Industrial Activity in Angola: Public-Private Partnerships as a catalyst for cost structure reduction and Sustainable Development

Industrial activity in Angola faces structural challenges that directly affect its competitiveness and sustainability. With an economy historically dependent on the oil sector, the country is seeking to diversify its productive base by promoting the industrial, agro-industrial, mining, energy transmission and logistics sectors. The cost structure of industrial activity remains marked by high operating costs, resulting from factors such as inadequate infrastructure, high energy costs, logistical constraints and regulatory barriers. This article analyses this cost structure and highlights how Public-Private Partnerships (PPPs) can function as a strategic tool to mitigate these constraints and boost industrial development, addressing strategies for attracting investment and the role of the Project Preparation Facility (MPP).

 

The cost structure in Angolan industry

The composition of costs in industrial activity in Angola can be broadly divided into fixed costs (facilities, skilled labour, maintenance and support services) and variable costs (energy, raw materials, transport, insurance). Energy costs account for up to 30% of operating expenses due to the instability of the electricity grid, which also contributes to dependence on diesel generators. Logistics adds 20-25% to this cost structure, driven by the poor state of roads, secondary ports and rail links, especially outside the Luanda-Lobito axis. Added to this are the costs associated with the shortage of skilled labour, the importation of raw materials (aggravated by exchange rate volatility) and regulatory delays.

Other structural elements add to this:

• Labour and training costs: despite benefiting from a young population, Angola faces a shortage of intermediate technical skills, which increases spending on training middle management, specialist consultancy and the need to hire foreign staff.

• Raw materials and supply chain: the importation of critical inputs and equipment substantially increases production costs, both due to customs duties and exchange rate volatility and import financing costs.

• Fiscal and regulatory risks: the effective tax burden and the time-consuming process of obtaining licences and authorisations affect the profitability of projects, with industrial approval processes often taking more than six months.

The combination of these factors creates a well-known vicious circle: high costs reduce the attractiveness of investment, perpetuating the underutilisation of installed capacity, which in several non-oil industrial segments remains far from its potential.

Under the Diversifica Mais Project, supported by the World Bank, these constraints are identified as key barriers to the ambition of economic diversification.

However, efforts are already underway to overcome or remove these obstacles. Law No. 6/25 of 2025 represents a structural shift in this landscape, opening up the electricity transmission and trading sector to private investment and breaking the monopoly of the national grid. With the aim of expanding the grid, promoting renewable energies and implementing a single national tariff, the conditions are also being created for the promotion of PPPs in the energy transmission sector. The strategic regional agreements that Angola is part of are also very favourable and undeniable opportunities: the Southern African Power Pool (SAPP) and the Central African Power Pool (CAPP), facilitating cross-border electricity trade and reducing dependence on diesel in more remote areas.

The newly created Project Preparation Facility (MPP) for PPPs, established by Executive Decree No. 742/25 of 23 December of the Ministry of Planning (MINPLAN), is a central part of this effort and aims to function as a “project factory” for PPPs. Initially capitalised with around USD10 million under the Diversifica Mais Project, the MPP finances pre-feasibility studies, feasibility studies and transaction structuring, ensuring that projects submitted to the National Directorate for Public-Private Partnerships (DNPPP) are of a technical, legal and financial quality compatible with the requirements of institutional investors, whose investment it is particularly seeking to attract. Managed by a private management entity, to be selected on the basis of experience and independence criteria, the MPP gives priority to key industrial and infrastructure sectors, ensuring alignment with the World Bank’s environmental and social safeguards and Angolan legislation.

 

PPPs as a cost optimisation tool

PPPs are a particularly suitable mechanism for addressing structural inefficiencies in the non-oil industrial sector, as they allow the mobilisation of profitable and bankable private capital and know-how for projects of public interest under a long-term contractual framework. Law No. 11/19 of 14 May and Presidential Decree No. 316/19 of 28 October established the legal framework for PPPs in Angola, defining the distribution of risks between the State and private partners, as well as performance-based remuneration models.

In the industrial sector, PPPs can contribute to cost reduction in several ways:

• Shared infrastructure: industrial parks, logistics platforms and special economic zones, when structured as PPPs, allow companies to spread fixed costs, offering them access to energy, water, wastewater treatment, warehouses and other common services at more competitive prices.

• Operational efficiency and technology transfer: contractual models such as Build-Operate-Transfer (BOT) or Design-Build-Finance-Operate (DBFO) encourage private partners to introduce more efficient technologies and asset management systems and digitalisation solutions, reducing waste and energy costs.

• Cost recovery mechanisms: properly calibrated tariff forecasts, availability payments and revenue-sharing mechanisms enable private partners to recover investments in a sustainable manner, increasing the bankability of projects.

• Modernisation of logistics and transport infrastructure: Railway and port modernisation under PPP arrangements, particularly in the Lobito Corridor and Namibe Corridor, has the potential to reduce freight transport costs by 20-30%, improving the competitiveness of industrial companies and facilitating access to regional markets and export ports.

 

Examples of future industrial PPPs

In 2026, the PPP pipeline is expected to accelerate, with a strong focus on the industrial sector and logistics associated with economic diversification, with a particular focus on the Lobito Corridor. Among the examples already under discussion or in preparation, the following stand out:

• Agro-industry in Lobito: at the Angola-EU Lobito Corridor Business Forum in March 2026, partnerships with European investors were discussed for agricultural product processing units (vegetable oils, flours, animal feed, fruit processing), with the aim of reducing the food import bill and creating skilled jobs in rural areas.

• Special Economic Zones: expansion and modernisation of industrial parks in Luanda and Benguela, with a focus on light industry, logistics and value-added services

• Energy and transmission: renewable generation and transmission line projects, made possible by Law No. 6/25, which opened the sector to private players. A good example is the 80 MW power plant, in partnership with Siemens Energy, for industrial and mining clusters, which reduces dependence on diesel and cuts energy costs by up to 40%. Interconnection with the Southern African Power Pool (SAPP) and the Central African Power Pool (CAPP) would be a factor of added interest, as it would also allow energy to be imported/exported, increasing the efficiency of projects in these sectors.

Together, these initiatives support the ambition to mobilise around USD1.7 billion in private and mixed investment by 2026, strengthening Angola’s position as a regional industrial and logistics hub.

However, it is important to note that Angola is not starting from scratch.

Over the last six years, we have seen crucial developments in the logistics and oil sectors, through the signing of concession contracts that are fundamental for Angola. The Ministry of Transport has promoted remarkable development in the logistics sector, with Africa Global Logistic, part of the MSC Group, DP World and AD Ports now present in Angola. Similarly, ANPG and MIREMPET have created the conditions that allow all the Super Majors in the upstream oil sector to also be present. PPPs thus represent the next natural step in this successful trajectory of attracting world-class private investment.

 

Attracting investors and the role of the MPP

Attracting private investors to industrial PPPs in Angola should be based on a combination of regulatory reforms, tax incentives and risk mitigation mechanisms, and international exposure. Among the main lines of action, the following should be favourably aligned:

• Tax and regulatory incentives: tax exemptions and reductions, facilitation of equipment imports, security in profit repatriation and simplification of licensing, in line with the PPP Law and Private Investment Law No. 10/21 of 22 April, which updated the previous regime.

• International promotion: roadshows, forums and dialogue platforms – such as the US-Africa Business Summit 2025 and the Lobito Corridor Business Forum – platforms where bankable projects are discussed with potential financiers, including investment funds, development finance institutions (DFIs) and strategic investors.

• Transparency and governance: the adoption of ESG standards, independent audits and robust dispute resolution clauses, including recourse to UNCITRAL rules, strengthen investor confidence and help reduce the risk premium.

• Blended finance: the use of concessional financing, partial risk guarantees and blending instruments with DFIs (such as the AfDB or AFD) reduces the initial risk for the private partner without placing an excessive burden on the state’s balance sheet.

It is important to emphasise that attracting private investment in PPPs does not necessarily require the systematic granting of sovereign or bank guarantees by the State. Excessive use of such guarantees increases public debt, generates contingent liabilities and exposes the public purse to significant risks in the event of project failure, affecting fiscal sustainability and squeezing margins for other priorities, which is not at all advisable.

A more balanced alternative should involve the use of tax and customs incentives already provided for in the Private Investment Law, with tax reductions and benefits graded according to geographical area and priority sector, combined with guarantees of legal stability and free transfer of dividends.

The experience of the State of São Paulo in Brazil offers a relevant paradigm: in this model, private investors are selected essentially on the basis of their financial strength (therefore favouring institutional investors, investment funds, pension funds, family offices), and may subsequently subcontract the specific technical component of the PPP. By shifting the focus of private partner selection to financial criteria, it is possible to attract solid capital and highly specialised expertise in an efficient manner. A similar approach could be adopted in Angola, with identical benefits.

In this context, the MPP plays a decisive role in the selection and prioritisation of projects. Proposals submitted to sectoral ministries are evaluated based on criteria such as economic viability, impact on diversification, budgetary sustainability, social relevance and alignment with the National Development Plan. Through detailed pre-feasibility and feasibility studies, the MPP will filter out truly bankable projects, prioritising, in an initial phase, between five and ten annual initiatives in the Lobito Corridor. The Managing Entity will coordinate teams of legal, financial, technical and environmental consultants, with performance indicators (KPIs, such as IDE1-IDE8) that measure the quality of preparation and success in mobilising investment.

 

Progress, challenges and the way forward

The legal and institutional framework for PPPs in Angola has made significant progress, with the Ministry of Planning and the National Directorate for Public-Private Partnerships taking on the coordination of policies and projects. Initiatives such as the seminar “From Financing Gaps to Opportunities in Building Angola’s Future”, organised by DLA Piper in partnership with the UK Department for Business and Trade in September 2025, have helped to consolidate the view that PPPs can be an essential driver of industrial transformation.

Recent progress includes:

• Development of a structured project pipeline, supported by the MPP and an Off-Budget Financing Strategy focused on productive infrastructure.

• Strengthening of institutional capacities, with knowledge transfer and technical training programmes aimed at public administration staff, in particular the National PPP Directorate.

However, significant challenges remain: ensuring strict compliance with environmental and social safeguards, prudently managing the fiscal risks associated with long-term commitments, and maintaining investor confidence in a volatile macroeconomic environment. To address these challenges, the use of escrow accounts, the improvement of risk monitoring systems and the promotion of active consultation processes involving local communities and other stakeholders are particularly important.

The cost structure of industrial activity in Angola should therefore not be seen solely as a constraint, but also – and most importantly – as an opportunity to promote institutional and contractual innovation. PPPs, supported by the MPP and anchored in a more robust regulatory framework, can transform the cost structure, currently considered inevitable, into a competitive advantage through efficiency gains, risk sharing and the mobilisation of long-term capital.

As a legal advisor responsible for the development of several important infrastructure projects in Angola, I am optimistic about a future in which the Angolan industrial sector, leveraged by well-structured partnerships between the state and the private sector, will contribute decisively to the country’s sustainable and inclusive growth. To this end, it is essential that the Government continues to invest in institutional capacity building, process transparency and regulatory stability, consolidating Angola’s position as a leading industrial and logistics hub in Southern Africa.