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].
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.
https://www.cedesa.pt/wp-content/uploads/2020/05/corrupcao-combate.jpg523940CEDESA-Editorhttps://www.cedesa.pt/wp-content/uploads/2020/01/logo-CEDESA-completo-W-curvas.svgCEDESA-Editor2020-06-10 08:15:462020-06-10 08:15:48Angola: The need for a new legal framework to fight corruption
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.
https://www.cedesa.pt/wp-content/uploads/2020/05/china-angola-2.jpg400912CEDESA-Editorhttps://www.cedesa.pt/wp-content/uploads/2020/01/logo-CEDESA-completo-W-curvas.svgCEDESA-Editor2020-05-07 08:38:312020-05-07 08:38:33Why China should reduce Angola's debt
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