Feb. 5 (Bloomberg) -- Alex Thomson-Payan arrived in Angola in 2007 armed with a business degree from Babson College in Boston and $200,000 raised from Swiss and American friends.
Today the 29-year-old runs Thomson Group International, which earns monthly revenue of more than $2 million from selling mobile phones and supplying oil explorers with services. On top of a schedule from dawn to late into the night, he hosts parties at a beachfront house and collects motorcycles. All this in a country whose civil war ended 12 years ago and is ranked among the most difficult for doing business by the World Bank.
Entrepreneurs such as Thomson-Payan are becoming more common in Angola, which is attracting investment from Diageo Plc, General Electric Co., Spar Group Ltd. and China’s TBEA Co. Ltd. The country, Africa’s largest crude oil producer after Nigeria, has rebuilt a $1.9 billion railway line to the Democratic Republic of Congo as part of $109 billion in spending since 2002 on hydroelectric dams, airports, roads and ports, according to the International Monetary Fund.
“The perception of risk is a result of Angola’s headline news reputation, as opposed to the actuality one finds on the ground,” Thomson-Payan said in an interview at his office in Luanda, the capital. “The result for those who do have a local partner is amazing investment opportunities that benefit from high returns.”
When the civil war ended in 2002, Luanda, a city of almost 6 million, sported buildings pockmarked by shell fire and had only two or three serviceable hotels, on a sewage-filled bay. Today it boasts a skyline rivaling that of Africa’s biggest business centers and a string of expensive restaurants and hotels along a palm-fringed spit extending into the Atlantic.
Investors still are hindered by obstacles in getting work permits for foreign workers and a cost of living that makes Luanda the world’s most expensive city for expatriates, according to Mercer. The 2014 World Bank Ease of Doing Business Index ranks Angola 179th of 189 countries, below Nigeria and Zimbabwe.
The country is ranked 153rd of 177 countries on Transparency International’s 2013 Corruption Perceptions Index.
The World Bank estimates the population of Angola at 21 million and the United Nations says more than half live on less than $1.25 a day, Even so, the capital boasts restaurants that charge as much as $85 a hamburger, sports cars are not uncommon and the bay is lined with yachts.
The election victory of the ruling party, the Popular Movement for The Liberation of Angola, or MPLA, in 2012 was marred by protests in Luanda and a police crackdown on opponents.
The country’s economy, sub-Saharan Africa’s third-largest, expanded by 6.8 percent in 2012 to $114 billion, according to the World Bank. It was expected to grow by 5.1 percent in 2013, President Jose Eduardo dos Santos said in October. Inflation was 8.16 percent in December, according to the National Statistics Institute.
“Executives that only see challenges in Angola because the business culture is difficult to understand will miss out on a market that has many needs, the ability to pay for things and provides high returns on investment,” said Anna Rosenberg, senior analyst for sub-Saharan Africa at Washington-based Frontier Strategy Group.
The country plans to start a bond market this year followed by a stock exchange in 2016.
Thomson-Payan began by forming Electrix Telecommunicacoes SA to manufacture and sell mobile phones, including a unit with a 30-day battery. He distributed through 25 stores, 20 of them in Luanda, and expanded to become the country’s largest phone distributor by offering other retailers stock financing in exchange for a share in their businesses.
It wasn’t plain sailing at first. He had few contacts at the country’s airport and in 2008 his first three shipments, worth about $80,000 each, were delayed by red tape and looted.
“When I finally found them 75 percent had been broken into, it was as if rats had eaten away at the cardboard and pulled out all the phones,” he said. “It made me find a solution: someone goes on to the plane and escorts our merchandise directly to our protected area.”
Another young entrepreneur, Rupert Wetterings, 25, used $250,000 raised from friends and family in South Africa and the U.K. to transform his company, Fides Mediador de Seguros Lda., also known as AIBA, into the market’s largest insurance broker. Wetterings, who has a degree in management and finance from the University of Birmingham, England, said the company had gross written premiums of $30 million in 2013, mostly from oil and gas clients.
“Angola is an exciting and challenging investment destination for those who have an abundance of enthusiasm and the resources that match your determination to succeed,” he said. “The start was very difficult, but through working very long hours and attracting the right people, we’ve been able to build up the business.”
Wetterings benefited as the government acted to weaken the control state-run companies AAA and Empresa Nacional de Seguros e Resseguros de Angola had on the insurance market. In November, Groupe Saham, a Morocco-based investment company, paid an undisclosed amount for GA Angola Seguros SA, Angola’s largest closely held insurance company by revenue, to gain access to Angola’s $1 billion-a-year insurance market.
Companies such as Chevron Corp., Total SA and BP Plc helped the country pump 1.74 million barrels of oil a day in December, according to data compiled by Bloomberg. Angola’s oil exploration and production attracts an estimated $20 billion a year in investment, according to London-based GlobalData Ltd. and Oilfield Support Angola Lda of Luanda.
Wealth from the country’s oil industry is propelling sales for Diageo, the world’s biggest distiller, in premium brands Johnnie Walker Blue Label and Ciroc vodka, James Crampton, a company spokesman based in London, said in an interview. Diageo has plans to set up a distribution company in Angola for its Johnnie Walker whisky and Guinness beer, Crampton said.
Spar, a South African food and liquor retailer, is supplying merchandise to an Angolan partner in a store under the Savemor brand, called Kamba locally, that opened in December in Luanda, Finance Director Mark Godfrey said. The first fully-fledged SPAR branded store is to open in the northern oil district of Cabinda before April, he said.
Foreign investment last year in Angolan industries excluding oil was $1.9 billion by the end of September, compared with $2.3 billion for all of 2012, Maria Luisa Abrantes, chairwoman of the National Private Investment Agency, said in an interview on Oct. 1. The agency is targeting $4 billion a year in investment outside of petroleum as the government seeks to diversify the economy, she said. Oil accounts for almost all exports and 80 percent of tax revenue.
Some investors targeting Angola are reaching out to others already on the ground. Thomson-Payan said he’s started a consulting side-line to offer advice, a $4 million investment fund offering an 18 percent return, and trade finance to give newcomers a leg up.
Back among his Vespas and Yamahas near a long cabana and pool below the balconies of his two-storey house, Thomson-Payan recalls he was attracted to the country after a friend said “you have got to check this place out.” Like Wetterings, he said the beginning was tough, and he used his U.S. and Latin American heritage as the grandnephew of Colombian president Alfonso Lopez to overcome a “bit of a wall” that he said Angolans erect to foreigners.
Angola has mixed ethnicity inherited from when it was a colony of Portugal before independence in 1975. Ties to South America include Portuguese-speaking Brazil, Angola’s fifth-largest trade partner, which shipped $1.14 billion in goods to the African country in 2012, according to the Association of Brazilian Entrepreneurs and Executives in Angola.
TGI has also expanded into construction, real estate and finance.
“There’s a big sense of community in Angola: they take care of each other, and as soon as you become a true friend, they take care of you,” said the six-foot-three Thomson-Payan, who wore a blue pin-stripe suit and red tie as he leaned over his boardroom table. “The right document to get stuff out of the port can take weeks, or minutes if you know the right person.”
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