Angola: Where Self-Preservation Is Disguised as Reform

4 MINS READJun 1, 2016 | 09:00 GMT
Angola: Where Self-Preservation Is Disguised as Reform
By presidential decree, Angolan energy giant Sonangol will cease activity in the oil and natural gas industry, becoming instead Angola's concessionaire for oil and natural gas contracts.

Even as Angola's long-standing president prepares to step down, he is working furiously to eliminate any threats to his family's interests before leaving office in 2018. On May 26, President Jose Eduardo dos Santos issued a decree that Sonangol, the African country's energy giant, will halt its activity in the oil and natural gas industry as well as other sectors of the economy. Instead, the company will focus its efforts on acting as Angola's concessionaire for oil and natural gas contracts. The move marks the latest in a string of steps taken by Luanda in recent months to restructure its energy industry as Angola copes with the financial consequences of low oil prices. However, it also serves another purpose: to limit the emergence of a potential power rival to a president in the twilight of his rule.

Ironically, Sonangol has in many ways formed the cornerstone of the ruling party's economic power base while dos Santos has held the presidency. Oil almost single-handedly finances the Angolan government: It accounts for roughly 50 percent of the country's gross domestic product, 75 percent of the government's revenue and over 90 percent of its exports. Its dominion over Angola's economy — and the People's Movement for the Liberation of Angola's (MPLA's) control of it — has enabled the president and his party to monopolize political power and fund a strong security apparatus capable of stifling public discontent. As a result, no opposition group in Angola has proved capable of competing with the MPLA.

But as layers upon layers of opaque political links have formed between the party's different factions and Sonangol, the company has become something of a state within a state as it has shaped and implemented Angolan oil policy. The lack of transparency within the group has exacerbated corruption, prompting investigations into ties between Sonangol and several foreign oil companies, including Western ones such as Norway's Statoil. Sonangol's supremacy in Angola is not confined to the energy industry, either; the company has also expanded its reach into other strategic sectors, including real estate and telecommunications.

Lately, however, a steep decline in oil revenue has forced Sonangol to tighten its purse strings. Luanda has cut its spending in half this year, and most of Sonangol's exports have been used to repay the company's debts to other oil companies and service contractors. (Sonangol is estimated to owe China alone more than $25 billion.) As a result, the government was forced to seek a loan from the International Monetary Fund, entering into talks in early 2016.

A Solution for More Than One Problem

Given the government's budgetary shortfalls and need for greater efficiency and transparency within Sonangol, the company's restructure should come as little surprise. However, there is an added motive behind the president's latest decree: ensuring that his exit from Angolan politics goes smoothly.

The proposed overhaul is intended to break down the potential blocks of power forming within Sonangol and place the company squarely under dos Santos' control. If implemented, the reform (spearheaded by the president's daughter and the minister of petroleum) would force Sonangol to cease any activities beyond its role as Angola's concessionaire, including the exploration, production and operation of oil blocks. The company's subsidiaries would be transferred to another state agency, while the newly created Senior Oil Sector Monitoring Council would assume the government's share in Sonangol, reporting directly to dos Santos. (Sonangol EP would likely represent Angola in the country's production-sharing contracts and concession agreements, but it is not yet clear how Sonangol P&P will fit into the planned organizational structure.) Finally, a new Oil Sector Agency would take charge of regulating the oil sector, negotiating contracts and awarding rights to oil blocks.

By splitting up the company, the president hopes to safeguard the interests of his family and tribe — not least of which is his children's oversight of Angola's sovereign wealth fund — by blocking any contenders from emerging within his party or the oil industry. However, announcing a reform and implementing it are two very different things. The president has not yet chosen an anointed successor, and without one he will not be able to direct the transition away from his rule — or cement the policies he is trying to put in place before leaving office.

The MPLA's various factions have already begun to look toward the president's 2018 departure, eyeing ways of preserving their own bases of support while moving against their rivals. Dos Santos would prefer to handpick his successor, if given the choice. After all, a member of his family or inner circle would reduce the likelihood of corruption investigations into the dos Santos business empire in the future. However, the MPLA will do its best to avoid the emergence of a dos Santos political dynasty, and Manuel Vicente — the most obvious candidate outside of dos Santos' immediate family — has already been taken out of the running by allegations of corruption. With the looming presidential succession fast approaching, self-preservation may be the best dos Santos can hope for, and a reform cloaked in legitimacy may be the best way to get it.

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