Angolan President José Eduardo dos Santos has hinted that he’s keen to abdicate – but he’s holding back because he fears that his sins will be avenged when he relinquishes power.
For years, Angola has been touted as the epitome of “Africa rising” – the new frontier of investment, where fortunes stand to be made for those with the acumen and audacity to take the risks and reap the profits. And indeed, on paper, Angola has been just that.
From 2003 to 2013, Angola had one of the fastest-growing economies in the world and the third-largest in sub-Saharan Africa, with oil revenues reaching over US $450 billion and annual average GDP growth at the 11% mark – a remarkable performance by any standards. Kudos to the leadership of Africa’s second-longest serving president, José Eduardo dos Santos.This version of the facts was endorsed in February by the UN General Assembly, which resolved that Angola’s status will rise from low to middle income by 2020. Concrete proof of progress and cause for congratulations all round.
However, there is a jarring disparity between these figures and facts on the ground. In fact, under current economic circumstances, not even middle-income status may suffice Angolan citizens – most of whom get by on two dollars a day. Yet the “cost of living in Angola is 60.25% higher than in United States (aggregate data for all cities, rent is not taken into account). Rent in Angola is 327.97% higher than in United States (average data for all cities)” (www.numbeo.com).
Luanda is the most expensive city on earth. Angola is also among the ten countries with the lowest life expectancy (51.3), while its child mortality rate has led to it being described as the world’s most dangerous place to be a child under the age of five – even during the height of the oil boom.
|Angola's President José Eduardo dos Santos|
Now oil has gone from boom to bust, parts of the country are experiencing severe food shortages, banks are rationing withdrawals to deal with cash shortages and the real-estate market has crashed. Meanwhile, the informal dollar exchange rate has risen 500% in one year against the official 60% at a time when private-sector companies are either slashing their staff complements or simply going bankrupt. Government institutions are utterly dysfunctional.
Why is Angola suddenly looking like a failed state? It’s not just about the oil; it’s about how failure has been built into the fabric of the state under the leadership of José Eduardo dos Santos, who also happens to have become Africa’s wealthiest president. Unofficial estimates put Dos Santos’s worth at a cool US$20bn.
How did the son of a poor immigrant stonemason ascend to such lofty heights? It all began with revolutionary zeal. Even as a schoolboy, Dos Santos agitated for the overthrow of Portuguese rule. At age 19, he became a member of the Popular Movement for the Liberation of Angola (MPLA) when it was still banned and persecuted. In Léopoldville (now Kinshasa), his obvious leadership qualities led to his appointment as deputy president of the MPLA youth wing. Two years later he joined the MPLA office in Brazzaville, where “he could not have had more than two pairs of trousers and two pairs of shirts,” according to Dr Makuta Nkondo. Then, in 1963, Dos Santos went to study petroleum engineering in Soviet Azerbaijan. Graduating in 1969, he delayed his return to take a course in telecommunications and radar and marry Soviet chess champion Tatiana Kukanova, who bore his eldest child, Isabel.
Returning to Angola in 1970, Dos Santos spent three years with the MPLA armed forces on the Cabinda front and was appointed second-in-command of telecommunications services. In 1974, the year of the Carnation Revolution that saw the peaceful overthrow of the Portuguese fascist dictatorship, Dos Santos became a member of the MPLA executive committee. Angola’s independence in November 1975 saw his appointment as Minister of Foreign Affairs in President Agostinho Neto’s government, on the strength of his loyalty, military track record and education.
In 1977, with Angola now mired in civil war between the rival MPLA, FNLA and UNITA, Dos Santos was assigned to head the National Planning Commission. Neto died in September 1979. At the age of 37, José Eduardo dos Santos was unanimously chosen by the MPLA Central Committee as party leader, commander-in-chief of the Armed Forces, and President of Angola.
The office of president carried the right to appoint the board, chair and CEO of all state-owned companies directly, affording him direct access to national oil company Sonangol, the sole oil concessionaire, regulator, tax collector and manager of revenue on behalf of the Angolan state. Sonangol was founded in 1976, the very year in which the MPLA officially adopted Marxist-Leninism.
Angola specialist Ricardo Soares de Oliveira points out that late colonial Angola had a vibrant and diversified economy, growing at 4.7% between 1961 and 1974. The civil war put paid to that: massive infrastructure destruction and an exodus of educated and technically able personnel led a desperate President Neto to introduce central economic planning. Catastrophe ensued. Nationalised companies and collective farms led by inexperienced political appointees were run into the ground, until very little remained of the economy at all – except for oil.
To win the war, the MPLA needed to buy weapons. Pragmatism dictated that Sonangol be exempt from the strictures of Marxist-Leninist economics. While every other sector nose-dived, Sonangol was allowed to flourish. Whatever it takes, the oil must flow, was the prevailing wisdom. The first step was to woo back the multinationals, starting with Gulf Oil. The American firm had previously accounted for the bulk of Angolan oil production through its subsidiary, the Cabinda Gulf Oil Company (CABGOC), but pulled out of the country in November 1975. A combination of diplomacy and promises of “business as usual” persuaded Gulf Oil to return. It didn’t seem to matter that Angola was a sworn enemy of the USA, backed by Moscow and Havana in a flashpoint of the Cold War. Gulf Oil was followed by other players such as Petrofina and Texaco.
Although the MPLA took control of the oil company ANGOL, in line with its policy of expropriating all Portuguese property without compensation, the blow was softened when the Angolan oil commission visited Lisbon in 1976 and signed an MOU with Petrogal, ANGOL’s Lisbon-based principal, agreeing to staff Sonangol with ANGOL staff, many of whom stayed on to become long-serving Sonangol employees.
As one such executive told De Oliveira, “In no other area of the Angolan economy was there such a degree of continuity, with both structures and people kept in place. You see, through colonialism, foreign invasion, Marxist-Leninism and capitalism, I have not left the same building.”
Maintaining good relations with Western oil investors took precedence over all political concerns. Covering any skills gaps with the best international expertise (including Arthur D Little, the highly renowned consulting firm from Cambridge, Massachusetts), Sonangol soon established an enviable reputation for reliability and competence. It was a good company to do business with.
Late colonial production levels were surpassed in 1983; the first Sonangol subsidiary, Sonangol Limited, was established in London to trade Angola’s 40% share of oil production directly. Chevron bought out CABGOC in 1984 and remained Angola’s biggest private-sector ally throughout the conflict period. It didn’t matter that 80% of Angola had been over-run by US-backed UNITA – it was protected by Cuban troops and Soviet weaponry, paid for with Sonangol petrodollars. Not once, in the midst of one of Africa’s lengthiest, most devastating wars, did oil production cease. Chevron was joined by ELF, British Petroleum, Royal Dutch/Shell, ExxonMobil, Statoil, Norsk Hydro, Petrobras, Marathon, CNOOC, Sinopec, and others.
Angola dropped Marxist-Leninism in 1991; Sonangol restructured. The Sonangol Group comprised a far-flung net of international business interests, including Sonils (logistical support of oil exploration and services companies), Sonadiets (technical assistance, maintenance and professional training), AngloFlex (manufacturing of umbilicals and pipelines for underwater production systems in the oil and gas industry), SonanGalp (distribution and marketing of fuels and refined products), Sodispal (food retail and agriculture), SOPOR (distribution and marketing of fuels and refined products in Portugal), BAI (Banco Africano de Investimento) (banking), Bricomil (civil engineering) and Wapo Angola (services for the oil industry and other businesses).
Naturally, when the civil war ended in 2002, the Sonangol Group was expected to power Angola into an era of accelerated national development. Despite incredible economic growth figures from 2003-2013, this didn’t happen. The reason is simple enough: from the outside, Sonangol was a good company to do business with; on the inside, it has been treated as a private piggy-bank by a rentier elite grown fat on the spoils of war.
For O Chefe (“The Boss”), President José Eduardo dos Santos has never won a presidential election. The MPLA rules by right of conquest. The contested 1992 election was inconclusive (Dos Santos did not gain the 50% mandate required), yielding only the bloody Halloween Massacre and a return to civil war; in 2008, direct presidential elections were formally done away with. Since 1979, his power has been based on patronage purchased with oil money and backed by military muscle. Already in the 1980s, unlimited access to oil revenue had allowed Dos Santos and his cronies, known as the Futungo de Belas (“the Palace”), to build a parallel state accountable only to the Presidency.
Sidelining official MPLA structures, this web of officials and businessmen, with the president at its centre, treated Sonangol like a private bank account, enriching themselves through offshore money laundering, running up debts against future oil production, procuring military hardware at inflated prices, and other crooked practices. The lack of internal regulation at Sonangol makes it difficult to trace where the money goes. For example, some $4,22bn simply disappeared between 1997-2002, into what the IMF called a financial Bermuda Triangle.
One thing is for certain: the state’s oil revenues are not invested where they should be. On the contrary, state institutions have been neglected to the point that they have been completely undermined. A strong, healthy democracy is diametrically opposed to the interests of the rentier elite. This year, the president set the cat among the pigeons by announcing his intention to step down in 2018. (The next election is in 2017; since the winning party gets to appoint the president directly, Dos Santos is confident of maintaining his seat.) Immediately, talk turned to the question of who he would choose to succeed him. An orderly succession would guarantee the continued influence of the Dos Santos family and its associates and ensure that their financial interests are not investigated. The prime candidates are two of the president’s numerous children, Isabel dos Santos and José Filomeno dos Santos.
Born in 1973, Isabel has become Angola’s First Lady of Business, with large stakes in Angola’s banking, cement, diamonds and telecom industries. Most of her assets are held in publicly traded Portuguese companies. Indeed, her ranking on the 2012 Forbes list of Africa’s 40 Richest was based on Portuguese shareholdings in ZON Multimedia and Banco BPI, amounting to some $500m. However, one year later, Forbes revealed that she also owned stakes in an Angolan bank, a share in Angolan mobile network UNITEL, and a 6.9% stake in Portuguese oil company GALP, which raised her net worth to $3bn – making her Africa’s eighth-wealthiest billionaire. According to the authors of the Forbes report, “As best as we can trace, every major Angolan investment held by Dos Santos stems either from taking a chunk of a company that wants to do business in the country or from a stroke of the president’s pen that cut her into the action.”
However, the London-educated, photogenic and well spoken Isabel dos Santos has repeatedly denied ever benefiting from undue influence, instead ascribing her success to honest hard work. She is attached to a personal myth that would have had her starting up in business as a six-year-old selling eggs “to finance her candy floss habit”.
Angolan activist Raphael de Moraes tells a different story. During the war-torn 1990s, several companies were formed in order to control diamond sales intended to finance the war; Isabel dos Santos’s mother Tatiana Kukanova was awarded a 25% share in a company that, by presidential decree, received a monopoly to buy and sell Angolan diamonds. De Moraes also reports that in 2014, the Princess, as she is unaffectionately known in Angola, acquired 75% of the Swiss jeweller De Grisogono for over $100m. The stake was acquired by Victoria Holding Ltd, a shell company, owned by Sodiam, the Angolan state diamond company, and Melbourne Investments, whose sole owner is Sindika Dokolo, Isabel dos Santos’s husband.
Dokolo reputedly owns Africa’s largest private art collection. He also sits on the board of Amorim Energia BV, a holding company that owns a third of Galp Energia, the Portuguese oil company. He was appointed in 2006 by Esperaza Holding, a company entirely owned by Sonangol at the time.
This year, Isabel has expanded into politics. In February, she was appointed to head three key government commissions charged with overseeing the restructuring of Sonangol, the oil sector as a whole, and Luanda’s US $15bn Urban Redevelopment Master Plan. This effectively puts Isabel directly in control of everything that matters from a financial point of view, even though she has never held a government appointment before. She has also been granted a US $615.2m contract to develop the southern waterfront of Luanda.
| Angola's first daughter multi-billionairess Isabel dos Santos
To recap: the president’s daughter, a businesswoman with no previous political experience, has been given the keys to 95% of Angola’s GDP. The President’s 36-year-old son, José Filomeno dos Santos, known as Zenú, is chairman of the Angolan Sovereign Wealth Fund (FSDEA), which was established in 2012 with $5bn of initial capital, plus oil revenue derived from the sale of 100,000 barrels a day, in order to develop and diversify the economy away from oil.
Although his appointment was defended on the grounds of his experience in the banking sector, it is clear that other factors were at work. Questioned in 2013 by the Wall Street Journal, Zenú said the fund’s investments “would depend on priorities set by parliament and his father”. In other words, the FSDEA is just another type of family-and-friends piggy-bank. For example, Raphael de Moraes reports, on 22 January 2015, the FSDEA transferred the equivalent of US$100m in kwanzas to Kijinga SA, a shell company created by Banco Kwanza Invest (BKI), which had been run by Zenú before he resigned to become chairman of the FSDEA. Such a shell is Kijinga SA. In fact, according to official documents, it doesn’t even have a single employee on its payroll.
Questioned on this, the FSDEA responded blandly: “The Angolan Sovereign Fund provided the equity capital of 9.950.750.000,00 kwanzas for a company which is focused on setting up incubators for micro-business for Angolan businesspeople. This initiative represents the first project of social integration in the country undertaken as a sustainable business enterprise.
“FSDEA has scheduled the public announcement of this investment in the coming days, in tandem with five other investment funds recently certified, which all aim for social and economic development in Angola and for the whole of sub-Saharan Africa. We invite you to refer to these imminent announcements for any additional information.”
Some US$3bn of the FSDEA’s assets are managed by Quantum Global Investment Management (QGIM), whose founder and chairman Jean-Claude Bastos de Morais has a long-standing business relation with Zenú, and who just happens to be a majority shareholder in Banco Kwanza Invest. Despite the FSDEA’s Sovereign Wealth Fund Institute having given the FSDEA a clean bill of health, its efforts towards development and diversification have signally failed, since low oil prices have now pushed Angola into asking the IMF for help.
Clearly, neither Zenú nor Isabel are likely to improve the situation of Angola’s desperately poor citizens. The fact of the matter remains that nobody seeking to invest or do business in Angola can do so without the direct or indirect approval of the Presidency.
Since no such approval will be granted unless it furthers the interests of the elite, it should be understood in no uncertain terms that any potential enterprise or investment is guaranteed to prolong the status quo, postponing the day when the Angolan people can have a say in their own destiny, or see the resources of their country applied to improving their prospects in life.
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