May 20 (Bloomberg) -- Land is the most attractive asset of state companies being sold by Angola, Africa’s largest crude oil producer behind Nigeria, Banco Angolano de Investimentos SA Executive Director Joao Fonseca said.
The southwest African country plans to sell about 30 companies that are mostly inactive and date from when the formerly Marxist state was fighting a 27-year civil war that ended in 2002, Minister of the Economy Abrahao Gourgel said in an e-mail exchange yesterday. A ministry list includes agricultural mills, textile manufacturers, builders and a hotel.
“The most valuable asset should be the land and premises as most of the equipment will be obsolete,” Fonseca of Banco Angolano, the country’s largest bank by assets, said by e-mail yesterday. “It will be very important to do a proper due diligence of the company status, mainly related to the property rights and commitments.”
Angola sold 198 state companies over the last decade as it sought to cut costs and improve efficiency while rebuilding from the war that destroyed most of its infrastructure. The government still owns about 90 companies, including petroleum producer Sonangol EP, diamond explorer Endiama EP and insurer Ensa Seguros de Angola SA, which aren’t for sale. It’s keen to diversify the economy away from crude oil which accounts for more than 40 percent of its output.
“Most of the enterprises to be privatized, for instance in the sector of civil construction, reveal generalized structural constraints,” said Gourgel, who has held government posts since the early 1990s and was a central bank governor. They lack “complete and organized accounting and management control.”
At least two companies on the list, Refrinor UEE, a refrigeration manufacturing company, and Panga Panga UEE, a plywood maker, have good locations in Luanda, the capital, Fonseca said.
Luanda is Africa’s most expensive city for expatriates to live in and the costliest worldwide after Tokyo, according to Mercer’s annual survey on the cost of living. Dozens of new high-rises and construction cranes stab the skyline, which has experienced a building boom over the past decade fuelled by the expansion of the offshore oil industry.
“It is an encouraging sign the Angolan government is seeking to privatize a number of the smaller, non-strategic state-owned companies,” Lucy Corkin, a sovereign-risk analyst at Rand Merchant Bank in Johannesburg, said today in an e-mail.
“This indicates that there is more openness to private-sector participation in the economy, where the government has long dominated the landscape.”
Industrial plastics producer Cipal, a division of Enepa Lda., and public-works builder Bricomil SARL, are some of the few companies on the list with work. Investors will have to consider bank loans, labor relations and environmental effects, Fonseca said.
Most of the companies for sale prevailed during the war when there was no competition and the private sector was almost non-existent, he said. They suffered as Angola shed its Marxism in the 1990s after the Soviet Union collapsed and oil production soared, while the end of the civil war boosted entrepreneurship.
“These state companies weren’t able to cope with the changes in the market after 2002,” Fonseca said. “The government clearly wants to stay away from where the private sector can be more efficient, reducing the burden on the budget while promoting employment and the diversification of the economy.”
Angola probably pumped 1.8 million barrels of oil a day in April, according to data compiled by Bloomberg. Production is mostly from offshore fields operated by companies such as Total SA, Chevron Corp., Exxon Mobil Corp. and BP Plc.
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