Artigos

Rule of Law and Corruption in Angola: for a mini-system of justice against corruption

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1. Introduction. Fight against corruption in Angola. Goals and facts

Corruption has become such a widespread phenomenon in Angola that it has jeopardized the survival of the state itself and the country’s economic viability. The so-called fight against corruption is not a matter of the police and combating criminal activity. It is something much bigger and much more important. In fact, what is called corruption in Angola is a more widespread phenomenon of large-scale appropriation of national resources and “privatization of sovereignty”[1]. It consists of varied behaviors that fulfill various criminal types such as fraud, abuse of trust, embezzlement, tax fraud, money laundering, among others, and not just the crime of corruption. What this phenomenon entails is the capture of the State and the Economy by the corrupt forces and the use of their mechanisms of power for their own benefit. It is a systemic degradation of the country’s political and economic body. Ultimately, corruption in Angola prevents the functioning of political institutions and the economy in a free market environment[2].

We believe that it was the perception of the seriousness of corruption for the political and economic development of the country that led João Lourenço to determine as one of the fundamental goals of his presidential mandate the fight against it. It is not worth mentioning the numerous speeches and actions initiated on the topic, to confirm that the fight against corruption has effectively become an insurmountable point of the presidential mandate.

If this goal is clear and justified, the questions arise at the level of implementation. Some criticize what they call the selectivity of the cases taken to court, others the slowness and still others the trampling of legal forms.

We do not see that there is selectivity in the fight against corruption. Just observe the judgments that have taken place and we will see that the people who have been sentenced are different. We have in the case of “Thai fraud”, a former Director of the foreign investment office, Norberto Garcia and a former Chief of Staff of the Armed Forces, General Nunda. Both were acquitted and now occupy important positions, Garcia in the presidential office and Nunda as Ambassador in London. Then we have Augusto Tomás, former Minister of Transport, who was sentenced to effective imprisonment, José Filomeno dos Santos, son of the former President of the Republic, sentenced to five years in prison and awaiting the result of the appeal in freedom, just like Valter Filipe, former Governor of the National Bank of Angola. Finally, we recently had Manuel Rabelais sentenced to 14 years in prison. Rabelais was the strong man of social communication at the time of José Eduardo dos Santos. He also awaits the outcome of the appeal in freedom. It can be seen that they are not all, not even the majority, of the family of José Eduardo dos Santos, only one is a son; have different prison issues and different results. No selectivity is confirmed.

Different is the procedural slowness and some disruption with legal forms. Even recently, the Attorney General of the Republic in relation to the alleged case related to Isabel dos Santos, which will possibly be the most important and outstanding process in Angola, said that it was overdue because it was too complex[3]. And many other lawsuits drag on and raise legal doubts. Not going into details here, what is worth noting is, at this moment, (April 16, 2021), there is only one very relevant political process that has been res judicata and served time. The other two cases of very relevant people are on appeal, and nothing else has come to trial.

This scenario for a situation of extreme urgency like the one described above is very short. There is no doubt that the fight against corruption was an urgency and priority of the State and that it was assumed as such by the President, what is verified is that the judicial results are still limited. Our opinion is that this lack of results is a consequence of a good faith option of the political power that does not work. This option was to combat corruption with the normal and customary means existing in the Angolan judicial system. The use of the judicial system as it stands to fight corruption is not satisfactory. We will see the reason why such an option does not work and the alternatives.

2. The option to fight corruption within the pre-existing judicial system

When the political power chose the fight against corruption as its main goal, it decided to make this fight through the pre-existing judicial bodies and with the usual regular people. There was no organic or personnel renewal, just mere adjustments, the Vice-AGR moved up to AGR (Pesident), the Presidents of the Supreme Court and Constitutional Court switched positions and some slightly hasty laws on asset recovery were passed. So, few moves to launch the fight against corruption. This option must have corresponded to a formalistic opinion given by the most eminent Angolan jurists according to which, the fight against corruption should be carried out within the rule of law and with the existing legal means. Only in this way would the necessary rights of defense and credibility of the processes be guaranteed. And in the face of foreigners it could always be said that there would be no abuse on the part of the authorities as it was the installed judicial system that was operating within the usual regulations of the rule of law.

This legal normality seems correct, but in reality, it is what prevents a real, swift and effective fight against corruption. What we are watching is the machine and people who were captured in the past by corrupt interests to make this fight against corruption. For this reason, cases are physically lost in the courts, others turn into a mess, others come up with unacceptable decisions and others extend inexplicably. In fact, handing over the existing judicial structure the fight against corruption cases  turns out to be a mistake. If that structure was also corrupt, it cannot, for reasons of elementary logic, be judging corruption, the patronage relations of the past, the favors owed, the usual venality, are too strong, for suddenly a blanket of integrity to remove everything. What we have been seeing is that the judiciary system is unable to fight corruption. Lawsuits with beginning, middle and end are rare. It is as if there is a dysfunctionality between the intentions of the Executive Branch and the concretizations of the Judiciary Branch.

The reality is that we are asking for a structure that collaborated and benefited from the corruption that is now combating it; in the end, to turn against itself. Safeguarding, that in this structure there are agents of change, judges, prosecutors, police, employees, who must be praised for their hard work, the fact is that they are an exception – even if they are large – and do not prevent the judicial structure as a whole from being conservative and risk-averse to fighting yesterday’s allies.

To that extent, the fight against corruption may turn out to be inglorious and not work, given the various existing structural obstacles.

3. Historical examples of overcoming the atavistic magistrates

It is not the first time that magistrates, due to their conservatism and risk aversion, call into question the intentions of new regimes. There are impressive historical examples, which also contribute to solutions to this problem.

Briefly, we will refer to two situations.

The first to mention occurred after the French Revolution and the establishment of the legal regime that followed, namely at the level of administrative law. This right was considered key to the development of the new regime as it would regulate the activity of the new State and its relations with citizens. Being the revolutionary state and wanting to institute a regime based on new values ​​- Freedom, Equality and Fraternity – feared that the judges, belonging to the privileged classes and one of the pillars of the Ancien Régime, would prevent these demands and become insurmountable obstacles to the new measures. To remedy this danger as early as 1790, an August law would define a code of relations between the judiciary and the administration, prohibiting the courts from participating in the exercise of legislative and executive powers, in particular by preventing the ordinary judge from intervening in the activity of the administration . A year later, a new Penal Code provides for sanctions against judges who rule on the functioning of an administrative body. The logic that presided over administrative law after the French Revolution was a logic of tightness vis-à-vis the judiciary, for the Revolution to move forward, the judges had to be removed. This logic has evolved and has allowed the creation of a new judicial system, autonomous from the ordinary judicial system. Thus, alongside administrative laws, administrative courts and administrative judges emerged, a body foreign to previous judges[4].

Another situation in which there was a need to circumvent the conservatism of judges linked to an old regime, occurred in Austria, after the end of the First World War (1918). There, a Republic replaced the old Habsburg Empire, and a new class of judges was needed to enforce the new Republican values. It is in this context that the Constitutional Court and Hans Kelsen’s new conceptualization on the subject arises. A new court is set up with different judges.

This means that in several historical circumstances, when political power felt that judges and courts did not correspond to new times and values, it became necessary to create new parallel, complementary or supplementary judicial systems. It is a suggestion of this kind that is made in relation to the present time in Angola[5].

4. Rule of law for corruption

Many argue that in Angola there are already adequate mechanisms to fight corruption and that it is imperative to respect the rule of law, considering that this is represented by the systems and laws as they are at the moment. We cannot subscribe to this thesis for two reasons. The first is based on a theoretical point of view, while the second has an eminently practical character.

In theoretical terms, the rule of law is no more, nor less than respect for the law approved according to pre-established criteria, therefore, the opposite of arbitration. The rule of law implies that there is a law and that everyone respects it. Several legal thinkers add to this formal assumption, that the rule of law also contains a substantive element linked to equality – all are equal before the law, and to freedom – there is a presumption in favor of freedom in the implementation of legal norms. Others go even further by equating the rule of law with a range of fundamental rights and democratic principles[6]. We did not follow this last version, staying for the second. However, this is not important, it is important to note that the rule of law admits that there are specific rules for certain situations. A typical example is the constitutional rules for the State of Emergency (see Articles 58 and 204 of the Angolan Constitution), another example is the system of autonomous administrative law as it exists in France or Portugal. In Portugal, we have a very clear situation of a system completely separate from the ordinary judicial system, with its own laws, specific courts, judges with independent careers in what concerns administrative law, the right of state power and its relationship with citizens. Therefore, from a theoretical point of view and the rule of law, it is not difficult to design mini legal systems dedicated to certain matters.

If, from a theoretical point of view, there can be a different rule of law for issues of great economic and financial crime and state capture (alias corruption) with different rules from the normal rule of law, from a practical point of view it is clear that this is the only way they will be able to combat the corruption installed in the sovereign power of the State. Only by establishing a mini-system that is impervious to influence and with its own rules will this be feasible.

The truth is that each national legal system admits several subsystems according to the subjects or properties outlined. This does not violate any conception of the rule of law, on the contrary it creates rules and obligations for all, transparent and clear, in certain areas. In short, there will be a rule of law for normality and a rule of law for corruption.

5. The proposal: creation of the mini-anti-corruption judicial system

The proposal presented here is simple: to create an anti-corruption judicial mini-system from scratch, or more precisely a legal system relating to major crimes of an economic and financial nature and the capture of the State.

This legal system would operate independently of the other judicial bodies and would consist of four parts:

i) A special body with judicial powers for investigation and prosecution. This body would be a mix of judicial police and public prosecutors having powers to investigate, apprehend, search and detain, ask for international judicial cooperation and in the end make an indictment or file a major corruption case. It would only work in these cases and would be composed of a body of agents with focused and dedicated training.

ii) A system of courts dedicated to these crimes. For the judgment and appeal of cases of serious economic-financial crime and capture of the State, there would be a system of courts solely dedicated to this matter. This system of courts would imply a revision of the Constitution with regard to Article 176 nº3 and nº5. Jurisdiction should be allowed for major crimes of an economic and financial nature and also abolish the ban on courts with exclusive jurisdiction to judge certain types of offenses.

iii) An autonomous and dedicated body of judges would be another part of this mini-system against corruption. Certain judges would specialize in these matters who would fill the seats in the courts.

iv) Finally, this system should have a simplified procedural law drafted in the same way as the current American or French law that allows for quick and fair judgments.

Alternatively, and in case it is not intended to carry out a constitutional review on the subject, instead of creating a system of exclusive courts with its own judges, it could always establish specialized sections to fight corruption in the existing judicial courts. Courts in the provincial capitals or Luanda alone, as well as the Appeal and the Supreme Court, would have specialized sections for corruption. In this case, article 176 was respected when new courts were not created with exclusive powers to judge certain types of infraction, but at the same time we would have sections of ordinary courts or rooms dedicated to the topic. This is already constitutionally possible and the remaining proposed mini-system remained as described.

[1] The expression is characterized by Achille Mbembe, On the postcolony, 2001.

[2] On the impact of corruption in Angola see Rafael Marques, The space of freedom between corruption and justice, 2019, in MakaAngola (https://www.makaangola.org/2019/12/o-espaco-de-liberdade-entre -a-corrupcao-ea-justica /), Ricardo Soares de Oliveira, Magnificent and Beggar Land: Angola Since the Civil War, 2015 and Rui Verde, Angola at the Crossroads. Between Kleptocracy and Development, 2021.

[3] https://www.jornaldeangola.ao/ao/noticias/pgr-admite-complexidade-no-caso-isabel-dos-santos-2-2/ 

[4] Jean-Louis Mestre, « Administration, justice et droit administratif », Annales historiques de la Révolution française 328 | avril-juin 2002. http://journals.openedition.org/ahrf/608

[5] Sara Ligi, “Hans Kelsen and the Austrian Constitutional Court (1918-1929)”, June 2012, Co-herenci,a 9(16):273-295. https://www.researchgate.net/publication/262430581_Hans_Kelsen_and_the_Austrian_Constitutional_Court_1918-1929

[6] See a detailed analysis of the concepts of the rule of law and their historical and spatial differences in Rui Verde, Brexit. The triumph of chaos? 2019

Flashes of optimism in the Angolan economy at the beginning of 2021

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0-Introduction. A different focus for Angolan economic analysis

The consulting companies that are dedicated to the study of the Angolan economy follow a conjunctural methodology in which the predominant narrative is based on the negative numbers about the macroeconomic aggregates and their possible perspectives.

However, a more detailed analysis of the evolution of the Angolan economy suggests that behind the numbers of inflation, unemployment, GDP growth and public debt, which are not very encouraging[1], a series of public political reforms are taking place together with the reinforcement of certain economic trends that will indicate the construction of a new, more positive economic reality for Angola.

This study deals with the positive elements that point to the correction of the direction of the Angolan economy in a sense more consistent with the necessary prosperity.

A-Positive trends in the Angolan economy

1-The International Monetary Fund (IMF) and public policy reform

A first element that allows to shed a different light on the perspectives of the Angolan economy lies in the recent assessment carried out by the IMF. In fact, on January 11, the IMF Executive Board concluded the fourth review of the Extended Fund Mechanism Agreement for Angola and approved the disbursement of an additional USD 487.5 million[2].

The important thing in this decision is the IMF’s positive assessment of the reform of Angolan public policies. The IMF states that: “The [Angolan] authorities achieved a prudent budgetary adjustment in 2020, which included gains in non-oil revenues and containment of non-essential expenses, while preserving essential spending on health and social security networks. The approval of the 2021 budget in December consolidates these gains. The authorities have also allowed the exchange rate to act as a shock absorber and have begun to implement a gradual shift towards monetary restraint to face increasing price pressures [3]”.

According to what the IMF explains, the economic policy followed by the Angolan government is developed in the following vectors:

-The stabilization of public finances, which is the cornerstone of the authorities’ strategy. In this regard, the government achieved a strong fiscal adjustment in 2020. In addition, its budget for 2021 consolidates non-oil revenue gains and the containment of budget expenditures for 2020, while protecting priority social and health expenditures.

These advances help to reduce the budget’s dependence on oil revenues.

– Reformulation and management of public debt. The government has implemented debt profile reform agreements, in addition to benefiting from the extension of the Debt Service Suspension Initiative until the end of June 2021, which will provide significant debt service relief and help reduce risks related to debt sustainability. We will elaborate below on the reformulation and management of public debt.

-Restrictive monetary policy and exchange rate easing. After easing the monetary constraint to mitigate the shock of COVID-19, the National Bank of Angola (BNA) began, once again, to face the increase in inflationary pressures through the tightening of monetary policy. A more gradual tightening of monetary policy is needed to reduce inflation. Exchange rate flexibility served as a valuable buffer during the crisis. Efforts are underway to develop a liberalized foreign exchange market.

-Reform of the financial sector. Continued progress in financial sector reforms was critical, especially the completion of the restructuring of the two struggling public banks. The timely adoption of the revision of the BNA Law and the revision of the Financial Institutions Law is the key to continuing this progress.

Finally, the IMF highlights the fundamental aspect that underlies all political reform, which is the maintenance of the fight against corruption.

What can be seen clearly from this IMF assessment is that the government is pursuing a reformist policy based on the assumptions made by this international organization, and is implementing difficult reforms.

It is known that many of these IMF policies have an initial recessive effect, especially fiscal consolidation when it involves raising taxes and cutting wages and subsidies, as well as restrictive monetary policy to fight inflation. It is therefore no wonder that the first result of adopting IMF policies is recession and not growth.

What is expected is that this “housekeeping” creates the conditions for a sustained and virtuous growth of the Angolan economy.

Fig. Nº. 1 – Economic policies of the Angolan government celebrated by the IMF

2-Management and careful reformulation of public debt

The executive followed an appropriate strategy when initially negotiating with China the issue of public debt. As we described in previous reports, the Chinese debt is key to Angola, as it represents about 50% of external commitments[4]. Consequently, it was important, first of all to ensure the appropriate terms with China, although they are not public knowledge, apparently imply a three-year suspension of payments agreement. The adherence already mentioned to the IMF’s debt suspension program allowed the government room for maneuver. It should be noted that the Eurobonds on which a lot has been written and pointed out various dangers, has a smaller weight in the total Angolan debt, around USD 8 billion, thus not having, on the contrary, what one could think of exaggerated pressure on Angolan finances in this area.

So, for now, the issue of public debt pressure seems to be eased and within the government’s management capacities.

3-Meridian oil price recovery

As we had also anticipated, after an abrupt drop in the price of oil at the beginning of the pandemic (March 2020) there would be a rise[5], which is gradually happening.

The reality is that following a trend that was already very clear at the end of the year, the barrel of brent finally reached a price above $ 55, a value that had not been reached since the end of February 2020, the month before the start of the pandemic.  Still being the most relevant indicator for the Angolan economy, and considering that the budget for 2021 was calculated based on USD 33 per barrel, we have a financial margin of more than USD 20. This is an additional “cushion” in the management of Angolan public finances.

It is clear that it is not known for how long this rise in the price of oil will continue. The commitment of the new Biden administration to the Paris Agreement, the evolution of the Chinese economy, the decision to cut or increase production by Saudi Arabia and the maintenance of the restrictions resulting from the Covid-19 pandemic are factors that may imply a further decline in the oil price.

Therefore, movements in the oil price are always unknown and these moments of increase must be used by the government to reinforce its reserves for future reproductive and social investments.

Fig. No. 2- Evolution of the Brent price since February 2020

4-Decrease in imports of food basket and agricultural production with continental relevance

The diversification policy combined with the promotion of the national industry through the substitution of exports has been another “motto” of this government. This policy allows in one fel swoop to reduce external dependency and create a thriving national industry.

While it is still untimely to draw any definitive conclusions about the results of this policy, some figures emerge that can be encouraging, at least in relation to the dependence on imports and foreign exchange spending on foreign trade.

According to data provided by the Ministry of Industry and Trade, Angola managed to record a reduction of almost US $ 100 million in the import of products from the basic basket and other essential goods in the last month of 2020, compared to the same period in December 2019. In December 2019, the Government disbursed US $ 250 million for imports, while in the same period of 2020, it only spent US $ 152 million[6].

In particular, it is worth noting the reduction in sugar imports, which went from 2.1 million tons in 2019, at the cost of 17.6 million dollars, to 1,472 tons, at the cost of 831,121 dollars. Regarding the importation of current rice, in 2019 Angola imported 136,985 tons in the amount of US $ 37.2 million and in 2020, only 59,505 tons, in the amount of US $ 10.5 million. In what concerns chicken (the most consumed meat in Angola), it is also worth mentioning a considerable reduction, compared to 2019. In that year, 46,385 tons were imported, for US $ 51.5 million, whereas last year, only 32,447 tonnes were acquired, for a value of just over US $ 25 million.

Fig. Nº. 3- Comparison of annual imports of basic basket products (Dec.2019 / 2020 in USD million)

These are just some of the products highlighted in the considerable reduction in imports, however this trend has proved to be general in the remaining products that make up the basic basket.

For these numbers to be considered a success, it is necessary to compare them with the internal consumption of the same goods, and understand if the decrease in imports was due to a substitution by domestic products or only reflects a decline in demand as a result of the economic crisis.

In the latter case, although they represent savings in foreign exchange, they do not mean a success in politics, but a decrease in the quality of life of the population. However, even in this situation, national investors should be alert to proceed with investments in these areas in order to correspond to future demand growth.

Statistics published by the Angolan Ministry of Industry and Trade and released by the Portuguese news agency Lusa show the enhanced sustainability of some Angolan agricultural production.

Angola asserts itself as a continental-level agricultural producer. Angola is the largest African banana producer and the seventh in the world with an offer of 4.4 million tons, according to the latest table of the United Nations Food and Agriculture Fund (FAO). It should be noted that the banana continues to be the most produced and consumed fruit in the world. Angola, in particular, has declared itself self-sufficient in banana production for more than six years, with emphasis on the provinces of Bengo and Benguela. In these provinces, private companies already export the fruit to countries such as Portugal, Zambia, Democratic Congo and plan to bring the fruit to the United States, the world’s largest consumer[7].

In relation to cassava, Angola has an annual production estimated at more than 11 million tons of cassava, being today the third largest producer in Africa, after Nigeria and Ghana, and wants to bet on its transformation into starch[8].

5-New investments and exports. Two examples: Rio Tinto and Gold

The finance minister recently told Reuters: “We are building a future (through our reform program) that prioritizes direct investment (not just with China, but with other partners). We want to add value for our economy to create jobs. We want the money to stay. Borrowing is an option, but we are trying to change the way we relate to our partners [9]”.

Thus, it appears that the government is betting on direct investment to revive the economy and also to increase exports.

There are two recent examples that are important to underline in this context. The first is the entry of the powerful multinational Rio Tinto into the Angolan market. Apparently, such a perspective will materialize this year[10].

Also important is the first export of gold mined in Huíla in 2020, in the amount of sixteen hundred and ninety-six ounces sent to Portugal and the United Arab Emirates, which corresponds, at the current price, to more than three million dollars. Obviously, what is relevant is not the amount of gold exported, but the beginning of a trend. As with the entry of Rio Tinto, it is important to mark a trend that brings other big investors like Anglo-American or DeBeers.

None of these investments is very firm yet. Their reference is important because they can represent future axes for the development of the Angolan economy, now in the beginning.

Fig. nº 4 – Signs of optimism in the Angolan economy

B-Necessary policy adjustments

The foregoing demonstrates that the Angolan government pursues an economic reform policy based essentially on the IMF’s revenues: i) budgetary balance and debt control, considering financial solvency as a sine qua non for economic growth; ii) restrictive monetary policy to control inflation; iii) flexible exchange rate policy, allowing for a devaluation of the currency that encourages exports and hinders imports; iv) investing in investment and the private sector as engines of the economy.

Basically, the policy followed corresponds to what was once called the Washington consensus[11]. This is the standard reform package adopted by the IMF, World Bank and the US Treasury Department since the late 1980s and which corresponds to a liberal model of the economy, based on fiscal prudence and the free market.

Naturally, this model has potential for Angola, but it is not enough. There are not  strong enough institutions in Angola yet to guarantee the functioning of a free market in which some do not end up dominating others and creating oligopolistic and inefficient situations, as there is not a private sector strong enough to become the engine of the economy.

Making Angola’s economic reform dependent on reforms inspired by the Washington Consensus is not enough, a broader view is needed.

This broader view should imply structural institutional reform. This means that property rights must be clarified by abandoning the confusion that the collectivization of property has generated and still generates, courts must be put in place, bureaucracy is no longer an obstacle, and obviously great corruption must be eradicated. In addition to structural institutional reform, it should be realized that the State has a role to play in this new phase. There is no robust private sector in Angola, nor can everything be delivered to foreign investors with short-term perspectives. A mix should be found between the state and the private sector. In fact, this is how the most advanced Western countries work, despite rhetoric. It is important to adopt the concept advanced by Mariana Mazzucato of Entrepreneurial State[12].

The point to consider in economic reform in Angola is that the role of the government, in the most successful economies, went far beyond creating the right infrastructure and setting the rules. The State is a fundamental agent to achieve the type of innovation that allows companies and economies to grow, not only by creating the “conditions” that allow innovation. Instead, the state can proactively create a strategy around new areas of high growth before the potential is understood by the business community by financing the most uncertain phase of research in which the private sector is risk-averse, seeking new developments, and often even supervising the marketing process.

In addition, the IMF’s recessionary policies, while necessary, must be offset by other types of policies that alleviate the socially depredating burden of those. In short, there must be a mix of reformist policies that is more comprehensive and adequate to Angola, so that in the end the first flashes of success have sustained results.

C-Conclusions

It is necessary to look beyond the negative conjuncture numbers of the Angolan economy and understand that there is a reformist economy policy that is beginning to bear fruit and to mark some new trends. This policy has been applauded (and possibly advised) by the IMF, and here lies its strength and weakness. Strength because it contains some indispensable measures to clean up the Angolan economy and launch it on the path of growth. It also strengthens because its adoption and implementation brings the praise and support of the IMF and sister organizations. However, this policy also has weaknesses, including the lack of attention to institutional reform, the weakness of the private sector in Angola, the recessive effects of contractionary policies, among others.

Consequently, with signs of optimism in the medium-term perspectives of the Angolan economy, it is necessary to improve the economic policy that is being followed, including the intensification of institutional reforms that ensure that the judiciary works, bureaucracy does not hinder, corruption does not divert resources. In addition, the role of the State as an entrepreneurial partner in the private sector should be reviewed.

[1] See the most recent figures: Unemployment 34% (III quarter 2020), Annual inflation 25.19% (December 2020 / December 2019), GDP growth -5.8% (III quarter 2020) at https: // www. ine.gov.ao/

[2]  https://www.imf.org/en/News/Articles/2021/01/12/pr216-angola-imf-executive-board-completes-4th-review-of-the-eff-arrangement-approves-disbursement

[3] idem

[4] https://www.cedesa.pt/2020/05/05/porque-a-china-deve-reduzir-a-divida-de-angola/

[5] https://www.cedesa.pt/2020/06/03/angola-petroleo-e-divida-oportunidades-renovadas-2/

[6] https://www.noticiasaominuto.com/mundo/1663059/angola-importou-menos-100-milhoes-de-dolares-de-produtos-da-cesta-basica

[7] https://www.plataformamedia.com/2020/12/15/angola-e-o-maior-produtor-de-banana-em-africa-ha-seis-anos/

[8] https://www.noticiasaominuto.com/economia/1663123/angola-e-terceiro-maior-produtor-africano-de-mandioca

[9] https://www.minfin.gov.ao/PortalMinfin/#!/sala-de-imprensa/noticias/8787/angola-prioriza-investimento-directo-nao-apenas-com-a-china

[10] https://mercado.co.ao/negocios/diamantifera-endiama-quer-concretizar-entrada-da-rio-tinto-em-angola-HC1004823

[11] https://piie.com/commentary/speeches-papers/what-washington-means-policy-reform and https://web.archive.org/web/20170715151421/http://www.cid.harvard.edu/cidtrade/issues/washington.html

[12] See  https://www.wook.pt/livro/the-entrepreneurial-state-mariana-mazzucato/19312561

Angola: The need for a new legal framework to fight corruption

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Abstract:

The fight against corruption initiated by João Lourenço, President of the Republic of Angola, is finding several obstacles.

In order to be successful, a structural change is required that includes the creation of a new judiciary body focused on corruption, a specialized Court section on corruption and money laundering, and new legislation to allow plea-bargain and agreements between the parties.

It was in February 2018, when the then Chairman of the Board of Directors of Sonangol, Carlos Saturnino, presented at a public press conference facts that he considered very serious and related to the management of Isabel dos Santos in that company.

In May 2020, after several reports about these and other facts, for example the Luanda Leaks[1], possibly attributable to Isabel dos Santos, the truth is that, apparently, she has not yet been notified to make statements in the judicial procedure which was opened in Angola.

The reality is that there is a risk of a sharp prolongation in this case, neither condemning nor absolving herself, leaving a trail of injustice over all matter. The comic episode about the passport with Bruce Lee’s signature that would be in one of Isabel dos Santos’s cases is a first tenuous symptom of the hypothesis of failure of this symbolic process of fighting corruption in Angola.

Also, in May 2020, very recent suspicions about acts of corruption were made public in the Interministerial Commission to Combat the Coronavirus Pandemic, namely, the unjustified chartering of Ethiopian Airlines planes and the purchase of goods from private entities, all of them with large tax debts in Angola. Companies that were hastily resuscitated to compete with the government’s biosafety material supply program[2]. In the words of the veteran Angolan journalist Graça Campos, we begin to see that the “PIIM (Integrated Plan for Intervention in Municipalities) has become the official free transit of access to public money[3].”

It is not for us to evaluate or judge the claims made by Carlos Saturnino,  the ICIJ or Graça Campos, but to conclude from the factual point of view that the fight against corruption in Angola, despite the very clear intentions expressed by the President of the Republic, João Lourenço, isn’t having an immediate and permanent effect. Neither the processes move quickly, nor the corrupt practices seem to have been eradicated, lasting as a reality in the life of the country.

It is in this context that it is essential to proceed with a structural change in the organic and fundamental legislation regarding the fight against corruption.

We envision three areas of intervention:

-The creation of a judiciary body focused on combating corruption;

– New judicial judicial with the competence to investigate and judge cases of corruption and money laundering (specialized sections of courts, judges and procedural law).

-The introduction of legislation that provides for plea-bargain and the possibility of procedural agreements ratified by judges between the parties to a criminal case.

Fig. 1- Proposed measures to fight corruption

These three measures are essential to put the fight against corruption on the right path. We will briefly go through each of the proposals.

Judiciary body focused on combating corruption

A body with sweeping legal powers, i.e. to investigate, search, seek, apprehend, listen, detain, demand international cooperation, etc., specialized in combating corruption, should be created. This body would centralize all the investigation regarding major cases of corruption and money laundering, having its own structure and statute equally separate from other bodies. It would be a focused body, capable of investigating a case, accusing, filing or reaching an agreement, proceeding to argue the case in court, and finally appealing to follow cases from beginning to end.

An example that can be followed and properly adapted is the Serious Fraud Office (SFO) in the United Kingdom. Here we have an entity that investigates, prosecutes and follwow several of the proceedings in cases of serious or complex fraud, bribery and corruption[4].

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Fig. 2- The British Serious Fraud Office can be a reference for the body to be created in Angola in order to fight corruption

Specialized sections in the ordinary Courts with the competence to judge cases of corruption and money laundering (Investigation and Judgment) and its own procedural law

Concomitantly, an investigating judge attached to this  kind of criminality would be established, as well as a specific section within the ordinary Courts. The procedure in this section, both in the investigation phase and in the judgment phase, would be the subject of a specific procedural law, albeit guaranteeing the defense will allow an acceleration of the process, avoiding delays. Only the appeal would be made to the usual criminal section of the Supreme Court.

Hence, investigation and prosecution would have bodies specialized in corruption and money laundering.

Fig. 3- New judicial structure for fighting corruption

Legislation that provides for plea-bargain and the possibility of procedural agreements ratified by judges between the parties in a criminal case.

Finally, it is urgent to pass legislation that enables and speeds up the fight against corruption, allowing for the adoption of measures of premium law, as well as the possibility of reaching agreements in the processes between the parties, with such agreements subject to ratification by a judge.

We advocate the existence of the plea-bargain, that is, of negotiations between the Public Prosecutor and the defendants that lead to the return of assets, a lighter or nonexistent penalty and the denunciation of other co-participants.

“Plea-bargain” is a legal benefit granted to a defendant  who agrees to collaborate in a criminal investigation or explain the role of his or her co-participants in a crime. This formula facilitates criminal investigation and, provided certain guarantees are safeguarded, allows for quick convictions within the framework of the rule of law.

It will be  not enough for the defendant to confess a crime and to indicate other culprits. He/She  must provide evidence of what he/she is  saying and cannot be repeating what is already known. Therefore, the plea-bargain has to bring evidence and novelties, and it is subject to a detailed menu of regulations that prevents abuse.

The approval of a law on “negotiations” with defendants, should be an urgent objective, to substantiate the activities of asset recovery through agreements.

Fig.. 4- Advantages of the Plea-Bargain in Angola

[1] International Consortium of Investigative Journalists (ICIJ), Luanda Leaks. Available online at: https://www.icij.org/investigations/luanda-leaks/

[2] Graça Campos, A mamata vai solta, 17 de maio 2020. Available online at:  https://www.correioangolense.info/2020/05/17/a-mamata-vai-solta/

[3] Idem

[4]  https://www.sfo.gov.uk/

Why China should reduce Angola’s debt

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Angola’s public debt at the present

In its December 2019 report on Angola, the International Monetary Fund (IMF) stated that: “Angola’s public debt is sustainable, but the risks have increased and the vulnerabilities remain. [1]”While forecasting a peak of 111% public debt/ GDP by the end of 2019, the IMF’s view was optimistic for several reasons, namely the mobilization of new non-oil revenues in the 2020-2021 budgets, the rapid implementation of structural reforms and the continuation of the privatization program.[2]

The percentage increase in public debt/ GDP forecasting was due to three factors: the depreciation of the kwanza in the fourth quarter of 2019 (about four fifths of the increase), the fall in prices and oil production, and the slow economic recovery. Therefore, the first point to be emphasized is the fact that 80% of the increase in the percentage of public debt/GDP derives from the depreciation of the kwanza.

Consequently, a policy favoured by the IMF (currency depreciation) would negatively influence another aspect considered important by the same organization (public debt / GDP ratio). This means that it was not too important to look at this relationship to calculate the possible fragility of the Angolan public debt, as it essentially reflected nominal and not real fluctuations. In December 2019, Angolan public debt was sustainable.

However, after four months, the state of affairs has become more difficult. Now, the real aspects of the economy may hinder debt service. However, Angola is not in that situation yet, and proper action can avoid any problem. The Covid-19 economic shock has consequences for Angola, adding  pressure on the two material elements that are important for the sustainability of debt payments: the price of oil and the economic recovery. As we already know, oil has seen its price drop sharply, and the prospects for the recovery of the Angolan economy are weak.

Consequently, in April 2020, the same IMF predicted a 1.4% recession for the Angolan economy and a debt value equal to 132% /GDP. The IMF’s forecast is just that, and it does not yet correspond, in terms of public debt, to any new reality. In fact, 2019 closed with a public debt of 109.8%/ GDP and not 111%, slightly better than expected.[3]

It should also be noted that the share corresponding to the external public debt will be 85.4% of GDP, which is what we are interested in analyzing.

The several elements considered so far, leads us to two conclusions: the first: the Angolan public debt was evolving in a sustainable manner, and the nominal degradation of the country’s public debt as a percentage of GDP reflected, above all, the nominal depreciation of the currency and not some absurd lack of control that would have occurred in recent times ath the  public finances. Between 2017 and 2019, in an epoch  of recession, the stock of external debt increased only 14%, whereas it was previously, between 2012 and 2016, that it increased 100%. This means, politically, that the government of José Eduardo dos Santos doubled the external public debt in four years, while João Lourenço has tried to stop this exponential increase. [4]A detailed analysis of the figure below shows the great boost in the Angolan external debt ocurred between 2012 and 2016. There was an attempt to stabilize in 2017 and only a modest increase in 2018 and 2019.

Figure 1 – Angolan external public debt stock (2012-2019) [amounts in millions of dollars; BNA source]

However, and this is the second conclusion, if in the past there was confidence in Angola’s capacity to pay the debt, and its control by the current government, the truth is that the Covid-19 global crisis has launched a cloud of uncertainty over the public debts in global terms, obviously affecting perception in relation to Angola. Naturally, this post-Covid-19 perception requires governments to anticipate and take steps to avoid future problems.

 It is in this context that the possible adjustment of the Angolan external debt to the current reality brought by Covid-19 deserves attention, as well as the need to lighten its weight to guarantee the sustainability of the economic recovery.

The importance of debt to China

The current global situation brought about by Covid-19 implied the need that Angola has to ensure that its public debt is sustainable and do not to disturb the economic kick-start that is urgently necessary to mobilize.

Regarding the essential features of the Angolan public debt, the Cartesian method must be followed. This means that one should not look at the debt as a whole, but divide it into sections, addressing each one independently. It is wrong from a methodological point of view to perceive the Angolan external public debt as a whole due to the huge weight that China has in it.

Total Angolan public external debt (stock) was worth US $ 49,461 million at the end of 2019, according to data from the National Bank of Angola. [5]It turns out that $ 22.424 million is owed to China. [6]This means that China accounted for almost half of Angola’s external responsibilities, more precisely, 45.3%.

Figure 2-Weight of the Angolan external debt to China (in percentage; source: BNA)

It seems clear that the Angolan debt to China represents an enormous magnitude and obviously has the most important weight in Luanda’s public finances.

Given the historical features of Angola’s relationship with China, as well as its global positioning, especially with regard to the relationship with Africa, this is the time to propose a thorough negotiation of the Angolan debt to China, promoting its reduction and time-based rescheduling.

In simple terms, the negotiation of the Angolan public debt to China should lower the debt amount and increase the payment times.

It is easy to see that debt to China may become the main obstacle to Angola’s development.

Nevertheless, China in Angola  must be a factor of development and not of economic recession. At the outset, it should be noted that since 2017, the year when João Lourenço took office, the date on which the debt peaked, Angola has been lowering the stock value (see Fig. No. 3 below) thus demonstrating its capacity and good faith towards China.

There are three very strong reasons for carrying out China to renegotiate its debt with a view to reducing and prolonging it over time.

1-China’s global positioning, especially in Africa.

China is currently one of the great world powers, intending to engage with the United States in terms of projected influence in the world.

In that sense, with a new power comes new responsibilities, as happened  in relation to the United States at the end of the Second World War (1939-1945), in which it took on is shoulders  the European economic reconstruction through the Marshall Plan and actively promoted the creation of which became the EEC (European Economic Community), today the European Union. It was the American commitment that made this reality possible and brought prosperity and peace to Europe.

China has been taking a similar position in relation to Africa, using a rhetoric of friendship and solidarity. President Xi Jinping’s words at the opening ceremony of the China-Africa Cooperation Forum (FOCAC) in 2018: “China seeks common interests and puts friendship first in the search for cooperation. China believes that the right way to boost China-Africa cooperation is for both sides to leverage their respective strength; it is up to China to complement Africa’s development through its own growth, and it is up to China and Africa to seek cooperation for mutual benefit and common development. In doing so, China follows the principle of giving more and receiving less, giving before receiving and giving without asking for a return ” [7](emphasis added).

What is certain is that the current situation caused by the Covid-19 disease presents itself as the ideal one for President Xi Jinping to turn his speech into reality and move on to concrete acts of friendship, giving more and receiving less, as well as giving without ask for return.

In this way, it will build positive China’s image in Africa as a great world power that bets on the effective development of a continent and will show, from the geostrategic point of view , that it is a real competitor  of the United States in the creation of a more prosperous and secure world.

It is at this moment that China’s place in the post-Covid-19 world will be seen.

2-Pragmatism

Deng Xiaoping is attributed with the slogan “It doesn’t matter if the cat is black or white, as long as it hunts mice”. It is precisely this pragmatism that has brought so much success to China that it will justify the remission of the Angolan debt.

Angola has always been presented as the model for investment in Africa. The scientific literature even refers to the “Angolan model” that served as a basis for China’s contemporary performance in Africa.

Thus, it will be worrying for China to see that its model fails and becomes a burden on the economy.

If we look at the numbers, during 2019 Angola spent almost 43% of public revenues to pay debt, where, as already mentioned, China occupies the largest share. Consequently, the continuation of this situation may prove to be justified by the allegations that the US Secretary of State, Mike Pompeo, made during his recent tour of Africa, that the Chinese debt is  becaming an unbearable burden for the development of the continent. In fact, to conclude that this is ocurring in Angola, will turn the whole of China’s African policy into a disaster, since its initial model failed badly.

In addition to this political pragmatism, there is an obvious economic factor. The most recent evaluations show that Chinese companies in Angola recorded a loss of 350 to 500 million dollars due to the COVID-19 pandemic[8]. And these losses can be widened if Angola’s economic situation does not improve. Therefore, it is of Chinese interest to create the conditions for a relaunch for the Angolan economy, as such a relaunch will  benefit in a massive scale Chinese companies. It is called the win-win situation.

Consequently, it is therefore of Chinese practical interest to reduce Angolan debt to show the world that its model of intervention in Africa works and is not predatory, and also help the countless Chinese companies established in Angola.

3-Combat corruption and odious debt

There is a fundamental and ultimate reason to reduce the Angolan debt to China. There is no doubt that part of this debt is what is doctrinally called “odious debt”, ie, debt whose purposes were not the public interest and the common good, but the private appropriation of sovereignty by members of the highest organs of the State . [9]More bluntly, it is a debt that was used in acts of corruption or served to finance the private interests of Angolan leaders and possibly of Chinese officials.

One can never forget the role that Chinese citizen Sam Pa, today, apparently imprisoned in China, played in several businesses in Angola. Names like the CIF-China International Fund, the Queensway Group, or China Sonangol, are paradigms of activities considered illegal that are or have been under close investigation. It is a fact that Chinese money was involved in diverse acts of corruption.

In addition to this, there is another one with undefined contours and that deserves a more careful investigation by researching journalists. The analysis of the disaggregated statistical series provided by the National Bank of Angola on the evolution of Chinese debt shows that in the second quadrimester of 2016 (May to August) this debt went from US $ 10,531 million to US $ 21,228 million. Debt to China doubled in 2016.[10]

Figure 3- Evolution of Angola’s external public debt (stock) to China-2012/2019 (Millions of dollars. Source: BNA)

This movement was relatively recent and it is, still,  badly explained. In terms of timing, this event coincides with an announced trip by José Eduardo dos Santos to China to negotiate a loan in July 2015, which was subsequently followed by several events such as the fall from grace of the Vice President of the Republic, Manuel Vicente, and the Sam Pa’s arrest in October 2015. After this, Isabel dos Santos assumed the presidency of Sonangol in June 2016, coinciding with the launch of the Chinese debt in the BNA’s accounts. Apparently, it was from this new Chinese debt that the Government attributed to Sonangol 10 billion USD. At the time the company was starting to be chaired  by Isabel dos Santos. Apparently from those 10 billion USD, Sonangol paid loans in the total amount of five billion dollars. This allowed the Sonangol`s debt to be reduced from 9.8 billion to 4.8 billion USD. The remaining five billion USD will have been channeled to investments in and from Sonangol.

In view of the judicial controversy that currently involves Isabel dos Santos’s appointment as President of Sonangol and the apparent simultaneity of her appointment with the doubling of the Angolan debt to China that may have served to finance Sonangol, perhaps there should be a suspension of payment of this debt until it becomes clear whether there was any illegality or not, namely in what refers to the 5 billion that were apparently allocated to investments in and from Sonangol.

It should be noted that this is what Chinese law, enforced by Xi Jinping, imposes. The Chinese President and his administration are taking a long and hard fight against corruption in their country. Current Chinese law on corruption is found in the Penal Code of the People’s Republic of China approved in 1981, revised in 1997 and enhanced  in 2015. According to this rule, all activities involving corruption related to foreign rulers are a crime for which Chinese courts have jurisdiction. In effect, since May 1, 2011, it is a crime to pay illegally to foreign officials. The truth is that, currently, the Chinese Penal Code acts beyond its borders, so corrupt payments, the “odious debt”, already has to be considered by the Chinese authorities when making their assessments of situations.

This means that for political reasons as well as for reasons of domestic law, China is obliged and must analyze the debt that may have been incurred for corrupt purposes or for illegitimate benefit. Angola’s debt must be thoroughly reviewed in this perspective.

Figure  4- Reasons for China to reduce Angolan debt

Conclusions

The reasons explained strongly advise China to proceed with a substantial unilateral reduction of the Angolan debt. It is an imperative of its current position in the world, its pragmatism and sinic law.

[1] IMF- Angola, IMF Country Report No. 19/371, p. 54. Available in: https://www.imf.org/en/Publications/CR/Issues/2019/12/18/Angola-Second-Review-of-the-Extended-Arrangement-Under-the-Extended-Fund-Facility-Requests-48887

[2] Idem, p. 54.

[3] IMF- World Economic Outlook, April 2020: The Great Lockdown, p. 24. Available in  https://www.imf.org/en/Publications/WEO/Issues/2020/04/14/weo-april-2020 and also IMF-SUB-SAHARAN AFRICA.COVID-19: An Unprecedented Threat to Development, April 2020, p. 19. Available in https://www.imf.org/en/Publications/REO/SSA/Issues/2020/04/01/sreo0420

[4] BNA-National Bank of Angola, DÍVIDA EXTERNA PÚBLICA POR PAÍSES (STOCK): 2012 – 2019. Available in https://www.bna.ao/Conteudos/Artigos/lista_artigos_medias.aspx?idc=15419&idsc=16458&idl=1

[5] BNA-National Bank of Angola, idem.

[6] BNA-National Bank of Angola, idem.

[7] President Xi Jinping “Full text of Chinese President Xi Jinping’s speech at opening ceremony of 2018 FOCAC Beijing Summit”, XinhuaNet, 3rd September 2018. Available in http://www.xinhuanet.com/english/2018-09/03/c_137441987.htm

[8] Francisco Shen (interviewed by Natacha Roberto), “Empresas chinesas em Angola com perdas de 500 milhões de dólares”, Jornal de Angola, 28 th April 2020. Available in http://jornaldeangola.sapo.ao/economia/empresas-chinesas-em-angola-com-perdas-de-500-milhoes-de-dolares

[9] Robert Howse, The Concept of Odious Debt in Public International Law, UNCTAD, 2007.

[10] BNA-National Bank of Angola, External data by Country, Quarterly Data. Available in https://www.bna.ao/Conteudos/Artigos/lista_artigos_medias.aspx?idc=15420&idsc=16460&idl=1