For a variety of reasons, the Angolan flag carrier had been unable to capitalise on the country’s extraordinary growth. Sir Tim Clark, CEO of Emirates, said the deal was good for both parties.
On one hand, Angola should finally benefit from having a professionally run airline operation; on the other, Emirates has just planted its flag in sub-Saharan Africa’s third largest economy.
Since 1990 the Angolan economy has enjoyed double-digit growth every year. Its success has, for the most part, been underpinned by the thriving oil and gas sector. Of course, is has not been immune to the recent fall in oil prices, which has lead to the scaling back of a number of badly-needed infrastructure projects. However, the International Monetary Fund (IMF) still predicts the country’s gross domestic product (GDP) will grow by 4% in 2015.
These are exciting times for the resource-rich African nation. A number of reputable European companies, such as BP, Diageo and Standard Chartered Bank, already operate in the capital, Luanda. And given the country’s potential, businesses from across industry verticals are lining up to enter the marketplace. The country’s middle class is growing every year. And around 50% of the population (22 million) is under the age of 21. But while there is healthy demand for jobs and enthusiasm for education, there are challenges with which the business community must contend.
The 30-year civil war, which came to an end in 2002, devastated the country’s natural resources leaving them heavily reliant on imports. There is a poor power supply nationwide and weak infrastructure across most sectors. Government bureaucracy and corruption remain obstacles. Though times are changing, there is still a high rate of unemployment and an acute skills’ shortage. Starting a company in Angola is an enormously bureaucratic affair, for which companies must exercise an abundance of patience. There are also strict regulations about employing and training Angolan nationals, as well as sourcing and buying products and services from other Angolan firms.
Rolling out a travel policy and programme in Angola is no easy task. For starters, there is a massive shortage of recognised hotels in the capital and across the country. Government protectionism makes it very hard for global chains to enter the marketplace. The consequent lack of competition exacerbates the price of accommodation, meals and conferencing. In 2014, Forbes ranked Luanda as the most expensive city in the world for expats.
A dearth of flight rotations at the airport in Luanda poses logistical challenges for many companies. The situation will eventually be alleviated when the new airport opens. However, this could still be many years away. A veil of secrecy surrounds the government’s plans, and there are squabbles around the construction of rail and road links. Furthermore, there is no IATA billing settlement plan (BSP) in the former Portuguese economy, which creates a cash and credit economy. Obtaining a visa is also no easy feat. It can take up to three weeks for paperwork to be processed at an Angolan embassy, and is often only issued days before departure.
Emirates is run by an astute group of people. A lot of work will have gone into assessing the potential of its arrangement with TAAG Angola. But the deal was effectively a vindication of what many analysts and commentators had been saying for a few years; Angola is a county of huge potential.