Angola April 2019

AFRICA RISK CONSULTING

Angola Monthly Briefing April 2019

 

 

Angola 15 April 2019

Jose Filomeno Dos Santos and Jean Claude Bastos de Morais are released from preventative custody, and charges against Bastos de Morais appear to have been dropped. The World Bank and the International Monetary Fund (IMF) examine Angola’s economic reforms, and the United States (US) Treasury announces it will carry out an assessment that should allow US correspondence banks to return to doing business with Angolan banks. The World Bank loans $2.7 billion to Angola for infrastructure development; the IMF warns on Angola’s level of indebtedness and the government has developed a new debt repayment strategy including stopping oil-backed loans. The government discovers that $4.7 billion has been diverted from public funds to private investment and intends to recover the money.

 

Jose Filomeno dos Santos and Jean Claude Bastos de Morais released from custody

The trial of former Fundo Soberano de Angola (FSDEA) (sovereign wealth fund of Angola) chairman José Filomeno (Zenu) dos Santos and Jean-Claude Bastos de Morais, head and major shareholder of the Switzerland-based Quantum Global group, appears to have been halted by an unanticipated piece of evidence coming to light. The Procurador Geral de Republica (PGR) (attorney general) released dos Santos and Bastos de Morais from preventative custody in Luanda at the expiry of a six-month term of pre-trial detention. They had been held since 24 September.1

Although Zenu is still facing charges in Luanda, it is reported that the attorney general has dropped charges against Bastos de Morais after a previously unknown addendum to the contract between the Angolan government and Quantum Global, which managed the FSDEA’s funds, was produced in a London (United Kingdom)(UK) court.2 The London court ruled against Angola after the scope of Quantum’s contract with Angola was produced in court, together with the addendum, which neither dos Santos nor Bastos de Morais had made available to the new head of the FSDEA last year.3 The national director of the PGR’s Asset Recovery Services, Eduardo Rodrigues, said,

“Jean-Claude de Morais had legitimacy and legality to manage the assets of the Sovereign Fund, thanks to a contract concluded in light of English law with this institution of the Angolan State, despite [its] being extremely damaging to the Angolan State."4

President João Lourenço (2017-present) gave some insight into the nature of the contract saying,

"Against all the norms and rules of operation of the State Sovereign Funds, in this particular case of Angola, for reasons still not understood, the funds were run by a single foreign entity that the FSDEA itself did not control." 5

The effect of the addendum was to clear Bastos de Morais of the charges of fraud, criminal association, active corruption, influence peddling and money laundering, according to the PGR’s office.6

Quantum Global announced that Bastos de Morais had been released from detention and that the Angolan authorities have not filed any criminal conduct charges against him. They noted that a settlement agreement has been reached on a confidential basis between the FSDEA and Bastos de Morais. 7 The PGR, however, made part of the terms clear:

"All the financial and non-financial assets belonging to the Angola Sovereign Fund (FSDEA), which were under the management of Mr. Jean-Claude Bastos de Morais and the companies of the Quantum Global group, were recovered and returned to Angola; [further] both parties agree not to sue each other.” 8

The PGR’s office said Zenu dos Santos is still facing charges relating to the illegal transfer of $500m to the UK, and other charges relating to the FSDEA.9 It is unclear how the discovery of the addendum has affected the charges against him. However, new charges may be brought against Bastos de Morais. Attorney general Hélder Pitta Grós made a statement at the end of March, saying:

“The case involving Jean-Claude Bastos de Morais, money manager of the Sovereign Fund, and José Filomeno ‘Zenu’ dos Santos, a former president of the Fund, is [now] running in secret.”10

The trial of both men was expected to start during April, but has been halted not by secret deal-making but by new evidence coming to light. This gave Bastos de Morais, a ‘get out of jail free’ card to play, which also seems to have affected the charges against Zenu dos Santos. The attorney general has suggested that there may be further data on which to base charges. Any hint of impunity for either man is likely to derail the significant progress Lourenço has made in demonstrating that theft and corruption will no longer be tolerated.

Bretton Woods institutions and US banks back economic reforms in Angola

Both the World Bank and the International Monetary Fund (IMF) have recently reviewed Angola’s economic reforms, and the United States (US) Treasury has announced that it will carry out an assessment that should allow US correspondence banks to return to doing business with Angolan banks. The new agreements add to Angola’s economic credibility and capacity, as well as potentially easing the pinchpoint of dollar availability. World Bank vice president for Africa Hafez Ghanem visited Angola in mid-March to announce the decision to provide support for projects in Angola, aimed in particular at the most vulnerable populations.11 In a joint briefing with President Lourenço, Ghanem said:

“We want to support the reform process that is happening. This new financial support that the World Bank will grant to Angola results from the trust in the programmes that are being implemented by the government.”12

Angola is expected to receive a $1.2 billion loan from the World Bank over a three-year period, to finance social infrastructure and water projects.13 and a $1.5 billion loan for treasury support.14 It is envisaged the loan will be finalised over the next three months and will support agriculture, health and education.15 Ghanem added that also under discussion is how the bank can provide support to the mining sector.16

The scope and repayment methods of Angola’s debts have come under scrutiny from the other Bretton Woods institution, the IMF, which agreed financing of $3.7 billion for macro-economic stabilisation last December (see ARC Briefing Angola January 2019). The IMF evaluation team proposed the need for "much caution in contracting new public debts, since current debt approaches 90% of GDP”.17

The government has already developed a new debt strategy.18 One key term is that Angola plans to stop using its oil production to obtain loans or credit from other countries, such as China, Brazil and Israel.19 Speaking to Russian news agency TASS, President Lourenço said that the Angolan government intended to change the way it repays its loans:

“Angola plans to stop using its oil production to obtain loans or credit from other countries. This change will happen not only with China but also with other countries with which we have the same way of repaying loans, such as Brazil and Israel. The amount of oil we exported to China was equivalent to our debt to the country, but this system is now outdated.” 20

Repayments might be eased by an assured flow of dollars into Angola. ARC business and banking sources in Angola say the dollar shortage has caused major forex problems. However, the US is now reconsidering its stance. US Deputy Secretary of State John J. Sullivan made an official visit to Angola on 18 March, and noted:

"The reestablishment of correspondent banks by the United States banking system in Angola is a very important issue for our business and investment relations. My government colleagues and our embassy here in the State Department in Washington, and especially in the Treasury Department, have been holding intensive intense discussions with the Angolan Government and its Angolan ministers to improve the investment climate in Angola, especially to build confidence in US banks so they can re-establish the corresponding banks." 21

Sullivan noted that a mission from the US Treasury Department will visit Luanda shortly to assess the measures taken on fighting corruption and preventing money laundering, and make recommendations.22

All three major institutions believe Angola has made in progress in reforming the debt-laden economy, despite the loss of revenue from oil. Lourenço has to achieve a balancing act between debt repayments and the need to invest in the basic needs of the population if he is to succeed. The new US position may help to increase confidence in Angola and speed up Angola’s external payments for the public and private sectors, which are a continuing source of complaint.

Angola discovers $4.7 billion public funds diverted to private investments

The Angolan attorney general has opened an investigation into the diversion of state funds valued at $4.7 billion into private investments, following a communiqué from the Conselho de Ministros (council of ministers – cabinet) on the findings of the Comissão Multissetorial (multisectoral commission) charged with investigating losses from the public sector.23 President Lourenço said the report on private investments “made using huge public funds is shocking and repugnant and the State is entitled to use all means at its disposal to recover what belongs to the Angolan people.”24

Attorney general Hélder Pitta Grós says that the PGR is collecting all the documents necessary to investigate.

"When we came to the conclusion that there were irregular use of resources, some people were identified quickly, but we need to obtain all the documentation and interview them. The lawsuits are not all the same; some cases may have a faster solution, and some cases may not [need to] follow the judicial process."25

Following this, the attorney general announced that $286.5m had been recovered from the Angolan accounts of the Hong Kong-registered China International Fund, after an investigation into the accounts of the new Luanda International Airport.26

During the March meeting of the ruling Movimento Popular de Libertação de Angola (MPLA) central committee (CC), President Lourenço emphasised there will be no further amnesty for corruptly obtained funds, after some MPLA members proposed a new amnesty law.27Lourenço told the CC that,

“The application of Lei sobre o Repatriamento Coercivo e Perda Alargada de Bens (law of coercive repatriation of capital and excess loss of goods) is something that the competent judicial bodies will take seriously, with the consequences that can result therefrom. Many have used public goods with impunity for their own benefit.”28

The six-month amnesty given to repatriate capital under the Lei do Repatriamento de Recursos Financeiros (repatriation of financial resources law) appears to have had little success in persuading those Angolans with illicit assets abroad to return them (see ARC Briefing Angola June 2018). Lourenço told the CC that the state will now coercively repatriate "the assets of those who arrogantly opted to ignore and waste the unique opportunity given up until December 26, 2018”.29

Lourenço gave an accounting of assets already recovered from the FSDEA. These were: $500m diverted from the accounts of the Banco Nacional de Angola (BNA) (central bank) to accounts in London, a further $2 billion from another UK bank, and another $1 billion recovered in cash, assets and different types of assets in Mauritius and other parts of the world.30 No announcements have been made on any other assets voluntarily returned to Angola.

Investigations into the diversion of $4.7 billion from the state coffers into private investment at least provide the possibility of identifying and recovering assets successfully. The attorney general implies he hopes some cases can be settled without going to court, and Angola has already begun to take control of companies set up using state money (see ARC Briefing Angola February 2019), as well as recovering a large part of the assets held by the FSDEA. Yet, within the MPLA there is a clear resistance to the new policies, unsurprisingly since major MPLA players are directly implicated in illicit dealings. Lourenço made it clear to the central committee that failure to deal with corrupt players will have a direct and negative result on the MPLA’s political future as Angola’s ruling party, and it will fall into greater disrepute.31

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1. [Angop, 26 Mar 2019]

2. [Angop, 26 Mar 2019]

3. [Club-K, 21 Mar 2019]

4. [Angop, 26 Mar 2019]

5. [Angop, 29 Mar 2019]

6. [Angop, 29 Mar 2019]

7. [Quantum Global Group press release 22 Mar 2019]

8. [Club-K, 24 Mar 2019]

9. [Angop, 26 Mar 2019]

10. [Jornal de Angola, 31 Mar 2019]

11. [Africa News, 14 Mar 2019]

12. [Angop, 14 Mar 2019]

13. [Angop, 14 Mar 2019]

14. [Lusa, 29 Mar 2019]

15. [Lusa, 13 Mar 2019]

16. [Angop, 14 Mar 2019]

17. [Lusa, 31 Mar 2019]

18. [Lusa, 22 Mar 2019]

19. [TASS, 31 Mar 2019]

20. [TASS, 31 Mar 2019]

21. [Lusa, 18 Mar 2019]

22. [Lusa, 18 Mar 2019]

23. [Lusa, 4 Apr 2019]

24. [Lusa, 4 Apr 2019]

25. [Lusa, 4 Apr 2019]

26. [Lusa, 4 Apr 2019]

27. [Lusa, 4 Apr 2019]

28. [Angop, 15 Mar 2019]

29. [Angop, 29 Mar 2019]

30. [Angop, 29 Mar 2019]

31. [Angop, 29 Mar 2019]