11 Aug Reforming Angola’s Honey Pot – Part 2
In the first of this two-part blog post, Liliane Mouan showed that the first signs of the Angolan government’s intention to revamp the oil sector came in 2011. One reform-minded insider recalls that this was a time when ‘the regime was regrouping following the 2008-09 global financial crisis and was thinking strategically about the way ahead’. This implies that the latest economic crisis of the mid-2010s did not act as a trigger, but merely reinforced the need, for structural reform. Mouan now returns to the ongoing restructuring and asks whether these reforms will deliver greater transparency.
By Liliane Mouan
Today’s Angola is a country of extremes. Besides being Africa’s largest oil producer and fifth largest economy, it is also considered one of the world’s most unequal and corrupt countries. One ranking puts it as the 6th most corrupt country (out of 168 countries).
Previously reluctant to abide by demands to open its books to international scrutiny on the grounds that such action would infringe upon the country’s national sovereignty, the Angolan government has since the early 2000s implemented a series of home-grown governance reforms. The latest round of these reforms is aimed at both the oil sector and Sonangol, the state oil company dogged by controversy following the appointment of the president’s eldest daughter Isabel dos Santos as chairwoman. A toxic combination of technical challenges, low oil prices, revenue losses, alleged fraud and a huge debt burden has left the state oil firm unable to contribute nearly 60% of oil revenues to the state budget since January.
Besides providing some clarification on the timing of ongoing reforms, the previous blog post outlined the government’s plans and objectives, which includes bringing added transparency to the oil sector. Whether and how the ongoing restructuring would deliver transparency is the subject of this second blog post; so too is the question of dynastic succession in this southern African state.
Transparency: The Name of the Game
As noted previously, Angola’s new oil regime envisages a split of powers between Sonangol and a new agency as well as the transfer of Sonangol’s assets to three different holding companies. This new institutional structure should go a long way to help solve Sonangol’s conflict of interest issues, but it is also dogged by a number of unanswered questions.
One such question relates to uncertainties in the institutional setting for managing oil revenues. So far, Angola’s oil revenue management system has involved Sonangol, the Ministry of Finance (MINFIN), the central bank – which hosts three different fiscal institutions – and the US$5 billion sovereign wealth fund (SWF) set up by the government in 2012 to replace the oil-for-infrastructure fund previously managed by the central bank.
Of these four agencies, MINFIN is widely regarded as the one that has spurred efforts to enhance transparency in public affairs. It justified its reputation as chief reformer again last month with the release of its latest budgetary performance and other key performance indicators. Yet MINFIN has always played second fiddle to Sonangol and has often seen its work undermined by policy reversals, changes in its leadership teams, capacity issues, and by Sonangol’s failure to transfer oil revenues due to the treasury on a timely basis.
The SWF, meanwhile, has focused on ‘assessing international best practices for its governance structure, investment strategy and risk management rules’. But even it is proving to be problematic. Headed by José Filomeno ‘Zenu’ dos Santos, one of the president’s sons, the SWF has since its inception faced criticisms of nepotism; concerns about its investment policies, transparency and governance; and allegations of corruption.
When I asked Zenu dos Santos what he made of those allegations surrounding the institution two years ago as part of my doctoral research into oil governance reforms in Angola, he responded that the way to tackle corruption is to ‘invest in having a parliament that works well, in the judiciary system, and ensuring that these different sovereign institutions do work to support the activities of the government.’ The reality however is that apart from challenging its constitutional legitimacy, the Angolan parliament and opposition parties in particular have had no say over the SWF.
With the creation of a new finance holding company and seemingly ill-defined legal and procedural rules governing the administration of oil revenues, the question therefore arises as to how revenues from the government share of the profit oil would be managed under the new oil regime. ‘Under the finance holding company or would they be flowing directly to the national treasury?’ as one industry insider approached in June 2016 for further clarifications on this matter queried, or would it suitable to transfer these revenues to the controversial SWF?
Even when these questions get settled, others remain: just how transparent is this new oil regime likely to be? Who is this transparency really intended for, and for what purpose(s)?
The problem with Angola’s transparency reform agenda is not only that it is mostly driven and shaped by state actors who never really felt the need, and were never under sustained pressure, to incorporate civil society voices. It is also the case that this agenda has so far generated mixed reform outcomes, owing in part to the fact that changes are often introduced that offset the effects of other more positive reforms.
This is most evident in the oil sector where there has been a strong tendency to shift corruption from the upstream offshore sector dominated by international oil companies to the less visible onshore and downstream sectors. But it also runs through other sectors of the economy in which Sonangol operates. In effect, as the leader of Angola’s opposition party CASA-CE, Abel Chivukuvuku, told me during a question and answer session at British think tank Chatham House last week, it is common to see ‘those in power distribute these enterprises [being privatised or transferred by Sonangol] among themselves.’ Bearing in mind this particular track record, he submitted, we should ask: ‘what does transfer [of Sonangol’s assets] mean?’
One way to answer this question is to examine the current reforms in a more systematic and comprehensive way. That includes when questioning what the sheer diversity of actors included in or excluded from the reform process say about whose interests the current reforms may seek to protect. So far, the emphasis has been on the appointment of Isabel dos Santos and the absence of Vice President and former chairman of Sonangol (1999-2012) Manuel Vicente from the reform scene.
Vicente played a critical role in furthering Angola’s international influence through Sonangol’s international expansion and helping the company make its first steps towards improving transparency in bidding procedures for awarding licensing rights and contracts and through the release of its audited accounts from 2009 onwards. Yet although once touted as the likely successor to dos Santos, Vicente has seen his influence wane after being linked to a series of corruption scandals.
Much less has been said about other actors. For example, what should we make of the international ‘experts’ that Isabel hired, including the Boston Consulting Group, Portuguese law firm Vieira de Almeida and a purported contingent of 170 professionals – the majority of Portuguese nationality and some reportedly linked to Isabel’s other business ventures? And why was Vicente’s successor, Francisco de Lemos, sacked?
In sharp contrast to Vicente who had accommodated extra-budgetary activities, de Lemos’s tenure was heralded as a new beginning in terms of shifts in oil sector management and transparency. He was seeking to curb wastage, and according to one industry insider, was proposing to help ease Sonangol’s difficulties by building internal capacity for technical work. That Isabel hired so many external actors after de Lemos and others seemingly advocated for this alternative course of action suggests perhaps that it is a clash of visions that combined with his lack of political clout to ultimately cost him his job.
What, then, do the Sonangol reforms have to do with Isabel and the succession process?
Isabel, Sonangol and the Politics of Succession
How to treat Isabel’s appointment at Sonangol depends almost entirely on one’s starting perspective. So far, there are three main views concerning this matter. Some believe that this signals that the president no longer trusts anybody but his daughter to go about implementing the reforms that are necessary to revitalise the sector and boost profitability. Others posit that this appointment is a politically motivated move and part of dos Santos’ succession plan. A third argument goes that this is a temporary measure designed to protect the interests of the dos Santos family during this transition period.
All three positions are entirely plausible. At times of crisis and in a context where politics are so personalised, it is easy to see why the president would entrust this responsibility to his eldest daughter whose reputation as a ruthless businesswoman, some say, make her more than qualified for the post. All the more so when the reforms needed are of such magnitude.
Likewise, there are reports circulating in Luanda that appear to support the idea of Isabel being groomed for the presidency. Rumour has it that as head of Sonangol, the largest and most significant state-owned enterprise, Isabel could be elected to the Central Committee during the 7th Ordinary Congress convened later this month (17-20 August). The idea then is for her to become a member of the ruling party’s politburo, before subsequently being nominated Vice President by her father just in time for the 2017 elections, only to succeed him when he retires a year later.
It bears recalling that under Angola’s 2010 Constitution, it is the person whose name appears first on the closed list of the party that wins the legislative elections who becomes President. President dos Santos would therefore be legally allowed to choose his successor should the ruling party, the People’s Movement for the Liberation of Angola (MPLA), win the next elections.
In addition to her status as the president’s daughter and a reputable businesswoman, some commentators imply that Isabel’s charisma, age and gender would also appeal to the youth, many of whom have expressed their frustrations at the high levels of corruption and slow pace of democratic progress in the country.
While there is apparent enthusiasm in some corners for this succession plan, it is also rumoured that there are strong objections to a dynastic tendency especially among senior figures within the party and armed forces. One well-informed source declared: ‘while Dos Santos has undoubtedly centralised power very much in his own hands, and while that has been accepted because he’s kept everybody [in the core power structure] happy, it’s not necessarily the same as saying that powerful people want that to continue.’ How these differences will be managed is still unclear. Still, in the absence of any significant signs of major struggles among elite factions such as in Gabon, for example, this informant opined that it is probable that a ‘compromise’ candidate is found who has a high level of popularity within the party, the ‘right credentials’ and credibility.
In short, to draw from the Nigerian writer Chimamanda Ngozi Adichie’s analogy on single storyism, the preceding analysis shows that what has been constructed as a simple tale about succession is in actual fact a collection of overlapping ‘stories’ that to understand, one would have to go beyond the headlines. Indeed, these are stories about the prospects of continuity in Angola insofar as they relate to the commingling of public and private interests; the understanding of development as ‘done by the elite and by foreigners’; and as Jesse Ovadia’s book further illustrates, the ongoing shift and increasing complexity in strategies of elite wealth accumulation.
Would a change of presidency ultimately replace who has power over Sonangol and the oil rents or reshape Angola’s economic structure? The fact is, it may be too soon to provide a definitive answer to this question, not least given the issues raised above and the lack of clarity surrounding the constitution of the newly-created agencies and lines of reporting and accountability. Judging by the ruling party’s tight control over the political, economic and financial systems though, what seems clear is that no major structural changes can be expected in the next few years at least.
Again, arguing that the reforms underway may not alter the structural character of Angola’s political economy anytime soon is not the same as suggesting that the country’s elites are bound to continue with their old ways unfazed and unobserved. On the contrary, while there may not be a shift in ‘who benefits from oil and gas or from …economic structure in general’, Ovadia contends that ‘even those inclined to continue accumulating rent from the sector are recognising the need for international legitimacy.’ This is especially so in the Angolan case where, acting out of self-interest, foreign governments like China and the U.S. whose companies are extracting oil are showing signs that they would no longer be accommodating of past practices.
In a context of heightened interest and growing regulatory activism in anti-corruption and anti-bribery, it is therefore possible that the current reforms serve a dual purpose: to further strengthen elite control over every aspect of Angolan economy and society while simultaneously portraying Sonangol as a more efficient and more transparent company. The latter is crucial not just for the oil sector. It matters for Angola’s international legitimacy and reputation too. Angola’s rulers are well aware that this international legitimacy requires a restructuring process that retains at least some semblance of integrity, even if it simply means putting the corruption somewhere else.
Liliane Mouan is a Research Assistant in business and human rights at the British Institute of International and Comparative Law. She will join The Dickson Poon School of Law at King’s College London in September. You can follow her on Twitter @liliane_mouan.