Artigos

The economic and financial sector in the Angolan constitutional review – In particular, the enshrining of the independence of the central bank

1. Introduction. Constitutional review in Angola

The present Angolan Constitution (CRA) dates from 2010 and has never been revised. Recently, President João Lourenço announced that he had taken the initiative to propose a constitutional revision.

A first comment that this action raises is that the Angolan president has a courageous policy facing the several challenges that have been placed on him: combating corruption, economic reform, quick reaction to Covid-19. At the moment, the fruits of this determined confrontation are not yet reaping, and there lies some paradox, a reformist president risks being submerged by his own reforms.

The present proposal for constitutional revision is minimalist, and so it was assumed by the government. In this sense, it risks creating expectations in the population that later will not be met. However, it represents a very important step in the discussion of the Angolan political model and the fact is that the constitutional discussion will be more important even though the effective changes that will eventually be inserted in the Constitution.

The purpose of this text is to highlight and analyze the main proposals for constitutional revision in the area of ​​economics and finance.

2. The proposed constitutional review law in the economic and financial area

The first proposed modification is found in article 14 of the CRA, which concerns private property. The expression “promotes[1]” is introduced, with the meaning of being a function of the State in addition to guaranteeing and protecting private property and free enterprise, also the promotion of private enterprise. Positive State behavior is introduced, that of promoting free private initiative.

Later on, a new number 4 is added to Article 37 that regulates the “Right and limits of private property”. This number establishes the possibility of nationalization in the case of “ponderous reasons of national interest”. It also introduces confiscation as a sanctioning measure, which is permitted when there is a serious offense against laws that protect the economic interests of the State.

Naturally, it is in the Title about the Economic, Financial and Tax Organization that some modifications in the economic area are added. Article 92 will contain new paragraphs 2 and 3. The new wording proposed for paragraph 2, aims to “clarify the scope and meaning of the principle of community property, as a type of property enshrined in Article 14 of the Constitution, which defines the nature of the economic system by calling the regulation of the exercise of this type of property the rules of customary law that do not contradict the economic system, the social market regime and the fundamental principles of the Constitution ”. Paragraph 3 establishes the legal existence of the unstructured sector of the economy, i.e., it refers to the informal economy, pointing to its progressive institutionalization.

Then we have article 100 on the National Bank of Angola (BNA). In paragraph 1 of this article, it is determined that the BNA will be the “central bank and issuer of the Republic of Angola” and will have as primary functions: to guarantee price stability in order to ensure the preservation of the value of the national currency and ensure the stability of the financial system. Therefore, the BNA’s functions are limited to combating inflation and the stability of the financial system.

Then, in paragraph 2, “the new legal nature of BNA is enshrined, as an independent administrative entity, with an eminently regulatory nature, and the content of the principle of independence of this type of entities is signaled”. “Transmission of recommendations or issuance of directives to the governing bodies of the BNA on its activity, structure, functioning, decision-making” is hereby prohibited on the priorities to be adopted in the pursuit of constitutional and legally defined attributions, by the Executive Branch or any other public entity.

Subsequent paragraphs of the same article state that: “The Governor of the National Bank of Angola is appointed by the President of the Republic, after hearing in the National Assembly’s Specialized Labor Committee.” And they stipulate a detailed procedure for that appointment. There is a duty of parliamentary hearing, but the final decision rests with the President of the Republic.

Another change concerns the General State Budget (GSB). Article 104 proposes an amendment “in order to remove a current idea that the budget of local authorities is part of the GSB”. The GSB will provide for transfers to be made to municipalities, but not their income and expenses.

3-Analysis and comment on the proposed changes to the economic and financial Constitution

The articles to be amended are 14, 37, 92, 100 and 104.

ARTICLE 14

In relation to article 14, the State will be responsible for promoting private initiative. In addition to the rhetorical aspect of such a statement, in practical terms, this rule allows the State to assist the private sector in a consistent manner, for example, expanding free zones and tax benefits for the private business, subsidizing private companies, creating partnerships with the private sector. The State shouldn’t be merely passive and adopt a positive and active attitude towards the private sector. It is a good sign for the market.

ARTICLE 37

Article 37 is of a different nature and constitutes the only constitutional amendment directly related to the fight against corruption. In the face of a constitutional gap, the general principles on which nationalization and confiscation can take place will now be established. This last part is essential to achieve the recovery of assets that is underway in which it becomes very difficult to understand the legal framework.

It is now clear that the state can confiscate assets when there has been a serious offense against laws that protect its economic interests. In simple language, it is now clear that those who have been charged at the expense of public funds may be without these assets, with no need for a final criminal case, but only the conclusion that they have carried out a serious offense against the laws that guarantee economic interests of the State. This rule is to be applauded in the present context of combating corruption.

ARTICLE 92

If the promotion of private initiative and the speeding up of the recovery of assets obtained from corrupt activities are measures that deserve praise, more doubts raises the rule of article 92 regarding the informal economy. More than “its progressive framing in the structured economy system” (proposed wording of Article 92, paragraph 3), which essentially means the payment of taxes and fees, what the Constitution should advocate was the adoption of supportive policies to the informal sector of the economy, which is a real buffer from the lack of work and an incubator for potential successful small and medium-sized companies[2].

It has already been pointed out that in southern Africa, the informal economic sector is a crucial element of survival, given that 72% of all non-agricultural employment resides in the informal sector and the majority of new jobs show up there. The informal economy provides income and employment to all people, regardless of education or experience. In Angola, the majority of employed people are also involved in the informal economy, as otherwise they would not be able to support all of their expenses. To that extent, it is necessary to be very cautious in establishing rules about the informal economy because it helps the Angolan government[3].

ARTICLE 100

In terms of public opinion, the core of the constitutional change in economic and financial terms will be found in article 100 referring to the BNA. This article contains three main lines:

  1. The BNA is the “guarantee price stability in order to ensure the preservation of the value of the national currency and ensures the stability of the financial system”. Thus, the BNA’s functions related to inflation and the financial system are precisely determined;
  2. The BNA becomes an independent administrative authority and therefore “independent in the pursuit of its duties and in the exercise of public powers”. It is the famous independence of the central bank, which today is defended by most economic doctrine.
  3. The Governor of BNA is appointed by the President of the Republic, after hearing the National Assembly. It should be noted that the National Assembly has no right of veto, but of hearing.

The enshrining of central bank independence corresponds to the modern dominant trend in economic doctrine. The arguments in favor of central bank independence can easily be summed up. Governments are thought to tend making wrong decisions about monetary policy. In particular, they are influenced by short-term political considerations. Before an election, the temptation is for the government to cut interest rates, making economic cycles of expansion and retraction more likely. Thus, if a government has a history of allowing inflation, inflation expectations start to rise, making it more likely.

An independent central bank can have more credibility and inspire more confidence. Having more confidence in the central bank helps to reduce inflationary expectations. Consequently, it becomes easier to keep inflation low. Thus, there is an attempt to introduce additional credibility in monetary policy and to increase the fight against inflation. It should be noted that inflation is an evil that has endured in the Angolan economy for too long.

This measure is correct and should be considered positive.

ARTICLE 104

The last change concerns the clarification of the differentiation between the General State Budget and the Municipalities, as part of the material preparation for the installation of the municipalities.

Conclusion

Minimalist, the proposed constitutional revision in the area of economics and finance aims to reinforce the signs of the market economy and macroeconomic stability, highlighting as an essential element of this law the consecration of central bank independence and its focus on combating inflation.

*****

Attachment: New proposed wording of the norms referring to the economic and financial sector

“Article 14

(Private property and free enterprise)

The State respects, and protects the private property of natural or legal persons and promotes free economic and business initiative, exercised under the terms of the Constitution and the Law ”.

“Article 37

(Right and limits of private property)

1. […].

2. […].

3. […].

4. Own law defines the conditions under which the nationalization of private goods can occur for ponderous reasons of national interest and of confiscation for serious offense to the laws that protect the economic interests of the State ”.

“Article 92

(Economic Sectors)

1. […].

2. The State recognizes and protects the right to community property for the use and enjoyment of means of production by rural and traditional communities, under the terms of the Constitution and the law.

3. Own law establishes the principles and rules to which the unstructured sector of the economy is subject, aiming at its gradual inclusion in the structured economy system ”.

“Article 100

(National Bank of Angola)

1. The National Bank of Angola, as the central bank and issuer of the Republic of Angola, guarantees price stability in order to ensure the preservation of the value of the national currency and ensures the stability of the financial system, under the terms of the Constitution and the law.

2. As an independent administrative authority, the National Bank of Angola is independent in the performance of its duties and in the exercise of public powers to which it is concerned, in accordance with the Constitution and the law.

3. The Governor of the National Bank of Angola is appointed by the President of the Republic, after hearing the Specialized Labor Committee of the National Assembly, competent by reason of the matter, under the terms of the Constitution and the law, observing, for this purpose, the following procedure:

a) the hearing is triggered at the request of the President of the Republic;

b) the hearing of the proposed entity ends with the vote on the report in accordance with the law;

c) It is up to the President of the Republic to make the final decision in relation to the nomination of the proposed entity.

4. The Governor of the National Bank of Angola sends to the President of the Republic and to the National Assembly, a report on the evolution of monetary policy indicators, without prejudice to bank secrecy rules, the treatment of which, for the purposes of control and inspection by the National Assembly it is ensured under the terms of the Constitution and the law ”.

“Article 104

(General State Budget)

1. […].

2. The General State budget is unitary, estimates the level of revenue to be obtained and sets the authorized expenditure limits, in each fiscal year, for all services, public institutes, autonomous funds and social security and must be prepared in such a way as to that all the expenses provided for therein are financed ”.

3. The State Budget presents the report on the forecast of funds to be transferred to local authorities, under the terms of the law.

4. The law defines the rules for the preparation, presentation, adoption, execution, inspection and control of the General State Budget.

5. The execution of the State Budget complies with the principles of transparency, accountability and good governance and is supervised by the National Assembly and the Court of Auditors, under the terms and conditions defined by law ”.


[1] All citations without a specific source mentioned are from the 2021 Constitutional Review Law Proposal Rationale Report made public by the Government.

[2] Alain de Janvry e Elisabeth Sadoulet, Development Economics, 2016, p. 19

[3] Moiani Matondo, Em defesa das zungueiras e da economia informal, MakaAngola. https://www.makaangola.org/2020/04/em-defesa-das-zungueiras-e-da-economia-informal/

A radiography of the fight against corruption

1- Introduction. The discussion on fighting corruption in Angola

The fight against corruption was established as a main goal in the beginning of João Lourenço’s presidential term. What we want to know in this analysis is whether this fight has gone from rhetoric to practice, and, above all, what elements can identify a clear response to a theme that has become the subject of political dispute in Angola. To reach provisional conclusions – since the process against corruption has not ended yet – we will analyse some structural elements of the fight against corruption, such as the discourse of political power, the legislation adopted, the bodies created, international cooperation, the cases under investigation, the asset recovery and the universe of legal charges. Balancing all these elements together we will draw a picture of the current fight against corruption.

This text seeks to ascertain whether there is a fight against corruption in Angola, using the mentioned index elements. It does not take a general assessment of this fight, this will only be done at the end of the presidential term, nor does it investigate the failures and improvements necessary for that fight, which has been done in other studies. Here we want to gather elements and conclude about the praxis of fighting corruption in Angola.

2- Structuring elements of the fight against corruption

2.1- The political discourse

The fight against corruption began with a strong appeal from the political power that started with the inauguration of the President of the Republic. At that time, in September 2017, João Lourenço elected the fight against corruption as one of his priorities, stating that he will confront the corruption that “rages in state institutions.” The President emphasized the “direct negative impact on the State” of corruption, saying that it threatens “the foundations of the country” and concluding that this will be “one of the most important fronts of struggle in the coming years”[1]. Later, in February 2020, after several speeches of the same content, when the possibility of an agreement between the State and Isabel dos Santos was publicly raised, the President went out on a rally to vigorously reaffirm the priority of fighting corruption and denying any agreement with Isabel dos Santos[2]. Recently, on the anniversary of the Attorney General’s Office (AGO), he reaffirmed his commitment to this fight and praised the role of the AGO[3].

Three different moments, and three clear and solemn speeches on the fight against corruption by the President of the Republic and the holder of the executive power. The same rhetoric has been followed by other policy makers over the past few years. There have been no hesitations or setbacks in grammatical constructions. Therefore, from the point of view of political discourse, there is no doubt that there has been a strong and permanent commitment since 2017 in the fight against corruption, with the first analytical element being fulfilled. It is necessary to comply the following elements.

2.2.- Anti-corruption legislation

The political discourse was accompanied by legislation with a focus on combating corruption. The government passed two laws on the repatriation of capital, which it considered to be the cornerstone of its anti-corruption policy. These laws are the Law on the Repatriation of Financial Resources, alias the Law on Voluntary Repatriation (LVR), Law No. 9/18, of June 26, and the Law on Coercive Repatriation and Extended Loss of Assets, alias the Repatriation Corercive Law. (RCL), Law No. 15/18, of 26 December. These laws will represent the executive’s commitment to ensure that funds diverted by corruption, return to their rightful owner, the State. We will see further below which are the effects of applying these laws in terms of values. Later, in 2020, the National Assembly passed a new Penal Code and a new Penal Procedure Code. Although these laws are structuring for the entire State and the legal system, it should be noted that the new Penal Code has a specific chapter on Crimes Committed in the Exercise of Public Functions and in Prejudice to Public Functions (articles 357 to 375) which includes corruption (art. 358 to 361), undue receipt of advantages (art. 357), influence peddling (art. 366) and embezzlement (art. 362), among others. The entire sanctioning typology of criminal law has been revised and systematized to make it easier to understand and adapt.

Also, in the area of ​​public contracts, there were several changes aimed at strengthening transparency and the fight against corruption. Public contracting legislation was amended by Law No. 41/20, of 23 December. In 2018, the government approved the Primer on Ethics and Conduct in Public Contracts, the Practical Guide for the Prevention and Management of Risks of Corruption and Related Infractions in Public Contracts and the Guide for Reporting Corruption and Related Infractions in Public Contracts. In the area of ​​financial information, mechanisms to control illicit flows and to prevent money laundering were clearly reinforced. Note should be taken about Law No. 5/2020 of 27 January on the prevention and fight against money laundering, the financing of terrorism and the proliferation of weapons of mass destruction, resulting from the ratifications of the United Nations Conventions against Illicit Traffic in Narcotics and Psychotropic Substances, against Transnational Organized Crime and on the Suppression of the Financing of Terrorism. Important, too, was Presidential Decree No. 2/18 of 9 January, which approved the Organic Statute of the Financial Information Unit, hereinafter referred to as the FIU and the Supervisory Committee, as a public service specialized in the coordination at national level of reinforcements for the prevention and repression of money laundering, financing of terrorism and the proliferation of weapons of mass destruction.

We see, therefore, there is a massive update of legislation against corruption and money laundering. The rhetoric was lumped by the legislative act, the words to the norms. The next element of analysis concerns the organic.

2.3- Anti-corruption agencies

The government chose not to create new bodies, and to base the execution of the anti-corruption policy on the already existing institutions: Attorney General’s Office (AGO), Banco Nacional de Angola, Financial Information Unit, Criminal Investigation Service (CIS), etc.

However, at the level of the AGO, it created a sub-body with specific functions in the fight against corruption: the National Asset Recovery Service. This service was created by Law 15/18, of December 26, Law on Coercive Repatriation and Extended Loss of Assets. According to article 13 of that Law, the main task of this National Service is to proceed with the location, identification and seizure of assets, financial and non-financial assets or products related to crime, whether those assets are in Angola or abroad. In addition, the Service has the expertise to ensure international cooperation among its counterparts, as well as to exercise the other attributions conferred by law, in which it is worth mentioning the initiation of any civil, administrative or fiscal action in order to recover the assets taken out illegally from the State.

The practical functioning of the Service has been based on the opening of patrimonial investigations attached to the criminal proceedings that are under terms in the judicial authorities, to investigate and identify the location of assets that may be the subject of a confiscation order and the adoption of measures necessary for its recovery. Within this scope, the Service carries out all necessary measures (sending rogatory letters to its counterparts, ordering seizures and requesting foreclosures) to ensure that the assets do not dissipate. It should be noted that this body does not act alone, but in cooperation with the bodies that have the main processes. However, the truth is that it has stood out for the amount of seizures and measures taken.

There are several examples of the Asset Recovery Service’s activity. In July 2020, it ordered the seizure of three buildings, office and residential, called Três Torres, in Luanda. The buildings, known as Três Torres and recently built, include Torre A Offices, and Torre B and C Residencial, are located in the urban district of Ingombota, in Luanda, the country’s capital. At the time, Deutsche Welle said that: “The name of Manuel Vicente, ex-president of Sonangol and ex-vice president of the country, is pointed out, on the grapevine, as being connected to the buildings[4].” In September 2020, the Service determined the seizure of the minority shareholding of 49% of AAA Ativos in the SBA, as well as buildings of the AAA group, belonging to Carlos São Vicente, within the scope of the patrimonial investigation process linked to the criminal process that it concerns. In 2021, five housing projects were seized, namely Tambarino Project (Lobito, Benguela), Palanca Negra (Malanje), Mifongo Project (Malanje) and the Ex-Petro projects, in Golf II and Nova Vida III, both in Luanda. At the same time, as part of a lawsuit against the former chairman of the board of the Banco de Poupança e Crédito (BPC), Paixão Júnior, the Service also seized containers of material for the erection of a yoghurt factory in Benguela that was delivered to the Smart Solution company.

These are mere examples of a broad work that is being developed by this service dynamically directed by Public Prosecutor Eduarda Rodrigues. This Service could possibly be the embryo of a more global and comprehensive anti-corruption body, as we have argued.

2.4.- International judicial cooperation

Along with the asset recovery work carried in the sub-organ described above, there has been a wide appeal to international judicial cooperation. First, it is important to highlight the requests addressed and fulfilled to Portugal. The activity with Portugal has been immense, since the rogatory letters referring to Isabel dos Santos and her associates that have already led to multiple “freezes” of social participation in Portuguese lands. It was recently reported that the Central Court of Criminal Investigation (TCCI) arrested the bank accounts in Portugal of three Isabel dos Santos’ friends, at the request of the judicial authorities of Angola. The seizure of the accounts of Mário Leite da Silva, Paula Oliveira and Sarju Raikundalia was carried out in the context of a rogatory letter sent from Angola to Portugal in January 2020. In that letter, the Angolan authorities requested the preventive seizure in Portugal of assets by Isabel dos Santos and his three friends up to a total value of 1.15 billion euros, as a guarantee of possible future compensation to Angola[5].” Carlos São Vicente and others were also the subject of rogatory letters and requests to Portugal.

The Angolan AGO reported days ago that requests for cooperation have already been made to Switzerland, the Netherlands, Luxembourg, the United Kingdom, Singapore, Bermuda, the United Arab Emirates, Mauritius, the Kingdom of Monaco, Malta, the Isles of Man and others. Within the scope of international cooperation, the Attorney General’s Office has already requested the seizure of assets worth approximately US $ 5 billion.

3- Benchmarks

3.1.- Quantitative indices

All the activity that has been described has shown quantifiable results that are reproduced here:

• Since the beginning of the fight against corruption, the Angolan State has definitively recovered in cash and assets a total of around 5.3 billion dollars.

• In addition, it asked to seize US $ 5.4 billion in foreign jurisdictions.

• In Angola, assets worth around US $ 4 billion have already been arrested and seized. Such assets are still subject to the respective lawsuits still pending, awaiting a final decision at first instance or on appeal.

• 1522 criminal cases were opened regarding corruption-related crime and alike.

3.2. Qualitative indices

In terms of criminal charges, the prosecutor’s office has handed down charges against a variety of senior dignitaries. Noteworthy are the accusatory orders against: General Sachipengo Nunda, former Chief of Staff of the Armed Forces, Norberto Garcia, former director of the External Investment Agency, Valter Filipe, former Governor of the central bank, José Filomeno dos Santos, former CEO from the Sovereign Fund, Augusto Tomás, former Minister of Transport, Manuel Rabelais, former Minister of Social Communication, Carlos São Vicente, former President of the AAA Group.

In addition to these public figures, there are a myriad of cases at the provincial level that are replicated in each one. Recently, it was noted that the former director of the Regional Office Planning, Urbanism and Environment in the province of Bengo was sentenced to two years in prison for the crimes of active and passive corruption and undue receipt of 125 million kwanzas. In the same process, the former director of the legal office of the Provincial Government of Bengo, and the ex-director of the office of the former governor were also sentenced to one year in prison for the crimes of passive corruption and degree of influence and having benefited from monetary values in the business.

In what concerns the “freezing” of assets, the assets of Manuel Vicente and generals Dino and Kopelipa, among others, were seized or handed over. Regarding the latter two, it should be noted that as representatives of the companies China International Fund Angola – CIF and Cochan, SA, the generals handed over the shares they held in the company Biocom-Companhia de Bionergia de Angoala, Lda., in the Kero Supermarket chain and in the company Damer Gráficas-Sociedade Industrial de Artes Gráficas SA. Still in relation to Manuel Vicente, the President of the Republic determined the nationalization of 60% of the shareholdings of the commercial company Miramar Empreendimentos, SA “, which covers” 43% of the shares belonging to the Suninvest — Investimentos, Participações e Empreendimentos, SA “and” 17% of the shares belonging to Sommis, SGPS. These shares belong to Manuel Vicente.

Obviously, it is also necessary to mention the seizures of assets referring to Isabel dos Santos and her associates.

4-Conclusions

In this study we tried to assess, with precise elements, the reality of the fight against corruption in Angola at this moment. Take an “x-ray”. We conclude that there is a powerful rhetoric to support the fight against corruption, that appropriate legislation has been passed, a specific sub-body has been created with a view to recovering assets, an entity that has shown itself to be quite committed. International judicial cooperation is quite broad. From the asset recovery point of view, between seizures and definitive deliveries, perhaps US $ 10 billion have already been obtained. Various accusations have already been made against several senior individuals.

What is to be concluded from this list is the scope of those who have already been the target of an accusation or action to recover assets. It cannot be said that there is selectivity, because in fact we have a representative sample of the former senior officials, nor can it be said that there is no action. There were many and diverse. It does not mean that the scope of the fight cannot and should not be extended. In sum, there is a wide-ranging fight against corruption in Angola, which translates into the elements that we have identified here.

However, this does not mean that this fight does not need several improvements and has several flaws, which we have already identified in previous studies, namely, the lack of specialization and of its own extensive investigation and justice bodies, the need for promptness, and the creation of modern mechanisms to prevent the continuation of corrupt practices.

Fig. nº 1-  Table of Contents to Combat Corruption

Supporting political SpeechYES
Adequate new legislationYES
New OrganicYES/Partial
International Judicial CooperationYES
Asset RecoveryYES
Criminal chargesYES/Need for specialization and promptness

[1] https://www.publico.pt/2017/09/26/mundo/noticia/joao-lourenco-promete-combater-a-corrupcao-que-grassa-o-estado-1786811

[2] https://www.dw.com/pt-002/jo%C3%A3o-louren%C3%A7o-quebra-o-sil%C3%AAncio-e-fala-%C3%A0-dw-sobre-isabel-dos-santos/av-52240806

[3] https://novojornal.co.ao/politica/interior/joao-lourenco-elogia-pgr-no-combate-a-corrupcao-uma-das-suas-prioridades-anunciadas-quando-tomou-posse-101998.html

[4]  https://www.dw.com/pt-002/angola-pgr-apreende-tr%C3%AAs-pr%C3%A9dios-em-luanda/a-54272442

[5] https://angola24horas.com/component/k2/item/20926-justica-portuguesa-arresta-contas-bancarias-de-amigos-de-isabel-dos-santos

Sonangol: the need for a new strategic vision

The Annual Accounts: 2019

On 22 September 2020, Sonangol presented its annual accounts with reference to 31 December 2019[1]. The net result was USD 125 million (one hundred and twenty-five million US dollars), equivalent to AOA 45 854 million (forty-five thousand, eight hundred and fifty-four million kwanzas), with EBITDA (Results before Interest, Taxes, Depreciation and Amortization) of USD 4,779 million, representing an increase of 10% in relation to the previous year.

Revenues were identical to 2018, while operating costs fell 11%.

Oil production was also similar to the previous year while gas production increased by 6% and LNG by 8%. The production of refined products grew 37%, after resuming operations at the Luanda Refinery.

This is the accounts’ summary as announced by the Company’s Board of Directors[2].

Fig. 1 – Summary of Sonangol 2019 Accounts according to the Board of Directors

ITEM  NET RESULTS
Net Profit  125 M USD
EBITDA  4,799M USD
Oil Revenue and Production  Similar 2018
Gas  +6%
LNG  +8%
Refined Products  +37%

The accounts make ample references to the ongoing Regeneration Plan, which has as essential goals to place the company’s focus on the activities of the oil industry value chain, that is: prospecting, research and production of crude oil and natural gas, refining, liquefaction natural gas, transportation, storage, distribution and marketing of derivative products[3].

Combating corruption at Sonangol and strengthening the role of Non-Executive Directors

The key issue of these accounts begins to be formal, as, finally, accounting reserves that lasted for 15 years were eliminated and the financial reporting is endowed with enhanced transparency.

An effort to eliminate Sonangol’s role as an “epicenter of corruption” is visible[4], that is, as the main public financier of the business and private pleasures of the Angolan ruling elite.

This can be seen in the attempt to improve the transparency of financial reporting and in the appointment of non-executive directors such as Marcolino Moco and Lopo do Nascimento, two individuals with recognized integrity. These are moves to ensure that Sonangol’s revenues are not used for these private businesses.

To these measures are added the termination of Sonangol’s functions as a National Concessionaire and the privatization of several expensive units of the group, which in many cases were only vehicles for withdrawing public money for private purposes.

However, within this framework it would be important that the Non-Executive Directors, in addition to publicly signing the report and accounts, issued a declaration of verification that there was no significant and visible appropriation of public funds by private entities. Transparency has to go further.

Fig. No. 2- Measures to combat corruption at Sonangol

Sonangol’s weaknesses:

If the first task of the Government and of the Sonangol’s governing bodies is to eliminate corruption[5] within the company, the second and no less important task is to make the company profitable and with prospects for the future.

And here despite the implementation of the so-called Regeneration Plan, this is not enough. A full qualitative leap is needed at Sonangol.

If we look at the company’s net profits, they dropped in 2019 to 46 billion kwanzas (about $ 125 million) compared to the 80 billion kwanzas ($ 316 million) in 2018. There are several reasons why this happened, from the low price of oil to the cessation of receiving supplies as a National Concessionaire. However, this number represents an additional weakness of the company.

In a study recently issued, Reuters[6] reported that Sonangol’s core activities in 2019 lost 351 billion kwanzas ($ 995 million), compared with a profit in 2018 of 69 billion kwanzas ($ 274 million) ). In 2019, debt payments were spent US $ 1.8 billion, while operating profits from oil production, sale and refining of US $ 1.570 million.

In addition, the total liabilities in 2019 were US $ 36 billion, referring to loans, risk provisions and accounts payable.

It should be noted, moreover, that the final net profit mentioned above is the result of unrepeatable extraordinary results such as cancellation of old debts and sales of some assets. They do not result from the central activity of the company.

KPGM points out that Sonangol’s liabilities or obligations exceed its assets, something that has not happened since 2016.

This means that the company’s core business is not competitive. Therefore, modeling the Regeneration Plan in a mere return to the core business isn’t the best solution.

This means that it is not enough for Sonangol to focus on its core business, as indicated by the Regeneration Plan. It is not enough and it cannot happen.

Fig. No. 3- Sonangol: Compared data between 2018 and 2019 (millions of dollars)

In addition, in 2019 Sonangol had sales of US $ 10 billion, 4% less than in 2018, which is understandable, as mentioned above, since in the middle of the year it stopped receiving earnings as a National Concessionaire. However, in addition to sales being stagnant, the production of barrels of oil is also stalled at 232 thousand barrels per day. In addition, it is feared that in the future oil will lose its importance in the world economy.

If we look at the amount of expenditure in the Angolan State Budget for 2020 in the revised version, it is US $ 23 billion. As only a part of Sonangol’s sales accrues to the State, we have a direct contribution from Sonangol to the national economy much lower than in the past. It should also be noted that the Angolan GDP is around US $ 105 billion. In this sense, Sonangol’s total sales do not reach 10% of GDP.

These elements lead us to two conclusions:

I) Sonangol’s oil activity is stagnant;

II) the company no longer has the magnitude to be the driving force of the Angolan economy.

These two conclusions have repercussions for the national economy and for Sonangol itself.

As far as the national economy is concerned, the solution is clear and is already beginning to be taken: broadening the national productive base, diversifying the sources of public income, promoting the creation of a strong agricultural and livestock support in the country, promoting the opening of companies, investment and competition in the market. It is a painful and difficult process, but a necessary one.

Harmonium Strategy. Going beyond the Regeneration Plan

Regarding Sonangol, it is understood that it is not enough and it is not the best idea to just focus on oil. The company’s reform has to be more ambitious and forward thinking.

On that matter we have already advocated in previous work[7] and it lays on the partial privatization of the company. The privatization of 100% of the company is not advocated, but the privatization of 33% of its capital in order to bring international investment, involvement of Angolan capital and motivation of its workers. These three objectives would be achieved through the following partial privatization model. Of the 33% of share capital to be privatized, 15% would be for foreign investors and would be the subject of an OFS (Public Offer for Sale) on an international reference exchange with abundant liquidity. The other 10% would be for national investors and would be subject to an OFS in Luanda. And finally, the remaining 8% would go to Sonangol workers, who would also become owners of the company for the ownership of their shares.

There would be new money, fresh ideas and people without connections to the past. This would allow a different approach to the problems and a renewed vision of the future.

However, in view of the negative evolution of the world and Angolan situation in recent months, partial privatization alone will not suffice, as the Regeneration Plan is not enough.

A new strategy for the company is vital.

The strategy no longer involves excessive attention to the oil focus. That which is not profitable and in which the company is not competitive must be sold. Free the company from its weaknesses. Decrease. But at the same time, increasing the company’s capacity and scale. Hence this option is designated as the Harmonium Strategy.

The remaining activities are expected to remain at Sonangol, while a renewal strategy is launched, based on developing a stronger downstream business, increased refining capacity, expansion for chemical products, and investing abundant renewable energy in Angola, such as sun and water, at the same time. time creating new technologies through its R&D efforts and developing new lines of business through investments and acquisitions. This means that there must be a transformational effort by Sonangol and not a mere reduction or dismantling.

It is necessary to follow what many large foreign oil companies, whether dominated by the state like Aramco (Saudi Arabia), or private like BP, are doing.

And this is turning the oil company into an integrated energy company driven by the production of resources focused on providing energy solutions to customers. Construction on a scale of investments in renewable energy and bioenergy, initial positions in hydrogen and creation of a global portfolio of gas customers; there are several options that Sonangol faces to become a modern and competitive company.


[1]https://www.sonangol.co.ao/Portugu%C3%AAs/ASonangolEP/Relat%C3%B3rio%20de%20Contas/Paginas/Relat%C3%B3rio-de-Contas.aspx

[2]https://www.sonangol.co.ao/Portugu%C3%AAs/Not%C3%ADcias/Paginas/Not%C3%ADciasHome.aspx?NewsID=472

[3]https://www.sonangol.co.ao/Portugu%C3%AAs/ASonangolEP/Estrat%C3%A9gias%20Corporativas/Paginas/Estrat%C3%A9gias-Corporativas.aspx

[4] See for example on the topic: https://www.makaangola.org/2020/09/sonangol-o-epicentro-da-pilhagem-de-sao-vicente-parte-1/

[5] We use the word corruption not in a technical sense, but in the current common sense in Angola, like all illicit private appropriation of public values, basically corresponding to what is criminally referred to as embezzlement, abuse of trust, economic participation in business, fraud, etc.

[6] https://www.reuters.com/article/angola-oil-sonangol/angolan-energy-giant-made-no-money-from-oil-in-2019-as-debt-bites-idUSL8N2GP4V2

[7] https://www.cedesa.pt/2020/01/29/um-modelo-de-privatizacao-da-sonangol/