Angola has $395m in British investment projects — but who gets the work?

Angola has 18 investment projects involving British companies worth about $395 million, according to Finance Minister Vera Daves de Sousa. The projects include telecommunications, technology, energy, mining, services and non bank financial businesses. For Angola's small businesses, the interesting part is not the $395 million itself. It is what those projects will buy once the work starts. A new telecoms network needs installers and technicians. A mining operation needs transport, repairs, security and supplies. An energy project needs contractors and equipment. People working on those projects need food, accommodation and other services. Some of that work can end up with small Angolan companies. Whether it does is another matter.

A small company can benefit without being part of the main project

Take a transport business. It does not need to be involved in building a mine to make money from the mine. It could be hired to move workers, equipment or supplies. The same applies to a workshop. A company operating a fleet of vehicles will need somewhere to service them. A catering company could supply meals to workers. A security company could protect a construction site. An IT company could provide support to a new office. These are the kinds of businesses that can pick up work when a large project starts operating.

But winning the contract can be difficult

There is a catch for many SMEs. A large company may need a supplier that can handle an order worth far more than anything the small business has dealt with before. A transport operator with three trucks may need six or ten to meet a contract. A contractor may need to employ more people before receiving its first payment. A supplier may have to buy stock upfront and wait weeks to be paid. The business may also need insurance, tax documents, financial records and safety certificates that it did not previously need for smaller customers. So even when the work is available, some SMEs may not have the money or paperwork to take it.

This is where finance becomes important

Working capital can make the difference. A small business that gets a large order may need a loan simply to fulfil it. For example, a company supplying equipment to a construction project might need to buy the equipment before it gets paid by the contractor. A transport company may need finance for another vehicle. A catering business may need fridges, cooking equipment and additional staff. The investment in non-bank financial services among the 18 projects could therefore be relevant to SMEs if it leads to more financial products aimed at smaller businesses. But more lenders do not automatically mean cheaper finance. For an SME, the interest rate and repayment terms can determine whether taking the contract is worth it.

Telecoms investment could change how smaller businesses operate

The telecommunications projects could have an effect even on SMEs that never win a contract from a British investor. Reliable connectivity makes everyday business easier. A shop can accept digital payments. A wholesaler can communicate with customers and suppliers. A delivery company can track vehicles. A small business can advertise and sell through online platforms. For companies that currently rely heavily on cash or face unreliable internet access, better infrastructure can remove some of the friction from running a business. It is not a dramatic change for one business overnight. It is simply one less problem to deal with.

Energy is similar

A workshop, factory or cold storage business needs electricity whether or not it works in the energy sector. If energy investment improves supply, businesses can spend more time producing and less time dealing with interruptions. Energy projects can also create direct work for local electricians, mechanics, engineers, construction companies and equipment suppliers. Again, the question is who gets those contracts.

Mining could bring a long list of smaller businesses into the supply chain

Mining tends to generate demand for businesses that have little to do with mining itself. There are vehicles to maintain, workers to transport, food to supply, buildings to clean and sites to secure. A local business near a mining operation may therefore find itself with a much larger customer than it normally deals with. But large mining companies usually have strict requirements for suppliers. An SME may have to spend money on equipment, staff training and certification before it can qualify. That can leave smaller businesses stuck in a strange position: there is work nearby, but they cannot afford to meet the requirements needed to get it.

Government cannot fund everything

Daves de Sousa has also called for more private-sector involvement in infrastructure. Angola has major infrastructure requirements, but government finances are not unlimited. Private investment can help pay for projects that the state would struggle to finance alone. For SMEs, infrastructure can matter just as much as the investment itself. A road that cuts delivery times helps a transport company. Reliable electricity helps a manufacturer. Better internet helps a retailer. Infrastructure is often not something a small business thinks about when it hears about a foreign investment announcement. It can, however, affect the cost of doing business every day.

The $395m will tell a better story once the projects start

There is still a gap between an approved investment and money being spent. The 18 projects have been approved, but the eventual effect on Angolan businesses will become clearer as companies start building, hiring and buying. That is when it will become possible to see how much work is going to local suppliers. The useful numbers will not only be the value of the investments. They will be things such as the number of Angolan SMEs receiving contracts, the value of those contracts, local jobs created and how much equipment and services are bought from companies inside Angola. That will show whether the $395 million is mostly an investment by foreign companies in Angola, or whether it also becomes new business for companies already operating there.