Despite its large market size and potential business opportunities, Angola is deemed one of the most difficult business environments in the world. To be successful, considerable time and capital commitment is required. A strong, experienced local partner is also highly advisable.
Corruption remains a major barrier to doing business in Angola, despite some progress. It creates private and social deadweight losses and hence, entrepreneurs are willing to pay corruption rentals (bribes) in order to circumvent red tape that reduces productivity. Estrin et al. (2016) suggest that less corruption and stronger protection of property rights increases the growth of entrepreneurship. Angola has developed a comprehensive legal framework to combat corruption, but still confronts challenges with implementation.
In 2021 Angola was ranked 136 out of 180 in the Transparency International’s latest corruption perception index.
Public servants routinely ask for bribes, what they refer to as “gasosas” in the local language. This is usually to supplement their low wages, levying additional charges for bureaucratic services such as permits, licenses and registration of businesses. Business owners are expected to make informal payments to “get things done”. 36 %of companies identified corruption as a major constraint to doing business in the country (World Bank & IFC, 2006).
While progress has been made in recent years to improve the overall regulatory environment, the business environment remains difficult. It is plagued by pervasive corruption, complex bureaucratic procedures and an underdeveloped financial system (US Department of State, 2010).
President Lourenco has prioritized the anti-corruption fight, putting forward new laws on Anti-Money Laundering, Combatting the Financing of Terrorism, and the Proliferation of WMDs; the Law on Repatriation of Financial Resources; and development of a national anti-corruption strategy. There have been a number of high-profile court cases against senior officials which have resulted in some custodial sentences and a slew of dismissals. This fight against corruption is a vehicle to ensuring a conducive business environment for Angolan entrepreneurs.
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Also, companies should assess the business climate in the sector in which they will be operating or investing, have an effective compliance program or measures to prevent and detect corruption, and become familiar with the relevant anticorruption laws of both Angola and the United States.
~ Author: Eniye Aduwari