1. Panel: Investing in Key Sectors UK-Angola Investment Forum 2012 May 2012 Aurelien Mali, Vice President – Senior Analyst, Sovereign Risk Group

2. 2Investing in Key Sectors Strong growth prospect supports Angolas Ba3 rating »Angola Ba3 rating is supported by a moderate assessment of economic resiliency: –Wealth of economy measured as GDP per capita on a PPP basis is in between the second and third quintiles according to Moodys rated universe. –However, at current prices, the strong underlying growth trends suggest the size of the economy will be over US$150 billion in a few years time. May 19, 2010 Feb 28, 2011 June 3, 2011 B1 / Positive Outlook B1 / Review for Possible Upgrade Ba3 / Stable Timeline ModerateHighLowVery Low

3. 3Investing in Key Sectors 10 years of peace: Laying the foundation for diversification and broad-based growth »Re-construction: Key driver of non-oil GDP »Since 2009, non-oil GDP overtook the hydrocarbon sector contribution to GDP »Concurrently, very positive progress in achieving macroeconomic stability – Reduction of inflation / Foreign exchange stability – Constitution of Foreign currency reserves - a large cushion in the making – Positive reform momentum following the end of the IMF stand-by agreement

4. 4Investing in Key Sectors However, Angola is to remain reliant on oil over the medium term »Oil = Main export sector –Source of foreign currencies –Positive effect expected from the new foreign exchange law for the oil sector »Development of oil-related sector –Services / Angolan fabricated content –Refinery projects »Oil Reserves – Continued exploration of Angolas oil potential Ultra-deep water Onshore Namibe Basin Source: Sonangol

5. 5Investing in Key Sectors Angola benefits from a large pool of resources to diversify its economy Extractive IndustryAgricultureFishing Manufacturing Hydro-electricity Construction Financial Services Trade & Services - New mining law adopted - National Plan of Geology - Diamond, iron ore, copper, phosphate, gold, uranium, bauxite,… - Productive soil > 35mn ha of which only 10% is fully utilized -Self-sufficient prior to independence -With 1,600km coastline, Angola benefits from a rich fishing ground - Fish reserves are comparable to the one along the Senegalese coast -Bank usage rate slightly above 10% - Rapid organic growth of current banks - Positive effect on liquidity expected from the new foreign exchange law for the oil sector - Food processing potential - Heavy industry already represents more than 15% of manufacturing - Cement and steel tube production - Large and powerful rivers that cross the country provide a large hydropower capacity -Wholesale and Retail trade = main contributor to a rapidly expanding non-oil GDP -Telecom = a growing sector with only two main players - Large construction requirement driven by civil war legacy and high urbanisation rate (57.6%)

6. 6Investing in Key Sectors Structural constraints to growth remain present »Infrastructure –Roads/Ports: Capacity constraint linked to war legacy –Railways currently being rehabilitated –Energy suffers transmission and distribution problems –Raising infrastructure endowment could boost annual growth by almost 3% »Health –Health infrastructure has been neglected during the almost 30 years of civil war. –Though improving, sanitation and water management remain an issue, generating for example cholera epidemic. –Absenteeism is one of the often quoted issues faced by Angolan enterprises. »Education / Human Resources –Skill shortages –Young population to educate and train –MT National Plan underway to equip physical infrastructure with qualified teachers Source: World Bank

7. 7Investing in Key Sectors Structural constraints to growth remain present »Institutions and governance –Angola ranks low in the World Bank governance indices. –However, Angola suffers a perception issue » Real improvement in WB governance indicators » Reforms and measures to improve transparency – Phasing out of Sonangol quasi-fiscal operations – Audited accounts of Sonangol and BNA » Overall successful completion of IMF stand- by agreement World Bank – Governance Indicators

8. 8Investing in Key Sectors Structural constraints to growth remain present »Business environment has room for improvement –Angola is amongst the lowest performers in global rankings (WEF, WB Doing business,…) –Bureaucracy remains a constraining factor –Large interventionism of the state in the economy –Sonangol: from oil concessionaire to Angolan 1 st State conglomerate –Low lending to private sector World Economic Forum Survey, The most problematic factors for doing business Note: From a list of 15 factors, respondents were asked to select the five most problematic for doing business in their country and to rank them between 1 (most problematic) and 5. The bars in the figure show the responses weighted according to their rankings.

9. 9Investing in Key Sectors Conclusion Angola is a booming economy that should continue to expand quickly but it will remain a oil story for the years to come. In Moodys opinion, we have a positive view on Angola over the medium term as the authorities have the necessary means to foster real development. Some constraints, such as the lack of skilled labour, will however take decades to overcome. Key parameters to take into account and monitor: continuation of reform process despite the end of Stand By Agreement Sustained action to liberalise the economy and ease of doing business Public finance management in particular oil proceeds that will accumulate strongly Concrete results concerning infrastructure development for example by looking at social indicators like water and sanitation coverage Political risk should not be overestimated over the short term but growing social demand will exert more and more pressure on the authorities

10. 10Investing in Key Sectors Q&A Mali Aurelien Vice President - Senior Analyst Sovereign Risk Group Moody's Investors Service Ltd. Tel: +44 20 7772 5567 E-mail: Aurelien.Mali@moodys.comAurelien.Mali@moodys.com

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