GRASPING THE NETTLE
Angola’s new president is ridding state institutions of cronies linked to the Dos Santos family, but his second challenge — to rescue the country’s oil-dependent economy — will be a tougher task
Since being sworn in as Angola’s president just seven months ago João Lourenço has become known among Angolans as “The Terminator” for his fight against rampant corruption. The 64-year-old former army general faces a daunting task. Corruption became institutionalised under his predecessor, José Eduardo dos Santos, who ruled Africa’s second-largest oil producer with an iron fist for 38 years.
The magnitude of the challenge facing Lourenço is clear: Berlin-based Amnesty International ranks Angola as the world’s 14th-most corrupt country out of 180 in its 2017 corruption perceptions index. On a scale where 0 is totally corrupt and 100 is totally incorrupt, Angola scored 19.
To the surprise of sceptics, who thought Lourenço would be a puppet of the Dos Santos family, he set to work swiftly to clean up corruption. His first big target was the former president’s daughter, Isabel dos Santos, whom he summarily dismissed as head of state oil company Sonangol in November, together with all board members. She had been appointed by her father in June 2016 and now finds herself being investigated by the Angolan public prosecutor following allegations made by her successor, Carlos Saturnino, that she was central to a US$38M shady transaction.
She has a net worth of $2.6bn, which makes her Africa’s wealthiest woman, and has hit back, claiming in a
What it means: The collapse of the oil price in 2015 dealt a blow to Angola’s economy and government finances
13-page document that she is the victim of “slanderous” and “defamatory” “campaigns”.
But her problems are minor compared with those of her brother. José Filomeno dos Santos, who was appointed head of Angola’s $5bn sovereign wealth fund by his father in 2013, finds himself accused by the finance ministry of an attempt to defraud the fund of $1.5bn. He was fired by Lourenço in January.
Among the others accused of involvement is former Angolan central bank governor Valter Filipe da Silva, who allegedly orchestrated the transfer of $500m just before Lourenço’s election. UK authorities flagged the transaction as suspicious and have recently transferred the funds, which had been frozen, to Angola’s central bank.
The Dos Santos siblings have been the most prominent targets of Lourenço’s cleanup, but the heads of other cronies have also rolled. They include the chief of the foreign intelligence agency, André Sango; the head of the armed forces, Gen Geraldo Nunda; the chief of police; the head of state diamond company Endiama; the boards of the three state-owned media companies and most state governors.
Another daunting priority confronting Lourenço is repairing the badly damaged economy. The collapse of the oil price in 2015 dealt a severe blow to it and brought 14 years of strong GDP growth to a shuddering halt. GDP grew by 0.9% in 2015, by 0.1% in 2016 and by 0.9% in 2017.
The lower oil price has also played havoc with government finances. According to the African Development Bank, government revenues declined by 51% between 2014 and 2017 to $22.3bn. Oil-related revenues accounted for 46% of total receipts in 2017, down from 67% in 2014.
This forced government to slash its total expenditure, which fell 44.8% between 2014 and 2017, to $29.3bn.
The collapse of the oil price has left the country facing a severe US dollar shortage, largely due to authorities’ determination to keep the Angolan currency pegged at 166 kwanza to the US dollar. It also helped send inflation roaring to a crippling 32.2% in 2017.
The peg hammered Angola’s foreign exchange reserves, which in 2017 alone fell from $20bn at the start of the year to $12bn at the end. Monetary authorities finally capitulated in January, announcing that the currency would be allowed to float in a trading band to the dollar.
The kwanza inevitably weakened after that, dropping by a third to about KZ22/US$. But this does appear to have had a positive influence on Angola’s foreign exchange reserves, which ended February at $12.6bn.
Uk-based research firm Capital Economics says in its second-quarter 2018 review of African economies: “Angola has finally begun the policy reforms needed to help the economy adjust to lower oil revenues. This will improve long-term growth prospects, but it will be painful in the short run.”
Capital Economics predicts marginal GDP growth of 1% in 2018, with a modest rise to 1.5% in 2019 and 2% in 2020. The good news is that inflation is expected to abate gradually to 21% in 2018 and 14% in 2020.
But to really prosper again Angola appears to have no choice other than to diversify its economy. Ominously, the finance ministry warns that without a resumption of largescale exploration and development, oil production will fall 36% by 2023.
Inflation is expected to abate gradually to 21% in 2018 and 14% in 2020