Foreign Holdings of Angola Government Debt

Foreign investor participation in Angola’s domestic bond market has been gradually increasing, driven by the country’s attractive yield environment, positive real returns, and the regulatory framework established under Aviso 15/19. Understanding who holds Angolan debt, how access works, and the trends in foreign participation is critical for assessing market depth and potential flow dynamics.

The Aviso 15/19 Framework

The BNA’s Aviso No. 15/2019 was a landmark regulation that formally opened Angola’s domestic government securities market to non-resident investors. Prior to this directive, foreign access was severely restricted and largely confined to Eurobonds traded on international exchanges.

Key provisions of Aviso 15/19:

Non-resident investors can purchase domestic government securities (BTs, OTNRs, OTX bonds) through licensed local custodian banks
Requires registration with the BNA and appointment of a local fiscal representative
Capital repatriation is permitted, subject to demonstration that the original investment was funded through the official foreign exchange market
Income (coupons and capital gains) is subject to the Imposto sobre Aplicacao de Capitais (IAC) at standard rates
Settlement occurs through CEVAMA, the central securities depository

Who Holds Angolan Debt

Domestic Holders

The domestic investor base remains heavily concentrated:

Commercial banks — By far the largest holders of government securities, driven by regulatory requirements (liquidity ratios, reserve requirements) and the attractiveness of yields relative to lending opportunities.
Pension funds — The Angolan Social Security Fund (INSS) and private pension schemes are growing holders, particularly of medium-dated OTNRs that match their liability profiles.
Insurance companies — Regulatory capital requirements push insurers toward government bonds, particularly at the longer end of the curve.
Retail investors — An emerging segment, primarily accessing the market through the Portal do Investidor.

Foreign Holders

Foreign participation in the domestic market remains small relative to total outstanding stock but is growing:

Frontier market funds — Specialized emerging and frontier market fixed income funds have allocated capital to Angola, attracted by yields in the 18-22% range for kwanza bonds and 7-9% for OTX.
Development finance institutions — Some DFIs hold positions in Angolan government securities as part of their mandate to support capital market development.
Diaspora investors — Angolan nationals abroad represent a growing source of demand, particularly for OTX USD-indexed instruments.

Foreign participation is most concentrated in:

OTX USD-indexed bonds — The currency protection makes these the preferred instrument for foreign investors concerned about kwanza depreciation risk.
Shorter-dated BTs — Some foreign investors use BTs for tactical positioning given their relatively better liquidity.

Trends and Outlook

Several factors are shaping the trajectory of foreign participation:

Yield advantage — Angola’s real yields are among the highest in sub-Saharan Africa, providing a strong pull factor.
Capital market infrastructure — Improvements in BODIVA’s trading platform and CEVAMA’s settlement processes are gradually reducing operational friction for foreign investors.
FX liquidity — The ability to repatriate capital depends on foreign exchange availability. Periods of tight FX supply have historically deterred foreign inflows.
Sovereign credit trajectory — Rating upgrades (current ratings: S&P B-, Moody’s B3, Fitch B-) would unlock access for a broader range of institutional mandates that have minimum rating requirements.

Challenges for Foreign Investors

Despite the regulatory opening under Aviso 15/19, several practical barriers persist:

Custodian bank requirements — Foreign investors must maintain a relationship with a licensed Angolan custodian bank, adding operational cost and complexity.
FX repatriation — While legally permitted, repatriation of capital and income requires BNA processing, which can experience delays during periods of FX pressure.
Secondary market liquidity — Limited secondary market depth makes it difficult for foreign investors to build or exit large positions.
Tax complexity — IAC withholding and the absence of many bilateral tax treaties create uncertainty around net-of-tax returns.

For details on how foreign investors can access the market, see access for foreign investors. For the domestic-external debt split, see domestic vs external debt.