In spite of the civil war and the socialist legacy, sizable investments in the petroleum sector were made during the 1990s. In 1994, Texaco announced plans for a five-year, $600 million investment in its Angolan oil exploration and production efforts aimed at increasing the company's Angolan oil output by 50%. Approximately 15 foreign companies, including Chevron, Texaco, Exxon, and Occidental, had invested more than $8 billion in Angola as of 1997. Elf Oil and Chevron both had major investments underway. In 1999, the Angolan government issued three new licenses to oil drilling companies in order to conduct exploration in ultra-deep water.
Countering the illegal trade in diamonds, De Beers, in a 1991 agreement with the government diamond company Endiama, invested in new diamond exploration. A UN sanction on the purchase of black market diamonds has been hard to enforce.
In spite of a 27-year civil war (1975 to 2002), an investment climate characterized by corruption, ineffective governance, arbitrary decision making, a deteriorating infrastructure, kidnappings for ransom targeted at foreigners in the Cabinda enclave, socialist suspicions about free markets, openly solicited bribes, no capital market or stock exchange, scarce skilled labor, and scarcer foreign exchange, Angola ranked second in the world in 2000 (after Lesotho) in foreign investment as a percent of GDP. The statistic is a result of both Angola's small economy and substantial investments in its oil sector that continued despite the civil war.
On the basis of joint ventures (JVs) or production sharing contracts (PSCs), at least $8 billion ($1 billion a year average) was invested by foreign oil companies from 1990 to 1997 with the state oil company, Sonangol, which dominates both upstream and downstream operations. The main foreign operators upstream were Energy Africa (South Africa), Agip (Italy; now ENI-Agip), Elf (France; now Total FinaElf), Chevron and Texaco (United States; now ChevronTexaco). About 30 other foreign companies have substantial interests in upstream enterprises. Petrofina of Belgium is both a major producer and a major downstream partner with Sonangol. Downstream operations are hampered by poor infrastructure and a small domestic market.
From 1998 to 2001, reported foreign direct investment (FDI) totaled about $5.6 billion, averaging about $1.2 billion a year from 1997 to 2001. This performance was driven by giant class offshore discoveries, particularly in 1999 when FDI peaked at close to $2.5 billion. In 1999, the Angolan government issued three new licenses to oil drilling companies in order to conduct exploration in deep-water, including ExxonMobile, the major investor in the offshore Xikomba field that began operations in August 2002. The only substantial FDI outside the oil sector before 2002 was a $36 million Coca-Cola bottling plant in 2000, 45% of which was bought in 2001 by SAB Miller of South Africa, which in 2003 was considering adding a brewery.
Before the peace accords of April 2002, there had been three other peace agreements, starting with the Lusaka Protocol of 1994, which had had virtually no effect. However, with the death of UNITA leader, Jonas Savimbi, in February 2002, Angola finally seemed to be able to move past the civil war. In September 2002, IDAS Resources, a subsidiary of London-based American Mineral Fields, Ltd., was granted the first clearance for diamond mining in 27 years. Under the contract, IDAS holds 51%; the state diamond company Endiama, 36%; and private investors 13%.
A 1991 agreement between Endiama and De Beers for diamond exploration was moribund because the territory was under the control of UNITA, which used smuggled diamonds to finance its operations. In 1998 the UN Security Council imposed an embargo on diamonds from areas controlled by UNITA. A report in 2000 implicated De Beers in the purchase of "blood diamonds," prompting the company to alter its policy of buying up diamonds to uphold the world price to a world certification system. In 2000, Angola set up ASCORP, a state-controlled company in partnership with Lev Leviev (Russian/Israeli diamond manufacturer), and established a monopoly on certified diamond buying. De Beers' plans to build a $30 million diamond processing facility in Luanda did not come to fruition, but in April 2003 the newly established National Private Investment Agency (ANIP) announced it was seeking funding for a diamond cutting and polishing factory in Luanda.
Before peace in 2002, the foreign investment regime as laid out in the foreign investment law of 1994 and administered by the Foreign Investment Institute (IIE) stood little chance of implementation. In February 2003, a new law on private investment and a companion law on tax incentives for private capital were passed, forming a new agency, the National Private Investment Agency (ANIP), for their implementation. As under the old regime, foreign companies are guaranteed national treatment, the right to repatriate profits, and the right to indemnification for property nationalized or expropriated. Added are incentives for private investment and provisions for streamlining the approval process. New investments receive up to 15 years exemption from industrial taxes and smaller investments, $50,000 to $250,00, are exempted from all customs duties. By law, approval requests for investments less than $5 million must be processed in 15 days and requests for larger investments, in 30 days. Despite the reforms, serious obstacles remain: poor infrastructure, a small market, single-entry visas, and registration costs that range from $20,000 to $60,000 for foreign corporations.