Local firms vie for a share of liquid gold money

As oil production in Angola continues to rise, local firms are trying to get more out of the sector that has single-handedly boosted the economy but done little to redress social imbalances.

Despite its considerable oil wealth - Angola is sub-Saharan Africa's second-largest crude producer after Nigeria - more than two-thirds of the country's roughly 16 million people live in poverty.

Although the number of Angolans employed by the oil sector has grown, and more local companies are providing big foreign oil firms with goods and services than ever before, the government wants to speed up the process - described as "Angolanisation" - and allow broader access to a bigger slice of the lucrative oil-industry pie.

To help small and medium-sized Angolan companies build their capacity and get onto the ladder, CAE-Apoio Empresarial, a business centre, has been established, sponsored by Sonangol, the state-owned oil company, private-sector oil companies such as BP, Chevron, Esso and Total, and managed by Citizens Development Corps, a US-based nongovernmental organisation (NGO).

The centre offers local businesses training in quality, bidding, and securing and managing contracts in the oil sector, with the aim of creating a more vibrant business community. There are currently more than 300 enterprises on its books.

"The problem facing oil operators is the high costs of doing business, as well as the quality of goods and services they receive in an industry where mistakes cost millions of dollars per minute," centre director Lars Benson told IRIN.

"Beyond being under pressure from the government [to Angolanise], most [energy companies] recognise it is good business practice. If you can improve the quality of goods and services and lower costs, of course it makes sense," he added.

The government has been criticised for not doing enough to improve the lives of ordinary people, amid persistent allegations of corruption. The large oil companies have also come under fire regularly for doing too little to help poor local communities.

"Most of the oil companies [sponsor] social projects as a part of their public relations, to build a positive image of themselves," said Allan Cain, who runs the NGO Development Workshop, which funds micro-financing projects in the capital, Luanda, and in the central province of Huambo.

But there is a growing belief in the industry that promoting grassroots investment, rather than providing development projects that only serve as a band-aid to heal more deep-seated problems, is equally important, as it has longer-term benefits.

Cain believes it is a step in the right direction. "These initiatives [to promote local businesses] demonstrate a self-interest from the oil companies, as they can probably do better business too," he said. "But encouraging the oil companies to make investments in communities by building partnerships is really important. If they see social investments as producing a better environment for doing business in, I think maybe it's a better long-term investment view."

According to Benson, if more small Angolan firms obtained contracts with the big foreign companies, the benefits would trickle down to ordinary Angolans, most of whom are unemployed or scraping a living in the informal sector.

"As more local companies win contracts, there are going to be more jobs created for Angolans," he said. "The potential for local Angolan companies to supply the oil industry is enormous - some ... [big companies] are spending hundreds of millions of dollars on operating in Angola. We want to make sure as much of that money as possible stays here."

CAE has already helped 15 Angolan firms secure contracts worth a total of around $1.25 million, to provide the oil industry with goods such as pumps, overalls and stationery, and services like cleaning and catering.

After five years of peace, Angola is still a tough place to start up or operate a business. According to World Bank data, it is ranked at 156 out of 175 countries for ease of doing business; entrepreneurs complain of a heavy bureaucracy, high costs and widespread corruption.

"It's harder for a company to survive in Angola," Benson agreed. "After 27 years of civil war, they don't really have an infrastructure, but a company cannot exist in a vacuum. It is also a question of experience - the potential for Angolan companies to provide high-tech services is a challenge because offshore drilling is such a high-tech industry."

Local companies can find it hard to market themselves to major oil companies, who often opt to import goods rather than buying locally. Benson attributed the cause of the problem to a lack of communication between the two sides, and said there was every reason for a bigger chunk of business to stay in Angola.

"It's true you can't go out and buy a jumpsuit in Luanda tomorrow. But there is no need to go to Korea to get it - you can get it made here," he said. "[Companies] might not have the nicest sign on the outside, but they can provide quality goods and services. It is not that you cannot find quality in Angola, you just don't know where to find it - and neither do the oil companies."

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