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GOVERNMENT OF ANGOLA

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									                              GOVERNMENT OF ANGOLA

                UNITED NATIONS DEVELOPMENT PROGRAMME

                                       Project Document

ANG/03/011 – ANGOLA ENTERPRISE PROGRAMME – SUPPORT TO THE
 DEVELOPMENT OF THE MICRO ENTERPRISE SECTOR IN ANGOLA


                                             Brief Description: The project seeks to promote the
          Classificação Temática             development of a diverse, robust, micro, small and
                                             medium enterprise sector in Angola. This will be
   Sector ACC                         02     achieved by supporting a process to build consensus
   SAS                               002     around a common vision and a national strategy for
                                             micro and small business development. As a result
  Inicio do Projecto: 01 de Janeiro de 2004
  Fim do Projecto: 31 de Dezembro de 2006
                                             of investments contributing to improve the enabling
                                             environment; expanding the supply of micro and
                                             small business credit, redirecting the offer of
vocational training towards the market and introducing pilot models of business development
service providers, employment will be generated and incomes raised, making an important
contribution to the Government‟s Interim Poverty Reduction Strategy. It will also contribute to
the establishment of a knowledge base on informal, micro and small business sector in Angola.

The initial phase of this innovative Public-Private Partnership will be co-funded by UNDP (US$
1 Million) and ChevronTexaco (US$ 3 Million) in the framework of the Angola Partnership
Initiative formally launched by ChevronTexaco‟s Sustainable Development Company in
November 2002. During the implementation of the programme UNDP will mobilize additional
donors to support the programme.


On behalf of:              Signature                Date                        Name and Title



Government:          _____________             _________         ____________________________


UNDP:                _____________             _________         ___________________________

                                                                        Date:




                                               1
INDEX


Section                                                                      Page


Index…………………………………………………………………………………..…02

Umbrella Project Document on Enabling Environment…………………………………03

Annex II – Results Framework – Enabling Environment…….....…………………..…...17

Annex III – Microfinance Component………...…………………………………..……..20

Annex IV – Results Framework Microfinance Component…...……………………..….31

Annex V – Vocational Training Component…..……………………………….…..……33

Annex VI – Results Framework Vocational Training Component…….……...………...41

Annex VII – Business Development Services & Business Incubators Component......…44

Annex VIII – Results Framework BDS & Business Incubators………………..…......…56

Annex IX – Budget…..…………………………………………………………………..59

Annex I – Memorandum of Understanding UNDP – ChevronTexaco……….………....60




                                        2
PART I.A.      SITUATION ANALYSIS

A.1    Overview of the Micro and Small Business Sector in Angola

Since the early 1990s, Angola has been struggling to achieve a complex double
transition: from war to peace and from a state-controlled economy to a market oriented
one with greater popular participation. The challenges are significant but progress is
being made on both fronts.

The country has experienced decades of economic distortions, caused by the centrally
planned economy adopted in the years following independence in 1975, together with the
war which lasted over 30 years and severely limited movement of resources around the
country. This has left its mark on the country in the form of high numbers of Internal
Displaced Persons (current estimates vary between 2.3 and 4 million people), the
destruction of much social and economic infrastructure, structural constraints related to
land, demography, agriculture and human resources; and institutional weaknesses in the
public and private sectors. However, since the signing of the peace treaty on April 4,
2002, even while facing continued high inflation, the Angolan economy has begun to
show dramatic signs of recovery.

The population of Angola today is approximately 13 million, with 50-60% living in urban
centres. The growth rate is high, with the fertility rate at an average of 7.2 children per
woman one of the highest in the world. Over two thirds of the population live in poverty,
while almost one in three Angolans are extremely poor. The last Household Budget
Survey conducted in 2000 –2001 shows a further increase in inequality in the country
with the proportion of population living in extreme poverty estimated at almost 24 %, a
substantial increase from levels recorded in 1995. Angola currently ranks 164 out of 175
countries on UNDP‟s Human Development Index for 2003, and the Millennium
Development Goals seem distant to achieve.

Angola is rich in natural resources, particularly in terms of agricultural and mineral
assets, however economic has activity collapsed in almost all sectors except oil and
diamonds. Today the country is heavily dependent on imports and highly vulnerable.
Angola experienced serious macroeconomic instability characterised by very high
inflation (peaking at 12000% per annum in July 1996), persistent fiscal and monetary
imbalances and under- investment in the social sectors. There are two key challenges
confronting the Angolan economy today. The first involves making better use of oil and
diamond revenues to reduce widespread poverty and the second involves expanding and
diversifying economic production. These two challenges are very much linked, as it is
only through the rebuilding of the production and service sector that Angola will be able
to provide employment and raise incomes. Also as virtually all inputs in the production
process with the exception of unqualified labour currently must be purchased abroad, the
domestic cost of production is extremely high. If productive chains may be rebuilt within
Angola, prices will fall, with corresponding benefits for all the population.




                                             3
Angolan small and medium enterprises face tremendous difficulties as they fight to
survive and grow in this volatile economy. The formally registered enterprises are being
squeezed between the officially limited profit margins and high taxes: the economic
police check that no more than a 25% mark-up is being charged to the customer while a
combination of monthly and annual taxes produce an effective tax rate on profits of 47%,
which leaves little to the owner of the business. There is a paucity of reliable data
regarding the activity in this sector: for example official figures show that between 1994
and 2001 13,636 new companies were registered, but there is no further data regarding
these new enterprises.

The informal sector has become the “sector of last resort” for survival of a large
proportion of the population in the cities. Although economic data on this sector is also
scarce, a recent study financed by the UNDP on Urban Micro-enterprises in Angola
provides some interesting information on this sector. It is estimated that more than 50%
of population survive from informal sector businesses. Around 82% of operators in the
informal sector are self-employed, which indicates that the sector is in its early stages of
development. Approximately 74% of the informal sector is involved in commerce while
barely a tenth of informal sector operators are involved in traditional productive activities
such as baking, carpentry, welding. Another significant feature is the predominance of
women - 47% of women worked in the informal sector in comparison with 27 % of men 1.

The UNDP study found that most productive micro-enterprises operate in dilapidated
premises, and are hampered by poor infrastructure and public utilities. They are
undercapitalised with very limited access to credit and business services. The micro-
enterprise owners in the study were unable to pay their workers regular wages and had
underdeveloped entrepreneurial skills. While in the service sector, the micro-
entrepreneurs were found to be more successful, with good business sense, but lacking
more conventional business skills. The main constraint to expansion of these businesses
was the lack of financial resources.

There are very few support services available to the smaller businesses of the country.
Credit is scarce as the banks demand guarantees and documentation that many of these
entrepreneurs do not possess, while the courses which improve business skills are
expensive when available, and of little relevance to those who face the challenges
inherent in operating at the lower end of the market. Finding qualified labor is also
difficult, as the limited number of Angolan training institutions depend upon government
subsidies, and seldom provide the qualifications that the private sector needs.

However, optimism is growing in many places of the country, as people become
convinced that the new peace will last, and the economy begins to show signs of
recovery. Angolans are returning to their homes, from the cities and countries where they
were forced to make their lives during the war and they are investing in new businesses.
The government is beginning to appreciate the importance of these new ventures to
economic recovery and is interested in implementing supportive measures. There is more


1
    Promoting the Urban Micro-Enterprise Sector in Angola, Fion de Vletter, 2002



                                                                  4
understanding of the importance of supporting the informal sector, as it will continue to
employ many Angolans in the coming years, although the government continues to
emphases measures that would encourage the formalization of micro-enterprises.

In this context the Angolan Enterprise Program has a tremendous opportunity to stimulate
the development of the micro, small and medium enterprise sector through investing in
the increase of the supply of needed services, while supporting measures to create an
environment more conducive to growth.

A.2    The Problem to be addressed

It is important to diversify the Angolan economy away from the oil and diamond sectors.
This will be achieved through the development of the micro, small and medium
enterprise sector, which will reduce the high cost of domestic production, offer
employment to the growing population, and raise incomes. The sector currently faces
serious challenges to growth due to macroeconomic instability and the fragmented
Angolan economy. The prolonged conflict and limited investment in basic infrastructure
has meant that access to electricity, water, roads, and communications is precarious,
while the many rules and regulations, onerous and complex licensing procedures and
high taxes stifle investment. Although there is currently a profusion of institutions that
are working to support this sector, there is no coordinated strategy.

Angolan micro, small and medium enterprises lack services, which could support their
development and growth. The services that are available are concentrated in Luanda, and
focussed on larger clients. Access to business development services is limited and the
design and structure of such services, when available, does not sufficiently take into
account the needs and realities of doing business at the lower end of the market. Literacy
rates are low, especially amongst women (82% of men and only 54% of women in 2001),
and the large majority of entrepreneurs whether in the informal or formal sector have few
vocational skills. There are a limited number of vocational training centres in Angola,
mainly located in Luanda, and their courses are not considered relevant to smaller
enterprises. It appears that the most successful vocational training at this level is
undertaken informally through apprenticeship schemes.

The banking system remains highly concentrated in the nation‟s capital, and focussed on
the higher segments of the market, which leaves the majority of Angolan enterprises with
limited or no access to financial services. In the last year, the growing optimism since the
end of the war together with some prodding from the Central Bank has led some banks to
open up new branches in the provinces, and even target smaller business clients, but there
is still a large untapped market. There are some young Angolan micro-credit initiatives
offering credit to enterprises in the informal sector, but the lack of experience with
appropriate methodologies is causing a lot of mistakes to be made. As the focus of the
majority of programs continues to be social, aimed as the most vulnerable in society, their
growth is limited.




                                             5
In order to assist the government in removing barriers for private sector development in
Angola, the UNDP and Chevron-Texaco are forming a partnership for the purpose of
supporting productive capacity building. Investments will be made in the expansion of
access to finance and other business development services for micro and small enterprises
throughout the country. The Strategy, objectives and activities described below will
inform the implementation of the Memorandum of Understanding, which is attached as
Annex I to this Project Document.

A.3    Past initiatives and lessons learnt

Traditionally, the government has not given high priority to the micro and small business
sector. However, during the 1990s, the focus of the public sector moved from large State-
owned industries to medium sized private enterprises, when various subsidized credit
funds were created. Recently the Ministry of Commerce has taken steps to simplify the
licensing procedures for commercial enterprises. For example, decree no. 7/00 authorized
the setting up the One-stop Enterprise Window (Guichet Único da Empresa), which is
intended to simplify licensing procedures in all sectors. The Guichet was only formally
inaugurated in August 2003.

Pioneering research by the Peruvian economist Hernando de Soto has shown that the
existence of a large parallel economy is often caused by an expensive, bureaucratic and
complex regulatory environment. Attempts by governments to repress the informal
sector, and force the register of small enterprises operating at the margin of the law
always fail. Enterprises who do not formalise their existence, are rarely doing so simply
to avoid taxes (as many claim), but are often taxed quite heavily in the form of rents for
market spaces, as well as extra-legal charges paid to various low-level public officials to
remain in business.

Practical initiatives in a number of countries as a result of Hernando de Soto‟s work have
demonstrated the importance of involving all stakeholders when reviewing regulatory
measures, from the informal entrepreneurs to the government officials. The availability of
documentation and titles, and the processes required to obtain them must be studied
carefully. In post-conflict environments such as Angola a large part of the population
may lack the basic legal evidence of their entitlements (identification, proof of address,
deed to property etc). Without this basic documentation, the system of contracts upon
which business, banking, and the legal system operate is severely restrained. What is
needed are more flexible regulations that can accommodate (without excessive charges
and requirements) the economic activity currently operating beyond the law. Once new
more flexible regulations are in place, incentives rather than repressive measures should
be employed to encourage, rather than coerce, small businesses to register themselves.

A.4.   Development Objective (Relevant Outcome)

The vision that the program intends to promote is „a diverse, robust, micro, small and
medium enterprise sector in Angola‟. Initially it is important to build consensus around a
common vision and a national strategy for the development of this sector. As a result of



                                             6
improving the enabling environment, expanding the supply of micro and small business
credit, redirecting the offer of vocational training towards the market and introducing
pilot models of business development service providers, employment will be generated,
and incomes will rise, making an important contribution towards the reduction of
poverty.

A.5       National Institutional and Legal Framework

A number of laws and regulations have been adopted recently, including the Law of
Private Investment; law 84/02 of 31 December, 2002, which defines various types of
NGOs (local, regional, national, international, etc), under the regulation of the Ministry
of Assistance and Social Reinsertion, who regulates their operations. But the legal and
institutional framework dealing with the micro and small business sector is still
fragmented, and ad-hoc, involving various institutions without a coherent strategy nor
means of effective coordination. At the central level the ministries involved are Finance,
Public Administration, Employment and Social Security, Fisheries, Assistance and Social
Reintegration, Industry, and Family and Promotion of Women. At the provincial level,
the micro-enterprise sector was the specific focus of decree 27/00 (19 May 2000), which
created the Department of Micro-Enterprises, within the Provincial Directorates of
Industry, Commerce, Tourism and Hotels. At the municipal and community levels, the
respective administrations limit themselves to matters concerning the regulation, taxation
and control of micro-enterprises rather than providing services to support the
development of this sector.

A.6. Intended Beneficiaries

The project has two sets of stakeholders: Direct beneficiaries, the micro, small and
medium enterprises, the investors in these businesses, the owners, and also the
employees, and indirect beneficiaries, the clients of these enterprises who will enjoy
access to more, better quality goods and services, and it is hoped that all the citizens of
Angola will benefit from a growing, more diversified economy.

PART I.B.        STRATEGY

B.1       National Commitment to achieving the Outcome

The Government‟s draft Interim Poverty Reduction Strategy Paper proposes actions that
can be summarized along five broad themes:

         Undertaking economic and institutional reform;
         Expanding the human capital base;
         Rehabilitating social and economic infrastructure;
         Promoting growth in the lower segments of the private sector, directly benefiting
          the poor through rural development, artisanal fishing, and small and micro
          enterprises;




                                              7
          Strengthening public sector capacity and institutions, including at the provincial
           and local levels.

 The Government has also agreed with the World Bank a Transitional Support Strategy
 encompassing three main pillars: (i) enhancement of transparency, efficiency and the
 credibility of public sector resource management;(ii) expansion of service delivery to
 war-affected and other vulnerable groups; and (iii) the preparation for pro-poor economic
 growth.

B. 2       Strategy for the use of AEP resources

The Angola Enterprise Program (AEP) is consistent with the UNDP mandate in so far as it
helps countries in their efforts to promote sustainable human development, and will be
aligned with efforts to support the achievement of Millennium Goal 1: Eradicate Extreme
Poverty. The project is in line with the UNDP Country Cooperation Framework 2001-
2003. The UNDP will provide support to the overall strategic direction of the program and
will play a greater upstream role in the area of policy support, regulation, legal
frameworks and institutional-building.

Through the partnership signed in November 2002 with UNDP in the framework of the
Angola Partnership Initiative (API), ChevronTexaco‟s Sustainable Development
Company (see Annex II) will assist Angola in its reconstruction and development efforts.

The guiding elements of the program strategy are:

Build consensus around a medium term vision, through frequent dialog between all
stakeholders especially public and private sector representatives, part of a national strategy
and an action plan.

Promote the development of the micro, small, and medium enterprises in all the regions of
Angola, based on pilot experiences in one or two provinces.

Develop local capacity, as part of a strategy to promote sustainable institutions, which
through competition, and working towards cost recovery, will continue to provide services
to the micro, small and medium enterprise sector long after the Angolan Enterprise
Program has ended.

Prioritise women due to their importance in the development of the family, and their
prevalence in the micro enterprise sector.

Make market oriented investments which encourage the most effective use of resources,
and through the strengthening of market mechanisms ensure that future resources will be
invested in an efficient manner.




                                               8
Work with a venture capital approach based upon pilot projects that will use a variety of
diverse mechanisms and institutions to deliver services. Positive results should mobilize
resources to expand the successes of the program over time.

The program strategy will include the following components:

► Working Towards an Enabling Environment.

  A research unit will be established in an Angolan University, or other appropriate
  institution, which in partnership with international organizations and experienced
  researchers will work towards building a broad knowledge base on micro, small and
  medium enterprises, and issues pertaining to the informal sector. Through the
  dissemination of information and analysis, the research unit will contribute to informed
  public policy design.

  The program will also invest in setting up a microfinance development unit, in
  partnership with the Central Bank (Banco Nacional de Angola). The staff of this unit
  will advise policy makers and regulators, centralise information regarding the supply of
  microfinance, and determine standards in transparency and benchmarks for the
  industry. Investments will be made in building the capacity of stakeholders, and the
  coordination of frequent dialog among different groups (public and private sectors). In
  this way, the Angola Enterprise Program will work towards building a consensus
  around a medium term vision for the development of the micro, small and medium
  enterprise sector. Through the implementation of a national strategy, involving all
  stakeholders, the Angolan economic environment will be made more conducive to
  investment and growth.

► Strengthen the Supply of Vocational Training and Re-direct Towards the Market.

  An in-depth, national market study will be conducted to review the quality and capacity
  of vocational training providers, the population‟s training preferences, and the demand
  for qualified workers from Angolan enterprises. Based upon the results of this study, a
  business plan for the strengthening of the vocational training market will be prepared.

  The strategy will focus on diversifying the supply of training (both geographically and
  in types of courses), strengthening the service providers, and stimulating the flow of
  information between the supply and demand for vocational training. A number of pilot
  projects will be financed to evaluate different strategies: A variety of delivery
  mechanisms such as mobile training centres, on-the job training and apprenticeships
  will be tested, selected service providers will receive financial support to improve their
  infrastructure and quality of their course content and. an information service will be set
  up in employment centres which will offer orientation regarding available courses and
  the demand for qualified workers. Data regarding the preferences of visitors to the
  centres will be passed on to training providers, to help them provide appropriate
  services. Successful pilots will be replicated around the country, according to the
  availability of resources. Through a strategy of cost recovery and competition, leading



                                              9
  service providers will become sustainable over time. The increased information flow
  between the supply and demand for training will encourage more informed investment
  decisions by both service providers and clients, over time leading to improvements in
  the quality of vocational training in Angola.

► Expand the Supply of Micro and Small Business Credit

  The supply of credit will be increased through the development of the national
  microfinance industry and downscaling of the commercial banks. The strategy of this
  component will be coordinated in partnership with the microfinance development unit,
  located in the National Bank of Angola, which will also receive financial support, and
  technical assistance from the program

The Angolan microfinance industry will be strengthened through a number of capacity
building initiatives and incentives for new entrants. Stakeholders will have the
opportunity to visit leading international microfinance institutions and learn from their
business models. Experienced microfinance specialists will be contracted to help
Angolan microfinance institutions identify the investments necessary to support growth.

The best international practices in the development of microfinance will be disseminated
in Angola through regular seminars and workshops. The program, together with the
microfinance development unit, will coordinate a dialog among stakeholders to promote
the building of a consensus around a medium term vision for the development of the
sector. The program will finance market studies, and seek local investors who could
partner with experienced microfinance practitioners in the founding of new Angolan
microfinance institutions. Market studies will also be commissioned to examine
opportunities for the commercial banks to explore regional markets, and develop new
products for small and medium enterprises. The program will invest, together with
interested banks, in pilots to explore these opportunities. In this way the supply of credit
to the micro, small and medium enterprise sector will expand


► Introduce Pilot Models of Business Development Service Providers

A comprehensive market study will be commissioned to evaluate the demand for
business development services from different segments of the market, and the capacity of
current service providers and potential local partners to meet this demand. Based upon
the results of this market study, four pilot service providers will be financed: An
incubator will be founded in an Angolan university or other appropriate institution,
initially based in Luanda, to support young graduate enterprises, a Business Center based
upon an experienced partnership between SEBRAE and UNCTAD will be launched in
Luanda and one other province, to identify and nurture champions among the small and
medium enterprise sector, and an Angolan NGO will be selected to pioneer downscaling
business services to micro-entrepreneurs, based upon a recognized methodology (e.g.
CEFE which has a successful track-record teaching business skills to illiterate groups in a
number of countries). The successes of these pilots will be multiplied around the country



                                            10
in accordance with available resources. Cost recovery of services will be prioritized with
a view to promoting sustainable institutions over time.

Strategy Phased Approach

The strategy of the Angolan Enterprise Program is based upon a venture capital approach,
which envisages a number of different phases of development.

The initial preparatory stage is expected to take approximately 6 months to one year,
during which time the program will focus on selected investments necessary to prepare
for the implementation of the individual components.

This will be followed quickly by the launch of pilot projects in each of the component
areas, to evaluate the potential of a number of alternate methodologies, delivery
mechanisms and partners to create an impact in the Angolan context. While some pilots
will require adjustments over time to arrive at an adequate model for Angola, it is
expected that a number will begin to produce positive results within 6 months to one
year. Based upon reaching certain targets in the preparatory stage which include the
preparation of a detailed business plan for each component and demonstrated successes
with some pilot projects, a resource mobilization campaign will be undertaken to expand
the program investments.

While the vocational training, business development services, and credit components are
relatively independent from each other in terms of investments, goals and development
paths, they each very much depend upon the enabling environment component for their
eventual success. It is clear therefore that in the first stage of the implementation of the
program, the focus of the investments will be in the enabling environment component. As
the strategies for vocational training and BDS require a deeper understanding of the
needs of different segments of the population, and the capacity of the existing providers,
investments will also be made in detailed market studies. Due diligence of identified
partners is also a necessary precondition to initiating program investments.

The phases of the Angola Enterprise Program are the following:

       i)      Start-up
       ii)     Pilots
       iii)    18 month Review
       iv)     Resources Mobilization
       v)      Expansion
       vi)     Impact Assessment

► Start-up

  In this phase the program staff must be hired, and trained. Systems will be installed,
  and/or adapted to produce the management reports, and provide the information




                                            11
  necessary to direct the program, and demonstrate the transparent, effective use of
  resources.

  Key stakeholders will be identified, and a program of raising awareness among this
  group will begin involving national seminars, courses, international visits and twinning
  arrangements. The most appropriate host institute for the micro and small business
  sector research centre will be selected, based upon demonstrated capacity and
  commitment to the goals of the program. A cost-sharing agreement will be negotiated
  with this institute, and international expertise contracted to support the launch of
  research activities (initially with a focus on the informal economy).

  Expertise will be subcontracted to begin the in-depth market studies for the vocational
  training, BDS and credit components. As part of the market studies, potential partner
  institutions (government institutions, NGOs and private sector firms/banks) will be
  evaluated in terms of their capacity to contribute to the program.

  Negotiations will begin to co-finance, together with the National Bank of Angola, a
  microfinance development unit. Support from international microfinance specialists
  will be important to support the Central Bank staff in the initial stages of this unit‟s
  development.

  The program steering committee will be formed, and early meetings will focus on
  coordinating the activities of the program with other Angolan development programs
  (FAS, FDES etc).

► Pilots

  Pilot projects will be launched to assess the appropriateness of partner institutions,
  methodologies and delivery mechanisms. In the area of BDS, 2 business centre pilots,
  based upon the SEBRAE/UNCTAD methodology will initiate activities, one in Luanda,
  and the other in a province recommended by the market study. An Angolan NGO will
  begin training in the application of a methodology for raising business skills in
  populations which have limited education and literacy (ex: CEFE, Competency based
  Economies through Formation of Enterprises). A pilot incubator will be launched in an
  Angolan University.

  Vocational training pilots will be launched, working with public sector, private sector
  and NGO training providers. A variety of delivery mechanisms such as ´on-the job´,
  mobile units, apprentice-ships, as well as traditional facilities in a number of
  geographical locations will be financed.

  In the credit component, commercial banks who wish to explore the potential of
  downscaling will partner with the fund to co-finance pilots. Technical assistance by
  microfinance specialists will be provided to selected micro-credit providers to resolve
  identified constraints to growth.




                                            12
► 18 month Review

  After approximately 18 months, an interim review will be conducted to evaluate the
  program and assess its progress against the established benchmarks. Particular attention
  will be paid to an evaluation of the pilot projects initiated in the credit, vocational
  training, and BDS components. Adjustments will be made to pilot design in
  accordance with the results of this review. Successful pilots will be identified for future
  replication and expansion.

► Resource Mobilization

  It is expected that within 18 months to 2 years from the beginning of the Angolan
  Enterprise Program, the conditions will be in place for the program to seek further
  funding to expand the investments, and continue coverage beyond the three-year initial
  phase.

  The program should be able to demonstrate clear progress in the following areas: the
  micro and small business research centre and microfinance development unit
  functioning inside Angolan institutions, on-going capacity building initiatives with
  stakeholders, dialog between government, private sector and representatives of civil
  society regarding issues pertaining to the development of the micro, small and medium
  enterprise sector, positive results from some pilot projects, transparent program
  operating procedures.

  Data regarding these activities together with the business plans for each component will
  be utilized in a campaign to mobilize resources for the expansion of the program.

► Expansion

  Based upon the availability of resources, investments will be made to replicate and
  increase the successful pilot projects in each component throughout Angola. In this
  way the supply of services to the micro, small and medium enterprise sector will grow
  in all the regions of the country. The program, and the institutions financed will be
  monitored, according to predefined targets. Institutions which perform well will be
  rewarded with further access to funding to allow them to continue to grow rapidly.

  The most successful service providers will grow, and begin to generate revenues
  sufficient to cover their costs. Eventually they will not depend upon the financial
  support of the Angola Enterprise Program, which may direct its investments towards
  the development of other institutions.

  Less successful service providers may receive support from the program to identify
  institutional difficulties, and implement measures to overcome them. Prolonged failure
  to meet targets will lead to exclusion of the program. Institutional evaluations will be
  contracted on a regular basis to monitor the development of participating institutions.




                                             13
  Cost-recovery strategies will be prioritized to discourage the dependence of
  participating institutions on program funding.

  The program staff will be increased according to the level of activity of the program,
  and available resources. The time frame of the program may be extended beyond the
  three years determined in the original program design, according to the commitment of
  the partners, and available resources.

►Impact Assessment

  Frequent impact assessments will be conducted to evaluate the success of the
  investments of the program in different regions. The use of control groups will help to
  isolate the benefits of the services provided by institutions financed by the program
  from general improvements in the economy. The results of the assessments will be
  utilized to adjust the strategy of the program. Positive results may be incorporated into
  resource mobilization efforts.


PART II.       RESULTS FRAMEWORK (Attached as Annex II)

PART III.      MANAGEMENT ARRANGEMENTS

A.1.    Institutional and Execution Arrangements

The successful implementation of this Program requires a strong institutional setting
tailored to the specific characteristics of Angola. It should aim at mobilizing and
coordinating the various institutions dealing with micro and small enterprises, private
sector and civil society organizations.

The implementation shall be based on the following arrangements:
The Steering Committee will include appointed representatives from the Ministry of
Planning (MINPLAN), Ministry of Public Administration, Employment and Social
Security (MAPESS), Ministry of Family and Promotion of Women (MINFAMU),
Ministry of Commerce (MINCOM), Ministry of Finance (MINFIN), Ministry of
Industry, Ministry of Fisheries, Central Bank (BNA), Network of Micro-finance
Institutions (RASM), Chamber of Commerce and Industry, Angolan Women‟s
Entrepreneurs Federation (FMEA), Chevron-Texaco, UNDP and other entities to be
identified by the promoters of the Programme.
The Steering Committee will oversee program implementation according to the agreed
program objectives. It will ensure coordination among stakeholders. It will approve
annual work plans and review performance and progress reports and audits. It will guide
overall program monitoring and evaluation.
It will meet semi-annually or more frequently as needed.
The responsibilities of the Program Co-ordinator will include:



                                            14
► Coordinating and following-up the implementation of component activities, preparing
  work-plans and guiding their implementation, and the supervision of contracts financed
  by the program.
► Ensuring technical guidance for the work, overall coherence of component activities
  and the circulation of information between the various stakeholders;
► Ensuring the financial management and control of the resources allocated to the
  program, to guarantee transparency and accountability.
► Monitoring and evaluation of overall program performance. Presentation of annual
  Progress Reports to the Steering Committee, partners and contributors to the Program.
► Serve as a key advocator for the program in the support of resource mobilization and
  communication of the program‟s strategies and findings.

Execution Arrangements

The Program will be executed through the Direct Execution modality (DEX). Individual
Components of the Programme will be backstopped by UN Technical Agencies, who will
serve as cooperating agencies of the program: Microfinance – UNCDF; Business
Development Services – UNCTAD, and ILO may provide inputs and advice for the
Vocational Training component. The program will utilize a variety of delivery
mechanisms from the public sector, NGOs, Universities, Church associations, private
sector and banking institutions.

A.2           Monitoring, Measurement and Evaluation

The following targets have been established for the program:

      (i)        After 18 months, a research unit producing data on the informal sector for
                 policy decision making should be functional
      (ii)       After 18 months, the Government of Angola will be taking measures to
                 implement a national strategy for the development of this sector.
      (iii)      After 18 months the unit in the Central bank responsible for micro-finance
                 development should be functional. There should be a prevalence of micro-
                 finance institutions which are charging rates appropriate to cover costs. The
                 number of micro and small businesses that have access to credit should
                 increase from approximately 8,000 in December 2002 to 20,000 by June 2005,
                 and to 50000 in December 2006,and to 80,000 in December 2008; After 3
                 years there should be a supportive environment for the development of the
                 micro-finance sector in Angola based upon a national policy and action plan
                 to support this sector
      (iv)       After 18 months. 200 Trainers will have been trained to implement the
                 vocational training strategy, and close to 1000 (one thousand) clients will have
                 taken vocational courses. A Business Plan for expansion will have been
                 developed. By the end or the third year it is expected that close to 2200 (two
                 thousand two hundred) clients would have benefited from the pilot vocational
                 training programs.



                                                  15
   (v)      After 18 months two Business Centers focusing on small and medium size
            enterprises will have been established and a target of 44 Trainers trained and
            certified. These business centers would have provided courses to
            approximately one thousand entrepreneurs. An Angolan NGO trained in
            CEFE, a recognized methodology to teach business skills to illiterate groups
            would have downscaled business development services to at least 200 micro-
            entrepreneurs. A strategy for Training of Trainers would have been developed
            in conjunction with local NGOs to guarantee a rapid expansion of CEFE
            licensed teachers throughout the country. Two Business Incubators will have
            been established and provided support to 30 enterprises. A Business Plan for
            expansion will have been prepared. After three years these centers will have
            trained two thousand entrepreneurs, supported 60 enterprises and will be
            working towards full cost recovery. At least 60% of the target group will be
            women.

A.2.1. Work planning, Monitoring, and reporting

         The project will be monitored, evaluated and reported upon in accordance with
         revised UNDP monitoring and evaluation procedures, which will be made
         available to the management at the beginning of the program. Program
         Management will draw up the work-plans at the start-up of activities, and
         subsequently at the beginning of each calendar year. Work plans will be
         submitted to the Program Steering Committee (PSC) together with the Annual
         Project Report. Given the large variety of delivery mechanisms to be utilized for
         program implementation, the program will contract an independent firm to audit
         service providers. An annual audit plan will be developed with this firm. The
         overall project operations will be subject to UNDP standing audit requirements.

A.2.2. Evaluation

An in-depth evaluation will be conducted eighteen months into the implementation of the
project, as part of the UNDP Monitoring and Evaluation. The terms of reference for the
evaluation will be proposed by the UNDP for discussion and approval by the Steering
Committee.

PART IV – LEGAL CONTEXT

This project shall be the instrument referred to as such in article 1 of the Standard Basic
Assistance Agreement between the Government of Angola and the United Nations
Development Programme, signed by the parties on 18 February 1977. The host country‟s
implementing agency shall, for the purpose of the Standard Basic Assistance Agreement,
refer to the Government co-operating agency described in that Agreement.

BUDGET (See Annex IX)




                                            16
                                             ANNEX II – Results Framework – Enabling Environment Component
Intended Outcome:                              Development of a diverse and robust micro, small and medium enterprise sector in Angola as contribution to the National
                                               Poverty Reduction Strategy

Outcome indicator:                             Specific outcome indicators will be mentioned in the three components of the project, namely microfinance, vocational
                                               training and business development services. The increase of the new micro, small and medium enterprises, the growth
                                               rate of the existing enterprises and a better knowledge of the informal sector and its contribution to the national economy
                                               will be success indicators.

Partnership Strategy:                          The enabling environment component will be implemented through public private partnerships. The Steering Committee
                                               of the Angola Enterprise Programme will rally representatives from Government, private sector, including women and
                                               youth entrepreneurs. Through regular meetings the partnership will generate a debate that will lead to a common vision of
                                               the development of the micro, small and medium enterprise sector. A special attention will be given to coordination and
                                               systematic information exchange between all the partners involved in activities related to the promotion of the micro-
                                               entreprise sector in Angola.

Project Title:                                 Angola Enterprise Programme - Enabling Environment component

Project Number:                                ANG/03/011
         Intended Outputs                                Output Target                                                     Activities                                    Resources
                                                 Description           Years
                                                                   1     2          3
1.1. Local capacity to produce research on     1.1.1. A funciontal                           1.1.1.1. Identify and Assess Candidate Institutions to Host the       International Consultant
issues related to development of micro,        research unit producing                       Research Unit, among Angolan Universities and research institutes     (1)
small and medium enterprises,                  research regarding        X
particularly the informal sector.              informal sector and
                                               micro, small and
                                               medium enterprises
                                                                         X                   1.1.1.2. Asses potential institutions and negotiate cost-sharing      Program Coordinator
                                                                                             agreement to finance research programme
                                                                         X                   1.1.1.3.Request Proposal from Candidate Institutions
                                                                         X                   1.1.1.4. Review Proposals from Candidates based upon financial and    Program Coordinator
                                                                                             technical merit

                                                                         X                   1.1.1.5. Negotiate and close the partnership with host institution.   Program Coordinator

                                                                         X                   1.1.1.6. Design a dissemination program of the research findings      Program Coordinator




                                                                                        17
           Intended Outputs                                Output Target                                                Activities                                         Resources
                                                   Description           Years
                                                                                          1.1.1.7. Organize training workshops regarding lessons learned from        Program Coordinator
                                                                      X                   researching similar areas in other countries
                                                                                          1.1.1.8. Contract research regarding topics identifies as key barriers
                                                                      X                   to the development of the informal sector and micro, small and
                                                                                          medium enterprises.

                                                                      X
1.2. Developing a national strategy for the   1.2.1. A national                           1.2.1.1. Identify stakeholders who should visit experienced                National Consultants (3)
development of the micro, small and           strategy for the                            stakeholders in other countries in the region to examine lessons           International Consultant
medium enterprise sector in Angola            development of the                          learned                                                                    (3)
                                              micro, small and
                                              medium enterprise       X
                                              sector as part of the
                                              Angolan Poverty
                                              Reduction Strategy
                                              Program
                                                                                          1.2.1.2. Send Angolan Stakeholders on International Visits                 Travel and training
                                                                      X
                                                                                          1.2.1.3 Select partner institutions, representative organisations of the   Program Coordinator
                                                                      X                   micro, small and medium enterprise sector,
                                                                                          1.2.1.4 Provide training to partner organisations regarding                Travel and training
                                                                      X                   experiences in other countries with enabling environment regulation.
                                                                                          1.2.1.5 Arrange national seminar on micro, small and medium                Consultants and travel
                                                                      X                   enterprise sector development
                                                                                          1.2.1.6. Disseminate results of seminar in nationally                      Program Coordinator
                                                                      X
                                                                                          1.2.1.7. Arrange regional workshops to discuss specific aspects of the     Consultants and travel
                                                                      X                   enabling environment
                                                                                          1.2.1.8. Disseminate results of regional workshops                         Program Coordinator
                                                                          X
                                                                                          1.2.1.9. Arrange second national seminar to discuss a national             Consultants and travel
                                                                          X               strategy development of micro, small and medium sector
                                                                                          development
                                                                                          1.2.1.10. Disseminate results of seminar nationally                        Program Coordinator and
                                                                                 X                                                                                   Research Institution

                                                                                          1.2.1.11. Arrange third national seminar to discuss a national strategy    Consultants and travel
                                                                                 X        development of micro, small and medium sector development
                                                                                          1.2.1.12. Disseminate results of seminar nationally                        Program Coordinator and
                                                                                 X                                                                                   Research Institution




                                                                                     18
           Intended Outputs                               Output Target                                            Activities                                       Resources
                                                  Description           Years
1.3. Regulatory and legal changes to create   1.3.1. Changes in                       1.3.1.1. Identify key areas of difficulty for Micro, small and medium   National Consultant (1) &
a more enabling environment for micro,        legislation considered                  enterprise development and form Taskforces which include                International Consultant
small and medium enterprises                  positive by                             representatives of appropriate stakeholders (Public sector, private     (1) and Program
development                                   representatives of Civil   X            sector, and specialists) to analyze problems                            Coordinator
                                              Society
                                                                                      1.3.1.2. Taskforces report on the special challenges developed          Consultants and travel
                                                                             X
                                                                                      1.3.1.3. Disseminate results of taskforces nationally                   Program Coordinator
                                                                             X
                                                                                      1.3.1.4. Negotiate with Banco Nacional de Angola a cost sharing         Credit Manager
                                                                         X            agreement to establish a Microfinance Development Unit for 3 years.
                                                                                      1.3.1.5. Provide training to employees of Banco Nacional who will       Credit Manager
                                                                         X            be responsible for the Microfinance Unit.




                                                                                 19
ANNEX III MICRO-FINANCE COMPONENT

PART I.A.            SITUATION ANALYSIS

A.1.      The current Situation
See Umbrella Document

A.2.      The Problems to be addressed
Access to credit allows businesses to leverage opportunities, make productive
investments and grow much faster. Comprehensive impact studies have also
demonstrated that: (i) microfinance helps poor households meet basic needs and
protect against risks; (ii) the use of financial services by low-income households is
associated with improvements in household economic welfare and enterprise
stability or growth; (iii) by supporting women‟s economic participation,
microfinance helps to empower women, thus promoting gender-equity and
improving household well-being; (iv) for almost all significant impacts, the
magnitude of impact is positively related to the length of time that clients have been
in a microfinance program. 2 Therefore the provision of credit has an important role
to play in the development of the micro, small and medium enterprise sector in
Angola, and will contribute towards the reduction of poverty

Estimated at between 400.000 to 500.000 (see analysis of market size in table
below) micro and small businesses, the demand for microfinance services in Angola
is largely unmet. It is estimated that most of these businesses could benefit from
loans of no more than US 1,000.

FIGURE 1: ANGOLAN ESTIMATE OF MARKET SIZING
 Total Inhabitants (estimate)                          12.000.000
 Number of households                                   2.181.818                                           18%
 Number of households with bankable micro enterprises
 in informal sector                                       500.000                                           23%
 Number of registered small enterprises                    13.000
 Total enterprises                                        513.000
 Total enterprises that have a demand for microfinance    410.400                                           80%
 Potential clients living in potential geographical
 coverage                                                 307.800                                           75%
 No active clients/ total potential clients               246.240                                           80%
 Average loan                                                $400
 Total Potential Active Portfolio                      $98.496.000

Hence, the problem to be addressed by this component of the Angolan
Enterprise Program (AEP) is that most micro, small and medium enterprises
do not have access to credit.

MICRO-CREDIT


2
 Clients in Context, The Impacts of Microfinance in Three Countries, Assessing the Impact of Micro -enterprise Services
(AIMS), January 2002 (www.mip.org).



                                                            20
Currently only two institutions are specialized in the provision of credit to micro,
and small enterprises, the commercial bank Banco Sol (no relation to the Bolivian
bank) and the international NGO, Development Workshop. Their combined total
active client base is less than 8,000 clients, and is heavily concentrated (>80%) in
the capital, Luanda. These institutions are still in a pioneering stage with respect to
providing microfinance as both are experimenting with different products and
methodologies while experiencing volatile repayment rates.              They have a
predominantly social focus and do not yet provide their services in a profitable
manner.

A new bank, which is expected to concentrate in micro and small business credit in
(loans up to US$ 50,000), has requested a license from the Central Bank, and should
begin trading under the name “Nosso Banco” by September 2003. It will be fully
funded by bilateral and multilateral public investors in the form of grants and
equity, and operationally managed by the German Consultancy bureau IPC for a
period of at least three years.

It is clear that the micro-credit industry in Angola is at a very early stage in its
development. If it is to expand to meet demand estimated earlier at over 500
thousand micro-enterprises, the current players will need to build capacity, and
grow rapidly, and even so, there is room for new market entrants.


SMALL BUSINESS CREDIT

The Angolan commercial banks only reach a small percentage of the demand for
businesses-loans between US$ 1,000 and US$ 50,000. Years of economic
distortions and particularly the hyperinflation of the last decade have left a banking
sector focused in attending the largest companies, and the richest families. The
relatively easy profits earned from short term financial intermediation
(import/export, foreign exchange, and salary transfers) do not encourage the banks
to take risk through lending, particularly to the smaller enterprises. In the whole
Angolan banking system today, there are less than 10,000 loans, the vast majority
concentrated in Luanda.

Few Angolan banks target lending to the small business sector as part of their core
strategy. Their appears to be a lack of knowledge of the potential market for loans
less than US$ 50,000 and little understanding of the products and procedures
necessary to penetrate this market.


A.3    Past initiatives and lessons learnt
Angola has little experience in provision of financial services to lower segments of
the market. The experience of UNCDF in stimulating financial sector development
in many countries around the world is shown below:

FINANCIAL SECTOR DEVELOPMENT TARGETING LOWER
SEGMENTS (see stages of development in figure 2)




                                          21
In the start-up stage, semi-formal microfinance activities are introduced as
experimental pilot projects. New products are developed and tested in the market.
The challenge is in building a human resource base capable of delivering credit
products while maintaining a high repayment rate. Awareness is built among many
actors in the economy, from government, private sector to the clients themselves,
that micro and small business entrepreneurs can be creditworthy. Although some
pilot projects fail due to low repayments, others gradually adapt techniques and
methodologies to the local context and begin to function well. In some
environments where microfinance is initially operating outside a formal legal
framework, successful pilots often convince local authorities to condone the
activities, due to perceived benefits for poor households, employment generation
and economic growth.

In the expansion stage, microfinance projects or programs become institutionalized
(consolidated into institutions dedicated only to the provision of microfinance), as
practitioners perceive the need to specialize. Successful microfinance institutions
(MFIs) concentrate on expanding the scale of their existing operations. The success
of their business model allows them to replicate their operational structure and
capture a larger share of the market. Their approach is often copied by other
microfinance operators. This stage is characterized by an expansion of existing
institutions, and on resource mobilization to finance the expansion. The institutional
growth leads to economies of scale and greater operational efficiencies. Eventually
the more successful MFIs are able to finance their operations with the income
generated by interest and fees. However MFIs continue to be subsidized by grants
and soft loans to finance their expansion. The increased scale of operations requires
further institutional strengthening, particularly in the areas of management systems
and procedures. Towards the end of this phase MFIs are beginning to capture a large
part of the market.

In the consolidation stage successful MFIs begin to focus on their overall
sustainability. Management oversight, organizational policies, procedures and
systems are managed in a more formal manner. The microfinance sector also begins
to gradually establish accepted financial sector policies. Donor subsidies to the
sector diminish in order to avoid creating institutional dependence, and distortion of
market prices. As a consequence, MFIs are required to increase their productivity,
expand further, and adjust their pricing policies to ensure greater profitability. At
this stage, as the microfinance industry tends to have already achieved a high
penetration rate in the original target market, institutions often expand into new
markets and launch new, more flexible, demand-oriented products. The small and
medium enterprises that continue to be underserved by the banks 3 are often
interesting clients to MFIs, while it is normal to see a broad range of financial
services being offered such as savings, insurance, and transfers.

For the microfinance sector to advance to the next stage, it is necessary to have
implanted a special regulatory framework, conducive to the development of the
microfinance sector, and allowing for effective regulation by the Central Bank. The
development of such regulations normally takes place towards the end of this stage


3
  Experience has shown that supporting access to microfinance for micro and small businesses often translates into job
creation for poor people that prefer to be wage employed rather than self-employed



                                                         22
when a critical mass of MFIs are willing and able to integrate into the formal
financial system.

In the integration stage leading MFIs become an integral part of the formal financial
sector, regulated by the central bank and offering a range of demand oriented
products for the lower segments in the market. The integration of the microfinance
sector into the formal financial system is necessary to finance the continued growth
of the MFIs through access to commercial capital (deposits from the public, loans
and equity). This stage is characterized by the transformation of MFIs into regulated
financial institutions, the drying-up of subsidies for the microfinance sector, the
expansion of microfinance institutions and the downscaling of commercial banks.
Licensed MFIs continue efforts to downscale their services, often developing
savings services for the poorest segments of the population. Instead of depending
upon public-sector funds and subsidies, MFIs now contribute to the public sector
through the taxes typically paid by financial institutions.

Figure 2. Stages of development of a microfinance sector



OUTREACH
(No of Clients
with access
to financial
services.)




                  Start-up              Expansion           Consolidation
Integration
                                     DEVELOPMENT STAGES




                                         23
   Figure 3. Downscaling of high-end commercial banks and Expansion of
   microfinance banks in the Integration Stage


Av. Loan O/S

                                               
100 * GDP                           down scaling high end banks

10 * GDP

1.5 * GDP                        expanding microfinance banks
                                                                          
0.5 * GDP

                                down scaling microfinance banks        

   At present the microfinance sector in Angola is in the start-up stage, with only two
   relatively inexperienced institutions specialized in offering micro credit.
   Experiences in other countries have shown that there are a number of requirements
   to be met before the sector can advance to the expansion stage:

   i) It is of key importance that at least a few select MFIs develop a business model,
   which is appropriate to the local market conditions. These pioneers should
   implement credible business plans that demonstrate future profitability. The
   management applies sound microfinance principles, commits to scale up and
   become profitable. These become leaders, demonstrating that poorer populations
   and micro-enterprises are bankable.

   ii) It is essential to have an enabling environment, conducive to the development of
   the microfinance sector. Wide spread supply-oriented microfinance programs with
   subsidized interest rates, do not allow for the emergence of a sustainable
   microfinance industry. Programs with low portfolio quality distort the market, and
   undermine the financial discipline of communities (increasing the pool of defaulters
   who are ineligible for subsequent loans) making it more difficult for successful
   programs to emerge. Also a repressive legal, regulatory or political environment
   will restrict the growth of microfinance sector (e.g. an interest rate ceiling defined
   in law which is too low for microfinance institutions to function without
   permanent subsidies).

   iii) The government and international donors must be willing to invest in the
   establishment of a microfinance sector. Investment in the start-up phase is normally
   more risky than in later phases because of the absence of microfinance institutions
   that have a proven track record. Donors often provide more grants in the early stage,
   with the object of building the capacity of microfinance operations.




                                            24
A.4.    Development Objective (Relevant Outcome)

The objective is to develop, in partnership with stakeholders, a diverse and robust
financial sector that provides financial services to micro, small and medium
enterprises.


A.5     National Institutional and Legal Framework
Legislation in 1990 specifically permitted NGOs in Angola to conduct activities
unrelated to government ministries, although it left the legal status of NGOs in
general somewhat ambiguous. Due to the increasing number of international NGOs
in Angola in recent years focused on humanitarian relief, the Government of Angola
provided new legislation in December 2002. In law 84/02 of 31 December, 2002,
various types of NGOs were defined (local, regional, national, international, etc), all
under the regulation of the Ministry of Assistance and Social Reinsertion, acting
through the Technical Unit for the Coordination of Humanitarian Aid (UTCAH,
created by law 30/98 and involving representatives from all the ministries). The
various activities that NGOs may carry out are specified, authorized partnerships are
described, and the financial accountability (previous years accounts, plus estimate
of future year‟s donations) must be presented to the Central Bank, Ministry of
Finance and the Ministry of Assistance and Social Reinsertion. It is interesting that
there is no specific prevision for micro-credit in this legislation.

The 1999 Law on Financial Institutions (Law 1/99 of 23 April 1999) establishes the
supervision and control of banks, finance companies, and credit cooperatives, and
states that a separate law will “regulate the micro-credit institutions.” Currently, the
Law on Financial Institutions allows only regulated banks and specially licensed
finance companies to mobilize deposits from the public, while credit cooperatives
may take deposits from members under certain conditions. 4

The National Bank of Angola (BNA), the regulatory body, has demonstrated its
openness to discuss drafts of the proposed law to regulate microfinance institutions.
The mission team had the opportunity to meet with a senior official who offered to
provide a copy of the draft legislation. Interestingly, the senior official mentioned
that the BNA will not encourage banks to get involved in offering micro-credit
because they fear it could put bank depositors at risk. The BNA official pointed out
that Banco Sol is currently operating without a specific license to engage in micro-
credit, and that the micro portfolio will be regulated as standard consumer loans. 5




4
  Credit cooperatives may only collect deposits from their members and carry out credit operations
for the purpose of promoting the productive activity of their members.
5
  This is common internationally among bank regulators who see microfinance loans as un-
collateralized consumer lending. Microfinance practitioners in such situations often demonstrate that
micro-credit presents a different, less risky profile than consumer lending and tends to present very
little risk to depositors or to the financial system.


                                                 25
Commercial Banks in Angola, Credit and Deposit Volumes, July 2002
Bank Name                                  No. of        Credit               Deposit
                                         branches* business (USD           business (USD
                                                        millions)            millions)
Banco de Poupança e Crédito       BPC       45            144.9                 577.5
Banco de Fomento e Exterior       BFE       24            76.0                 392.7
Banco Africano de Investimento    BAI       16            72.3                 327.8
Banco de Comércio e Indústria     BCI       20            65.3                 183.9
Banco Comercial de Angola        BCA         1            13.7                  33.8
Banco Português do Atlântico     BPA         1             6.9                  35.9
Banco Totta e Açores             BTA         7             8.1                 125.5
Banco Sol                         SOL        3             0.7                  13.5
Others                                                     0.6                  22.9
Total                                       117           388.4               1,713.5
Source: Banco Nacional de Angola - Exchange Rate: 1 USD = 44.5 AKZ

* refers to number planned by end 2002


A.6. Intended Beneficiaries
The direct beneficiaries are microfinance institutions that demonstrate the potential
to deliver microfinance in a commercial manner. The project also supports
commercial banks that are willing to downscale by targeting the demand for micro
and small businesses.

Indirect beneficiaries are micro and small business entrepreneurs that can increase
their livings standards by having access to financial services on a permanent basis,
the unemployed who will benefit from increased employment opportunities from
the expanding micro and small business sector and finally the population at large
who will enjoy a more diverse and increasingly competitive financial sector.

PART I.B.            STRATEGY

B.1       National Commitment to achieving the Outcome
Within the Angolan Government‟s Interim Poverty Reduction Strategy Document,
one of the principal axes of intervention, axis 5 speaks about the need for
Integrating and articulating the productive structure through the:

          a) Rural Development Strategy
          b) Artisan Fishing strategy
          c) Support and Development Strategy for Small and Micro Industrial Units


The development of a financial sector which offers credit to micro, small and
medium enterprises throughout the country is clearly an essential element in this
strategy.




                                                       26
In meetings with representatives of the UNDP mission, the Ministry of Women and
the Family, emphasized that one of its goals is „the promotion of access to micro-
credit services for women, heads of family, who live in the rural areas‟, while the
Ministry of Commerce expressed support for the expansion of micro-credit, as a
strategy to support all micro enterprises. The central bank, Banco Nacional de
Angola (BNA), is committed to expand the offer of credit, and is charged by the
Angolan government with the development of the financial system in general. BNA
should be seen as the logical partner to work with the Angola Enterprise Program to
expand the offer of credit to micro, small and medium enterprises.


B. 2   Strategy for the use of AEP resources
The financial sector has until now been focused on the higher segments in the
market. The long term objective of this project is to support deepening of the
commercial financial sector to ensure sustainable access to financial services for
small and medium enterprises while supporting the growth and development of
microfinance institutions who will offer credit to the low-income population, in
particular, micro enterprises.

EXPAND MICRO-CREDIT

In order to determine the support that would optimally stimulate the development of
the Angolan microfinance sector, it is important to review the evolution of this
sector in other countries. Although all microfinance sectors have unique
characteristics and development paths specific to each country, it is possible to
identify certain key stages that each sector passes through: a start-up stage, an
expansion stage, a consolidation stage and an integration stage (see A3 – Past
initiatives and lessons learnt).

The Credit Component of the Angola Enterprise Program will address the key
constraints identified in A3, with the objective of stimulating the development of the
microfinance sector to advance beyond the initial start-up stage.

A) The Program intends to support two existing Angolan institutions which
specialize in microfinance, have the objective of reaching a large client-base
becoming sustainable institutions. The size and nature of the support for the selected
institutions will be based upon an institutional assessment and a business plan
proposal which will evaluate the required capacity building as part of a performance
based agreement.

The Program envisages the provision of support in the following areas:

1) The consolidation of existing micro-credit projects in micro-credit institutions;
2) Technical assistance in areas which have been key to the development of
microfinance institutions in other countries such as governance, human resource
management, financial management, MIS, market studies, product development,
training of SME loan officers, creation of a credit information data base, etc.;
3) The establishment of model pilot branches which apply best practices in
microfinance;



                                         27
4) Visits to and training courses with experienced, internationally recognized
microfinance institutions.
5) Grant funding where applicable.

B) The program will look to provide incentives for new market entrants. Market
studies will be contracted, and results disseminated. Local partners and investors
will be identified, and introductions made to international organizations that have
experience with microfinance start-ups. Other technical assistance, as discussed in
A) will be evaluated on a case by base basis.

The contribution of the Project will be structured in close collaboration with DFID,
USAID and UNDP who currently provide financial support to Angolan
microfinance projects.

There are a number of constraints identified in A3 regarding the lack of an enabling
environment in Angola for microfinance development. The investments which the
Angolan Enterprise Program will make to resolve these issues have been addressed
in the Environment component.

EXPAND SMALL BUSINESS CREDIT

The Program will also support pilot projects for commercial banks which intend to
venture into lower segments of the market. Support will be provided in the
following way:

A) Banks may request the Program to conduct a market survey to evaluate the
potential of a specific market or client base. Results of market studies will be
disseminated among the financial sector in an attempt to identify which institutions
have interest in pursuing the opportunities identified in the study.

B) The Program will enter into memorandums of understanding with financial
institutions interested in implementing pilot projects. Investments in product
development, and technology/methodologies tailored to risk management of a new
customer base. The intention is that successful pilots will be replicated and
expanded to other regions.

In this way the Angolan financial sector will be strengthened and expanded,
increasing dramatically the supply of credit to the micro, small and medium
enterprise sector.


PART II.      RESULTS FRAMEWORK (Attached as Annex IV)


PART III.     MANAGEMENT ARRANGEMENTS


A.1.   Execution Arrangements




                                        28
Implementing Agency:           United Nations Capital Development Fund (UNCDF)

Counterpart:                   Banco Nacional de Angola (Central Bank)

Review Committee:              To review proposals from MFI‟s and Banks, and
                               accompany the progress of the Credit Component.
                               This Committee will consist of: representatives from
                               BNA, the UNDP, ChevronTexaco, Other donors
                               (World Bank?), the bankers association, the national
                               microfinance association (RASME)

Technical Service Provider: Recruited to provide the technical assistance needed
                            by selected MFI‟s

Short-term consultants:        Various areas.(business planning, institutional
                               assessment, product development, financial
                               management, MIS, market studies)

Total Staff:                   Project manager,
                               Two local consultants full time (to be trained)
                               One Technical Service Provider
                               Secretary
                               Driver

A.2     Monitoring, Measurement and Evaluation

The main performance indicators are:

1) The prevalence of profitable microfinance institutions
2) The number of micro and small businesses that have access to credit has
increased from approximately 8,000 in December 2002 to 50,000 in December
2006, 80,000 in December 2008.
3) A supportive environment for the development of the microfinance sector based
on national policy and action plan to support this sector.


A.2.1. Work planning, Monitoring, and reporting

The project will be monitored, evaluated and reported upon in accordance with
revised UNDP monitoring and evaluation procedures, which will be made available
to the project management at the beginning of the project. The Microfinance
Development Unit and Informal/ Small Business Research Unit will present a plan of
their initial start-up of project activities, and subsequently at the beginning of each
calendar year will draw up the project work-plans. It shall be submitted to the
Steering Committee integrated in the Program Coordinator‟s Annual Work Plan. An
annual progress report will be submitted to the Steering Committee integrated in the
Program Coordinator Annual Progress Report.




                                          29
A.2.2. Evaluation

An in-depth evaluation will be conducted 18 months into the implementation of the
project, as part of the implementation of the UNDP Monitoring and Evaluation. This
evaluation will be essentially thematic and will include other governance-related
activities of UNDP, so as to determine internal synergies in UNDP interventions in
this area. The terms of reference for the evaluation will be proposed by UNDP for
discussion and approval by the AEP Steering Committee.


PART IV – LEGAL CONTEXT

This project shall be the instrument referred to as such in article 1 of the Standard
Basic Assistance Agreement between the Government of Angola and the United
Nations Development Programme, signed by the parties on 18 February 1977. The
host country‟s implementing agency shall, for the purpose of the Standard Basic
Assistance Agreement, refer to the Government co-operating agency described in
that Agreement.


 BUDGET (See Attached Annex IX)




                                           30
                                              ANNEX IV – Results Framework - Microfionance Component
Intended Outcome:                         Development of a diverse and robust micro, small and medium enterprise sector in Angola as contribution to the National
                                          Poverty Reduction Strategy.

Outcome indicator:                        Number of New micro, small and medium enterprises, and growth rate of existing enterprises
Partnership Strategy:                     Working closely with the Central Bank (Banco Nacional de Angola), the microfinance component manager will provide
                                          technical assistance and financial resources (which may be used to purchase international technical assistance to specialised
                                          microfinance institutions, banks, the Angolan Government and BNA, to support the development of the consistent and
                                          client-friendly offer of credit services to micro, small and medium enterprises
Project Title:                            Angola Enterprise Programme - Microfinance Component

Project Number:                           ANG/03/011

          Intended Outputs                              Output Target                                                 Activities                                    Resources
                                                 Description                  Years
1.1. Existing microfinance institutions   1.1.1. The Number of clients                    1.1.1.1 Identify two microfinance institutions that have the        Credit Component Manager
have increased their capacity and         attended by microfinance                        potential and commitment to reach sustainability and large
outreach                                  institutions in Angola is                       outreachIdentify Short List of Candidate Institutions to Host the
                                          increasing, along with                          Research Unit, among Angolan Universities and research
                                          performance indicators                          institutes
                                          (portfolio quality,             X
                                          productivity, and efficiency)
                                                                                          1.1.1.2 Conduct an institutional assessment of identified           Credit Component Manager
                                                                          X               institutions                                                        + National Staff (2)
                                                                                          1.1.1.3 Review business plans                                       Credit Component Manager
                                                                          X                                                                                   + National Staff (2)
                                                                                          1.1.1.4 Prepare a joint capacity building plan for tailor made      Credit Component Manager
                                                                          X               institutional support                                               + National Staff (2)
                                                                          X               1.1.1.5 Negotiate performance based agreement                       Credit Component Manager
                                                                                          1.1.1.6 Draft Terms of Reference and contract modalities for TSP    Credit Component Manager
                                                                          X                                                                                   + National Staff (2)

                                                                                          1.1.1.7 Identify and recruit Technical Service Provider             Credit Component Manager
                                                                          X   X                                                                               + TSP
                                                                          X   X       X   1.1.1.8 Execute capacity building plan                              TSP
                                                                          X   X       X   1.1.1.9 Regular follow-up                                           National Staff (2)




                                                                                              31
         Intended Outputs                               Output Target                                          Activities                                   Resources
                                                Description           Years
1.2. Commercial banks have increased       1.2.1. Number of                       1.2.1.1 Establish eligibility criteria for support to banks in    Credit Component Manager
their capacity and outreach in financing   Enterprise Loans between   X           downscaling pilots
of small and medium enterprises by         US$10k and $100k
downscaling their operations               increasing
                                                                                  1.2.1.2 Inform banks on criteria and potential Project support    Credit Component Manager
                                                                      X                                                                             + National Staff (2)
                                                                      X   X   X   1.2.1.3 Request proposals of commercial banks,                    National Staff (2)
                                                                      X   X   X   1.2.1.4 Select four proposals submitted by banks to the Project   National Staff (2)
                                                                      X   X   X   1.2.1.5 Establish MOU with selected banks                         Credit Component Manager
                                                                                  1.2.1.6 Identify and recruit consultants                          Credit Component Manager
                                                                      X   X   X                                                                     + National Staff (2) + Short
                                                                                                                                                    Term Consultant
                                                                      X   X   X   1.2.1.7 Review present product policies and procedures            Short Term Consultant
                                                                      X   X   X   1.2.1.8 Draft advice on adjusted policies and procedures          Short Term Consultant
                                                                                  1.2.1.9 Execute selected pilots                                   Credit Component Manager
                                                                      X   X   X                                                                     + National Staff (2) + Short
                                                                                                                                                    Term Consultant
                                                                      X   X   X   1.2.1.10 Follow-up on pilots with banks                           National Staff (2)




                                                                                      32
Annex V - VOCATIONAL TRAINING

PART I.A.       SITUATION ANALYSIS

A.1.    The current offer of training
Angola has a significant training infrastructure with 216 centres, (170 privately
owned - 78,7 %), a total training capacity for 15500 trainees at one time, of which
about 75% is currently being used. The Coastal provinces of Luanda, Benguela,
Bengo and Namibe represent more than three quarters of the total training capacity
(77%). For details of the assessment of Angolan training providers, see annex 1.
The National Institute for Employment and Vocational Training (INEFOP) is a
public institute under the control of the Ministry of Public Administration,
Employment and Social Security (MAPESS). INEFOP is the body governing
vocational training and employment in Angola, it offers services within all the 18
provinces and governs directly a network of 24 vocational training centres (VTC), 4
integrated employment and vocational training centres and 46 employment centres.

A.2.    The Problems to be addressed
The Angolan vocational training system faces serious constraints limiting its capacity
to provide skills to support the productive development of the country. The main
problems are:

   Concentration, geographical and sectoral. The training capacity is mainly
     concentrated in Luanda (around 60% of the total training capacity) while the
     number of training providers is very limited in the interior of the country and
     inexistent in rural areas; vocational training for the service sector concentrates
     an important part of the offer (65%), and this trend is even more accentuated in
     the case of the private sector. Training is offered through formal providers with
     limited use of alternative delivery mechanisms such as mobile training units,
     traditional apprenticeships and on-the-job training.
   Depletion of assets. For those providing training for the productive sector, there
     is a lack of qualified human resources (managers and trainers), fixed assets
     (equipment and tools) and working capital (consumables). This contributes to a
     situation where there is a predominance of low-quality training, while the high
     level of investment required to rehabilitate training institutions (whose
     infrastructure have been depleted by the war and instability) means that
     investments in vocational training are perceived as expensive. Cost recovery
     remains a challenge.
   Scarce market linkages. The training provided by the public sector is mainly
     supply driven, with weak linkages to the private sector in terms of planning,
     monitoring and evaluation. The Employment Offices that could play an
     important role in establishing close linkages between training providers and
     enterprises are primarily focused on registration of job seekers and employment
     offers (more reactive than proactive). The absence of institutionalized, regular,
     feedback mechanisms limits improvements to training quality, and impact
     evaluations.




                                          33
A.3     Past initiatives and lessons learnt
The implementation of previous programs and projects such as the PAFDE -Training
for Ex-combatants, implemented by UNDP/ILO (Bicesse, 1991-92), the subsequent
UNDP/ILO project to support the reintegration of ex-combatants (Lusaka, 1996-99)
and the Medium Term Development Program for Vocational Training (PROFOR,
1994), have provided lessons and orientations regarding the relevancy and impact of
training to support private sector development:
     The need to involve the entrepreneurial sector in the different steps of
       training (planning, implementation and follow-up) to ensure relevance and
       effectiveness;
     The importance of developing training initiatives based on sound market
       studies, making training a key tool for the success of entrepreneurial
       initiatives;
     The call for better information in relation to training needs, offer and
       effectiveness;
     Improvement of training delivery can only succeed if appropriate feedback
       mechanisms for the trainees are in place;
     Training is not the end of the process but a mean to increase the
       employability of the beneficiaries therefore a close linkage should be
       established between provision of training and entrepreneurial development;
     The need for a permanent evaluation of the impact of training as measured in
       terms of its relevancy to the development of the entrepreneurial sector and/or
       the employability of its beneficiaries.

A.4.    Development Objective (Relevant Outcome)
The objective of this component is to strengthen the supply of vocational training
and re-direct it towards the market. A program will be developed based upon an in-
depth national market study, which will focus on investing in diversifying the
supply of training, strengthening the providers, and introducing market-oriented
mechanisms and testing a variety of delivery and supply mechanisms –NGOs,
private sector institutions, community and church associations.

A.5     National Institutional and Legal Framework
Since 1992, an appropriate framework for vocational training has been created,
which provided the necessary basis for the development of the sector. Important
legal tools concerning vocational training are the following:


Law nº 21-A/92Defines the basis of the National Vocational Training System that,
              taking into consideration the importance of the qualification of
              human resources for the social and economic development of the
              country, creates a national system based on the recommendations
              of the International Labour Organisation (ILO).
Decree Law nº Establishes a Fund for the financing of vocational training based
39- A/92      upon a contribution by the enterprises of 2% of the total volume
              of the salaries paid to their employees, restricted to those with
              more than 50 employees.




                                         34
Decree Law nº Creates the National Institute for Vocational Training (INAFOP)
39- D/92      as a tripartite autonomous institution under the dependence of the
              Ministry of Education, governing the vocational training
              developed in the country by public and private institutions.
Decree Law nº Transfers the INAFOP from the Ministry of Education to the
40/95         Ministry of Public Administration, Employment and Social
              Security (MAPESS).
Decree   Law Establishes the regulation for the creation of private agencies of
nº8/96        placement.
Decree Law nº Approves the Rules for the establishment and recognition of
16/98         Vocational Training Centres.
Decree   Law Creates and approves the statute of the National Employment and
nº34/98       Vocational Training Institute (INEFOP) and extinguishes the
              INAFOP created by the Decree Law nº 39- D/92.

The recognized training providers are governed by different type of institutions of
which:
                                   INEFOP                      28           13,0%
                 Public sector
                                   Other Ministries            18           8,3%
                                   Catholic Church             5            2,3%
                 Non public        NGOs                        3            1,4%
                                   Private sector             162           75,0%
                                                 Total        216          100,0%
The geographical coverage of the training suppliers is the following:
                      Province            Nº. of suppliers          %
                Bengo                             4                 1,9
                Benguela                         36                16,7
                Bié                               3                 1,4
                Cabinda                           4                 1,9
                Cunene                            3                 1,4
                Huambo                           10                 4,6
                Huíla                             8                 3,7
                Kuando Kubango                    2                 0,9
                Kwanza Norte                      4                 1,9
                Kwanza Sul                        3                 1,4
                Luanda                           117               54,2
                Lunda Norte                       0                 0,0
                Lunda Sul                         2                 0,9
                Malanje                           0                 0,0
                Moxico                            6                 2,8
                Namibe                            6                 2,8
                Uíge                              6                 2,8
                Zaíre                             2                 0,9
                               Total             216               100,0


                                          35
The main handicap faced by the training system in Angola is not related to the lack
of a regulatory framework, but to the relevancy and effectiveness of the training
delivered. The intervention of this component aims to improve the quality of the
training provided to support the development of the private sector in selected areas.
Furthermore, the Ministry of the Public Administration, Employment and Social
Security and its Institute (INEFOP) and the employer‟s associations will be key
partners in the implementation of the present programme but from private sector and
civil society organizations will be engaged in the development and implementation
of the training programs and activities.

A.6. Intended Beneficiaries
The project has two sets of stakeholders: Direct beneficiaries will be the unskilled
citizens benefiting from training services offered by the training providers; public
and private suppliers of training. Indirect beneficiaries will be the private sector, the
families of the trained citizens and the communities where economic activities will
be promoted by private agents.


PART I.B.               STRATEGY

B.1           National Commitment to achieving the Outcome
The government has been fully engaged in the process of economic diversification
through the development of the private sector: it has launched a national program for
the promotion of economic activities, which aims to train vulnerable unemployed,
and offer support in establishing small businesses (through the provision of inputs
such as tool-kits and working capital). The Angolan authorities consider that a strong
cooperation/partnership should be established with the Angola Enterprise Program in
order to create synergies and complementarities while preventing overlapping.
The Government of Angola considers that vocational training is crucial to enhance
employability of unemployed citizens and support economic revival. Flexible and
cost-effective short-cycle training should be made available, especially for the
promotion of self-employment and the acquiring of skills needed for reconstruction
and economic rehabilitation, with a focus on private sector development. The
training should be flexible in order to respond to the local business opportunities and
involve a wide range of training providers such as companies, skilled artisans,
government training institutions, public and private co-operation facilities, religious
groups, other NGOs and bilateral bodies.

B. 2          Strategy for the use of AEP resources
The project is consistent with the UNDP mandate in so far as it helps countries in
their efforts to achieve sustainable human development. Further, the component is in
line with the 2002 Common Country Assessment 6 as it addresses one of the six
constraints that hold back development of the economy: the low level of education



 6
     “Angola, the post-war challenges”, 2002 CCA, the United Nations System in Angola.



                                                              36
and lack of skills among the majority of the labor force. It will also contribute to the
Government‟s Interim Poverty Reduction Strategy.
The guidelines of the component are the following:
    • Building consensus
    • Promoting a medium term vision
    • Increasing the geographical diversity
    • Building local capacity
    • Promoting sustainable institutions and working through existing players
        (government, NGOs, private sector)
    • Prioritization of women participation
    • Promotion of market oriented training
    • Mobilization of additional resources.
The strategy for the use of program resources will be implemented as follows:
        Key sectors which offer most promising development prospects for the
    private sector will be identified in close cooperation with private sector and
    employers associations;
        A capacity building exercise will be conducted to strengthen the training of
    those skills considered essential to support the development of the private sector
    in the selected sectors;
        By assuring a full involvement of the private sector and employers‟
    associations, the component will help to create the required environment for an
    increased relevancy and effectiveness of the training delivered;
        The component will support Government efforts to improve the information
    relating to the demand and supply of training;
        Systematic Performance Evaluation mechanisms will be established to
    increase the number of training impact-evaluations and by doing so, improve the
    quality and relevancy of future training delivery;
        Close coordination with the other program components – business centers,
    micro credit and business incubators – will amplify the impact of the impact of
    the training provided in terms of contribution to the development of the private
    sector;
        With the UNDP aim of ensuring sustainability of the activities, the planning,
    monitoring and evaluation of activities are designed with a participatory
    approach and consensus orientation, based on indicators that are specific,
    measurable, attainable, relevant and tractable;
        Furthermore, in a bid to reinforce synergies and avoid duplications, UNDP
    resources will also contribute to the creation of complementarities with other
    Government programs, such as the Demobilization and Reintegration of Ex-
    combatants.

According to the Angolan economic context, potential fields of vocational training
could be:
       Skills related to rural non-farm activities upstream and downstream of
    agricultural production (production/repair of agricultural tools, rural trade,
    foodstuff processing/preserving, manufacturing of soap, kitchen utensils,
    ceramics, wickerwork and leather goods...).


                                           37
          All skills related to small-scale construction (carpenters, bricklayers,
       locksmiths, and electricians, blacksmiths, welders, plumbers, painters, tillers,
       and brick makers, whitewash makers...);
          Skills related to the transportation of people and goods (mechanics, auto-
       electricians, panel beaters, tyre repair, motorbike repair, and battery repair, etc.);
          Skills related to mechanical and electrical maintenance (refrigeration
       technicians, radio repair, household appliance repairs...);
          Skills related to restaurants, retailers and handicrafts (tailors, shoemakers,
       photographers, hairdressers…);
          Artisanal Fishing.

PART II.          RESULTS FRAMEWORK (Attached as Annex VI)

PART III.         MANAGEMENT ARRANGEMENTS

A.1.      Execution Arrangements
The MAPESS and its National Institute for Employment and Vocational Training
(INEFOP) will be a key national counterpart for the development and
implementation of the vocational training component in partnership with private
sector and civil society institutions, which will be involved in the development and
implementation of the vocational training activities. The capacity of INEFOP will be
strengthened through the contribution of high-level national and international
technical expertise, which will mainly concentrate on the capacity building exercise
of the national staff involved in training delivery and in the Employment Offices. To
achieve geographical and technical diversification, the training delivery mechanisms
will not only involve formal providers but also mobile training units, on-the-job skill
training and traditional apprenticeships. All the training proposals will be submitted
to the approval of the Program Steering Committee, which should have the following
functions related to the proposals:

   Approve the procedures of funding training activities (typology of proposals,
    conditions of funding, contractual arrangements, follow-up mechanisms, etc);
   Approve (or reject) fund allocations for the training sub-projects;
   Monitor the progress of the different sub-projects approved;
   Review the relevancy and effectiveness of training in terms of impact for the
    development of the private sector;
   Co-ordinate with other development projects and programs, including the other
    components of the Angola Enterprise Program (AEP).

All the training providers will be enrolled under well-defined contractual
arrangements. The process for contracting a training provider will start with the
identification of a specific training need, the establishment of Terms of Reference
(ToR) defining the required training action (by INEFOP and the Program
Coordinator) and the launching of a public appeal for bids to all the potential
providers.
The ToR will include the description and the location of the services, the objectives
and the duration of the training, the number of trainees, as well as the conditions of


                                              38
the bidding and subcontracting processes. The subcontract and bidding process will
follow the contract and procurement criteria established by the UNDP, including
receiving at least three proposals; exceptions and of waivers should follow UNDP
procedures and be justified by to the Steering Committee e.g. when it is recognized
that only one or two providers are in conditions to deliver the required training (for
example, in rural areas or provinces where the training offer is scarce).
The criteria for the approval of training proposals to be ratified by the Steering
Committee will respect the following guidelines:
    Relevancy of the training being offered for the development of the private sector
      and to the diversification of the economic activity in Angola;
    Contribution to the geographical and content diversification of the training offered
      by the training providers;
    Employability of the trainees;
    Synergies and complementarities generated with other development programs
      and/or AEP program components;
    Total training cost and costs of training each beneficiary;
    Level of partner cost-sharing of the total training cost.
For each proposal approved by the Steering Committee a subcontract will be signed
by UNDP and the selected provider. The subcontracts will include the objectives, the
scope and location of the service being provided, the obligations of the parts, the
amount and the modality of payments, the monitoring and evaluation criteria, the
penalties in case of non-accomplishment and the regulation modalities of eventual
disputes. All sub-contracts will be subject to audits.
The component will support the establishment of a Management Information System
(MIS) that will enable the Steering Committee and the relevant implementation
partners to react and take decisions based on the relevancy of the training for the
development and diversification of the private sector. It will also provide adequate
information on the use of resources, by collecting basic data on training sub-projects, by
monitoring the progress of operations and by assessing the impact on beneficiaries and
enterprises.

A.2     Monitoring, Measurement and Evaluation

A.2.1. Work planning, Monitoring, and reporting
The project will be monitored, evaluated and reported upon in accordance with
revised UNDP monitoring and evaluation procedures, which will be made available
to the project management at the beginning of the project. The INEFOP jointly with
the Program Coordinator at the initial start-up of project activities, and subsequently
at the beginning of each calendar year will draw up the project work-plans. This will
be submitted together with the Annual Report to the Steering Committee of the
Angola Enterprise Program.




                                            39
A.2.2. Evaluation
An in-depth evaluation will be conducted 18 months into the implementation of the
project, as part of the implementation of the UNDP Monitoring and Evaluation. The
terms of reference for the evaluation will be proposed by UNDP for discussion and
approval by the AEP Steering Committee.


PART IV – LEGAL CONTEXT

This project shall be the instrument referred to as such in article 1 of the Standard
Basic Assistance Agreement between the Government of Angola and the United
Nations Development Programme, signed by the parties on 18 February 1977. The
host country‟s implementing agency shall, for the purpose of the Standard Basic
Assistance Agreement, refer to the Government co-operating agency described in
that Agreement.


 BUDGET (See Attached Annex IX)




                                           40
                                          ANNEX VI – Results Framework – Vocational Training Component
Intended Outcome:                         Development of a diverse and robust micro, small and medium enterprise sector in Angola as contribution to the National
                                          Poverty Reduction Strategy.

Outcome indicator:                        Relevancy and effectiveness of the training delivered by public and private training operators.

Partnership Strategy:                     The component will be implemented through a close public-public and public-private partnership. The Angola Enterprise
                                          Steering Committee bring together representatives of the Government of Angola and of the private sector, including women
                                          and youth entrepreneurs. Through regular meetings, the partnership will generate debate that aims to build a common
                                          vision of the training sector administration and the need to improve market linkage and to diversify contents and
                                          geographical coverage. Consensus will be built regarding the investment in supplier strengthening and concrete training
                                          sub-projects aiming the development of the private sector in selected areas.

Project Title:                            Angola Enterprise Programme - Vocational Training Component

Project Number:                           ANG/03/011
        Intended Outputs                            Output Target                                                   Activities                                          Resources
                                               Description                  Years
1.1. Capacity of the training providers   1.1.1. A capacity building plan            1.1.1.1. Conduct market studies in selected areas to identify the most       Short-term International
increased to deliver market oriented      based on the assessment of the             promising sectors of private sector development.                             Consultant (1)
training using diversified ways of        sector weaknesses and the
delivering training.                      private sector development
                                          prospects designed and
                                          implemented.
                                                                                     1.1.1.2. Assess the national vocational training offer in terms of assets,   Internal travel &National
                                                                                     quality and relevancy of the training offered to support the private         Consultants (2)
                                                                                     sector development.

                                                                                     1.1.1.3. Draw up a set of performance indicators for suppliers and a list    National Consultants (2)
                                                                                     of courses to be organized within the framework of the component,
                                                                                     reflecting the needs of the private sector and the identified weaknesses
                                                                                     of the existing training offer.

                                                                                     1.1.1.4. Develop training methodologies aiming geographical and              Short-term International
                                                                                     sectoral diversification of training supply through the promotion of         Consultant + National
                                                                                     mobile training, on-the-job training and traditional apprenticeships.        Consultants (2)




                                                                                            41
         Intended Outputs                           Output Target                                       Activities                                        Resources
                                             Description          Years
                                                                          1.1.1.4. Develop training methodologies aiming geographical and           Short-term International
                                                                          sectoral diversification of training supply through the promotion of      Consultant + National
                                                                          mobile training, on-the-job training and traditional apprenticeships.     Consultants (2)
                                                                          1.1.1.5. Identify investments in fixed assets and working capital         National Consultants (2)
                                                                          required to develop new offer responding to the identified needs of the
                                                                          private sector and expansion of outreach.
                                                                          1.1.1.6. Design a training program addressed to vocational training       Short-term International
                                                                          managers and trainers of the key professions identified through the       Consultant + National
                                                                          previous activities and including the use of the agreed performance       Consultants (2)
                                                                          indicators.
                                                                          1.1.1.7. Organize training workshops and in-service training addressed    National Consultants (2)
                                                                          to the VTC managers and trainers identified above.                        & Internal travel
                                                                          1.1.1.8. Prepare a report on the training offer, including location,      National Consultants (2)
                                                                          courses offered, training capacity, evaluation of the quality of the
                                                                          training provided and training assets available on private and public
                                                                          operators, including a set of targets for development of the vocational
                                                                          training sector.
1.2. Market linkages of the training   1.2.1. Employment Centers          1.2.1.1. Review the existing network of Employment Centers (ECs),         National Consultant &
offer promoted by the provision of     providing information on           including their needs on fixed assets, technical upgrade and staff        Travel costs
information service through the        the existing training              training.
Employment Centers                     supply, counseling and
                                       orientation to job seekers,
                                       feedback on quality and
                                       relevance of training and
                                       information on the profile
                                       of trainees.
                                                                          1.2.1.2. Prepare an investment program to improve the quality of the      National Consultant (*)
                                                                          services delivered by the ECs to job seekers and employers.
                                                                          1.2.1.3. Design a Management Information System (MIS) to be used by       Short-term International
                                                                          the ECs and providing automatic relevant data on job seekers'             Consultant
                                                                          registration, training courses and suppliers, trainees profile and
                                                                          employability, feedback on quality and relevance of training.
                                                                          1.2.1.4. Conceive a staff training program (supported by appropriate      Short-term International
                                                                          manuals) addressed to the identified training and to be implemented       Consultant & National
                                                                          through in-service training and workshops.                                Consultant
                                                                          1.2.1.5. Implement the training program designed and identify             National Consultant &
                                                                          additional staff training needs in using the new working methodologies.   travel costs
                                                                          1.2.1.6. Evaluate in close cooperation with the private sector            Short-term International
                                                                          representatives the functioning of the ECs and their effectiveness in     Consultant & National
                                                                          promoting market-oriented training.                                       Consultant




                                                                                 42
          Intended Outputs                                  Output Target                                                          Activities                                       Resources
                                                     Description          Years
1.3. Market-oriented skills training          1.3.1. Vocational training                            1.3.1.1. Support the Steering Committee of the Angola Enterprise          National Consultant
courses conducted for 3,000 citizens in       fund established and                                  Program in the issues related with the funding of training proposals.
line with the market opportunities            financing training activities
identified by the studies and confirmed       in accordance with training
by the Employment Offices and                 (business) plans presented
Employers' Associations.                      by the training providers
                                              and responding to the
                                              needs of the private sector.
                                                                                                  1.3.1.2. Prepare the regulations related with the vocational training       National Consultant
                                                                                                  component, including the criteria for the approval of training
                                                                                                  development programs and the definitive criteria for the approval of
                                                                                                  training proposals.
                                                                                                  1.3.1.3. Train the implementation partners in designing training            National Consultant
                                                                                                  proposals and implementing them effectively.
                                                                                                  1.3.1.4. Promote the approval and issuance of subcontracts to selected      Financial resources ($450
                                                                                                  training providers by the Steering Committee.                               per trainee)
                                                                                                  1.3.1.5. Monitor implementation of training through visits and active       National Consultant &
                                                                                                  use of the training indicators.                                             travel costs
                                                                                                  1.3.1.6. Evaluate the impact and effectiveness of the training activities   National Consultant
                                                                                                  in terms of relevancy for the private sector, numbers of trainees
                                                                                                  economically active, costs per beneficiary, self-sufficiency, etc.
                                                                                                  1.3.1.7. Prepare regular progress reports and submit them for approval      National Consultant
                                                                                                  by the Steering Committee.
(*) In principle, MAPESS is available to finance the rehabilitation and re-equipment of the Employment Centers




                                                                                                           43
ANNEX VII - BUSINESS DEVELOPMENT SERVICES AND BUSINESS
INCUBATORS

PART I.A.      SITUATION ANALYSIS

A.1.   The current market for Business Development Services
The supply of Business Development Services in Angola today is largely limited to
a few firms which support the oil and diamond industries, public sector institutes
which work with small and medium size enterprises, and a large network of
individual consultants of varying quality. There are few services available for
smaller Angolan enterprises.

A1.1 SUPPLY OF SERVICES
A1.1.1 Private sector providers
Most of the large, international consultancy firms are present in Angola. There are
also 15 medium-size (around 10 consultants) national consultancy companies.
These firms target exclusively large clients.

There are very few specialized business service providers, which work with small
and medium sized firms, mostly located in Luanda. There are estimated to be
between 2,000 and 5,000 individual consultants in Angola, working together with
public institutions and through Chambers of Commerce. The most common service
offered is a preparation of a business plan, usually as part of a proposal to receive
financing, for which is charged on average US$500. Representatives of the private
sector suggested in interviews with the UNDP mission that the services offered by
these individuals were in general of a low quality due to their outdated expertise,
and lack of business-friendly attitude.

A1.1.2 Public sector providers
The most relevant institutions for the micro, small and medium enterprise sector are
INAPEM and INEFOP.

INAPEM is the National Institute to Support Small and Medium Enterprises,
responsible to the Ministry of Finance. It has a network of some 1,500 Trainers and
Advisors working around the country. In recent years, it has incorporated some
business services and courses following technical advice from SEBRAE/Brazil. In
the "Novo Horizonte" programme, this institute works in partnership with the
national development fund FDES, supporting the preparation of business plans to
submit for financing by the fund.

INEFOP is the National Institute for Employment and Vocational Training,
responsible to the Ministry of Public Administration, Employment and Social
Security. It is the body governing vocational training and employment in Angola,
with an impressive network of technical staff and training-centres covering all the
18 provinces. INEFOP governs directly a network of 24 vocational training centres
(VTC), 4 integrated employment and vocational training centres and 46
employment centres.. The Institute offers a complete range of vocational based-
courses and is currently trying to focus on job-creation by through a new series of
courses and services to support entrepreneurs, including BDS for retired public
servants, young entrepreneurs and rural business activities. INEFOP‟s


                                          44
methodologies are mainly based upon the experiences of ILO and SEBRAE (a
Brazilian quasi-government BDS supplier).

A1.1.3 Business incubators
A Business Incubator (BI) may be simply defined as a structure or environment,
which accommodates and supports enterprise development, innovation and
technology transfer. In Angola, there exists good quality infrastructure with the
potential to become a BI, offering a stimulating environment and practical support
for new business projects and existing micro, small and medium enterprises. While
there is currently no functioning incubator in the country, a local University, and the
public institute INEFOP have expressed interest in the concept and appear to be
committed to opening such a facility.

A1.2 DEMAND FOR SERVICES
There is very little information regarding the demand for BDS services among the
Angolan enterprises and until now there has been no research on the principal
barriers to the growth of the micro, small and medium enterprise sector. There
would appear to be a lack of a local culture of investing in business development
services. Many entrepreneurs do not recognize the value that professionals such as
accountants, lawyers and consultants can bring to an enterprise, as they have had no
experience in contracting them.

The principal representative institution is the Chamber of Commerce and Industry,
which acts as a Confederation of Chambers and Associations (including the
associations of Rural Producers of Angola, the associations of Industries of Angola,
the Chamber of Young Entrepreneurs, and the Federation of Women
Entrepreneurs). The first formal dialogue between the Government and the private
sector is planned for the second semester of 2003, and is counting on the support of
the Confederation of Chambers of Southern -African Countries (based in
Johannesburg). As there is no current national policy or strategy for the
development of the micro, small and medium enterprise sector in Angola it would
be important institute dialog between stakeholders and works towards the building
of a consensus regarding the key issues that affect the sector.

A.2.   The Problems to be addressed
LIMITED SUPPLY
The micro, small and medium enterprises in Angola lack services which could
support their development and growth. The services that are available are
concentrated in Luanda, and focussed on larger clients.

INAPROPRIATE SERVICES
Angolan micro and small enterprises have problems accessing business
development services because the design and structure of such services do not
sufficiently take into account their needs and local realities.

HARSH ENVIRONMENT FOR NEW ENTERPRISES
New initiatives are hampered by the difficult conditions common to many rural and
urban areas in Angola, such as inadequate basic infrastructure (roads,
communications etc) and services (water, electricity etc), as well as the lack of
skilled labour.


                                          45
A.3       Past initiatives and lessons learnt
The most successful BDS Centres, especially those which operate within
challenging environments, contain the following elements:
- Market-oriented: The centre should identify the services demanded by clients,
and tailor the portfolio of products accordingly.
- Sustainability: The centre should be managed in the same way as a private
company. It is important to prepare a Business Plan which establishes clear
directives for the Centre, identify sources of funding, build strategic alliances, have
strong management, recruit motivated and high professional staff, deliver high
quality services, and assess the results according to benchmarked criteria.
- Friendly follow-up support under one roof: The centre should offer a
comprehensive range of core services relevant to the evolving needs of the clients,
that builds a long-term relationship between the centre and the entrepreneurs.

The actions taken by the Angolan government to promote a dynamic
entrepreneurship culture are still at the infant stage, however, the initiative given to
INAPEM and INEFOP should be taken as a positive signal, and these institutions
could be identified as potential partners for the project.


A.4.      Development Objective (Relevant Outcome)
The Business Development Services component of the Angola Enterprise Program
expects to identify and overcome the main barriers to development and growth,
faced by formal and informal micro, small and medium enterprises in Angola today.
Through the provision of incubators, and business development services, the
program will support the launching of new initiatives and the expansion of
businesses throughout the country


A.5       National Institutional and Legal Framework
As the Government approach to the micro, small and medium enterprise sector has
always been ad hoc, it has resulted in a profusion of institutions without a coherent
strategy nor means of effective co-ordination. The of Finance, Public
Administration, Employment and Social Security, Fisheries, Assistance and Social
Reintegration, Industry, and Family and Promotion of Women are, responsible for
the following institutions:

         the National Institute to Support Small and Medium Enterprises (INAPEM),
          which focuses on training (and formerly financing) small and medium
          enterprises;
         the National Institute for Employment and Vocational Training (INEFOP),
          which provides support to small productive activities through training and
          the provision of kits;
         the Institute for Artisanal Fisheries (IPA);
         the Institute for the Socio-Economic Reintegration of War Veterans
          (IRSEM), which supports demobilized soldiers and other vulnerable groups;



                                           46
         special credit funds, which include the Fund for Economic and Social
          Development (FDES), the Fund for the Support of National Businessmen
          (FAEN) and the Fund for the Development of the Fishing Industry
          (FADEPA) (see Section 4.3).

These national institutions are responsible for implementing policies primarily
relating to training, material support and institutional support for businesses in the
respective sectors. The Funds were created to provide financial support to
enterprises, mainly through loans. It should be noted that most of the institutions
and funds mentioned above are mainly directed to supporting small and medium
sized enterprises. It is more at the administrative levels (licensing and taxation) that
the micro-enterprise sector is directly affected.

At the regional level decree no. 27/00 of 19 May 2000 established in each province
a Department for Micro-enterprises, within the Provincial Directorate of Industry,
Commerce, Tourism and Hotels. Unfortunately it appears that these departments
are still not functioning in all provinces and their role is not yet clear, (article 24 of
the decree mentions that the department should study methods and techniques for
increasing industrial and food production and ensure the rehabilitation of the
industrial sector at the provincial level).

At the municipal and community levels, the respective administrations limit
themselves to matters concerning the regulation, taxation and control of micro-
enterprise activities, rather than providing services to support the development of
the sector.


A.6. Intended Beneficiaries
The project has two groups of stakeholders: Direct beneficiaries: micro, small and
medium enterprises, the investors in these businesses, the owners, and their
employees. The suppliers of services to these institutions should benefit from the
growth of the sector and the better prospects for their clients.
As indirect beneficiaries, the clients of the enterprises will enjoy access to more,
better quality and lower-priced goods and services, while it is hoped that the citizens
of Angola will benefit from a growing more diversified economy.


PART I.B.       STRATEGY

B.1       National Commitment to achieving the Outcome
Several Ministries have various competencies related to the development of the
micro, small and medium enterprise sector, but a specific Ministry dedicated to
coordinating the sector development has yet to be established. Formally it appears
that the primary responsibility for the private sector development lies with INEFOP
and INAPEM, nevertheless there continue to be a variety of Ministries involved: the
Ministry of Commerce, the Ministry of Industry, the Ministry of Family and
Promotion of the Woman, the Ministry of Tourism, and the Ministry of External
Affairs. Recently, a law creating the Agency for Private Investments (former



                                            47
Institute for Foreign Investments) has been approved, which will offer various
financial and non-financial services for small and medium size firms.

The Angolan government has implemented several measures in recent years,
intended to support the private sector development. The budgets of INAPEM and
INEFOP have been increased, and a "Guichet Único da Empresa", „One–stop
Window for the Company‟ has been established in order to simplify the complex
registration procedures which can take many months to complete. However
business activities continue being constrained by bureaucratic procedures and new
business opportunities are being lost.


B. 2   Strategy for the use of AEP resources
Through investments in the creation of technical support centres that will gradually
become self-sustainable business services providers, the BDS component envisages
the building of Angolan capacity to develop and support indigenous entrepreneurs
and innovative micro, small and medium enterprises.

The program places special emphasis on supporting women entrepreneurs,
considering their important participation in the local business sector. Also the BDS
component will foster linkages between large and small enterprises. Foreign
investment should be prioritised as an effective mechanism to upgrade domestic
enterprises, provide access to international markets and facilitate international
technology transfer. In this way business linkages have been shown to be an
important way for developing countries to diffuse valuable knowledge rapidly
throughout their economies and increase the dynamism and competitiveness of the
domestic enterprise sector. In all cases the potential “clients” will pass through a
selection process based on their capacity for developing their entrepreneurial
behaviour. Their commitment with their respective business and/or initiative will
also be considered in the selection process.

The strategy for the provision of relevant business development services to the
Angolan micro, small and medium enterprises is to implant pilot service providers,
and invest in the expansion of those providers who demonstrate the most success.

-   As part of preparatory phase, a market study will be conducted to evaluate the
    demand for services, analyze the capacity of providers and investigate (due
    diligence) potential partners. Also, a feasibility study for Business Incubators
    will be contracted.

-   Pilot business service centres and incubators will then be launched in a number
    of provinces, utilising a variety of methodologies, and delivery mechanisms.

-   After 18 months the pilots will be assessed. Successful experiences will be
    extended and expanded throughout the country according to available resources.

The BDS component seeks to replicate successful Incubator models in other
countries, but which are adapted to the needs of Angolan micro, small and medium
enterprises. BDS centres and BIs should be organized as part of a network, working



                                          48
together to strengthen Angolan enterprises, and contributing towards the reduction
of unemployment and poverty.

The pilots will be structured in accordance with the results of the market study. The
centres to be supported by the BDS component of the Angola Enterprise Program
are the following:


B.2.1 Business development services – Business centres

B.2.1.1 UNCTAD/SEBRAE Pilots:
Two Business Centres, focussing on small and medium size enterprises, will be
launched, 1 in Luanda and 1 in a Province to be determined by the market study.
UNCTAD will provide the benefit of their experience with more than 50 business
service centres around the world, supported by technical assistance from
SEBRAE/Brazil, who has already worked with the Angolan government in this
area. The pilots will initially focus on „Training of Trainers‟, with the participation
of experienced Angolan professionals, employees of the centres, and international
consultants. UNCTAD will monitor and guide the activities of the BDS component
until sustainable local capacity has been established.

B.2.1.2 The Expansion Phase:
After the pilot phase new BDS centres will be installed - one per year - in selected
geographic areas creating a national network of public and private BDS providers
that will be able to offer updated expertise. These Business Centres will act
simultaneously providing services for entrepreneurs as well as delivering "on-the-
job" training for BDS providers. It is anticipated that in the first three years, these
business centres will train a total of 3,200 entrepreneurs, and advise and certify 50
BDS providers on updated methodologies, through the use of established training
techniques and counselling tools. In accordance with available funding, by the 5 th
year the centres are expected to have trained 7,200 entrepreneurs, while 120 new or
renewed BDS providers will be certified in updated methodologies.

An operational plan including a tailored portfolio of courses for local MSMEs and
BDS providers has been designed and it is reflected in Annex I of this section.

B.2.1.3 CEFE pilot:
For micro and informal enterprises the CEFE methodology, will be used, as
experiences in other countries has demonstrated its effectiveness in training
entrepreneurs with low levels of literacy. An Angolan NGO will be selected by the
market study, according to its capacity and understanding of the micro-enterprise
sector. International consultants will be utilised to train the NGO in the effective
use of this methodology.

B.2.1.4 Expansion Phase:
After 18 months, the results of this pilot will be evaluated. Should it be considered
a success, special attention will be given to a Training of Trainers strategy, working
in conjunction with local NGOs, in order to guarantee a rapid expansion of CEFE
licensed teachers throughout the country.



                                           49
The corresponding operational plan will be prepared by an international supplier - to
be identified - in coordination with the selected local counterparts.

B.2.2 Business incubators
In Angola, there are a sufficient number of individuals with entrepreneurial vocation
and innovating projects with a commercial potential that would justify supporting
new ventures. Based upon the results of the feasibility studies, two Business
Incubators will be established.

B.2.2.1 The "University Model" Pilot
In this pilot, the incubator is installed, planned, led, directed and monitored by a
university. Its objectives usually include technology transfer to industry and
commerce, revenue generation from consultancy, research and development, and
the fostering of spin-off companies. Management functions may be sub-contracted.
It is usually owned by the university and is based in or close to the campus.

The BDS component will invest in the creation of a Business/University Incubator
for supporting spin-off companies created by graduates. The UCAN-Catholic
University in Luanda has expressed interest in being a candidate for such
investment, but it is expected that the feasibility study will select the optimum
location for the first pilot

B.2.2.2 The "Partnership Model"
In this pilot, a public institution is a partner with other institutions, agencies or local
groups, including local government, community organizations, commercial
developers and professional bodies. Many legal structures are possible (e.g. NGO,
Foundation, etc.). The overall objective of the partnership model is the local and
regional economic development and the fostering of enterprises.

B.2.2.3 Methodology
The tenants will have to pay for their private space and also cost-share for common
spaces (offices, meeting room, etc.). The price of the rental fees should be increased
each year as to guarantee a "healthy" environment, where tenants that enter the
Incubator will "graduate" as successful entrepreneurs and leave room for new
tenants. Experience shows that 80% of tenants, when the selection process has been
applied, begin to generate income within the second year of incubation. A key
aspect that is to be considered in the proposed market-study, is the price of the
initial rent. This should be a realistic price for the target market.

Incubator management and staff will provide general support to all tenants. In
addition, the management and outside consultants will provide advisory services:
training, technical, managerial, accounting and marketing. Costs for such specific
services will need to be recovered from tenants. One method of doing this would be
to charge a Services Recovery Fee of 2% on gross sales per year. This has the
advantage of simplifying book-keeping and ensuring that start-up companies
without a saleable product/service are not charged, and only those who have an
income-flow pay.

Costs of electricity, water, telephone, etc., will be paid by tenants. Expenditures
incurred by the management for all common facilities and shared areas will be


                                            50
charged to the Incubator budget. Obviously, the feasibility study should include an
"objective" Business Plan. The Incubator management and informal network of
advisors can also provide technical and other services to entrepreneurs outside the
Incubator, who are starting or operating on their own premises. Therefore, practice
can be gradually built up on the basis of demonstrated excellence and results.

The goal of each incubator is to have supported 30 enterprises by the third year of
operation, working towards full cost recovery. The corresponding budget
incorporates a budget line - Incubator's work capital. This is to cover the maximum
level of accumulated deficits based on expected standard rates of new enterprises
entrants each year, successful enterprises exiting and enterprises that drop-out, all of
which has an impact on the financial income to cover the fix costs such as staff
(Manager, Secretary, part-time Business Counselor) and facilities (telephone,
electricity, water, etc.).

B.2.3. Assumptions on inputs and management
The project depends upon the motivation and commitment of the national
counterparts, in order to implement and manage the BDS component in a successful
manner. It is expected that these counterparts will make available to the
beneficiaries of the program, entrepreneurs and BDS providers who are under going
a learning process, the best of their support capacity. Therefore, the BDS component
makes the following assumptions:

B.2.3.1 BDS Centers based in INEFOP premises:
a) INEFOP Tangible Inputs
- A "focal point" office with a dynamic and professional Manager that will
interact with the Program Coordinator of the program on all strategic and
implementing aspects, such as logistical arrangements for the agreed activities,
promotional actions, etc.
- Secretarial/ Administrative support for the "focal point" office.
- Office space, including basic equipment (furniture, PCs, telephone, fax and
     photocopier)
- Communication lines (telephone, internet, fax).
- Access to appropriate training rooms for all planned workshops.
- Two or three offices for business counseling activities.
- Maintenance (cleaning, security) for all areas to be used by the Program.
- Training materials for workshops, produced locally, and sold to trainees when
possible.

b) INEFOP Non-Tangible Inputs
The BDS centers established within INEFOP premises will target most of the small
and medium size companies and also the micro enterprises with the most potential.
Therefore, the INEFOP centers should meet quality standards and promote a
friendly business environment. These centers should function as an "incubator
without walls", where entrepreneurs and the BDS providers create personal and
institutional synergies.

B.2.3.2 BDS centers providing CEFE methodologies.




                                          51
These centers will target mainly micro and informal business entrepreneurs. This
important segment of the Angolan society should feel that these centers offer
supportive environments for their initiatives.
a) Tangible Inputs Of Licensed CEFE Centers
The project assumes that each centre will provide the necessary logistical, technical
and administrative staff required for the proposed activities while the manager of
the centre will interact with the coordinator of the Program in all organizational and
operational aspects.

b) Non-Tangible Inputs of Licensed CEFE Centers
The BDS providers should maintain an attitude of excellence as part of the new
business culture.

B.2.3.3- Main aspects to be considered for implementing a successful Incubator
a) Host Counterpart
-The institution selected should have a clear understanding of the need of this kind
of initiative, and should offer as a minimum: i) business space, ii) an environment
that stimulates creativity and innovation, iii) clear terms of acceptance and
permanence of users, iv) support for the solution of micro and small enterprises
problems.

INEFOP has shown interest in establishing a BI in one or more of their Centres,
where synergies can be created among the clients of vocational training, users of
BDS, and tenants of the BI facilities. INEFOP has offered their Centre in Viana (a
municipality close to Luanda and a Industrial Park) for the implementation of a
pilot-project that later could be replicated in other Centres around the country.

b) Management
-Most of the success of an Incubator is based on the identification of an appropriate
Manager for the Incubator. The manager has overall responsibility for the planning
and day-to-day operations of the Incubator.

c) Tenants/ Users
- The tenant selection is a critical aspect for the incubator success in order to
guarantee the migration of the enterprises to the "real-world-stage" within the
agreed terms of time (3 rd year on average). Emphasis should be given to the
"entrepreneurial" profile of the candidates and the commercial possibilities of
his/her project/enterprise.

B.2.3.4 Expected Inputs From Incubator Host-Counterparts (UCAN and INEFOP)
- Space: The tenants will have approx. 50 sqm. each, to install necessary
equipment and to develop their products/services. They also will have at their
disposal a common room for meetings with clients and suppliers, a cafeteria and rest
rooms.
- Facilities: The tenants will also have, water and electricity for the normal
operations of their enterprises, as well as fax, telephone, computer and photocopy
machine.
- Administrative Assistance: The Incubators will provide to the tenants,
assistance in the administrative and legal organization of their enterprises,
formulation of their business and marketing plans, and promotion of their business.


                                         52
- Financing: As it is reflected in the corresponding budget, they will be expected
to financially assist the tenants in the acquisition of technical equipment (e.g. by
leasing). However it will be important to create a seed capital fund that could
financially assist the enterprises with small loans for initial expenditures. This will
depend upon availability of funds.

B.2.4 Expected end of project situation

B.2.4.1 After Pilot Phase
 The results of the Market Study will be disseminated.
 2 or more BDS centres functioning.
 A Business Plan will be prepared for increasing the number of potential BDS
providers.

B.2.4.2. After Fifth Year
Upon conclusion of the project it is expected to have a MSMEs strategy in place,
effectively reaching formal and informal entrepreneurs in the rural and urban areas.
Staff, trainers and counsellors working in public and private BDS outlets will have
been trained in updated and tailored methods for Angola, and prepared to work in a
competitive basis.

The number of Angolan enterprises applying for BDS will have increased. Access
barriers will have been reduced effectively and more BDS providers will have been
trained. In addition:

 7,200 entrepreneurs will be trained from which 750 will have received special
business development services (counselling) in 7 Business Centres located in
Luanda and other Provinces. 50% of participants will be women entrepreneurs.
 A small group, 350, of these entrepreneurs, will have received support to
become ready for profitable linkages with large companies.
 7 associations and/or formal groups of micro, small and medium enterprises will
be created, one per each Business Centre.
 A least two Business Incubators will be assisting 60 (30 each) promising
companies.
 By the end of the project, training material and experiences will have been made
available to most of the suppliers country-wide. Know-how from
UNCTAD/SEBRAE and CEFE will be transferred and expanded to selected local
experts and institutions.

PART II.       RESULTS FRAMEWORK (Attached as Annex VIII)

PART III.      MANAGEMENT ARRANGEMENTS

The national counterparts will be confirmed based on the conclusions of a feasibility
study, and should possess:
- Management committed to the goals and strategy of the Angola Enterprise
Programme.
- Highly qualified and committed staff with extensive experience in working with
micro, small and medium enterprises.
- Solid financial status.


                                          53
-     Buildings and equipment necessary for project needs.

This BDS component will be implemented by international experienced
organizations:

- UNCTAD/SEBRAE for the BDS centres and Incubators.
- A licensed CEFE provider (to be identified) for support to micro and informal
enterprises.

Working in partnership with selected local institutions:

-     INEFOP (to be negotiated): for the first BDS centres.
-     INEFOP (to be negotiated): for the Business /Enterprise incubator.
-     UCAN (to be negotiated): for the University/Business incubator.
-     INEFOP and NGOs (to be negotiated): for delivering CEFE methodology.

These institutions together with selected private sector BDS providers, will receive
technical assistance support from specialists in order to effectively execute the
activities foreseen in this project.

The organizations responsible for the implementation of the BDS component of the
Angola Enterprise Program will ensure that all material developed through the
program will continue to be made available to other BDS providers after the
program has ended.

A.2      Monitoring, Measurement and Evaluation

A.2.1. Work planning, Monitoring, and reporting
         The project will be monitored, evaluated and reported upon in accordance
         with revised UNDP monitoring and evaluation procedures, which will be
         made available to the project management at the beginning of the project.
         The project coordinator at the initial start-up of project activities, and
         subsequently at the beginning of each calendar year will draw up the project
         work-plans. It shall be submitted to the Steering Committee as well as the
         Annual Progress Report.

A.2.2. Evaluation
An in-depth evaluation will be conducted eighteen months into the implementation
of the project, as part of the implementation of the UNDP Monitoring and
Evaluation procedures. The terms of reference for the evaluation will be proposed
by UNDP for discussion and approval by the AEP Steering Committee.

PART IV – LEGAL CONTEXT

This project shall be the instrument referred to as such in article 1 of the Standard
Basic Assistance Agreement between the Government of Angola and the United
Nations Development Programme, signed by the parties on 18 February 1977. The
host country‟s implementing agency shall, for the purpose of the Standard Basic




                                          54
Assistance Agreement, refer to the Government co-operating agency described in
that Agreement.

BUDGET (See Attached Annex IX)




                                       55
                         ANNEX VIII – Results Framework – Business Development Services and Business Incubators
Intended Outcome:                          Development of a diverse and robust micro, small and medium enterprise sector in Angola as contribution to the National
                                           Poverty Reduction Strategy.

Outcome indicator:                         Number of micro, small and medium enterprises with access to business development services (BDS). Percentage of market
                                           targets achieved. Percentage of clients that improved their entrepreneurship practices. Number of enterprises promoted by
                                           the business incubators.

Partnership Strategy:                      Institutional Agreements with local partners for the programme and the subsequent phases of the project.

Project Title:                             Angola Enterprise Programma - Business Development Services & Business Incubators Component.

Project Number:                            ANG/03/011

          Intended Outputs                                Output Target                                                 Activities                                         Resources
                                                    Description                   Years
1.1. Well-structured Business plans        1.1. Support and advice on                     1.1.1. Conduct business diagnostics and business plan assessment           UNCTAD Backstopping
                                           Business planning and activities   X   X   X   (training)                                                                 Mission
                                           delivered to local entrepreneurs
                                                                                          1.1.2. Assist selected MSMEs in finalizing business plans
                                                                              X   X   X   (counselings)
                                                                                          1.1.3. Select the most promising business plans submitted by
                                                                              X   X   X   programme-participants, to be promoted
1.2. Iniciation of the Incubators          1.2. A dynamic incubator for                                                                                              UNCTAD Backstopping
activities                                 selected entrepreneurs,            X   X   X   1.2.1. Same activities mentioned in 1.1.1/1.1.2/1.1.3                      Mission
                                           committed to effective results
1.3 Demand-driven follow-up services       1.3. Self-sustainable business                 1.3.1. Identify most suitable follow-up assistance for each segment of     UNCTAD Backstopping
and support on a cost-sharing basis with   centers and incubators             X   X   X   clients                                                                    Mission
enterprises
                                                                                          1.3.2. Identify need-based follow-up advisory services in the area of      UNCTAD Technical
                                                                              X   X   X   marketing, quality, accounting and management                              Assistance and Quality
                                                                                                                                                                     Control
                                                                              X   X   X   1.3.3. Deliver selected assistance.

                                                                                          1.3.4. Facilitate access to credit or micro-credit to bankable proposals   UNCTAD Backstopping
                                                                              X   X   X   in priority sectors                                                        Mission




                                                                                              57
         Intended Outputs                              Output Target                                           Activities                                      Resources
                                               Description           Years
                                                                                  1.3.5. Facilitate access to investors (e.g. via the new Agency for
                                                                      X   X   X   Private Investements)
                                                                                  1.3.6. Advice on business linkages and facilitate sub-contracting
                                                                      X   X   X   arrangements
                                                                                  1.3.7. Assists MSMEs to team up into larger joint partnerships in
                                                                      X   X   X   order to improve competitiveness and market leverage (e.g. organize
                                                                                  clusters for exports)
                                                                      X   X   X   1.3.8. Facilitate access to national and international business fairs
1.4. Networking stimulated among         1.4. A dynamic framework                 1.4.1. Stimulate and assist MSMEs to establish associations             Missão de Apoio da
MSMEs at the local and regional levels   for Business transaction     X   X   X   according sectors, activities and/or geographical areas                 CNUCED
                                         and sharing of information
                                                                      X   X   X   1.4.2. Assist in the creation and updating of respectives databases




                                                                                      58
                                          ANNEX IX – Budget
Project Number                  ANG/03/011
Project Title                   Angola Enterprise Programme – Support the Development of the Micro
                                Enterprise Sector in Angola
Execution Modality              DEX – Direct Execution
Designated Institution
CMBL          Description       Impl.      TOTAL                   2004               2005               2006
                                Agent   W/M    US$           W/M       US$      W/M       US$      W/M       US$
10       Project Personnel
11       International Staff
11-01    Coordinator                    36    600.000        12      200.000    12      200.000    12      200.000
11-02    Microfinance Expert            28    448.000        12      192.000    12      192.000     4      64.000
11-51    VT Consultant                  12    240.000         4       80.000     4       80.000     4      80.000
11-52    BDS Consultant                  6    120.000         2       40.000     2       40.000     2      40.000
11-53    Incubator Consultant            3     60.000         1       20.000     1       20.000     1      20.000
11-54    Enabling Env.                  12    240.000         5      100.000     5      100.000     2      40.000
         Consultant
11-55    MF Consultant                  12     240.000        4       80.000     4       80.000     4      80.000
11-56    MFI Consultant                  9      90.000        4       40.000     3       30.000     2      20.000
11-99    Sub Total                      109   2.038.000      44      752.000    43      742.000    31      544.000
13       Admin. Supp Staff
13-01    Adm/Finan. Assist.             36     72.000        12      24.000     12      24.000     12      24.000
13-02    Bilingual Secretary            36     72.000        12      24.000     12      24.000     12      24.000
13-03    Driver                         36     54.000        12      18.000     12      18.000     12      18.000
13-99    Sub-Total                      108   198.000        36      66.000     36      66.000     36      66.000
15       Monitor & Evaluat.
15-01    Audits/Evaluation                    200.000                                   100.000            100.000
15-.99   Sub-Total                            200.000                                   100.000            100.000
16       Mission Costs
16-01    External Missions                     30.000                10.000             10.000             10.000
16-02    Internal Travel                       17.000                7.000              5.000               5.000
16-03    HQTERS Mission                        30.000                10.000             10.000             10.000
16-99    Sub-Total                             77.000                27.000             25.000             25.000
17       National Profess.
17-01    VT Consultants                 10      50.000        5       25.000     5       25.000
17-02    BDS Consultant                 10      50.000        5       25.000     5       25.000
17-03    Enab. Env. Consul.             12      60.000        7       35.000     5       25.000
17-04    Microfinance Cons              10      50.000        5       25.000     5       25.000
17-99    Sub-Total                      42     210.000       22      110.000    20      100.000
19       Total Componentes                    2.723.000              895.000            983.000            735.000
20       Sub-Contracts
20-01    Informal Sector                      200.000                70.000             90.000             40.000
         Research
20-02    VT Pilot Project                     1.000.000              400.000            400.000            200.000
20-03    BDS Training                          200.000                70.000             90.000            40.000
20-04    CEFE Training                         200.000                70.000             90.000            40.000
20-05    Business Incubators                   400.000               140.000            180.000            80.000
20-99    Sub-Total                            2.000.000              750.000            850.000            400.000
30       Training
30-01    MFI Workshop                         240.000                 90.000            90.000             60.000
30-02    Enab. Env Workshop                   100.000                 40.000            60.000
30-03    VT Workshops                         150.000                150.000
39       Total Componente                     490.000                280.000            150.000            60.000
40       Equipment
45-01                                          20.000                7.000               7.000              6.000
45-02    Computers                             20.000                15.000              5.000
45-03    Vehicle                               25.000                25.000
49       Total Componente                      65.000                47.000             12.000              6.000
50       Sundries
52       Reports
52-01    Advocacy                              15.000                 5.000              5.000              5.000
53       Miscellaneous
53-01    Miscellaneous                        180.000                 70.000            65.000             45.000
53-02    Unforeseen Expe.                      67.000                 33.000            23.000             11.000
59       Total Componente                     262.000                108.000            93.000             61.000

90       TOTAL
99       Total do Projecto                    5.540.000             2.047.000          2.065.000          1.251.000




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