Local content regulations for the oil sector in Angola were practically frozen since 2003. Although the well-known process of Angolanization (“Angolanização”) has been running for decades, new rules entered into force through Presidential Decree no. 271/20, of October 20th of this year, aiming to strengthen the national entrepreneurship and assure knowledge transfer to the national labour force.
Relevant changes in respect to the repealed Order no. 127/03, of 25 November notably include:
- Local content rules are now applicable to all companies providing goods and services to the oil sector and not only to oil companies acting in the country as associates of the National Concessionaire (E&Ps).
- Restrictive concept of national company limited to companies fully owned by Angolan citizens or Angolan companies as opposed to the previous framework that deemed as Angolan company entities held in at least 51% by a local citizen or company.
- Inclusion of the definition of other companies incorporated in Angola (but not fully owned by local shareholders) as companies incorporated under Angolan law.
- This new law maintains three regimes for the acquisition of goods and services in the oil sector (exclusivity, preference and competition), however does not specify which services and goods fall in each regime, leaving such definition for the National Concessionaire after consultation with the Competition Authority.
- Activities subject to the exclusivity regime shall be performed and provided by Angolan companies as defined above (100% held by Angolan citizens or companies).
- Activities that fall in the preference regime may be performed by companies incorporated under Angolan law, however preference is given to Angolan companies.
- Goods and services not included in the exclusivity and preference lists may be provided by foreign entities.
- Companies aiming to provide goods or services to the oil sector shall be registered and certified by the National Concessionaire before being hired for a particular contract (this includes Angolan companies, companies incorporated under Angolan law and foreign companies).
- All contracts shall now include a local content clause.
- All technical assistance and foreign management agreements shall include a detailed programme on training, transfer of knowledge and technology and evidence of improvement of local staff skills.
The contracting process involves now more than a simple commercial agreement between client and supplier/ provider. Companies in the oil sector value chain shall deliver to the National Concessionaire and/or the relevant ministry documents evidencing the commitment with the promotion of local entrepreneurship, diversification of the economy and training of local staff, as follows:
- Annual local content plan;
- Annual human resources plan;
- Framework Agreement expressing the contractor’s obligations regarding human resources development;
- Investment plan;
- List of expected acquisitions for each quarter (for operators only).
The new local content legal framework provided an extensive list of violations from which we would highlight the lack of a Framework Agreement with the relevant ministry or the non-inclusion of a local content in the contracts. Violations are punishable with fines ranging between $50,000 – $300,000 and may lead to the suspension or prohibition to enter into new contracts.
Presidential Decree no. 271/20, of 20 October, entered into force on 20 October and has no retrospective effects.