Old habits rendering Angola a no-go area for investors

Angola national assembly

Angola national assembly

from PEDRO AGOSTO in Luanda, Angola
LUANDA, (CAJ News) JUST recently, organisers of a major oil and gas summit scheduled for Angola next year bragged how the country was set to attract much-needed foreign direct investment (FDI) in 2020.

Yet, prevailing crises, including a recurrence of corruption in the awarding of state contracts and government’s contractual breaches, indicate otherwise.

These make such projections far-fetched.

The Southern African country looks increasingly likely a nation that is a deterrent to investments as the issues prevail in the midst of so-called sweeping reforms by the government of President Joao Lourenco to address corruption and subsequently make the major oil producer a destination of choice for investors.

Two major projects – one a hydroelectric scheme and the other an oil refinery project – are cases in point.

The Laúca Hydroelectric Plant project is synonymous with the disgraced Brazilian firm, Odebrecht, which is at the centre of one of the biggest corruption probes in its home country and beyond, over bribes for public works contracts.

These were paid between 2001 and 2016.

Angola was not exempt apparently with the beleaguered company that has since pleaded bankruptcy in a bid to restructure a US$13 billion debt, owning up to paying bribes to Angola between 2006 and 2013.

Oderbrecht admitted to paying $50 million in bribes to secure contracts worth $261 million. The admission was part of a guilty plea in a New York court at the end of 2016.

Despite the vaunted anti-corruption crusade by Lourenco, Angola has not probed the expose.

Rafael Marques de Morais of the anti-corruption and democracy watchdog, Maka Angola, led calls for a probe into the illegal payments.

“I asked for the case to be investigated in Angola, including Odebrecht and the said government officials. My request and the evidence provided were met with silence,” de Morais said.

Perhaps unsurprisingly, the Laúca Hydroelectric project has been fraught with irregularities and inconsistencies.

Firstly, the cost of the exercise set to be largest civil engineering project ever in the country and befitting 8 million Angolans with about 2 000 megawatts of energy is uncertain.

Odebrecht’s website values the project at $750 million but government figures fluctuate between $400 million and $600 million.

Despite reports in some section of the media of Standard Chartered interest in financing the project, the global financial firm has distanced itself from Lauca.

Another project entangled in tumult that analysts believe is a deterrent to investors is the Cabinda mega refinery project.

Anticipated to be the panacea to Angola’s sporadic fuel shortages, it has degenerated into an episode of government’s failure to honour agreements. Africa’s second largest producer of crude oil, behind Nigeria, Angola imports about 80 percent of oil products due to lack of domestic refining capacity.

United Shine, the Hong Kong company aggrieved by the government’s decision to terminate its contract on the refining project is contemplating legal action.

State-owned Sonangol has backtracked on the partnership agreement confirmed with United Shine in June. United Shine belongs to Jose Tavares, a longtime friend of Lourenco’s.

Sonangol said the decision to cut ties was on the grounds of “non-compliance with the agreed actions.”

Peculiarly, the refinery contract has been awarded to British investment fund, Gemcorp, without it participating in the international tender call in 2018.

Gemcorp is not new in Angola’s political economy landscape, with its role prominent in recent years, particularly when the influential Manuel Vicente was deputy president to dos Sanstos. Germcop first came to prominence in 2014 when it provided dos Santos’ government with a $300 million loan.

Vicente remains an advisor to Lourenco and during his role as Sonangol chair, was credited with securing Angolan investment in China, including China / Sonangol International Limited (CSIL) and China Sonangol International Holding (CSIH). CSIL is a partnership between Sonangol and China International Fund (CIF).

Battling economic challenges because of the issues in the global oil markets, Angola has gained uncanny reputation of courting questionable partners notably in Asia.

Thus, with such developments, hoping for more investment inflows to Angola appears a pipedream.

– CAJ News