern Corridor and the Moçâmedes Railway links with Namibia and Victoria Falls (Trans-Cunene), in addition to the building and operation of a railway link between Angola and Zambia (CFB) – Extension of the Central Corridor.

Infrastructures are vital to the country’s ability to attract foreign investment. When there is a lack of infrastructure, or when this is poor or inefficient, doing business becomes more challenging because it is less competitive and so less attractive to investors.

However, the lack of infrastructure can attract new investment, both domestic and foreign. PPPs can play a major role here, generating change in Angola, where the government is known to have been allocating more resources to social sectors, so paving the way for the private sector to play a leading role in the economy.

Laying the foundations for this include the facilitation of investment – by reducing red tape – and the establishment of a competitive legal and regulatory framework, as well as the adoption of a major fiscal stimulus, among other policies, against a backdrop of increasing transparency in private-public relations.

The use of PPPs in major public works has been adopted all over the world, and although there are many examples of unsuccessful risk-sharing, with the state left holding the hot potato, the number of successes is much higher.

Angola, like other countries in the region, now has the opportunity to start this process and should learn from the experiences of others, both good and bad, in order to launch its own successful PPPs.

Investors will surely be keen to take part in this process, if the right conditions are in place, even taking into account the well-known constraints in the Angolan economy and their potential impact on PPPs, including foreign exchange restrictions, lack of knowhow, heavy dependence on imports, etc.

The type of investors that could potentially be attracted by PPPs are those that Angola – and any country – want the most: long-term ones. The building from scratch of new infrastructures such as a surface metro, a combined cycle power plant, a dam or a motorway, among others, means huge investment with a slow return.

Nobody invests in such an undertaking hoping to make money in the short or medium term. Such projects pay off over decades, and citizens and companies are often asked to make a financial contribution – in the form pay-per-use – since they are the ultimate beneficiaries of the capital gains provided by these infrastructures.

In a country where the majority of the population has not yet reached the desired income levels, this is another challenge to be taken into account in PPPs. But there are also ways to create positive differentiation here to protect less well-off groups.

In February, Angola’s minister of transport, Ricardo Viegas de Abreu, in an interview with Portuguese newspaper ‘Negócios’, appealed to businesses in Portugal, especially in the building and construction sector, to take another look at Angola, in light of the new strategy. He also challenged them to position themselves “as investors and an integral part of the investment and management risk of some infrastructure”.

Portugal has experience in PPPs and, as a natural partner of Angola, should put this experience at the service of its relations with the country, including as a long-term investor, committed to the well-being of its population.

Angola, more than ever, needs the support of its partners and friends. After all, it is in difficult moments that we realise on whom we can truly rely. 

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