The EU-Angola Sustainable Investment Facilitation Agreement (SIFA), which came into force this month, is a first of its kind for the European Union. The deal aims to boost Angola's economy by simplifying regulations and promoting green and socially responsible investments, specifically in the energy sector. The EU is looking to deepen its ties around Africa, which is a source of critical raw materials. Deals like this could serve as a hedge against parallel efforts by China and Russia.
Angola is one of Sub-Sahara Africa's largest oil producers. It left the Organization of the Petroleum Exporting Countries, a global oil cartel de facto led by Saudi Arabia, last year due to disagreements over production levels. If SIFA succeeds, it could help transition Angola from an economy based largely on fossil fuels and diamond extraction to more ecologically sustainable means of growth.
Chigozie Nweke-Eze runs Integrated Africa Power, which helps develop Africa's energy sector, and is active in the hydrogen space. He spoke to The Parliament about SIFA in his capacity as a visiting fellow at the European Council of Foreign Relations.
How does SIFA align with both sides’ strategic interests?
This deal is a win-win situation. It builds on a preexisting relationship between the EU and Angola.
Angola’s economy is largely monocultural, with limited diversification and a heavy reliance on oil and gas. The economy desperately requires diversification, and I think it should explore the potentials in the agricultural and mineral sectors and in energy generation. The deal focuses on all economic sectors to amplify diversification. Angola has not been able to do this efficiently because of the lack of investment over the years.
On the other hand, SIFA helps advance the EU’s green economic goals, which align with climate change initiatives and the [global] sustainable development goals. For example, investments in energy, renewable infrastructure, and hydrogen are key areas of interest for EU companies focusing on Angola.
Not to mention, the EU’s strong desire to establish a sustainable supply chain for critical raw materials, with less dependence on China. Similarly, Angola aspires to become a key global player in the supply of these materials.
Why Angola for this first-of-its-kind agreement?
It is a question of the [investment] package itself as it aids in preparing the economy for investment. Angola undeniably needs that kind of preparation. The EU is Angola’s main trade and investment partner, while Angola is the EU’s fifth-largest destination for foreign direct investment [on the African continent].
Also, Angola’s location is a gateway to the broader African market, making it a key player in regional trade. Therefore, strengthening the relationship with Angola should unlock even more opportunities across the continent.
Who or what stands to benefit most?
Angola primarily benefits from an environment that attracts investments to help the economy. So, SIFA benefits both foreign and local investors, especially the local, small -to -medium-sized enterprises.
However, since the EU has helped prepare the ground for investment, they stand the chance to benefit first from this openness. This also builds the EU's power in the competitive geographical realm as other countries, like China, are interested in establishing closer ties in the region, and with Angola, too.
How will the success of this deal be measured?
Success will be measured whether the deal actually unlocks sustainable investment. The long-term question would be, how much have financial investments increased as a result of the deal? How many jobs were created? How much did [Angola’s] GDP rise? Is the investment climate more favourable?
Apart from this, it is vital that all stakeholders are involved and equally satisfied. I know, as of now, both parties vow to hold frequent committee meetings to ensure close monitoring and transparency.
In what ways does the deal address environmental sustainability and social and economic equality?
The deal advocates for incentives to promote more sustainable renewable energy technologies, which in turn aims to generate more local jobs. Over 13 million people experience poverty in Angola, so mass job creation is crucial. Also, SIFA upholds commitments to international agreements and labour standards, ensuring adequate local work conditions.
SIFA uses incentives like purchase power agreements to boost transparency and reel in investments, especially in renewable energy. While there aren’t specific quotas per sector yet, the agreement does ensure that investments align with sustainable development goals and benefit local communities and businesses.
What kinds of enforcement or consequences are there to ensure the agreement is abided by?
It ensures compliance through consultation and, if necessary, state-to-state arbitration to resolve disputes. If a party doesn't comply, the other can take proportionate measures. Transparency and regular publication of decisions also help keep both sides accountable.
How does this agreement fit into the broader EU strategy for enhancing partnerships with African nations?
This deal aligns with the EU Global Gateway investment package.
If successful, it could be replicated in other African countries, like Democratic Republic of Congo, Gambia, and Zambia for example, which could really benefit from this technical support. Many African nations have low GDPs due to insufficient local and foreign investment. This deal can be seen as homework for other [African] nations to prepare their economy to receive investments. But a hurdle is that investment deals require political stability.
SIFA is crucial for the EU to secure a stable supply of critical raw materials and to reduce dependence on any single source. By partnering with Angola, the EU diversifies its supply chain, fosters economic growth in both regions, and ensures more sustainable and ethical sourcing practices. Angola seeks to look beyond diamonds and aspires to become a global player in the supply of critical minerals. It also strengthens the EU’s position in Africa, to counter the influence of China. Overall, it enhances the EU’s supply chain resilience and geopolitical leverage.
How might this deal impact China’s influence in the region?
The power of players in Africa depends on the burden of investment deals on the country or continent. Speed and lengthy bureaucratic processes are key factors, too. Typically [the implementation of] EU funded projects take more time than Chinese investments. This helps China’s stance.
It is not as if Africa is a ground for everyone to play football. African countries have their own geopolitical interests and should choose how to move forward with future investment deals from China.
How do other African nations, or at the African Union level, view this deal?
African countries know they have to prepare their grounds to be able to effectively welcome bigger investment deals from abroad. So, it can be seen as a benchmark. SIFA aligns with the African Union’s goal of economic diversification. It has been viewed positively.
Could you point out any criticisms or potential challenges related to the deal? How are they being addressed by both parties?
The EU has committed to support effective implementation [of the deal] through technical assistance and capacity building. However, if it is not, Angola could face exploitation of resources or pseudo forms of colonialism.
Therefore, it requires full public transparency between both parties and consistency with checking results with indexes. Angola needs to update local policies to avoid citizens being mistreated.
This interview has been edited for clarity and length.