For Armando Manuel, taking on leadership in Angola's Sovereign Wealth Fund (SWF) – Fundo Soberano de Angola (FSDEA) – meant becoming a complete circle. After helping to launch the fund in the role of Angola's economic advisor 12 years ago, Manuel led it for a year before taking on the role of finance minister. Three years later at the helm of Angola's economy, Manuel left the country and played a senior role in the IMF and the World Bank.
In late 2023 he returned to lead the FSDEA, but the fund, which had around $4 billion in assets as of September, operates in a very different local and global context from Manuel's first stint 12 years ago.
Angola has undergone significant political change, and the death of long-term president Eduardo dos Santos in 2022 has been a catalyst for further admiration for government and business, such as the reverse of his family. Since 2017, under Dossantos' successor, João Lourenzo, the government has committed to privatization, improved transparency, diversification beyond oil, dominating the economy and providing the basis for FSDEA, but today it is below $70 a barrel.
Eight years later, the reform agenda has mixed property under a barrage of global crisis, but it is clear that the government and the funds it owns hold a broader aspiration.
Manuel says the focus of the FSDEA has shifted from his role as a guarantor for the stability of Angola's unstable oil economy to a fund that invests more widely in the home and in the African production sector. “(Previously) it was a savings fund that initially had a stability function delegation. A multicrisis has removed stability delegation. If there are many crises and the finances are not stable, you can drain the fund very quickly.
“And we have started a lot of reforms, first reforming investment allocations from an investment class perspective, ensuring a proper distribution between fixed assets and non-fixed assets, securities and alternatives.
“And we came up with this idea… Under a balance, savings must be on par with investment. This means that nearly two-thirds of our portfolio are exposed to the US market and Europe while resources are investing in securities.
Investing in the real economy
While investments in foreign securities remain dominant, Manuel says the fund has headroom over the next five years to roll out up to 40% of its investment allocation to alternative investments on the continent, including Angola itself.
“So we expanded our exposure to many African countries, including investments in mining, ICT, energy, agriculture and hospitality. We began to focus more on the country (Angola). We looked at the national development plan and tried to identify areas that do not overlap with governments and existing financial systems, but offer complementarity. The most important of these gaps is the lack of fertilizer to improve the country's small agricultural yields. Investment offers an opportunity to grow the industry and support farmers, he says.
“Descends ago, Angola played an important role and was the top world producer of many crops. This is gone. Today, there are a few factors you should tackle, and one of the key factors is fertilizer.”
Cash crops are a priority
Food Security Issues in Angola – The World Food Program estimates that chronic malnutrition (stunting) affects 40% of children aged 6-59 months, so the fund emphasizes cash crops as a priority. “It helps to supply local markets, but it also helps to ring the balance sheet as it allows cash crops like avocados, palm oil and more.”
Animal proteins are another area of expansion. FSDEA has co-invested in companies like Lottienpendiment, a company engaged in chick production in Quanzanorte, which supplies poultry farms. “Angola relies heavily on imports (but) this is a product that can be grown in just a few days. You grow chicken in 30 days, but most crops take three months. So we put a strong agenda on this so that we can support the rebalancing of imports and domestic production.”
The Co-Investment Strategy is a strategy that FSDEA is eager to expand. “Despite the fact that we can take a senior debt approach with debt and mezzanine, we always work fair. We always identify private investors. We analyze projects, bankability, and we tip us as co-investments.
In June, the model was displayed when the fund signed the contract, along with the Swiss-surrounded Menomading Loop, giving $50 million each to the initial capital of the Robito Corridor Impact Development Platform.
Benefits of privatization
SWF's co-investment model has the Angolan government's desire to traditionally welcome individual investors into the state-dominated economy. The government initially allocated 178 assets privatizations by 2022, but by 2023 it had fallen mid-ambition under pressure from Covid-19 and other events.
While the privatization plan continues – a recent report suggests that plans are currently underway to privatize the state airline TAAG and sell shares in dominant telephone company Unitel and local banks – for the government to transfer assets to FSDEA is another option.
Manuel says it will help create opportunities for co-investment and reduce the fund's reliance on volatile oil revenues.
Relationship with the government
When it comes to asset transfers, the fund's proximity to government could be an advantage, but given that the unfortunate history of Angola's economy has facilitated decisions on limited commercial logic, an open and cozy relationship can raise concerns of transparency.
“The first task when we returned to the institution was to strengthen our governance model. It was clear that it was important to follow the principles of Santiago (in the case of SWF governance, it was approved by the IMF). Investment decisions should not be dependent on the government.
“We looked at the national development plan and talked with the authorities what they are expecting from us. The understanding was that given the multi-crisis that hit the country, and given the low GDP growth, it was important that the fund contribute to speeding up the transformation of the economy.
