New expectations in AngolaMarch 14, 2018
Braulio de Brito, the chairman of the board of the Association of Service Providers of the Angolan Oil & Gas Industry (AECIPA), talks to TOGY about local content trends in Angola, shifts in national monetary policy and the recent management changes at Sonangol. AECIPA is the leading association for oil and gas contractors in Angola.
On currency reforms: “For the oil and gas industry this impact will be positive because it allows for more business freedom for an industry that traditionally is operated under free market parameters. What we see as far as the oil and gas industry is concerned is that it will allow us to be more flexible, particularly for international transactions that we have to execute on a regular basis.”
On business climate: “We all understand that for the Angolan oil and gas industry to be successful, we need to have a strong plan of Angolanisation and local content, we need to improve what is done, built or manufactured in Angola, to continue to work through reducing our cost base, and to continue training and developing Angolans. These are all measures that will contribute to a more competitive business environment and one that brings more benefits for Angola.”
On investment: “There has been an improvement to the understanding of the government about what it takes to make Angola more attractive. We see that the private investment law and mechanisms of investment in Angola are being revised. It is being observed and the government realises that they need to look into those mechanisms to attract foreign investments.”
On the workforce: “We definitely see more attention to Angolanisation in the sense of giving more opportunities to Angolans, not so much in the organisational sense of recruiting Angolans or training Angolans, but everybody looked deeper within their organisations and gave more opportunities to the Angolans. We saw quite a few locals being promoted on merit.”
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What do you see as being the immediate effects on the industry and the country of the devaluing of the currency and the scrapping of the peg against the US dollar?
I believe that the Angolan government has a very strong finance team. They all have strong technical backgrounds and I am sure that the recommendations and actions they put forward and which we are starting to see were very well thought out and received input from all sectors of the business environment. Every time there is a change, there is always an impact, positive or negative, and I believe for the oil and gas industry this impact will be positive because it allows for more business freedom for an industry that traditionally is operated under free market parameters. What we see as far as the oil and gas industry is concerned is that it will allow us to be more flexible, particularly for international transactions that we have to execute on a regular basis.
There is always going to be some reaction. Traditionally devaluation comes with inflation, but if we can control the inflation, it is a risk or pain worth taking because it will be for the benefit of the whole country in general. I would like to think macro and not micro. Macro is good for the industry, and if it is good for the country, then all industries will have to adjust. There are going to be some changes and reactions, but at the end of the day, because of the guys leading the process, the country will be OK.
What is your level of optimism regarding the new board of Sonangol?
All that is wanted is people who understand and work with the industry. The previous board was essentially made up of people that were from the industry, but the political or economic circumstances at the time were not conducive for them to be as successful as the expectation was. There are now positive expectations that the new board will deliver. As far as the industry is concerned, we want straight communication and direction because Sonangol is the concessionaire, so it has to provide some sort of direction and guidance to the industry. Above all, they have to activate the mechanisms for us to make money by approving contracts and new opportunities for business.
They are all from the oil and gas industry so they understand its dynamics and the dynamics of our services sector. We all understand that for the Angolan oil and gas industry to be successful, we need to have a strong plan of Angolanisation and local content, we need to improve what is done, built or manufactured in Angola, to continue to work through reducing our cost base, and to continue training and developing Angolans. These are all measures that will contribute to a more competitive business environment and one that brings more benefits for Angola. We are here to help when called upon.
As AECIPA, have you had any involvement in the working groups that the new president has set up?
We were called into one working group, but in general I would say no. The reason that was given to us was that these were sessions that ought to be conducted between the operators and the stakeholders. We were then invited to work in some particular subgroup, but not on a frontline engagement.
When given the reasons, we understood. We are all for the benefit of the country and the industry. Angolan revenue and economics are still based on the oil and gas industry. It does not really matter who is sitting around the table. We have to have deliverables so the ministry and government know what we think and what we want or what we think would be appropriate. Our message is out there, we are letting the guys finish their work and if they need our intervention later on we will be available.
What are your members reporting to you in terms of their financial situations?
Many companies are hurting because 2017 was very flat, if not negative. We did not have much work going. The way our industry is set up, those events tend to be reflected the following year. When companies say 2018 will be like 2017, it is because by the time projects get approved and there will be budget allocations, we will be pretty much at the second half of the year. Although we are seeing potential for business with bids coming out and projects being approved, we will not see the positive financial reflections of these until the latter half of 2018. They may have to continue to readjust a bit further by cutting costs and possibly letting people go to be able to survive until they start to see some returns.
I would be very surprised if we saw a massive staff reduction in 2018. They have reduced as much as possible to allow themselves to survive. This is where they are right now, in the surviving mode. I would therefore be surprised if we saw a massive wave of people being let go.
Is now a good time to invest in Angola?
Now is another good time to invest. Firstly there has been an improvement to the understanding of the government about what it takes to make Angola more attractive. We see that the private investment law and mechanisms of investment in Angola are being revised. It is being observed and the government realises that they need to look into those mechanisms to attract foreign investments. We also see a number of very strong chambers of commerce being created in Angola, and they have been working very closely to promote the Angolan business environment.
There is a strong drive of economic diversification. It is not all about oil and gas but also about incentivising investors to come to Angola and invest outside oil and gas. It is a good time to invest given that an attractive business environment is being created. It is not there yet, but if you think about investing now, by the time it is ready, we will be ready. It is a question of starting to plant the seeds, understand where the country is going and what potential business opportunities are there, and plan accordingly.
Readers within the country should look to AECIPA as the continuous body of full support in Angola. At the international level, I would say that Angola is a country that is still open for opportunities and will be offering very strong opportunities, not only within the oil and gas industry but also outside.
How can people be better trained and educated in Angola? What ideas need to be prioritised?
In line with the new government strategies, they have been promoting high-level education. As far as the industry is concerned, this is something that has been lacking. We have a couple of institutes, and then there are technical institutes, or what one calls high schools in the UK. They cover the industry to a certain degree, but Angola is at a time when it needs engineers, economists and people with higher-level degrees, higher rather than technical, all of international standards.
When you look at positions of management, although many Angolans were promoted, we still have a massive shortage of Angolan executives. It is not that the existing ones are not competent, it is just that there are few people who could actually do it. We need people with stronger backgrounds and the involvement of universities (Angolan and international) to help train and develop Angolans to the highest level.
What were the highlights for AECIPA in 2017 and what are the strategies you are pursuing for 2018 and beyond?
We are all aware that 2017 was a rather challenging year for the industry. As such, it was the same for AECIPA. We were challenged to keep it flowing and to continue to be the spokesperson for the oil and gas services sector. Despite the challenging business environment, we noticed that every company needed more support, advice and guidance than usual. In the particular case of Angola, we had issues with forex and payments abroad, which impacted business to and from Angola. Being the representative of the service companies, we played a very strong role in liaising between our members and the government bodies or other stakeholders.
Going forward, there have been tremendous changes within the Angolan business and political environments, which are taking Angola into a more business-minded environment. We now have, out of the recent legislative elections, a new government and a new Sonangol board, which as we know, always have an impact on the way the industry works. There is a new wave of expectation; some pending projects are being approved and we expect new projects to come out. We are starting to see a revitalisation of some sort, of the oil and gas industry. That gives us, particularly in the services sector, new hope and expectations that we are beginning a new era within the oil and gas industry.
Globally, the price is holding strong from where it was only a short time ago, so that is also fantastic for the industry, particularly to the Angolan industry, when you consider where our cost base is. The oil price at USD 70 per barrel makes it operational for us. We have to continue to reorganise the industry. We lost a lot of people and it is a question of seeing whether those people are still available. We are also expecting a set of new regulations that will replace, or maybe adjust and improve, the existing ones, which will help the industry continue into this beginning of a new era.
As far as the AECIPA business is concerned, we will continue with our modus operandis. We will continue being the interface or liaison between our members and Angolan stakeholders – the new Ministry of Oil and Mineral Resources, the operators and the National Bank – in supporting the drawing up of the new legislation and the anticipated improvements on some of the legislation that is surely forthcoming. We will also continue with providing working forums for our members through technical workshops and the usual learning sessions that we have also been organising. The modus operandi will continue as it is. It is a dynamic organisation and as such, it will continue to improve.
Do you expect to see more new companies opening in Angola during 2018?
Despite all the challenges, 2017 was a very good year. We managed to keep AECIPA going strong. Our membership numbers stayed the same and we actually had more applications for membership than usual.
That being said, I have seen fewer new companies opening up.
We definitely see more attention to Angolanisation in the sense of giving more opportunities to Angolans, not so much in the organisational sense of recruiting Angolans or training Angolans, but everybody looked deeper within their organisations and gave more opportunities to the Angolans. We saw quite a few locals being promoted on merit, something that was already there, only that the cost management exercise created an avenue for that to be realised. The other side of Angolanisation is local content, where work is actually done in Angola. The oil and gas industry is still catching up. We are not there yet, but we have to set up training schools for Angolans. The development of local content is not done yet.
To what do you attribute the increasing applications for membership?
It is a testament to all the members, the engagement and participation that all have been providing and giving to the organisation. We all see the benefits and importance of having one strong voice, one strong body, representing everybody and taking those common issues forward. Throughout the past three or four years, we have been able to address and in most cases actually resolve all of the issues that the industry has presented to us. We had tremendous issues with visas. We were able to work with the Ministry of External Affairs, Petroleum Ministry and Interior Ministry to set up a number of recommendations which were eventually implemented. The visa issue then stopped being an issue. We were able to go into the backlog of visas and passports being lost and recover a great number of them. We were also able to get people to their home countries who had been stuck in Angola.
We also had the forex payments. We did not resolve the issue, but we helped the government, BNA and the Ministry of Petroleum to strategise on the best way to mitigate the backlog of payments that we had. We are able to work with service companies and our members put together a realistic plan and proposal of the amounts of money, priorities and costs that were needed to ensure that business went as it needed to go. AECIPA is such a strong body because of these reasons. Members value being members because there are deliverables, there are tangibles results from our actions. When there are issues, we address them, strategise and take it forward. When we knock on the door, we are heard and the doors are open for us to discuss and negotiate whatever needs to be addressed.
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