Abstract
M.Phil.
Determining the risk for investment in Angola - economic, commercial and political analysis of long term investment risks in Angola. The main problem that the dissertation addresses is determining the overall country risk rating which would in turn determine, to a large degree, whether private investment in Angola would take place or not. The aim of the project is to assess the country risk of Angola from a political, economic and commercial risk perspective. Within these three broad parameters lie many characteristics and factors which will be addressed in dethil. All of these characteristics and factors tie up to give an overall rating of the investment risks inherent in Angola. The main reason for pursuing this topic is the recent emergence of Angola from the darkness of war into the possible dawning of peace and analysing the new investment hazards and opportunities in Angola. The principle modes of analysis to determine an investment rating and conclusion are as follows. Chapter one defines and explains what country risk is and also addresses the different sub-risks encountered under country risk. Chapter two consists of a critical discussion of the models of country risk analysis and the theory thereof. The country risk model adopted in this study is explained in the conclusion of chapter two. Political risk is analysed in chapter three. This section focuses on factors that influence political risk and the current state of politics in Angola. A dedicated chapter to socio-economic factors has not been included for the sake of brevity. However, a
dedicated section within chapter three (political risk) discusses, albeit limited, the socio-economic factors and their effects on the Angolan risk profile. In chapter four the economic and commercial risk of Angola is analysed. This involves studying what resources Angola has and all the economic indicators required for such an analysis. Chapter five is a discussion of the current management of Angolan economic and political risk, as well as what is required to improve the risk in Angola. Chapter six looks at the investment prospects in Angola and contains a country risk matrix to give a quantified rating of Angolan country risk. Chapter seven is the conclusion. The conclusion consists of a summing up of the political and economic risks, speculation on the endurance of peace and two five year scenarios, the one more probable than the other of materialising. The investment risk rating achieved for Angola was 28.3 out of 100, with 100 being the most attractive investment rating and 1 being the most unattractive investment rating. This is the quantitative analysis of the risk rating in Angola. However, the qualitative analysis reveals some nuances that the qualitative analysis cannot reveal. Based on the quantitative risk rating, the average private investor would not invest in Angola. Based on the qualitative risk rating, certain industries in Angola can be targeted for private direct foreign investment (DFI). The oil industry at the moment is the only industry where the current risk rating is not warranted. However, this industry is extremely well controlled by private creditors that to ensure the security of investment it must be proven that the proposed investment will benefit the existing creditors and the Angolan oil industry (Jones, Lloyds Bank). The best security offered to the foreign investor in Angolan oil is the Cabinda Trust, which effectively removes Angolan risk and replaces it with British corporate risk.