* New law makes oil firms use Angolan banks for payments
* Analysts say great opportunity for banks, see M&A;
* Questions remain about transparency in financial sector
By Shrikesh Laxmidas
LUANDA, May 11 (Reuters) – A stern test and a golden
opportunity, Angola’s new foreign exchange law for the oil
sector will flood billions of dollars into the country’s banking
system and pose tough questions about transparency and technical
readiness.
Riding on the coattails of an oil boom – the country is
Africa’s second largest crude producer after Nigeria – Angola’s
banks have posted strong growth in the last decade, attracted
foreign players and become the subject of takeover talk.
Until now, foreign oil companies were allowed to hold
revenues from Angolan operations in overseas banks, transferring
foreign currency to the central bank to pay taxes and making
only some, limited payments via Angolan banks.
The first phase of the new law will come into effect on
Monday and will force oil firms to pay taxes in foreign
currency, most likely U.S. dollars, through accounts in Angolan
banks. Later, they will also have to pay service providers
through those banks.
“This will have considerable impact on the banking system,
bringing substantial values,” said Rui Amendoeira, Managing
Partner at international firm Miranda Law and an expert on oil
and gas legislation.
Analysts declined to provide estimates on how much foreign
currency may flow through the system, but say tax figures can
signal the scale of the first phase.
According to government data, last year Angola collected
$12.8 billion in taxes from foreign oil companies.
“This type of value will go through Angolan banks in the
first year from the start,” said Joao Fonseca, Executive
Director at Banco Angolano de Investimentos (BAI), the country’s
largest bank by assets.
Total deposits in the system stood at around $37 billion at
the end of 2011, according to central bank data.
“As oil companies manage balances tightly, the funds will be
parked in accounts for short periods, but commissions and gains
on overnight loans will be substantial,” Fonseca added.
Angola’s economy is heavily dominated by oil though a decade
after the end of a brutal civil war, petro-dollars have brought
little benefit to most of its 19 million people who live in
abject poverty.
TRANSPARENCY TEST
Angola’s drive to raise output to 2 million barrels per day
in 2014 and the promise of discoveries in new ultra-deep
offshore concessions by global players including BP,
Total and Chevron, make the prospects even
brighter.
“It’s a great opportunity for the banks, but a test that
demands re-organisation,” said Miranda Law’s Amendoeira.
“They’ll have to ensure their systems are fast as oil firms
cannot afford delays in making payments.”
BAI’s Fonseca said the banks will have to upgrade their
personnel, possibly create dedicated teams, but added that a
balance of payments of crisis in 2009 already forced them to
create strong systems, with tight links with the central bank.
Analysts say the key test is about transparency.
Angola ranks 168th out of 183 countries in Transparency
International’s Corruption Perceptions Index and questions
remain about the probity of its financial system.
The central bank is currently the target of an embezzlement
probe by Angola’s attorney general that has led to dozens of
arrests of employees.
“There are steps to take on transparency,” said Fonseca.
“But the central bank is preparing new rules on corporate
governance and internal bank controls, which should help.”
He added that the banks which are units of overseas groups
are set to gain most from the new law, as their stock market
listings and credit ratings offer oil firms confidence.
Portuguese banks BPI and BES have large
units in Angola, while South Africa’s Standard Bank –
has plans for rapid expansion in the country.
“Those who gain competitive advantage on this law will grow,
others will have to decide on their futures,” Fonseca said,
hinting at consolidation in a sector with 22 players.
The role of Angola’s central bank in the new regime has also
attracted attention.
“This is a major step and the central bank will have to take
very precautionary steps to beef up supervisory capacity,” said
Nicholas Staines, the IMF’s representative in Luanda.
Central bank governor Jose de Lima Massano, praised for
implementing prudent policies, has warned of the risk of the
flow of foreign currency into the economy and an appreciation of
the kwanza as obstacles to stimulating growth.
His main line of defence against those risks is a
multi-phase implementation, earning time to adjust monetary
policies.
After Oct. 1, stakeholders in concessions must pay local
providers in foreign or local currency through Angolan banks,
and only from July 2013 solely in Angola kwanzas. Companies that
operate blocks will have to pay overseas suppliers through
Angolan banks, but only after October 2013.
(Editing by Ed Stoddard and Ron Askew)
