Confidence for Angola’s energy consumers

Angola

Frederico W.L. Pinnock Makilanda, chairman and CEO of Hengye Electronics Indústria, talks to The Energy Year about the benefits of rolling out prepaid electricity meters in Angola and the strategy behind the company’s meter plant. Hengye Electronics Indústria is building a plant to produce water and energy meters at the Luanda-Bengo Special Economic Zone (ZEE).

What will be the benefits of prepaid electricity meters in Angola?
Over the years, the government has made great investments in the energy sector, particularly in electricity and water, such as the Cambambe and Laúca dams or even the new Luanda Bita water supply project. However, the downstream sector is struggling to recover their investments. The two main companies – ENDE, which is responsible for electricity distribution, and EPAL, which covers the water sector in Luanda – are sometimes claiming losses in the hundreds of millions of kwanzas due to the lack of prepaid meters.
Therefore, one of the main benefits of prepaid meters is that not only will consumers have full control of how we are using energy (electricity and water) in our respective homes and businesses and not receive an exaggerated bill at the end of the month but also it will help our national distributors such as ENDE and EPAL to recover their return on investment.
Also, customers will be able to decide to top up, with AOA 5,000 [USD 7.80] for example, and keep track of what they have paid. Consumers will surely have confidence knowing they can manage their consumption.
In the water sector, we have cases where consumers are charged based on an estimation, which is a loss for the government, and also not fair for our population. A small household may be paying the same bill as a big one.

Is this meter strategy in line with Angola’s efforts to step up energy generation?
Absolutely. For instance, we have one of the biggest combined-cycle power plants in Africa in Angola: the Soyo thermal power station. It’s worth more than USD 900 million. The government is investing billions in the hydro sector for the production of energy, so they are looking for a return on those investments as well.
In terms of distribution, we strongly believe the prepaid meters will be a solution. And, with our Data Centre, we will guarantee an excellent management service of our meters and we will also make sure that we have enough capacity to cover areas with no prepaid meters installed yet.

What was the main business driver behind the decision to start this meter manufacturing project?
All of Angola’s meters are imported, and the market is here. That’s why we’ve been negotiating for more than four years to set up a factory here. Most of our components are imported, so why not invest and create local factories? The labour cost is lower compared to many other countries, especially in terms of salaries, which will be in kwanzas. And, we will have a team not just for production, but also for installation and maintenance.
ENDE has more than 1 million clients without prepaid metres, waiting for them to be installed. With the existing meters being imported, if a client’s meter is damaged, they face a long waiting period to replace it. We will have a 24-7 call centre and technical support team to respond to our clients with meter repairs in record time.

How will the maintenance of Hengye’s meters be different from that for the existing meters?
The difference in our factory is that we will be local. As mentioned previously, our 24-7 call centre and technical support team will be able to dispatch our technicians whenever and wherever there are issues. You can contact us and we will be there. Also, our prepaid meters will be monitored by a data centre, just like Hengye does it in China. Our consumers can report any issues to our technical team and if we cannot repair the meter, we will replace it with a new one. It’s our policy to have a warranty and insurance on all of our products.

When will the factory be operational?
We do believe that construction will be finished by the end of this first semester. We had some delays due to Covid-19. We should be in production by the end of June or early July 2021, and plan to produce about 200 prepaid meters for water and more than 300,000 meters for electricity in the current year. We will produce monophasic, three-phase and MV meters on top of water meters, with a total investment of just above USD 20 million.

Will you operate as an Angolan company?
Yes, Hengye Electronics Indústria SA is an Angolan company with Chinese participation from Zhejiang Hengye Electronics, a prepaid meter factory based in Zhejiang with a production capacity of more than 10 million units per year. We’ve set up a partnership where we Angolans also have participation.
Our objective on top of doing business is also creating jobs. Behind one Angolan employee is a spouse and three kids on average. So, employing one Angolan is impacting five. The project will be employing more than 350 people in the operation once at full capacity, and more than 90% will be Angolans.

How are you managing the technology transfer from Zhejiang Hengye Electronics Company?
We are bringing technology from China to Angola. We are going to be producing, installing and managing prepaid meters and therefore we do expect challenges. However, we are already working hard to have plans such as intense training for our local team to deal with any possible technical issues. One of the challenges we are facing is transferring know-how, as you can expect we will be working with state-of-the-art machineries and equipment.
Because of Covid-19, we haven’t been able to co-ordinate with China to send us technicians, but our local team has been doing an excellent job. We’ve been doing our presentations without senior technicians from China. All of our technicians are locals. They had online trainings and have done an excellent job understanding the product. I am very proud of them. So far, so good.

What other areas of investment is the company assessing?
Our first priority is the prepaid meter factory, but our second investment interest will be in electric cables and other components because we need cables to connect the meters. There is an existing factory that produces cables in ZEE. We are discussing either acquiring this factory or setting up a new one from scratch. This will also help us to create more jobs for our population.

How important was ZEE’s work in your decision to install a factory in Angola?
From my personal experience, ZEE did an excellent job assisting us in acquiring a space with all its infrastructures, with a very efficient and dynamic team. In less than three months, we managed to close an agreement with them. Also, AIPEX [Angolan Agency for Private Investment and Promotion of Exports] did actually advise us on how to register with them and have access to all the great existing benefits to do business in Angola that we ignored previously. I will take this opportunity to thank the two institutions, who did a nice job.

Has Angola improved the ease of developing new businesses?
Yes, it has indeed. We have observed great improvements for the past couple of years. We have our challenges but we are working on it. President João Lourenço travelling the world has helped make Angola more attractive; more investors are interested in the country today. The government has made many things easier. For example, our Chinese partners can obtain their visas online within 48 hours. We’ve recently observed great changes in doing business in Angola.
Right now is the best time to do business in Angola. The opportunities are there and the authorities are very open and welcoming as long as you can demonstrate that you are here to do business and that you have a financial and technical capacity for your investment. We’ve seen big changes and the country does privilege private investment to create jobs.

What role do private companies have in spurring Angola’s economic growth?
The private sector plays a significant role in the economy of a country. Unfortunately, we do ignore or forget that. We shouldn’t be expecting the government to do everything. We should be the ones creating jobs and providing solutions hand-in-hand with the government.

What role do you see your company playing in Angola?
We do believe that Hengye will play a tremendous role as the sole prepaid meter factory in Angola. Beyond creating more than 350 jobs locally, we will also be able to help the government in reducing importation of prepaid meters. We do not intend to be just a factory, but also to create a solid relationship with our national distributors by providing not just prepaid meters, but also various services such as installation, maintenance and training.
Also, we believe that we are opening doors to more foreign investors to invest in Angola. We would like to see an industrialised Angola. We should produce locally whatever we are consuming, and we have laws protecting local production.
Most of the time, people question us about our prices. In our case, Hengye is a meter factory; we don’t do commissions, and our price will not be far from that of the international market.
It’s nearly 20 years since the war ended and in that time great things have happened. The energy sector has grown significantly, but there are challenges in terms of resources and infrastructure. We are also facing a growing population, which is requesting more and more from the government, but the government cannot do everything. We believe that our presence in the market will also be part of those solutions.

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