INVESTIGATION / Where did Angola’s money go?
After its civil war ended in 2002, Angola earned over $600bn from oil which it could have ploughed into its reconstruction. Instead, much of the money went missing. Cash-strapped and indebted, the new government is desperate to get it back
After its civil war ended in 2002, Angola earned over $600bn from oil which it could have ploughed into its reconstruction. Instead, much of the money went missing. Cash-strapped, the new government is desperate to get it back
AN ASSOCIATE OF JEAN-CLAUDE BASTOS DE MORAIS
AAt the end of the devastating civil war, in 2002, Angolans had the chance to rebuild their broken country using its bountiful resources of oil, gas and diamonds. It was the start of a commodity supercycle and in the next decade and a half the country earned more than $600bn in export revenue. But economists tell us that at least 15% of the country’s earnings were diverted into private accounts. Many reconstruction projects were badly run and hugely overpriced, thwarting the majority’s hopes for better clinics and schools. They cheered when new President João Lourenço promised a crackdown on corruption. The Africa Report investigates what happened in Angola, inside the system and with the people who ran it, and asks whether Lourenço can get the money back.
A FAMILY FEAST
Hours after his release from Viana maximumsecurity prison, clutching an Angolan passport in one hand and a Swiss passport in the other, multimillionaire Jean-claude Bastos de Morais stood in front of a portrait of President João Lourenço and grinned for the camera. The head of Quantum Global, the company that managed $5bn in assets for Angola’s sovereign wealth fund (SWF), Bastos had spent six months in one of the country’s toughest gaols. Bastos was free in March 2019 thanks to an undisclosed settlement with the SWF so that he would not face charges.
Soon after the photo was taken, Bastos flew to Dubai. Close friends say they have not heard from him since. “They’ve [the Angolan authorities] taken everything, but he’ll start all over again,” a loyal friend told The Africa Report in a Zurich beer hall. “He’s done a lot for African culture.” Few doubt that the quirky, charismatic Bastos will bounce back. There was “something manic, almost messianic about his business plans for Africa,” one of his acquaintances told us.
In September 2018, Bastos was arrested, taken to Viana and held without charges. On the same day, José Filomeno dos Santos (‘Zenú’), a close friend of Bastos and the son of former president José Eduardo dos Santos, was sent to São Paulo prison hospital.
Both men insist on their innocence. For many Angolans, their detention was a symbolic break with ex-president Dos Santos, who had been in power for 38 years.
A freelancer for professional services firm Deloitte, Bastos landed with big dreams in Luanda in 2004, just as the oil-fired economy was revving up. He called Marcel Kruse, a
‘He was this multilingual, charismatic person, a young guy full of ideas’
colleague on a couple of ill-starred ventures in Switzerland. “Marcel, we’re going to do investment banking,” Bastos told him in September 2004. A few weeks later, Kruse was with Bastos in Luanda looking at a number of projects.
Two years later, they were sitting around a boardroom table with people like the stepson of the head of the state oil company, Sonangol, and the son of President Dos Santos. When Zenú joined the project, Banco Kwanza Invest – as it is now called – took off. Bastos, working solo, clinched a contract to manage some of the central bank’s gold reserves.
One day, Bastos breezed into Kruse’s office: “Give me your car. Now this Range Rover is yours.” The accountant recoiled at the prospect of giving up his trusty Toyota. Bastos said that their Angolan counterparts would not take them seriously if they did not look the part.
This was the Luanda zeitgeist. A hundred metres from the office, a fortunate few sat at cafés overlooking the bay, sipping cocktails at $30 a throw. Along the street, a line of Hummers and luxury 4x4s cruised past.
An expatriate army of petroleum engineers, trade-finance specialists and diamond dealers had joined the oil bonanza. By 2010, Luanda was the world’s most expensive city for expats. It went from war zone to boom town. Many Angolans watched, puzzling how their country could produce so much wealth while so little filtered into their daily lives – into schools, clinics, state companies managing the electricity and water supplies.
Bastos’ ascent in Luanda was easy to understand, according to an associate. “When I met him first he had Rasta hair, he was a bass player […] he was this multilingual, charismatic person, a young guy full of ideas.”
As the e conomy took off towards a world-beating 23% growth in a year, Luanda’s nightlife exploded. Once a sandy landing ground for small fishing boats, the Ilha do Cabo hosted a strip of nightclubs that would fit in Rio de Janiero’s upscale Gávea neighbourhood.
An inveterate socialiser, Bastos fitted right in. “Jean-claude would always have his crowd around him,” said his associate. “[It was] kind of fun because you always met new people […], a bit more interesting than going out for pizza.”
As Quantum’s business boomed, so did Bastos’s profile. He became an investment guru on the Africa conference circuit, threw parties for A-list celebrities and, like many in Luanda’s nomenklatura, took to using private jets. He made much of his plans to “reward innovation” through an annual Africa innovation prize.
Bastos and presidential scion Zenú became inseparable friends, holed up for hours in business discussions at the Banco Kwanza offices. It was leading to yet another coup de théâtre – the launching of the Fundo Soberano de Angola, the country’s $5bn SWF in 2012. Zenú ended up as chairman. Then Bastos’s Swiss-based company Quantum Global was appointed to manage the SWF’S assets.
Questions quickly arose about the lack of a competitive tender for the asset-management contract, conflicts of interest and high fees. The mammoth Port of Caio was launched by Bastos’s company, which “invited” the SWF to invest. This was not a conflict of
interest, Bastos told Britain’s The Guardian newspaper: “We view these investments as having aligned interest.” Equally, Bastos told the Swiss weekly Die Weltwoche that criticism of the fees earned by his company from the SWF – more than $90m between May 2014 and December 2015 – was misplaced. “We have standards which correspond to international norms. We receive 2% of the fund’s volume plus 20% of the generated capital gain,” explained Bastos.
Many businesspeople we spoke to saw the SWF as part of the patronage system. One explained: “The SWF was created in a moment of hubris. There had been a slow build-up. Every bank had to have a Dos Santos in the structure. The next step was to give Zenú the fund. That was a step too far. Then everyone’s ears pricked up.”
In January 2018, Lourenço – who became president in September 2017 – sacked the board of the SWF, appointing a new chairman to guarantee “a more efficient and transparent use of the state’s strategic resources”.
THE PARALLEL ECONOMY
Greying elegantly, with an earnest, moustachioed smile and hand outstretched to greet a head of state or multinational corporation boss, Manuel Vicente looks every inch the chief executive. In fact, it has been seven years since he stepped down from the top job at Sonangol to become Angola’s economy minister and then vice-president. Vicente’s imprint on Sonangol is clear. He presided over the company’s fastest expansion in its four-decade history.
In those years, Sonangol was the country’s best-functioning entity, generating most of the funds for the war against UNITA rebels, which ended with the death of their leader Jonas Savimbi in 2002. Then Sonangol went on to underwrite the government’s nationalist approach to post-war reconstruction.
Sonangol’s role is key to understanding what derailed the post-war economic plan – a programme to rebuild using oil and diamond revenue to fix war-damaged roads and bridges, but also to modernise and diversify the economy. Most of the big development projects have run out of funding, yet Luanda’s Centre for Studies and Scientific Research reckons that $189bn was invested overseas between 20022015 by Angolan companies and individuals.
For Ricardo Soares de Oliviera, a professor at Oxford University, Sonangol became a parallel state during the war, all under the control of the presidency. When funds ran low, it was Sonangol executives who were trusted to negotiate complex oil-backed loans or set up opaque vehicles to service these financial commitments. And when the ruling elite swapped its Marxist proclivities for crony capitalism, “Sonangol was an island of competence thriving in tandem with the implosion of most other Angolan state institutions,” Soares says.
A senior official working on post-war reconstruction told us: “Sonangol was the cash cow, called upon to ensure there were resources, but there was no plan, no structures.”
Amid the geopolitical and financial chaos of the early 2000s, there was little international interest in rebuilding Angola. “There was this overwhelming need to provide goods and services to the population that is finally at peace […]. It’s the tyranny of the urgent,” the official said. “Sonangol was a real-estate developer, they were a bank owner, they ran an aviation company. […] They had more people devoted to things that were non-core business than were core business,” the official added.
At the centre of this vast operation employing thousands of people on four continents and controlling a parallel budget of offshore accounts and billions of dollars of physical and financial assets was Vicente. “He is like an octopus,” one of Vicente’s ex-colleagues told The Africa Report. “Everybody does what he says. He has a lot of people around him that control everything. […] He’s a gentleman.”
It was his savoir-faire, discretion and loyalty that won Vicente backing from President Dos Santos. Outwardly amiable, Vicente is a tough negotiator, as foreign oil companies have found. His relations with long-time colonial power Portugal are ambivalent. When Sonangol took a stake in Portugal’s Galp Energia, Vicente announced: “We are the bosses, we will dictate the rules of the game.”
A test for the Lisbon-luanda axis came with the trial of Orlando Figueira, a Portuguese prosecutor, arrested in 2016 on charges of receiving a $850,000 bribe to suspend an inquiry into Vicente’s business affairs. An indictment was issued against Vicente.
After acceding to the presidency in 2017, Lourenço called Portugal’s case against Vicente an infringement of sovereignty. Last May, a Portuguese court ruled that the Vicente case should be transferred to Luanda. Welcoming this, Marcelo Rebelo de Souza, Portugal’s president, said the decision had “removed an irritant” in bilateral relations. For Angolans, it showed Vicente’s influence: enough for the President to defend him against their country’s closest European ally.
THE CHINA-ANGOLA METHOD
Although Vicente had neither a combat record during the war nor a longstanding membership of the ruling MPLA, he had strong contacts with some of the top military and intelligence officers. His ties to Dos Santos’s top security adviser are a case in point. Common business interests and a taste for the finer things in life helped build friendships.
“Vicente and his friend General Kopelipa would take a plane to France to pick up cases of wine from the Pétrus chateau in the Bordeaux region,” said a business colleague. At more than $2,500 a bottle, it is an expensive wine.
The two also shared interests in ChinaAngola business, the main driver of the post-war reconstruction effort. As head of the Gabinete de Reconstrução Naçional, General Manuel Hélder Vieira Dias Júnior, known as ‘Kopelipa’, controlled that rebuilding programme, and as Dos Santos’s closest adviser, he was also the regime’s security capo di tutti capi.
Although the second-most powerful man in the country, Kopelipa was rarely in the public arena. To his irritation, he made news in Portugal when he bought two port wine estates in the Douro Valley without visiting them first.
A dapper man with a taste for well- cut Italian suits, he would glide into high-level negotiations and whisper into the ear of the most senior official before gliding out. A top diplomat who used to go swimming with Kopelipa said he seemed to have no interest in Marxism. “We would sit on the beach and he would say: ‘Look at us, we’re just like you guys, we want to do business and fix the economy.’” But Kopelipa blamed rebel leader Savimbi’s war for most of Angola’s problems.
As Angola became the leading supplier of crude oil to the roaring Chinese economy in the early 2000s, and by turns Beijing’s biggest trading partner in Africa, it set up a barter model. The China-africa Research Initiative reports that China delivered loans to Angola worth $42.8bn between 2000 and 2017. That meant resource-backed loans from Beijing to finance roads and power stations to be built by Chinese companies.
The common point in resource-backed loans was opacity and off-budget spending. Billions went unaccounted for on what the IMF calls “quasi-fiscal operations”. An official told us: “that means revenue that Sonangol received but which never made it to the Banco Naçional de Angola”, with its imposing colonial-era headquarters overlooking the ocean. Professor Alves da Rocha of the Catholic University in Luanda points to findings by its Centre for Studies and Scientific Research that some
‘Sonangol was the cash cow, but there was no plan, no structures’ SENIOR OFFICIAL IN THE GOVERNMENT
$28bn from state budgets between 2002 and 2015 went unaccounted for.
Initially, there was a sense of organised chaos in the meetings with Chinese officials. “So we arrive in China and for the next week we had stretch limousines and police motorcycle outriders,” recalled a banker on one of the early trips. Interpreters were at a premium: “Crazy […] [in] meeting after meeting […] a lot would get lost in translation.”
Suddenly everything scaled up, he said. One bank had been doing small deals with small hedge funds in the US, then it was walking away with $180m of business. After two years, it had done $2bn worth of deals with China.
There was a synchronicity between China and Angola, the banker said. “The reality was that China found itself in a moment when they were awash with dollars […] so they had money to spend and they had the right skills and all these people they could send overseas.” And Angola’s oil was the essential feedstock for those ties.
The projects became more and more grandiose, like the $3.5bn spent on the Kilamba Kiaxi city about 30km outside Luanda, and the sprawling Luanda-bengo Special Economic Zone with 76 factories, most of which are dormant for lack of inputs and local skills.
This year, Lourenço’s government has announced plans to sell off parts of the zone to private companies. Looking back, the senior government official said: “There is plenty of blame to go around. There is the inefficiency of our decision-making system, the patronage in the bureaucracy. […] There’s also a little bit of responsibility [for] our partners, including the Chinese, who were involved in the infrastructure work.” Eventually it comes back to Angola, he concluded: “In the end, we were the loan takers and decision takers, so oversight needed to have taken place.”
Although Kopelipa may find it difficult to adjust to the new era, his name is yet to surface publicly in the spate of financial investigations announced by Lourenço.
PREDATORS IN THE GOLDEN AGE
Ruthless Vladimiro Caposso rose up the ranks of the ruling party, making friends and influencing people. When the country dropped communism for crony capitalism, he built up his fortune to join the nouveau
‘The Chinese built badquality roads […] so the Portuguese can come and service them’ PORTUGUESE MEP ANA GOMES
riche in a country with constant power cuts and tap water that comes out in a muddy and rusty trickle, if at all. In fact, Vladimiro is the protagonist of Predadores (Predators), the 2005 novel by celebrated writer, Pepetela. It depicts an Angola hauntingly close to reality.
It was the era of what Luanda-based economist Da Rocha calls the mini-golden Age. State revenue boomed after the war ended in 2002, as did capital flight. It was also the time when Angola turned the tables on its former coloniser, Portugal.
Cash-strapped Portuguese businesses welcomed Angolan investors in banks, telecoms, media and energy. By 2013, Angolan investors were reckoned to own at least 7% of the shares on the Lisbon stock exchange. Two decades earlier, Isabel dos Santos, the former president’s daughter, had returned to Luanda to launch her business career. She has become the public face of Angolan money buying up Portugal.
Isabel made her first million aged just 18, according to one of her friends in Lisbon. Lev Leviev, a colourful diamond tycoon from Israel, “gave her” his licence to sell Angolan diamonds “because he didn’t want it”.
After private school and a degree from King’s College, London, Dos Santos’s first retail venture was opening the Miami Beach restaurant on Ilha do Cabo while she worked for a much-criticised rubbish-collection company.
“She reminds me of Tony Soprano,” says a regular visitor to Luanda, referring to the TV series in which the Italian-american mobster is also involved in an unpopular waste-management business. Unlike Soprano, Isabel seems to have a blissful family life, married to Danish-congolese art collector Sindika Dokolo, with whom she has four children. Her Instagram feed shows her jetting across the world from corporate boardrooms to charity balls. Also unlike Soprano, Isabel insists she is a self-made business leader who has not benefited from her family’s position. Some of the hostility that the family now faces comes down to overreach. In June 2016, President Dos Santos appointed Isabel to take over Sonangol, battered by falling prices and production. “It was a poisoned pill. It was going to damage her forever. Why do it?” asked a Luanda businessman.
The new President sacked her two months after he took over and her stewardship of Sonangol is under detailed scrutiny. Yet she’s fighting back with investigations of her rivals in the nomenklatura.
Some Portuguese officials like José Manuel Barroso, a former prime minister, cultivated close ties with Luanda and opposed investigations into money laundering in Portugal. Barroso is now a non-executive chairman of Goldman Sachs, which worked closely with Dos Santos’ government. In 2015, the Parisbased OECD condemned Lisbon’s failures to investigate corruption and financial crime.
Agreeing with the OECD, Ana Gomes, a socialist representing Portugal in the European Parliament said: “There are too many Portuguese willing to put themselves at the service of the kleptocrats; there are also many willing to put themselves at the service of the Chinese.” It is a symbiotic relationship for Portuguese business, she added: “The Chinese built bad-quality roads […]; that means the Portuguese can come and service them.”
Lisbon’s tree-lined Avenida da Liberdade, with luxury stores such as Louis Vuitton and Prada, became a promenade for Luanda’s monied clique. But they kept a low profile at home. A businessman, splitting his time between London, Lisbon and Luanda, explained the thinking: “They weren’t bling-bling like in Russia and Nigeria. The code was: ‘Do everything you want outside, but be careful in Luanda. Let’s make money here and have fun elsewhere.’”
THE FIGHT BACK
It was the great promise at Lourenço’s inauguration in September 2017 – his pledge to crack down on corruption and get serious about development. “No one is so rich and powerful that they cannot be punished, and no one is so poor that they cannot be protected,” he told a cheering crowd.
Experts are reluctant to put a number on how much money went missing. One well-travelled economist said a conservative estimate was that 15% of state revenue was lost between
‘The [oil] signature business, that was the big bit that fed the whole industry’ A BANKER WHO WISHED TO REMAIN ANONYMOUS
2002 and 2017. Oil revenues in that period totalled between $600bn and $1trn, meaning that $90bn to $150bn would have disappeared.
A banker explained: “The [oil] signature bonuses, that was the big bit that fed the whole industry. You’ve got to be talking about $150bn."
“The orders of magnitude are huge,” the economist agreed. “There are so many things going missing, going bump in the middle of the night. Even the fiscal data is complete crap, the IMF knows that,” said the economist. “The whole system is designed for purposes other than good management. No system is perfect; this one is completely kaput.”
And yet not all the ill-gotten gains are the proceeds of crime in Angolan law, explained a veteran banker. Many are hugely inflated oil service contracts with producers such as Chevron, Eni and Total or with commodity traders such as Trafigura. These are added as ‘costs of doing business’ and carved out of the state’s share of the revenue.
This could make it more difficult to find the cash, according to a banker who knows Luanda well: “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. […] 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, it could do so, he said. The central bank could apply to all the secrecy jurisdictions for information. That would identify some of the main leakages.
‘The reforms are about keeping the ship afloat rather than changing the course of navigation’ PROFESSOR RICARDO SOARES DE OLIVEIRA
After that the real work would have to start, according to asset-tracing specialist Kamal Shah. “To recover half-decent amounts, the government needs to be so committed […] spending significant amounts of money on investigations, prosecutions. Many governments do it only half-heartedly. ”
Angola’s dire economic outlook – oil production and the economy are forecast to shrink over the next three years – only increases the pressure for Lourenço to show he means what he says. In almost two years, he has introduced a law for the repatriation of illicit financial flows, has put some senior figures from the previous regime behind bars and is pledging to continue investigating corruption.
Lourenço’s acts have had an impact on the country, says Portugal’s Ana Gomes. “These things had a liberating impact on Angolan society. Suddenly there was a guy from the MPLA acting decisively against the top MPLA kleptocracy. […] But the question remains: is that real change or just replacing the top of the kleptocracy by others?”
According to Soares, the academic, if the oil price went back up to $110 a barrel, these relatively small reforms would be thrown overboard. “The reforms are so modest, they are about keeping the ship afloat rather than changing the course of navigation.” For now, Lourenço’s anti-corruption campaign is focused on a narrow range of political and military targets he can take on without triggering instability or threatening the interests of his key allies.
“He [Lourenço] focused on a lot of these blatant cases of things that everybody knew should not be allowed to happen. What that has done though is that it has now sent a signal to Angolans that it is possible to change,” said a senior official in Luanda. “There are hundreds of cases of allegations of corruption and misuse of resources and so on. But one cannot help but to conclude that there is an element of selectivity. A lot has been done, much more needs to get done.”
Luanda insiders talk of a plan to claw back $100bn of the missing money, which would pay some important bills. Government emissaries have been calling lobbyists and investigators in Western capitals to find where the stolen money has been stashed. But a serious effort to get the money will take a gargantuan campaign, and there is no sign that it is happening yet.
After the civil war Angola’s capital Luanda became a boomtown of flash cars and fast cash
Jean-claude Bastos De Morais got pally with the Angolan elite and before long was managing the assets of the sovereign wealth fund
National oil company Sonangol operated as a parallel state during the Angolan civil war
Charming and urbane vice-president Manuel Vicente drove a hard bargain when it came to Portuguese investments
Discreet security head General Kopelipa had the ear of rich and powerful José Eduardo dos Santos
Diamonds, a rubbishcollection operation and a once great national oil company are all part of Isabel dos Santos's varied business career
Some critics say President João Lourenço’s anticorruption drive has been ‘selective’