VZCZCXRO8117
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHLU #1127/01 3091438
ZNR UUUUU ZZH
R 051438Z NOV 07
FM AMEMBASSY LUANDA
TO RUEHC/SECSTATE WASHDC 4407
INFO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 02 LUANDA 001127 
 
SIPDIS 
 
SIPDIS 
 
FOR AF/S 
 
E.O. 12958: N/A 
TAGS: ECON EFIN AO
SUBJECT: HUILA PROVINCE - GREAT POTENTIAL AND HUGE PROBLEMS 
 
REF: A. LUANDA 1082 
 
     ¶B. LUANDA 164 
 
¶1.  (SBU)  Summary.  An energy deficit and dilapidated 
infrastructure diminish Huila Province's economic potential. 
Investors have to provide their own electricity, water, 
transportation and security.  The GRA's railroad 
rehabilitation, critical to reopening Huila's iron mines, is 
at a standstill.  MPLA Secretary Joao Marcelino Tyipinge and 
Huila Province's Director for planning, Fernando Pontes 
Ferreira, both argue that Huila is free of internal strife, 
rich in economic potential and deserves more attention from 
the national government.  Businessmen like Carlos Lemus of 
the Huila Industrial Association and Carlos Gomes, Operations 
Manager of Coca Cola and the N'Gola brewery, see a lack of 
policy support from the government made worse by active 
interference from officials.  End Summary. 
 
A Benign Environment? 
--------------------- 
 
¶2.  (SBU)  Most of Huila's advantages are potential, its 
disadvantages, present realities.  The advantages include 
abundant water, hydropower potential and fertile soil.  Bad 
roads, lack of skilled labor, lack of electricity and delayed 
railway reconstruction (Reftel A) lead the list of negatives. 
 MPLA First Secretary Tyipinge said the number of voters 
registered during the 2006-2007 pre-election registration 
process shows Huila has overtaken Huambo to become Angola's 
third most populous province.  Migrants arriving from Huambo 
and Bie Provinces during the war brought along their talents, 
Tyipinge asserted, permitting the Huila MPLA and provincial 
government to promote able individuals regardless of their 
birthplace or tribe, such as Governor Ramos da Cruz, a native 
of Kwanza Sul Province.  Tyipinge also credits the Party's 
uneducated, "ignorant" veterans with having the foresight to 
send the party's future leaders to universities, enabling 
them to meet the country's needs.  However, Carlos Gomes, 
Operations Manager of the N'Gola brewery and Lubango's 
Coca-Cola bottling plant, says that, while Angola's middle 
class has grown somewhat over the last ten years, GRA 
policies do not sustain its growth.  Furthermore, Angola has 
more lawyers than mechanics -- Angolans are not learning the 
skills their country needs, he lamented. 
 
Investment and Regional Integration 
----------------------------------- 
 
¶3.  (SBU)  Carlos Lemus, Director of the Huila Industrial 
Association, said recent investments included a Coca-Cola 
bottling plant serving southern Angola, a brewery invested by 
South Africa's SAB-Miller, and a Zambian cigarette factory. 
The Planning Office's Pontes, an eager Huila booster who 
created a handsome book describing Huila to potential 
investors, divulged that he distrusts South African partners, 
much preferring Huila do business with Portuguese, Spanish or 
Americans investors.  (Pontes said most American and Canadian 
investment in Huila has been in the form of hospitals and 
schools built by NGOs.)  Pontes also said he wants more 
mining interests to invest, but admitted Huila has no 
contemporary geological surveys to offer. 
 
Entrepreneurs Meeting Officials 
------------------------------- 
 
¶4.  (SBU)  Angola has emerged slowly from its 15-year 
experiment with socialism, according to Lemus, and few small 
businesses started since 1991 have grown into large ones. 
Domestic investments in Huila have revived a drinking water 
bottler, an abbatoir, and several flour mills.  Newly 
established factories produce such items as bricks, ceramics 
or stonework for the construction industry.  Recent 
construction projects include the Chinese-built gymnasium 
used for the Afrobasket tournament, refurbished government 
buildings and motels to serve the Afrobasket fans, along with 
a casino.  Huila's industry produces exclusively for the 
provincial market, except for ornamental granite, which is 
exported through the port of Namibe.  Banks cannot count on 
the justice system, so they lend only to enterprises that 
already have both income and assets, said Lemus.  Angola's 
informal economy, operating with powerful protectors, 
undersells and thereby undercuts the growth of legitimate 
businesses, he continued. 
 
¶5.  (SBU)  Carlos Gomes, operations director of both N'Gola 
Brewery and the Coca Cola bottling plant in Lubango, Huila's 
provincial capital, said he can manage Huila's physical 
challenges:  his plant purifies its own water, generates its 
own electricity (1 MW, according to Pontes of the Planning 
Office), imports all its ingredients, builds in longer lead 
 
LUANDA 00001127  002 OF 002 
 
 
times to allow for port delays, and buys extra delivery 
trucks to cope with bad roads.  N'Gola trains its workers but 
then loses them to other companies offering higher salaries. 
Despite these difficulties, this year N'Gola invested USD 23 
million and doubled beer production to 180,000 liters (48,000 
gallons) per day.  While the physical limitations are 
manageable, Angolan officials are not, he complained.  His 
company's rules absolutely forbid paying bribes, he 
explained.  He once waited 14 months for a work visa so a 
South African maintenance technician could visit for two 
weeks.  Worse, he knows Angolan officials are not arbitrary 
when they enforce reasonable regulations.  For example, he 
has never had problems with Angolan Customs, perhaps because 
of recent reforms to the Customs Code (Reftel B). 
 
¶6.  (SBU)  Gomes says the GRA's public investment projects 
have not helped Huila economy.  However, Planning Director 
Pontes looks to a new 60-MW oil-fired power plant, planned 
for neighboring Namibe Province, to give Huila the 40 MW it 
needs (Matala Dam only produces 23 MW).  Angola's agreement 
with China for a line of credit reserves 30 percent of 
project cost for Angolan companies.  Pontes declared that 
Huila companies will be ready to perform the work when these 
projects are let out for bids.  Although wealthy Angolans own 
these companies, he argued they deserve the chance to grow 
and improve their capabilities. 
 
Projects and Budgets and Bottlenecks 
------------------------------------ 
 
¶7.  (SBU)  Pontes said Huila needs more public investment 
projects (PIP) than the GRA can afford.  (Note:  The GRA's 
2007 budget provides USD 94 million for Huila's public 
investment projects plus USD 8.1 million for the provincial 
hospital.  The provincial operating budget is USD 197 
million.  End note.)  The province itself controls only USD 
20 million for public works with a USD 500,000 per project 
limit, but a new road between Lubango and its airport alone 
would cost USD 15 million, Pontes sighed. 
 
Comment 
------- 
 
8.(SBU)  Self-congratulation from provincial officials 
implies that success is inevitable for Huila's economy.  The 
darker private sector view, in contrast, describes a business 
environment where officials are usually a hindrance and 
success elusive.  The province is only now restoring 
businesses that closed down during Angola's civil war.  At 
worst, Huila may discover that a long civil war, high 
operating costs and over-priced labor have put success out of 
reach.  While there has been progress on important projects, 
Lubango got its gymnasium on a rush basis, while the 
railroad, lynchpin of economic regeneration, languishes. 
Huila needs to implement -- not just plan -- physical and 
governmental improvements that will attract the broader range 
of new businesses it needs for economic growth. 
FERNANDEZ