Angola: Where did all the money go? Part 5, the fight back
President João Lourenço has a tough job on his hands trying to claw back any of the billions siphoned off by corrupt government officials in Angola.
[In our fifth and final instalment of our series on Angola’s missing billions, we look at the obstacles facing President João Lourenço in his anti-corruption drive. For part 1 click here, for part 2 click here, for part 3 click here, for part 4 click here].
It was the great promise when General João Lourenço spoke for 45 minutes at his presidential inauguration in Luanda in September 2017, pledging to crack down on corruption and invest in health and education.
“No one is so rich and powerful that they cannot be punished and no one is so poor that they cannot protected,” he told the crowd. Then he talked about reforms to free up the media, give small businesses a chance against the country’s titanic monopolies and promote gender equality.
Expectations were running low at the beginning. As outgoing President Dos Santos had backed Lourenço as his successor, many believed there was a deal to protect the old guard and the first family.
People were afraid it would turn bloody. The way the transition was done was positive.”
But things started to change, says Ana Gomes, who was in Luanda late last year. “People were afraid it would turn bloody. The way the transition was done was positive.”
“Lourenço, with all the things he started doing, including putting some of the Dos Santos government in gaol, is significant. These things had a liberating impact on Angolan society. Suddenly there was a guy coming from the MPLA giving a totally different speech.”
Some in Luanda argue that Lourenço has no choice but to go after the stolen money, so dire is the state of the economy he has inherited. For the next three years economic growth per head and oil production will shrink, according to forecasts from the IMF and the Economist Intelligence Unit.
By introducing new laws for the repatriation of illicit financial flows, Lourenço has raised great expectations of the return of ill-gotten gains.
It won’t be that easy, warned a well-travelled economic consultant. “If I were trying to have an effect, I would do the same thing that General Park did in South Korea in the 1960s. He said: ‘I know you guys have stolen money, it’s going to be brought in and used in the productive sector.’”
Then the penalties came in: “If after three months if you haven’t brought it home, we are going to shoot you in the knees, if after six months we’ll do whatever….”
However it’s done, he warns, it will take five to 10 years to pay off and the person who starts it may not get the credit. “The government should publish details of every cheque it writes, every contract it signs. The people own the assets, they should have the information. This is the only way anything would change.”
A lack of data and information is at the root of the government’s problems, he argues. “Even the fiscal data is complete crap […] the IMF knows that.”
Those who know how the economy has been operating reckon that at least 15% of state revenues have been lost, insists the consultant. “That’s just what this very corrupt, very opaque system has revealed because of external pressure.”
No-one knows how much is missing
Other experts are equally reluctant to put even an approximate number on Angola’s missing money, beyond itemising deals in the oil services and construction sector which were over-priced by tens of billions.
A veteran banker, a regular visitor to Luanda, gave a low-register whistle when asked how much had gone missing.
“The inner core who made more than a billion each is maybe 20 people where they are worth way more than we can imagine. The inner core are like Rockefellers […] and the outer core are those – and their kids – who will never have to work again. They have generational wealth.”
Finding the cash could be more difficult, he adds: “I don’t quite get where the money is. I imagine it would flow into a Swiss bank account and it would have to flow out. I can’t image you would leave $20bn in a Swiss bank. All these guys have high-level connections […]. While you have your mansions in London and Portugal, you have your vast tracts of land in Latin America.”
Yet if the government was determined to track the money if it could, says the banker. The central bank could lead the investigation, apply as a government to all the secrecy jurisdictions such as Jersey and the British Virgin Islands for information.
Not all the ill-gotten gains are the proceeds of crime in Angolan terms, he adds. Many of them are hugely inflated oil-service contracts imposed on foreign producers such as Chevron, ENI and Total or commodity traders such as Trafigura. These are added as “costs of doing business”, and carved out of the state’s share of the revenue accordingly.
When the economy was growing at 25% the elite was making money everywhere.
The nomenklatura worked different deals with Chinese construction companies. A company would get a no-tender to build a bridge and a highway. Then the top official would say: “I own X hectares in Lunda Sul. On top of the deal we are doing, why don’t we do a partnership or you just build me 100 houses,” says the banker. “The Chinese would have come in and said: ‘This is great business.’”
When the economy was growing at 25% the elite was making money everywhere. For example, cement imports were controlled by a handful of people. “An entire economy was being built that needed cement and 99% was being imported.”
Once the main leakages have been identified, the real work has to start according to a forensic accountant.
“To recover half-decent amounts the government needs to be so committed […] spending serious amounts of money on investigations, prosecutions. Most governments do it half-heartedly. Few manage to get to the bottom of it because you’re looking at a period so long ago,” says the accountant.
And the asset trackers are up against formidable adversaries, he adds: “The targets usually have an army of lawyers and wealth managers because they want to protect it.”
Most international recovery attempts require a final judgement from a local court. There may be a lack of evidence, or a lack of political will. That process can take years.
For example, the Angolan government would have to hire a professional firm of investigators, says the accountant. “On the civil side, the lawyers work with local enforcement agencies. You then have the local prosecutor general whose job would be to bring the case against the targets. There is a whole army of people involved.”
“Finally when you go through all the hoops, it’s rarely returned in cash,” says the accountant. “The Swiss pay through social projects that benefit the people and the country […] rather than to the treasury.”
Out of court settlements or plea-bargaining can bring back some of the money, but often, as in Nigeria, there is little clarity about what has been returned and what it has been spent on.
Some lobbyists are talking up Angola’s chance of clawing back billions of dollars and using it to reboot the economy; yet others, usually linked to the Dos Santos family, say the the new president is just pursuing vendettas and isn’t serious about structural change.
Market conditions could influence the direction, according to one observer close to the current administration: if the oil prices goes back up to $110 a barrel, the relatively small reforms could be thrown overboard.
“The reforms are so modest, they are about keeping the ship afloat rather than changing the course of navigation,” says the observer. “So much of what needs to be done in the country is capital-intensive. Just paying the civil-service salary bill for the next three years will be a struggle under current conditions.”
That is why, we hear, Lourenço is so angry about the Chinese loans contracted between 2014 and 2017, their sheer volume and the amount of oil that has been mortgaged. The short maturities and high interest rates are putting Angola’s treasury under huge pressure to find the foreign exchange to service the debt. It has also shifted the power balance decisively in favour of China.
“Even if there is genuine reform, say on agriculture, electrification, industrial policy and banking regulations […] the question is when [Lourenço] pulls the levers can he really make a difference?” asks the observer.
For now, Lourenço’s anti-corruption campaign is narrowly focused on a range of political and military targets that he can take on without triggering instability or threatening the interests of his key allies.
Yet to change Angola’s course, to restructure the economy, will require a massive infusion of capital – the sort of money that is no longer available from oil-backed loans from China, nor from the IMF and the World Bank, or from the commodity markets unless there is a dramatic return to the super-cycle.
That leaves Lourenço with few options if he want to pull Angola out of the hole that the past two decades have dropped it in.
It would mean a hard-headed and politically iron-clad plan to secure the return of at least $100bn of the state assets that have been taken out of the country and are currently parked in stock markets or upscale residential areas of several capitals in Europe, Asia or the Americas.
That has been the talk in Luanda for months, but the policy remains shrouded in secrecy. Over the next year, Angolans will be able to test its seriousness.
One positive sign: the creation of a new penal code in Angola — the first upgrade since the Portuguese arrived over 130 years ago – that actually creates the infrastructure for an anti-corruption fight. It represents one of “the central pillars of President João Lourenço’s criminal justice reform program”.