24 Abril 2003

1
Preliminary Proposal for the Angola Enterprise
Program

• 24 Abril 2003
• Emma Torres
• Eduardo Tarrágo
• José Pinotes
• Peter Kooi
• Terence Gallagher

2
Content

• Overview of Micro
• Small Business Sector
• Supply of Services
• Strategy
• Investments
• Expected Results
• Planned Outreach
• Institutional Arrangements
• Execution Arrangements

3
Micro and Small Business Sector

• Understanding the Sector
• In the years 1994-2001, 13,636 companies were
• registered (67 in Luanda.)
• gt50 of population survive from Informal sector
  
• businesses
• 82 of Operators in the Informal Sector Were
  Self-Employed
• 74 Informal Sector Involved in Commerce
• Informal Sector dominated by women (47 of
  women worked
• in informal sector in 1995, 27 of men)
• Limited Documentation Registration and Asset
  Titles

• Service Micro Enterprises
• Run by Entrepreneurs with Successful
• Experience
• Business Sense But Lacking Formal Skills
• Major Constraint is Lack of Access to
• Financial Services

• Productive Micro Enterprises
• Operate in Dilapidated Premises
• Poor Infrastructure and Public Utilities
• Undercapitalized, obsolete equipment
• Shortage of Working Capital and Raw
• Materials
• Unable to Access Services Training,
• BDS and Credit
• Underdeveloped Entrepreneurial Skills
• Cannot Pay Regular Wages

4
Environment

• Macroeconomic Instability
• Fragmented National Economy
• Lack of Information
• Quantitative
• Supply Chains
• Dimension of Businesses
• Qualitative Expectations, Preferences,
• Ambitions
• Link between Informal and Formal Sectors
• High Taxes 47Sales Tax
• Highly Regulated
• Weak Infrastructure
• Little Coordination
• No Clear National Strategy for Micro
• Small Business Sector
• Several Government Institutions Involved
• Weak Civil Society Representation
• Post-war Growing Optimism

5
Preliminary Assessment

• PROBLEM
• Years of Economic Distortions Due to Central
  Planning, War and Macroeconomic Instability have
  drastically reduced the investment in the Angolan
  Economy
• Domestic Production (outside of Oil and Diamonds)
  has collapsed
• Fragmented National Markets are functioning
  poorly as an efficient mechanism to distribute
  resources, leading to unemployment and
  inequality.
• Small and Micro Businesses are operating in a
  challenging environment that increases risks and
  does not encourage growth and investment.
• Lack of Culture of Investment in Services to
  Develop Businesses

• OPPORTUNITY
• The renewed optimism in the post-war context is a
  unique opportunity to encourage investment in the
  Angolan economy.
• There are many small initiatives around the
  country which are developing the organization of
  Civil Society.
• Investments in the environment and in the
  provision of services which promote the growth
  and competitiveness of small and micro businesses
  will strengthen the sector.
• Strengthening the Micro and Small Business Sector
  will Help Stimulate Economic Growth, and
  contribute towards the reduction of poverty.

6
SUPPLY OF SERVICES

• - Finance
• Vocational Training
• Business Development Services

7
Finance

• 9 Banks
• Approximately 150,000 accounts and less than
  10,000 loans
• Branch Networks Concentrated in Luanda and
  capitals of Coastal Provinces
• Centralized
• Small amount of Lending and Limited to Largest
  Clients
• Banking Business focused on short term
  intermediation Trade, and FX
• Loans predominantly less than one year, with
  interest rates indexed to the dollar at between 8
  and 12 per year
• Optimism, Sector is Expanding, and there is much
  interest in Downscaling
• Little Experience with Microcredit
• lt10,000 clients between DW / Banco Sol / MINFAMU
• No Professional Micro-finance Institutions
• Short term Social Project focus
• Ties with Technical Assistance and Training
  Programs are common
• Not yet sustainable due to small size and limited
  efficiency.
• New Micro Enterprise Bank
• Government Funds
• gtUS50mm
• Focused on Larger Companies
• A Large Number of Potential Clients Do Not Have
  Access to Financial Services

8
Vocational Training

• 216 Centers (170 Private)
• Capacity for 15,500
• Concentrated
• Mainly located in Luanda (60)
• Focus on Service Sector
• Mixed Quality
• Depleted Assets
• Infrastructure, Working Capital, Human Resources
• Perceived as Expensive
• Supply Oriented
• Traditional Informal Market Apprenticeship
  Structure
• No Systematic Performance Evaluation

9
Business Development Services

• PRIVATE SECTOR PROVIDERS
• Large Clients
• Traditional International Firms
• 15 Medium Size National Consultant Companies
• Small Medium Clients
• 2000-5000 Independent Consultants
• Chambers of Commerce
• Micro Clients
• No Providers
• SERVICES FOR SMALL MEDIUM CLIENTS
• Concentration of Supply
• Luanda
• Mainly Business Planning to Secure Finance
• (ave. price US500)
• Limited Capacity
• Outdated Expertise
• Not Customer Friendly
• No Functioning Incubators

10
Public Sector Providers

• Ministry of Public Administration, Employment
• and Social Security (MAPESS)
• National Institute for Employment
• and Vocational Training (INEFOP)
• - 28 Vocational Training Centers
• 46 Employment Centers
• Services in all 18 Provinces
• Variety of Courses
• Crafts (Bricklaying, Carpentry, Masonry)
• Mechanics
• Agriculture
• Tailoring, Sewing, Shoemaking
• National Institute For the Promotion of Small
• and Medium Enterprise (INAPEM)
• Brazilian Model (SEBRAE)
• Network of 1500 Trainers and Advisors
• Short Term Courses in Basic Business
• Business Planning to Access FDES, Novo Horizonte
• 500 projects in pipeline, 120 Transport, 15
  Agriculture,

11
Conclusions

• Service Capacity Exists
• Concentrated in Luanda
• In depth Evaluation of Quality and Infrastructure
  Necessary
• Currently the focus is on the high end of the
  market
• There is a growing understanding of the
  importance of the micro and small business sector
• Willingness and Interest in Downscaling
• Public Sector Will be Strong Partner, but
  Important to Engage the Private Sector and Civil
  Society

12
THE STRATEGY

• - Objectives
• - Guiding Elements
• - Investments

13
Objectives
Vision A Diverse, Robust Micro and Small
Business Sector in Angola

• I. Improve Enabling Environment for Small
  and Micro Business Development
• II. Expand Supply of Micro and Small
  Business Credit
• III. Redirect Supply of Vocational
  Training Towards the Market
• IV. Introduce Pilot Models of Business
  Development Service Providers

14
Guiding Elements

• Build Consensus
• Medium Term Vision
• Geographical Diversity
• Build Local Capacity
• Promote Sustainable Institutions
• Working through Existing Players in Each Sector
• Government, NGOs, Private Sector
• Prioritize Women
• Market Oriented
• Mobilize Resources
• Scale Up Over Time
• Initial Stage will focus on small scale
  investments to build local capacity.

15
Enabling Environment

• Develop Understanding of Linkages Between Formal
  and Informal Sector
• Support Establishment of a Informal Sector
  Research
• Unit in a University
• Leading International Figures To Support Local
  Research
• Promote Quantitative and Qualitative Studies
• Support a Process (public/private) to Develop e
  Common Vision and
• National Strategy for Micro and Small
  Business Development
• Strategy for the Development of the Microfinance
  Sector
• Seminars / Workshops
• Training for Stakeholders
• International Visits to Exchange Experiences with
  relevant Stakeholders
• Public Sector / Private Sector Dialog
• Taskforces Focused on Specific Challenges
• Review Legislation and Regulation of Micro and
  Small
• Businesses
• Establish a Microfinance Development Unit in the
  Central Bank
• Advise on Policy and Regulation
• Determine Industry Standards
• Promote Transparency in Industry

16
Expand Microcredit

• Investments to Develop Capacity and Outreach in
  National Microfinance Programs
• Training with Successful International
  Institutions
• Technical Assistance
• Appropriate Courses (Product Development,
  Management, etc
• Transformation of Projects into Microfinance
  Institutions
• Technology Transfer
• Investments to Develop the Capacity of the
  Commercial Banks to Penetrate (Downscale) Markets
• Market Studies
• Pilots at Regional Branches
• New Product Development
• Systems and Techniques to Manage Risk
• Investments to Encourage the Launch of New
  Microfinance Institutions
• Identification of Investors / Local Partners
• Market Studies
• Technical Assistance
• Training
• Financial Resources to Fund Expanding Loan
  Portfolios

17
Vocational Training

• Assessment of National Capacity
• Quality and Relevance of Course Content
• Infrastructure
• Promote Market Linkage By Provision of
  Information
• Service Through Employment Centers
• Information on Supply
• Orientation on Source Content
• Feedback on Quality and Relevance
• Profile of Clients Disseminated to Suppliers
• Diversify Techniques and Geography
• Mobile Training Units
• On-the-Job Skill Training
• Apprenticeships
• Invest in Supplier Strengthening
• Training of Trainers
• Appropriate Tools
• Working Capital
• Fixed Assets
• Business Plan with Identified Break-even

18
Business Development Services

• PREPARATORY STAGE
• Coordinate Market Study
• Evaluate Demand for Services
• Analyze Capacity of Providers
• Evaluate / Due Diligence Potential Partners
• LAUNCH PILOT SERVICE PROVIDERS
• SMALL MEDIUM CLIENTS
• University Incubator
• Luanda Pilot
• Infrastructure Investments
• Salaries of Managers and Councilors
• UNCTAD / SEBRAE Business Centers
• 2 Pilots Luanda e 1 Other Province
• Partnership with INEFOP
• MICRO CLIENTS
• Implant CEFE Methodology
• Trainer of Trainers
• Working through National NGOs

19
Expected Results
BUILDING AN ANGOLAN DEVELOPMENT INCUBATOR

• 3 year First Phase with focus on Key Initial
  Investments
• Improve Environment
• Conduct Market Studies
• Implement Pilot Projects
• Resource Mobilization
• Second Phase
• Scaling Up with Targets in line with Available
  Resources

Expansion
Expansion
Expansion
Expansion
2nd Phase
Pilot
Pilot
Pilot
Pilot
Pilot
Pilot
Investments in Enabling Environment
1st Phase
20
Expected Results

• Benchmarking after initial 18 months
• Enabling Environment
• Functioning Informal Sector Research Unit
  Disseminating
• Information and Informing Policy
• Micro and Small Business Development Policy as
  Key
• Component of PRSP.
• Favorable Regulatory Structure
• Partner Civil Society Institutions Selected
• Finance
• 2 or More Market Studies Conducted
• 2 or More Downscaling Pilots Initiated with Banks
• Microfinance Technical Assistance Provided to
  Banco Sol
• Functioning Microfinance Development Unit
• Vocational Training
• Improving Performance Indicators for Suppliers
• Successful Service Providers Identified (From
  Evaluation of
• diversified strategies)
• Investment Strategy Designed for Expansion of
  Outreach
• Defined Targets for Development of Vocational
  Training Sector

21
Institutional Arrangement
PARTNERSHIP BOARD
USA
ANGOLA
STEERING COMMITTEE
Project Coordinator
Vocational Training
Microcredit
Enabling Environment
Business Development Services (including
incubators)