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STRATEGY FOR THE RATIONAL UTILIZATION OF AGRO-MINERAL RESOURCES AND THE ESTABLISHMENT OF A FERTILIZER INDUSTRY IN ANGOLA

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I INTRODUCTION The agrarian sector or Agriculture in “situ sensu” has always provided most of the basic consumer goods to mankind. This is why many countries seek to organize and maintain a diversified and developed agricultural sector in a bid to ensure self sustained prosperity. Given the potentialities of Angola, in terms of natural, human and technical and material resources, the mineral and geological sectors constitute key elements in the socio-economic development of the country. And this development could also be achieved mainly through the implementation of mineral based projects whereby the mineral resources extracted would, in turn, serve as raw materials for the domestic processing industry in view of its multiplier effects. Angola is situated in the inter-tropical zone where altitude plays a vital role in modeling climatic changes and, thus, it disposes of favorable conditions for various types of agricultural exploration, livestock development and forestry activities.

Even before independence, agriculture has always played a central role within the framework of the production activities in the country by ensuring self-sufficiency in terms of provision of basic consumer goods and has contributed to a considerable extent towards the balance of payments through the export of a diversified range of cash crops. This strategy to re-launch a domestic fertilizer industry in Angola is a joint-venture involving the Ministries of Geology and Mines, Agriculture and Rural Development and Industry and Oil and was launched in the fourth quarter of 2003 with the aim of taking full advantage of the mineral resources potentials and, thus, contributes in the implementation of the food security programme. Other objectives of the programme include, inter alia, the reduction in the importation of fertilizers into the country which is done mainly through subventions; boost agricultural output and cattle industry and promote a domestic fertilizer industry and assist in the diversification of export through the exploration of other mineral resources apart from diamonds.

The strategy also seeks to take stock of and identify mineral and oil based raw materials for the domestic production and, thus, establish poles of mineral, agricultural and petrochemical development susceptible of assisting government efforts towards combating famine and misery, job creation, poverty alleviation and improve the social and economic well-being of the people.

Considering the specific advantages of Angola in the area of agriculture, it becomes therefore imperative to re-launch and develop a domestic fertilizer industry not only as a means to combat famine and poverty alleviation but also in view of its potential in job creation, the restoration of a sense of identity and dignity of the communities and the huge prospects for individual and collective prosperity of the rural population which in 2005 were estimated at 7.480.000 people, or about 51% of the total population in the country. A whole gamut of activities, services and products and transactions relating to inputs and outputs, not to mention revenue collection by government, may be derived from this fertilizer industry Strategy in the country.

The Angolan agriculture has been confronted with the low level of yield per available unitary area, particularly in the farm family. This low level of development of the traditional agricultural sector is


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mainly due to, among other, the use of inadequate equipment and lack of agricultural raw materials. Thus, the Angolan farmer is reduced to a mere producer of subsistence crops and cannot produce surplus for commercialization.

Soil fertility constitutes a determinant factor in agricultural output, and therefore, in competitiveness. In this context and within the set of priorities established, the fertility of soils must be taken into due consideration.

Angola disposes of huge agro-mineral potentials. These include mainly the phosphorites in the Province of Zaire, phosphates in Cabinda, white plaster mould, sulphur and “guanos” in the Kwanza Sul, as well as potassium in the Kwanza and Baixo Congo Basins. This Strategy also envisages first the implementation of an Ammonium project for export and the implementation of smaller projects for the production of granulated urea and ammonium nitrate.

To implement the Strategy, we suggest the establishment of one or several enterprises of public, mixed and private capital for the management of agro-mineral resources in pre-determined areas for prospecting, exploring and commercializing agro-industrial minerals and the production and provision of raw materials to the Angolan processing industry. Thus, the global value of the participation by the State (OGE) is about USD 11,850.000.00 and the total value of the project is estimated at USD 226,910.000.00. It follows, therefore, that the strategy aimed at taking full advantage of the agro-mineral resources in the country to improve soil fertility and boost agricultural productivity, is highly justifiable and commendable.

II TYPES OF SOILS IN ANGOLA

Amongst the great-soil types existing in Angola, the so-called “ferraliticos e psicamiticos” group is predominant and constitute about 79% of the total area in the country. These serve as the backbone for most of the agricultural activity in the country.

In terms of fertility, these soils are characterized by an irregular or weak mineral reserve, weak expression of assimilate nitrogen or phosphorous and by low levels of potassium.

The low levels of fertility in the above mentioned soils is further compounded by the intensive washing during the rainy season and the accentuated tendency of these soils to keep insoluble phosphorous not propitious for crop production.

Acid reacting soils represent about 80% of the total area in the country. The levels of pH have a considerable influence on the absorption of nutrients which is reflected in the development and production of crops.

The low level of fertility is, to a great extent, responsible for the low unitary production average by the farmer, particularly at the informal sector. The table below depicts the productivity gap between Angola and several other African countries with regard to few crops


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AVERAGE UNITARY PRODUCTION FOR 1985/87

(Rural/family agriculture) TABLE 1

Unit of measurement expressed in Kg/ha CROPS AFRICA ANGOLA ZAIRE ZAMBIA ZIMBAB. TANZÂN. NIGERIA IVORY

COAST Cassava Maize Massambala Massango Groundnuts Sweet potato Common Potato. Rice Coffee Wheat

7.758 1.497

819 695 804 695

5.803 8.727 1.815

343 1.475

1.500 400 250 300 300 300

3.000 500 120 400

7.136 868 891 797 747 581

5.055 5.330

894 341 782

3.547 1.921

640 750 593

7.260 9.375 1.103

911 2.750

4.162 1.666

604 545 487 729

2.274 15.998 2.406 1.087 5.707

12.222 1.196

828 820 602 628

3.687 6.841 1.613

470 1.784

11.109 2.098 1.094

945 1.101

13.000 14.000 2.062

524 2418

5.556 732 622 634 970

2.000 12.000 1.164

238 ---

Source: Serafim, F. D. & Russo ª J. – Research on Agricultural Resources in the SADC Group of Countries- Report on Angola

The benefits deriving from the use of fertilizers in the increment of agricultural output was confirmed in tests carried out in various countries during a period of five years. The conclusions were as follows:

IMPACT ON AGRICULTURAL OUTPUT TABLE 2

Fertilizers Irrigation Improved seeds One harvest or more per year Improved soils and other corrective measures

41% 27% 13% 10% 9%

The agricultural output may be substantially increased by offsetting nutritional imbalances through the use of fertilizers and liming to correct the levels of soil acidity.

Rational fertilization and liming constitute, thus, effective means of agricultural production and important factors in ensuring cost-effectiveness of investment infrastructures and are indispensable tools for the development of agriculture in the country.

III USE OF FERTILIZERS AND OTHER SOIL AMELIORATORS IN ANGOLA

During the colonial era, the use of fertilizers and soil ameliorators measures was more predominant in the central region of the country.

In terms of global area, considerable quantities of fertilizers were applied by both the small and medium farmers to grow crops such as maize, potato and wheat.


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The so-called industrial crops such as sugar cane, sunflower and tobacco grown by the medium farmer, as well as vegetables, fruits and the improvement of grazing areas also consumed considerable quantities of fertilizers.

The use of soil ameliorators never attained considerable expression. THE 70’S ( END OF THE COLONIAL PERIOD), The use of fertilizers increased significantly and reached about 76.000 tones in 1971,

72.000 tones in 1972, and 80.640 tones in 1973. Complex fertilizers constituted already 40% to 50% of the total fertilizers used, with a

predominance of those of the type 1:2:1. Amongst basic fertilizers, the nitrogenous fertilizers are the most consumed in the

country as compared to phosphate and potassium fertilizers. Fertilizers are mostly used in the Angolan central region which comprises areas in the

provinces of Huambo, Bié, Huíla, Benguela and Kwanza Sul as compared to the remaining areas in the country

Maize, wheat and potato benefit more from the use of fertilizers than any other crops. The volume of fertilizers used by farmers is considerable taking into account the

important participation of traditional agriculture in the overall production of the crops mentioned above.

AFTER INDEPENDENCE

The consumption of fertilizers declined sharply after independence and was estimated

at 16.000 tones in 1999, 8.000 tones in 2000 and 9.000 tones in 2001. This sharp reduction is not compatible with the aims and objectives enshrined in the

policy for the development of the agrarian sector which calls for an increment of productivity and competitiveness.

The MINADER confirms its recognition of the added value derived from the use of

fertilizers by the traditional agricultural sector in the Angolan central region; indeed, this region has persistently been calling for an increment in the allocation and the availability of fertilizers.

Any programme aimed at re-introducing and promoting the use of fertilizers in the country has, as a matter of priority, to take into consideration the need to reconstitute the agriculture production


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tissue, i.e. the economic operators, the crops and the regions involved and the overall issues related to logistics, cost effectiveness, management of human resources, prices, etc.

At the outset, the following strategic principles should be considered:

ON THE ECONOMIC OPERATORS:

- Efforts should be made to recover the traditional agriculture as the productive base of the

majority of the population and to combat the growing phenomenon of rural exodus - Promote the creation of a domestic agriculture entrepreneurship as a means to “

constitute markets and favor the process of empowerment of the local investors in terms of capital accumulation and acquisition of technical know how required to create employment, combat poverty and finally attract private investment in the constant defense of true national interests”

ON AGRICULTURAL PRODUCTION:

- Priority and, therefore, substantial support, should be given first to the production of the

main crops for domestic consumption, particularly those contributing to food security; - Secondly, priority should be given to the production of crops which respond to specific

consumption needs and also may also be used in the domestic agro-mineral sector;

- Third priority should be accorded to the production of crops for export (to be defined by a survey and a consistent and realistic strategy based on the high level of price instability and world demand and competitiveness.

ON REGIONAL DEVELOPMENT:

- The reality obtaining in the country suggests that at this recovery stage, Angola should opt immediately for a strategy whereby development is not necessarily tantamount to an harmonious expansion of all activities in all regions; thus, to ensure economic growth in the agrarian sector, only those regions with better agro-ecological advantages and socio-economic infra-structures should be selected first

- However, it is also important to undertake small scale activities in those regions which

are left out to avoid the marginalization of local farmers.

According to MINADER, “the maximization of the available means and resources and the rational use of the potential and capacities of the economic operators, regions and the state agencies concerned” define priority interventions in the tables below.

MAIN CROPS TO BE GROWN IN DIFFERENT REGIONS (+/- CAPITAL INTENSIVE SCHEMES)

TABLE 3


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REGIÕNS PROVÍNCES CROPS

NORTHERN

BENGO Roots and cereals, fruits, vegetables and coffee

CABINDA Roots and cereals, vegetables and coffee and pulse crops

LUANDA Roots, cereals, fruits and vegetables

MALANGE Roots, cereals, fruits, vegetables and pulse crops

KWANZA NORTE Roots, cereals, coffee, vegetables fruits, pulse crops and palm oil

UÍGE Roots, cereals, coffee, vegetables, fruits, pulse crops and palm oil

ZAIRE Roots, cereals, horticultural crops, pulse crops and palm oil

CENTRAL

BENGUELA Roots, cereals, horticultural crops, pulse crops and palm oil and industrial crops

BIÉ Roots, cereals, fruits, vegetables and pulse crops

HUAMBO Roots, cereals, fruits, vegetables and pulse crops and coffee

KWANZA SUL Roots, cereals, horticultural crops, pulse crops and palm oil and industrial crops

SOUTHERN

HUÍLA Roots, cereals, fruits, vegetables and pulse crops

KUANDO KUBANGO

Roots, cereals, fruits, vegetables and pulse crops

NAMIBE Roots, cereals, fruits, vegetables and pulse crops and potato

CUNENE Cereals and horticultural crops

EASTERN

LUNDA NORTE Roots and cereals, vegetables and coffee and pulse crops

LUNDA SUL Roots and cereals, vegetables and coffee and pulse crops

MOXICO Roots and cereals, vegetables and coffee and pulse crops

Source- MINADER- Programme for Re-launching the Agricultural Sector 2000/2001

INTERVENTIONS BY IRRIGATED PERIMETER (CAPITAL INTENSIVE REGIME)


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TABLE 4 PERIMETER CROPS

Bom Jesus 1,300 Horticultures, fruits, cereals and roots Caxito 3,000 Horticultures, cerals and rootsVale do Yabi 5,000 Livestock, roots and fruitsMucoso 315 Horticultures, cereals and rootsLucala 250 Horticultures, cereals and rootsBita-Sequel 2,000 Horticultures, cereals, roots and livestockKikuxi 5,480 Horticultures, cereals, roots and livestockVale do Bengo Horticultures, cereals and rootsKiminha/Funda 25,000 Horticultures, cereals and rootsPorto Amboim Cereals, cotton and livestockCavaco 4,100 Horticultures, fruits, cereals, tobacco and rootsCatumbela 4,500 Horticultures, fruits, cereals and roots Humpata 1,000 Horticultures,fruits, cereals and rootsMatala 3,000 Horticultures, fruits, cereals, roots and livestockChibia 1,000 Horticultures, cereals and vegetablesBero e Giraul 600 Horticultures, cereals and vegetablesManquete Horticultures, cereals and vegetablesXangongo 500 Horticultures, cereals and vegetables

57,045

AREA

Source: MINADER- Programme for Re-launching the Agricultural Sector 2000/2001

According to projection requirements of the main nutrients- eg. Nitrogen, phosphorous and potassium per crop and area, contained in the 2000/2001 MINADER Programme for the Relaunch of Agricultural Production, 335.580 tones of the main fertilizer elements would be required and this represents 1.015.000 tones of fertilizers with an average concentration of 35%. Considering that Angola had an estimated population of 13.134.o million people in 2000, the total figure of N+P2O5+K2O represents an average consumption of 25Kg per person.

If the general trend in the consumption of fertilizer prevailing in the country between 1960 and 1971 had been maintained, this capitation would have been achieved in 1982-1983.

To achieve these projections, at short term, seems unrealistic, given the fact that MINADER clearly does not have the required human, material and technical resources. In the above mentioned Programme for the Relaunch of the Agricultural Production, MINADER refers to the need of 34.444 tones of fertilizers to carry out the Programme which, in our view, takes into account its limitation and constraints in terms of project implementation due to the factors mentioned above.

On the basis of the volume of 35.000 tones of fertilizers mentioned in the MINADER Programme above and of a projection of an average of 10%,20% and 25% of the annual growth, the table below depicts a projection of fertilizer consumption for the period 2004-2013.

FORECASTING THE USE OF FERTILIZERS TABLE 5

Unit of measurement used= tone PROJECTIONS 2005 2006 2007 2008 2009 2010 2011 2012 2013


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A –Average ANNUAL rate of increment 38.500 42.350 46.585 51.244 56.368 62.005 68.205 75.026 82.528 90.781 of 10% B – Average annual increment rate of 42.000 46.200 50.820 55.902 61.492 67.641 74.406 81.846 90.031 99.034 20% C – Average annual increment rate of 43.750 48.125 52.938 58.231 64.054 70.460 77.506 85.256 93.782 103.160 25%

IV GLOBAL TREND IN THE PRODUCTION, TRADE AND CONSUPTION OF FERTLIZERS- SADC AS A CASE STUDY

The salient features of the studies undertaken during 1996/97 – 2000/01 is as follows: ON PRODUCTION: Global production of fertilizers has generally stagnated; however, a considerable

increment was registered in Asia particularly in countries like China and India. Considerable reduction in the production of fertilizers was registered in Europe and America.

Europe maintained its traditional leadership in the production of potassium fertilizers

as compared to Asia The production of natural phosphates registered a slow down.

ON TRADE:

There was growing demand for the nitrogenous fertilizers while potassium reached

unprecedented high levels of trade and weaker demand phosphoric fertilizers worldwide.

The USA, China, France and India are amongst the major importers of fertilizers

while the list of exporters include Canada, Russia, USA and Germany There was a growing demand for ammonium and the USA and India were the main

importers an Russia, Trinidad & Tobago and Ukraine the main exporters. There was a considerable decline in the demand for natural phosphates. However, a

final assessment of the world demand for phosphoric acid revealed an increment, the main importer being India and Morocco, Tunisia and South Africa the main exporters.

ON CONSUMPTION:


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The global consumption of fertilizers was generally stable

Africa and South America registered very low levels of consumption of fertilizers.

ON THE SPECIFIC CASE OF THE SADC: By virtue of her considerable scientific and technical infra-structure and important

deposits of natural resources, South Africa is a dominant factor in the production, commercialization and consumption of agro-mineral goods and its derivates (e.g. phosphates, phosphosforic acid, ammonium, simple and complex fertilizers)

All member countries are net importers of fertilizers. With the exception of Mauritius and, to a certain extent South Africa, the unitary

consumption of fertilizers by member countries is very low. The facts above are based on the insignificant impact on the definition of a strategy for the production of fertilizers; however, the following should be borne in mind: a) On long term, world demand for fertilizers will be pushed by factors, such as the levels of

population growth and the increment in the living standards and consequently the increase in demands for food both in terms of quantity and quality.

b) The global economic growth and related and temporary factors of demand/supply will, on

a short and medium term, have a considerable impact on the increment and cost-effectiveness of the fertilizer industry. These factors include climate change, the levels of stocks available globally with regard to consumption, new production capacities and distortions in the market of fertilizers.

c) The International Fertilizer Association estimates that the consumption of fertilizers will

increase between 2.1% to 2.9%s by 2010. It is expected that this increment will be registered in developing countries, particularly in countries of the Southeast Asia and South America where the use of fertilizers did not have a significant impact on the levels of production and productivity. This will be accompanied by a considerable increase in the Gross Domestic Product.

d) Developed countries are expected to experience stagnation in the levels of demand and a

decline in their production capacity due to increment of imports from Asia, Eastern Europe and South America.


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V OCURRENCES OF NATURAL RESOURCES AND THE PROBLEM OF SOILS IN ANGOLA

The main raw materials used in the fertilizer industry include: Natural gas (mineral naphtha or coal) Natural phosphates Potassium Sulphur and white plaster mould

Angola has considerable reserves of associated or non-associated NATURAL GAS. Natural gas deposits are estimated at 10 billion square feet and the production of associated gas reaches an average of 1.2 billion square feet per day of which 65% is burnt. During the next five years, it is estimated that the production of associated gas will increase considerably as a result of the important deep offshore oil discoveries This trend in the increment of natural gas production may be sustained for a long period of time, since more than thirty (30) new oil discoveries are yet to be developed.

The “offshore” location of the oil/gas production centers, coupled with the inexistence of a domestic market and lack of infra-structures for distribution have posed important constraints in the efforts to tap this important natural resource.

NAPHTA derives from oil refinery. Its production in the country (Luanda Refinery) reached 75.766 MT in 2002. The establishment of a new oil refinery in Lobito with a production capacity estimated at 200.000 barrels of oil per day and 31.200 barrels of naphtha per day would increase considerably the production of naphtha in the country.

Natural phosphates are the main source of phosphorous. Angola has few deposits of organic phosphates, notably the “guanos” around N’Zeto, Sumbe and Lobito; however, the mineral phosphates are of greater interest.

Angola possesses various reserves of MINERAL PHOSPHATES distributed by four different groupings and locations: The deposits of phosphates of Cabinda Granuled an non-consolidated phosphate reserves of Zaire The phosphates of Bengo Associated and carbonated phosphates in various locations

The main occurences, recognized and surveyed are located in the provinces of Cabinda and Zaire. The lack of survey notwithstanding, it could be asserted that the occurrences of these natural resources in the aforementioned provinces may trigger an interest in their economic exploration. Known reserves in the Zaire area, though limited, are estimated at 10 million tones and are relatively ease to explore. This limitation, coupled with the existence of dispersed but easily extractable


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reserves, suggest that any immediate economic interest in tapping this resources should be geared towards the production of grinded natural phosphates for domestic consumption or eventually for export to neighboring countries using rudimentary technical know how and low level of financing.

The assessment survey on Cabinda is not yet concluded but it is strongly believed that there is an estimated concentration of hundreds of million of tones of high quality reserves. Therefore, there is a strong possibility of obtaining high level, (between 78% and 83% BPL) of concentrated phosphates with low levels of toxicity and the massive production of very high value added chemical goods for the domestic market and for export.

By and large, few occurrences of POTASSIUM SALTS have been discovered in the country, particularly in the basins of the Baixo Congo and Kwanza. The drilling of wells for assessment survey or oil production on the onshore concessions of Cabinda and Kwanza confirmed the existence of potassium salts. Over three hundred wells were drilled in the onshore of the Baixo Congo and Kwanza basins and few of the wells drilled revealed different types of salts distributed along irregular layers. For the survey on the Kwanza onshore, it was not possible to collect data which could establish the occurrence of potassium. However, the survey done by the Gulf oil Company in the Baixo Congo onshore, particularly in the areas of Dingue and Catata of Cabinda revealed the presence of potassium deposits estimated at 20 million and 7 million tones respectively. There was also indication of potassium salt along the coast of the Province of Zaire.

Further tests will have to be carried out on the Cabinda onshore to confirm the occurrence of potassium and to conduct feasibility studies.

The firm TOTTAL E&P ANGOLA, in its capacity as the former operator of the Kwanza onshore Association, will be engaged for the collection of data relating to the occurrence of potassium in this area.

The occurrence of SULPHUR in Angola is normally associated with Mould and is obtained through reduction; however, it is very difficult to establish its reserves because of its irregular occurrence. In Dombe Grande, few quantities of sulphur were used for the production of sugar.

Deposits of Mould in the area of Bengo, Sumbe, Benguela (Dombe Grande), Lobito (Hanha). For an overall assessment of these reserves, it is imperative to conduct a geological survey and identification.

Dolmitic limestone or a combination of the two have already been identified in the Sumbe; adjacent to the mould producing area and the reserves will soon be subject of a geological survey and assessment. This dolmitic limestone may be used as complements or correctives in the Project now underway in the Province of Zaire for the direct application of phosphorites, as well as of the Sumbe Mould Project which is normally used for soil correction or as an addictive.


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VI. PERSPECTIVES FOR THE LAUNCHING OF A FERTILIZER INDUSTRY IN

ANGOLA

The widespread use of fertilizers in Angola is gravely affected by the challenge posed by prices mainly due to the extreme economic and technical deprivation of the small scale farmers and the type of crops produced by these farmers.

Therefore, in attempting to advocate the need for a fertilizer industry in the country, the problem of the cost of production becomes of paramount importance. Like in other industrial production sectors, the processing or technical production of fertilizers requires a minimum level of cost-effectiveness. If the levels of production are below certain acceptable standards, the costs become increasingly high and unsustainable and cost-effectiveness could not be guarantees In brief, few but fundamental parameters should be taken into consideration before establishing a fertilizer industry. These include:

Those related to the production capacity of the enterprise and market demands;

The magnitude of the industry and the production costs

Location of the Industry

Technologies used and the goods to be produced Pollution is yet another relevant aspect to ponder about before establishing a fertilizer industry. There is a growing and generalized concern over the need to implement strict and binding measures for minimizing and controlling the pollution caused by fertilizer industries. NITROGEN INDUSTRY

Thanks to the technological development in the production of ammonium, nitrogenous fertilizers can now be produced essentially from ammonia which is obtained from atmospheric nitrogen which derives from hydrocarbon; The technological process involved in the production of ammonium could be divided into three phases, namely: preparation of substitute natural gas, purification and synthetic ammonium.

The following are the most commonly known nitrogenous fertilizers produced industrially through a varying degree of manufacturing process sequence charts:


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Ammonium Sulphate Ammonium Sulphate-nitrate

Ammonium nitrate and its solid solutions Ammonium Chloride Calcium nitrate & Magnesium Sodium nitrate Potassium nitrate Urea

In the 50’s, the production of ammonium sulphate occupied world stage but this trend was reversed in the 70’s when urea and the group of fertilizers consisting of ammonium, nitrogenous solutions, ammonium phosphates and others became first priority.

PHOSPHATED FERTILZER INDUSTRY

Phosphoric acid derives from the industrial treatment of phosphated rocks and the commonly used phosphorous fertilizers include simple or complex super calcium phosphates (in powder or granulated form) The industrial processing of natural mineral phosphates may be done through two distinct procedures, namely by acid treatment or heat treatment.

Acid treatment consumes considerable volumes of sulphuric acid and a lesser amount of nitrate acid. The main byproduct derived from this treatment which is not popular due to its high degree of toxicity and pollution is the phosphogypsum.

The alternative to acid treatment is the heat treatment which requires cheap sources of energy.

Tests carried out during the last stage of the colonial period by the Institute for Agronomical Research of Angola, revealed that thinly grinded phosphorites constitute an efficient and cost-effective means to correct phosphorous deficiency of soils in the country. The high level quality of a phosphorite from Nzeto was particularly mentioned during the tests.

POTASSIUM FERTILIZER INDUSTRY

The main source of potash is the potassium chloride and the dual salt K2SO4. 2MgSO4. The industrial production of potash includes the exploration of shallow or underground deposits, refining chloride or sulphate potassium through generally simple and common process.

However, more specific constraints tend to impact directly and negatively on the activities of farm holder unions, namely:

Appropriate selection and management of raw materials and other production means to ensure cost-effectiveness.


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An array of other universal factors of particular relevance, such as energy, water, communication outlets, safety and security, human resources, etc, which should be taken into consideration throughout the whole process.

To this effect, the fertilizer industry should, as much as possible, resort to local raw materials and seek to take full advantage of them and contribute to the foreign exchange economy. It also should seek to meet the growing agricultural needs of the country. With regard to fertilizers for domestic consumption, particular attention should be given to past experiences, considering particularly that updated research does not exist in the country. It is also suggested the production of both simple and complex types of fertilizers. Considering the main conditions prevailing in the country which comprise climate/soil/crops, the production of the following types of fertilizers is highly recommended:

i) The fractional provision of nitrogen is indispensable and the dominant fertilizer should be in the form of ammoniacal nitrogen and not nitrate. The types of nitrogenous fertilizers most suitable to conditions prevailing in the country include ammonium sulphate, ammonium sulphanitrate, ammonium nitrate and its respective solid dilution

ii) The use of phosphated fertilizers should be carried out on the basis of high consumption coefficient. However, both simple and complex soluble phosphated fertilizers should be provided in its granulated form.

iii) The most important potassium fertilizers include potassium sulphate and potassium chloride. Chloride provides for a cheaper potassium unit but it is not tolerated by most crops. The sulphate has the advantage of containing sulphur.

iv) The provision of sulphur becomes more cost-effective by its inclusion in the production of complex fertilizers in a minimum content of 5% expressed in basic form

v) The fertilizers mentioned above should, as much as possible, have a dung balance as shown below in view of the imposition of fractional nitrogenous fertilizers and the need to limit the provision of complex fertilizers. ( It is estimated that only 1/3 or ¼ of the total nitrogen is used in deep fertilizing:

N – P

1 : 2 : 0 1 : 3 : 0

N – P – K 1 : 2 : 1 1 : 2 : 2 1 : 3 : 1 1 : 3 : 2

Furthermore, it is suggested, in view of several constraints currently prevailing in Angola and the need to preserve economic aspects and for conservation purposes as follows:

i) The use of granulated fertilizers which are more user-friendly


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ii) Opt for high concentration of nutrients which a more cost-effective, in terms of transportation, supply and distribution

iii) Avoid the production highly hygroscopic fertilizers in view of the difficulties in its handling, storage and application.

The colonial power decided to waive some of the industrial conditionalities thus far imposed on the colony, in view of the growing use of fertilizers and the pressure exerted on an agricultural sector whose main objective was to provide raw materials to the colonial power. Thus, around 1972/1973, new investment ventures for the production of fertilizers were hatched but unfortunately they never materialized.

An exploration and processing complex was established in the 80’s in Mucula, Province of Zaire with a production capacity of 1.500 tones of grinded phosphorite on the basis of a technological process comprising sifting, washing, grinding and bagging. The conditions then prevailing necessitated the closure of this complex which remains inactive.

VII MAIN ACTIVITIES AND STRATEGIC OBJECTIVES

Angola has been grappling with critical problems in manpower training, water and energy supply transport and commercialization networks, technical and operational problems in the ports and telecommunication services. All these pose serious challenges in the development of the country. In order to overcome these challenges which by and large affect the whole societal tissue, bold and far-reaching interventions are required.

The Project for the rational utilization of agro-mineral resources and the launching of a fertilizer industry requires a SPECIFIC REFERENCE POINT WITHIN THE INDUSTRIAL AND AGRICULTURAL FRAMEWORK and an all-encompassing approach and undertaking by all relevant government agencies.

The Table below contains proposal of a methodological guide of the strategic issues and activities to be tackled at short and long terms (2004-2006 and from 2007 onward, respectively) by the Ministries of Geology and Mines, Oil, Industry and Agriculture and Rural Development.


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MAIN ACTIVITIES AND OBJECTIVES BY THE ENTITIES MOST CONCERNED TABLE 6

PHASES MAIN ACTIVITY TO BE UNDERTAKEN CONCERNED ENTITY

I (2004 – 2006)

→ UNDERTAKE STUDIES AND CONSOLIDATE DATA ON THE OCCURRENCES OF THE ECONOMIC “QUANTUM’ VIABILITY OF THE EXPLORATION OF;

. PHOSPHATES AND GUANOS . SULPHUR AND SULPHUR BASED RAW MATERIALS . POTASSIUM . LIME (dolomitic limestone)

MINISTRIES OF: GEOLOGY/MINES & OIL

UNITARY CONSUMPTION OF FERTILIZERS PER HECTAR

. ESTABLISHMENT OF FUNCTIONAL SYSTEMS FOR FERTILIZER DISTRIBUTION

. POPULARIZATION OF THE USE OF FERTILIZERS . PROMOTION OF RESEARCH/TESTS ON SOIL FERTILITY AND

FERTILIZATION AND OTHER CORRECTIVE TECNOLOGIES .ESTABLISHMENT OF EFFICIENT SUPPORT SERVICES

MINISTRYOF AGRICULTURAL AND RURAL DEVELOPMENT

→ RELAUNCHING OF PHOSPHORITES PROJECT IN THE PROVINCE OF ZAIRE

MIN. GEOL. /MINES

→ FEASIBILITY STUDY OF A PROJECT FOR THE PRODUCTION OF AMMONIUM AND UREA → DECISION ON THE AMMONIUM AND UREA PROJECT

MIN. OF INDUSTRY MIN. OF OIL

II DE

2007

A

2025

→ INCREMENT IN THE UNITARY CONSUMPTION OF FERTILIZER PER HECTAR BY:

. INTENSIFYING EFFORTS IN THE AREAS OF DISTRIBUTION, POPULARIZATION, RESEARCH, TESTS AND TECHNICAL ASSISTANCE

→ STUDIES ON AGRO-MINERAL DEPOSITS → DEFINITION OF PROCESSUAL ALTERNATIVES IN THE PROCESSING OF AGRO-MINERAL RESOURCES IDENTIFIED → TECNICAL AND ECONOMIC ASSESSEMENT OF THE PROCEDURAL ALTERNATIVES OF THE SELECTED PROCESSING VARIABLES → PROJECT WRITE- UP → DECISIONS ON INVESTMENT → CONSTRUCTION AND LAUNCHING OF FERTILER COMPLEXES

MIN. AGRIC. & RURAL DEVELOPMENT GEOLOGY & MINES AND OIL MINISTRY MIN. OF INDUSTRY MIN. OF INDUSTRY MIN. OF INDUSTRY MIN. OF INDUSTRY


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VIII PHASES IN THE DEVELOPMENT OF THE EXPLORATION AND PROCESSING OF AGRO-MINERAL RESOURCES

The main determinant factors and constraints in the exploration and processing of agro-mineral resources have been identified and examined in the following table:

BRIEF ANALYSIS OF THE DETERMINANTS IN THE EXPLORATION AND PROCESSING OF AGRO-MINERAL RESOURCES

TABLE 7 INTERNAL SET UPO ESTERNAL SET UP

ACTIVITIES CONSTRAINTS FAVOURABLE CONDITIONS

. Very young population and very keen to learn . High illiteracy rates and low levels of school attendance

. Country comparative advantage in fertilizer production, in view of the availability of agro-mineral resources. Angola has conditions to aspire leadership position in the production of agro-mineral derivates

. .

. Considerable existence of labor force keen to support the development of the country . Scarcity of trained and qualified human resources . .

.

. Urban unemployment, poverty, security related problems and the issue of reintegration of hundreds of thousands of people

.

. Vast territorial extension with abundant water resources and biodiversity . Áreas not densily populated

.Benefits likely to be accrued by the export ammonium, phosphated rocks (e.g. phosphoric acid) and fertilizers to the countries of the region within SADC Regional Integration Imitative

. . Low fertility levels of soils in most areas of the country

. Excellent conditions for the production of diversified crops and types of agricultural exploration, livestock and forestry .

. Low agricultural productivity due to the use of rudimentary technology, lack of agricultural inputs, extension services, inadequate access to credit and incipient commercialization schemes

.

.Prospects for ensuring self-sufficiency in most of food crops and for export of agro-industrial goods

. Activities related to the exploration and, processing of agro-mineral resources may attract international investors

. Existence of a considerable group of traditional farmers

. Lack of adequate human, technical and financial resources and support infra-structures for rural development CONSTRAINTS

. . . Great geological and mineral potential of agro-mineral resources

. Incipient knowledge and identification of agro-mineral resources

. .

. Occurrences of agro-mineral resources not adequately identified and quantified.

. High costs of mineral prospecting, exploration and transformation,

.

. Availability of the main raw materials required for establishing a domestic fertilizer industry ( e.g. natural gas, phosphorites, potassium, sulphur and a variety of other raw materials

.Problems of the actual dimension of the internal market which does not allow the introduction of new and adequate production capacities; and the affordadability of prices

.Excessive technical dependence in the establishment of fertilizer industries in developing countries

- .

.Excessive vulnerability of African countries within the framework of globalization characterized by stiff and unprecedented competition.

. High level of degradation of the existing infra-structures, particularly energy and water supply, roads and telecommunication services


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. Absence of a rational and harmonized multimodal transport system

. . Trade barriers imposed by developed countries, particularly on value added goods

. Absence of strong domestic economic groupings . . Excessive dependence on external financing-

.

. Strategies by multinational enterprises to shape the economy policies of developed countries and dictate the world economic order

. Excessive burocratic machinery .

.The interest of rich countries to see Africa as a source of cheap labor force, and raw materials

The following matrix provides the main issues to be considered in order to take full advantage of agro-mineral resources and for the launching of a fertilizer industry.

TTABLE 8 STRATEGIC MATRIX


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AREAS MAIN ELEMENTS

INFRA-STRUCTURAL RESOURCES REQUIRES FORTHE PRODUCTION OF FERTILIZERS

. Natural gas. . Phosphorites . Potassium. . Sulphur/sulphur based raw materials . Energy. . Water availability. . Other raw materials, ancillary and energy materials . Transport infra-structure (railways, roads, maritime

transport, ports, etc).

CONSTRAINTS IMPOSED BY THE EXPANSION IN THE USE OF FERTILIZERS

. Logístics for fertilizer distribution communication infra-structures. Storage and distribution channels.

. Prices and policy on fertilizer prices . Measures to stimulate and promote fertilizer consumption (

subsidies, credit, etc) . Agro-Technical . . Organization of Support, Promotional and Consultative

Agricultural Services. . . Agriculture research relevant to soils and crops.

COURT RELATED ISSUES FOR INDUSTRIAL PROJECTS

. Project selection. . Feasibility Studies. . Market Survey. . Project Engineering. . Project dimension and location. . Impact of the projects. .Project Investments. . Financing, Organization and Assessement. . Project Approval and selection of partners. . Alternative Implementation modalities (If necessary).

EDUCATION AND TRAINING (HUMAN RESOURCES)

. Active public policies in the areas of education, training, capacity building in science and technology

Bearing in mind the forces at play and the constraints mentioned in table I and the certainties and uncertainties referred to in table II (see page 89 - 91, of the Strategy), it is proposed a gradual but effective strategy to be implemented in two Phases hereby referred to as Phase I and Phase II. Phase I (2004 – 2006): This is the initial phase of a three year duration whose main objective is

to prepare conditions for a realistic decision on the development of concrete and rapid projects leading to fertilizer production in the country. During this Phase studies will be carried out on the basis for the development of an ample and sustainable ago-mineral sub-sector, with particular emphasis on the exploration and transformation of phosphates, guanos and dolomitic limestone for domestic consumption and possibly export; the studies will also concentrate on the decision to be taken regarding the viability of the production of ammonium/urea from natural gas. For the execution of this phase of the strategy, funds have been allocated in the Government budget for 2004 and additional resources will be incorporated for the years 2005 and 2006.

Phase II (2007 – 2025): This phase marks the culmination of all the activities related to the maximum utilization of agro-mineral resources and entails not only the satisfaction of domestic needs but also the export of a diversified gamut of high value added finished and semi-finished


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goods. It is supposed to run up to 2025 and aims essentially at integrating fertilizer production within a widest possible Cluster.

STRATEGY SCENARIOS: On the basis of the prevailing conditions within the agricultural sector and the administrative division of the country, the MINADER intends to distribute the main areas of the strategic sectors contained in the Investment Programme into four (04) Strategic centers, namely northern, southern, Eastern and central. This will facilitate the distribution and commercialization of locally produced fertilizers with the direct participation of the domestic extractive and processing industries involved in the implementation of the Strategy.

For the implementation of the strategy, four (04) scenarios were devised which may assist in selecting the most appropriate framework for the development of agro-mineral industry for the production of fertilizers in the country. These scenarios are as follows: � SCENARIO I: This scenario provides for the establishment of a parastatal enterprise with exclusive rights over the production and exploration of agro-mineral resources in the whole country...

The objective is clearly to provide agro-mineral based raw materials for the production of fertilizers by a parastatal or a capital mixed enterprise and the exportation of the surpluses. This scenario has the advantage of both ensuring the supply of raw materials for the production of fertilizers and the availability of fertilizers at affordable prices. However, it is necessary to provide this parastatal with the required technical and financial resources to carry out the exploration the mineral and industrial resources in the earmarked areas. There is a great degree of State control and oversight of the activities undertaken.

The disadvantages inherent to this scenario include the huge financial resources required for its implementation and the lack of skilled manpower for the production of agro-mineral goods or its derivates. All these constraints may cause delays in the implementation of the strategy. � SCENARIO II: Under this scenario, local and foreign private investors are invited to play a leading role in the exploration and processing of agro-mineral based resources ant the supply of raw materials to private factories for the production and commercialization of fertilizers at subsidized prices. The State continues to play its traditional role as a licensing, promoting and oversight agency. A major advantage of this scenario is the fact that the State is not required to provide financial contribution. The commercialization of the goods obeys the rules of a market economy and the State collects all the revenues accrued from the activities involved.


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However, the control of strategic mineral resources and its derivates may escape state control and remain almost entirely in the hands of the private sector which could consequently jeopardize vital national interests. This is one of the main disadvantages. If restrictions are not imposed on the exportation of fertilizers, there would be a real danger of Angola reverting back to its earlier position of net importer of fertilizers and consequently jeopardize the goal of attaining self-sufficiency embodied in the Strategy and, in the final analysis, defeat the overall goal of improving the food security situation in the country. � SCENARIO III: This scenario provides for an active participation of parastatals and mixed capital enterprises in the exploration of phosphated rocks for the supply raw materials to the fertilizer industry. On the other hand, the rights for the production of mineral based soil ameliorators shall be granted to private national and/or foreign entities which may equally supply domestic fertilizer industries or export their surpluses, under the terms of an agreement with competent state agencies. This scenario allows, therefore, for the establishment of infra-structures to facilitate the distribution and commercialization of fertilizers countrywide with the participation and harmonious coexistence of private and public entities. The State will oversee all the activities undertaken, stimulate and promote all other projects and ensure the materialization of the overall objectives contained in the Strategy. However, the scenario allows for the establishment of a monopoly in the exploration of phosphated rocks with a marginal involvement of the private sector and the proliferation of fertilizer industries in the country which would lead to a stiff domestic competition and massive exportation of fertilizers to the detriment of domestic needs. It should be pointed out that the scenario provides equally for the implementation of a Project for the production of ammonium for export and the implementation of projects for the production of granulated urea and ammonium nitrate.

It also should be pointed out that with the implementation of these projects, bases would have been established for the production of nitrogenous fertilizer in the country. A mixed enterprise will be established for the production of ammonium and urea with Sonangol representing the State with 25% of the shares. During the construction and take-off stage, 2.500 workers will be involved and new jobs may be created thereafter. � SCENARIO IV: This scenario provides for the participation of the private sector in the whole strategy implementation strategy, through bids; thus, the role of the State will be solely to promote, regulate and oversee the activities of the agricultural sector, regulate the import and export of


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fertilizers on the base of specific contractual programmes and ensure regular supply of goods to the domestic agricultural industry at reasonable prices. Under this scenario, therefore, the State does not contribute financially in the whole productive and commercialization processes; the principles of market economy are applied and revenues collected from projects under implementation. All these could be considered as an advantage. However, the liberalization of the activities may weaken the control and oversight role of the State on the real Project implementation and the immediate satisfaction of the real needs of the country in terms of stimulating and boosting agricultural activities at desirable levels. � OPTING FOR SCENARIO III In view of the above, it is suggested that SCENARIO III be opted for. If this suggestion is acceptable, therefore, the role of the State will be to stimulate and promote all Projects geared toward the implementation of the strategy as a whole whereby private and public initiatives will co-exist harmoniously. To this effect, the State should contribute with a minimum share of 30% (or USD 3,280.000.00) in the investments to be made for the implementation of geological-mineral related activities for the years 2005 and 2006 while the private entrepreneurial sector and commercial banks will contribute 70% of the shares or the equivalent of USD 5,810.000.00. With regard to industrial investments in projects for the production of Sulphur and potassium, it is suggested that the State contributes 25% of the total value or the equivalent of USD 4,750.000.00 and the private sector with 75%, or the equivalent of USD 14,250.000.00. As far as the projects for the production of ammonium and urea are concerned and estimated at USD 650,000.000.00, 70% of this amount or (USD 455,000.000.00) should be contributed by commercial banks and 30% or (USD 195,000.000.00) contributed proportionally by both private and state enterprises. More specifically, state enterprises should contribute with 25%, of this amount or USD 48,750.000.00 and the remaining 75% or USD 146,250.000,00 is to be contributed by private enterprises. Regarding agricultural related investments, the activities should be developed according to an internal plan established by MINADER and with strict observance of the budget allocation of USD 3,820.000.00 provided for in the State budget to meet the needs of fertilizers and support farmers in the country.


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The total value of the project is estimated at USD 226, 910.000,00 and the State is expected to contribute a total amount of USD 11,850.000.00 Considering that Angola possesses extensive agro-mineral resources and conditions susceptible for the establishment of a domestic fertilizer industry and on the basis of existing studies undertaken on the establishment of a phosphate based agro-mineral industry, MINADER should consider the inclusion of all the activities contained in the Strategy in a Project bankable Portfolio within the framework of the NEPAD (PDDAA/NEPAD) Detailed Programme for the Development of Agriculture in Africa

IX GENERAL POLICY AND INFLUENTIAL ACTIVITIES AND MEASURES Project execution requires an adequate framework and the necessary conditions and atmosphere conducive to attract investors, minimize risks or contingencies. To carry out the initiatives earmarked in the strategy, other factors have also to be considered, as follows: GOVERNMENT POLICY Research done on government policy and particularly on the advantages to be derived from selected activities in the country reveals that the sectors of education, taxation, health care, anti-trust, environmental, monetary and fiscal regulation are often the most relevant. Thus, considering the conditions and the situation now prevailing in Angola, the strategic intervention by the government in the economic and social life, by way of stimulating the development of the “social capital” and regulating and overseeing the overall activities in the country is extremely important, in order to ensure economic growth. PRIVATE INVESTMENT A realistic appraisal of the challenges faced by the country seems to indicate that the private sector has a crucial role to play in the implementation of projects to be developed under the current strategy. It is, therefore, necessary to intervene within the framework of private investment in order to reach balanced agreements, ensure the attainment of the national political, economic and social objectives and, as far as possible, to have a say in the economic and strategic decision making, naturally with due regard to the legitimate and just interests of our external partners.


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The participation of Angolan citizens in the foreign based capital investment seems to be an interesting trend to explore, particularly in view of the fact that privatization may be an instrument for the emergence of national economic groupings.

GOVERNMENT INFLUENCE AND POLICY OPTIONS PROTECTION POLICY Few mineral and industrial production activities need certain temporary protection measures to ensure their survival given the stiff concurrence prevailing in the market.

POLICY ON PRICES Considering the eventual importance of fertilizers in the process of agricultural development and in view of the very low economic power of the majority of the producers and the need to create an environment conducive to job creation, it becomes imperative to provide for adequate measures to ensure the provision of fertilizer to the farmers at affordable prices.

POLÍCY ON CREDIT Currently, farmers are clearly marginalized in terms of access to credit. The majority of farmers suffers from economic deprivation and therefore can hardly resort to the use of new agricultural technologies, including fertilizers. Only the access to credit combined with the indispensable technical assistance will ensure the much desired popularization in the use of fertilizers.

LEGAL JURISDICTION The mineral activity is generally regulated by Act n. º 1/92. Within the spirit of the aforementioned Act, it is suggested the establishment of a parastatal enterprise or mixed capital enterprise with rights over certain agro-mineral areas and which will devoted to the prospecting, exploration and commercialization of agro-mineral industrial goods and supplying raw materials to the fertilizer and related industries. It is suggested that the Angolan counter-part, including possible national private partners should have minority shares in the agro-mineral ventures or enterprises likely to be established. Notwithstanding the need for a State presence and intervention, selected strategic partnerships are strongly recommended in the investments for the rational utilization of the agro-mineral resources and for the establishment of fertilizer or related industries in the country.

Given the financial and technical constraints, compounded by the huge mass of capital required to implement mineral and fertilizer industry projects, specific revenues or budget lines should be earmarked to ensure state participation in national enterprise.


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POLICY ON SCIENCY AND TECNOLOGY Capacity building is extremely important, particularly the training of manpower in order to stimulate interest in knowledge and applied research and the use of new and innovative technologies.

The Government has an important role to play in this area. Though in its embryonic stage, the National Institute of Science and Technology should come openly in support of this Strategy, particularly through the establishment of research networks and partnerships to ensure applied research activities in agricultural sciences and basic productive related systems requiring low and medium levels technologies

X. PROSPECTS ON COSTS AND FINANCING FOR 2004 and 2006

(PHASE I)

To implement the activities provided for in the first stage of the Strategy and taking into consideration the adoption of Scenario III, the investments are estimated at USD 226,850.000.00, with a State participation of USD 11,850.000.00. The description of the activities and the annual contribution by the State and the private sector are detailed in Table 9. The activities to be undertaken for the year 2004 have already been provided for in the State budget (OGE).

XI EXPECTED RESULTS It is expected that the Strategy will bring about tangible and all-encompassing results and a harmonious and self-sustained development of the productive sectors, particularly the agrarian, mineral and industrial sectors. The overall results expected from the implementation of the Strategy are inter alia the following: Stimulate and increment the production of strategic agricultural goods, particularly by

the traditional sector mainly through the increment unitary production and productivity. Recovery and extension of the basic infra-structural network relevant for the increment

of production and productivity. Improvement of the social and economic conditions of the population, particularly the

rural population and the inherent reduction of poverty, famine and rural exodus. Improvement of knowledge of the mineral potential of the country and updated mineral

and geological data.


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Contribute towards social and economic development of the country through the rational utilization of its mineral resources as raw materials for the domestic processing industry in order to reduce or substitute imports and boost exports.

Criating new industries. Modernizing the industrial tissue. Increasing jobs by creating new Job generating entities. Increasing the industrialization index. Increasing the contribution of the processing industry to total GDP.

Attracting domestic and Foreign Private Investment. Expansion of applied research and development and increment f production and

productivity. Improving the national balance of Trade. Increasing the average growth rate of total GDP. GDP increment/ Head.

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