Tuesday, April 07, 2015

Angola and the Oil Cabal

Tom Burgis has been tenacious and intrepid in confronting the powerful vested interests – corporate, military, financial and political – that have fed to excess off Africa’s riches. He has been reporting for the Financial Times for the last eight years, writing a series of prizewinning investigative reports from Johannesburg and Lagos.

Since the end of the civil war in 2002 (by then some five hundred thousand people had died), Angola, a nation of 20 million people, has notched up some of the fastest rates of economic growth recorded anywhere, at times even outstripping China. Angola boasts sub-Saharan Africa’s third-biggest economy, after Nigeria and South Africa. Luanda consistently ranks at the top of surveys of the world’s most expensive cities for expatriates, ahead of Singapore, Tokyo, and Zurich. In glistening five-star hotels like the one beside Chicala, an unspectacular sandwich costs $30. The monthly rent for a top-end unfurnished three-bedroom house is $15,000. Luxury car dealerships do a brisk trade servicing the SUVs of those whose income has risen faster than the potholes of the clogged thoroughfares can be filled. At Ilha de Luanda, the glamorous beachside strip of bars and restaurants a short boat-ride from Chicala, the elite’s offspring go ashore from their yachts to replenish their stocks of $2,000-a-bottle Dom Pérignon. The railways, the hotels, the growth rates, and the champagne all flow from the oil that lies under Angola’s soils and seabed. Oil accounts for 98 percent of Angola’s exports and about three-quarters of the government’s income.

“When the MPLA dropped its Marxist garb at the beginning of the 1990s,” writes Ricardo Soares de Oliveira, an authority on Angola, “the ruling elite enthusiastically converted to crony capitalism.” The court of the president—a few hundred families known as the Futungo, after Futungo de Belas, the old presidential palace— embarked on “the privatization of power.” Melding political and economic power like many a postcolonial elite, generals, MPLA bigwigs, and the family of José Eduardo dos Santos, took personal ownership of Angola’s riches. Isabel dos Santos, the president’s daughter, amassed interests from banking to television in Angola and Portugal. In January 2013 Forbes magazine named her Africa’s first female billionaire.

The task of turning Angola’s oil industry from a war chest into a machine for enriching Angola’s elite in peacetime fell to a stout, full-faced man with a winning grin and a neat moustache called Manuel Vicente. Blessed with what one associate calls “a head like a computer for numbers,” as a young man he had tutored schoolchildren to supplement his meager income and support his family. After a stint as an apprentice fitter, he studied electrical engineering. Though he had been raised by a lowly Luanda shoemaker and his washerwoman wife, Vicente ended up in the fold of dos Santos’s sister, thereby securing a family tie to the president. Vicente honed his knowledge of the oil industry at Imperial College in London. Back home he began his rise through the oil hierarchy. In 1999, as the war entered its endgame, dos Santos appointed him to run Sonangol, the Angolan state oil company that serves, in the words of Paula Cristina Roque, an Angola expert, as the “chief economic motor” of a “shadow government controlled and manipulated by the presidency.”

Vicente built Sonangol into a formidable operation. He drove hard bargains with the oil majors that have spent tens of billions of dollars developing Angola’s offshore oilfields, among them BP of the UK and Chevron and ExxonMobil of the United States. Despite the tough negotiations, Angola dazzled the majors and their executives respected Vicente. “Angola is for us a land of success,” said Jacques Marraud des Grottes, head of African exploration and production for Total of France, which pumped more of the country’s crude than anyone else.

On Vicente’s watch oil production almost tripled, approaching 2 million barrels a day—more than one in every fifty barrels pumped worldwide. Angola vied with Nigeria for the crown of Africa’s top oil exporter and became China’s second-biggest supplier, after Saudi Arabia, while also shipping significant quantities to Europe and the United States. Sonangol awarded itself stakes in oil ventures operated by foreign companies and used the revenues to push its tentacles into every corner of the domestic economy: property, health care, banking, aviation. It even has a professional football team. The foyer of the ultramodern tower in central Luanda that houses its headquarters is lined with marble, with comfortable seats for the droves of emissaries from West and East who come to seek crude and contracts. Few gain access to the highest floors of a company likened by one foreigner who has worked with it to “the Kremlin without the smiles.” In 2011 Sonangol’s $34 billion in revenues rivaled those of Amazon and Coca-Cola.

Oil is the lifeblood of the Futungo. When the International Monetary Fund examined Angola’s national accounts in 2011, it found that between 2007 and 2010 $32 billion had gone missing, a sum greater than the gross domestic product of each of forty-three African countries and equivalent to one in every four dollars that the Angolan economy generates annually. Most of the missing money could be traced to off-the-books spending by Sonangol; $4.2 billion was completely unaccounted  for. Having expanded the Futungo’s looting machine, Manuel Vicente graduated to the inner sanctum. Already a member of the MPLA’s politburo, he briefly served in a special post in charge of economic coordination before his appointment as dos Santos’s vice president, all the while retaining his role as Angola’s Mr. Oil. He left Sonangol’s downtown headquarters for the acacia-shaded villas of the cidade alta, the hilltop enclave built by Portuguese colonizers that serves today as the nerve center of the Futungo. Like its Chinese counterparts, the Futungo embraced capitalism without relaxing its grip on political power. It was not until 2012, after thirty-three years as president, that dos Santos won a mandate from the electorate— and only then after stacking the polls in his favor. Critics and protesters have been jailed, beaten, tortured, and executed. Although Angola is not a police state, the fear is palpable. An intelligence chief is purged, an airplane malfunctions, some activists are ambushed, and everyone realizes that they are potential targets. Security agents stand on corners, letting it be known that they are watching. No one wants to speak on the phone because they assume others are listening.

On the morning of Friday, February 10, 2012, the oil industry was buzzing with excitement. Cobalt International Energy, a Texan exploration company, had announced a sensational set of drilling results. At a depth beneath the Angolan seabed equivalent to half the height of Mount Everest, Cobalt had struck what it called a “world-class” reservoir of oil. The find had opened up one of the most promising new oil frontiers, with Cobalt perfectly placed either to pump the crude itself or sell up to one of the majors and earn a handsome profit for its owners. When the New York stock market opened, Cobalt’s shares rocketed. At one stage they were up 38 percent, a huge movement in a market where stocks rarely move by more than a couple of percentage points. By the end of the day the company’s market value stood at $13.3 billion, $4 billion more than the previous evening.

In July 2008, as Cobalt was negotiating exploration rights to put its theory about the potential of Angola’s “presalt” oil frontier to the test, the Angolans made a stipulation. Cobalt would have to take two little-known local companies as junior partners in the venture, each with a minority stake. Ostensibly the demand was part of the regime’s avowed goal of helping Angolans to gain a foothold in an industry that provides just 1 percent of jobs despite generating almost all the country’s export revenue. Accordingly, in 2010 Cobalt signed a contract in which it held a 40 percent stake in the venture and would be the operator. Sonangol, the state oil company, had 20 percent. The two local private companies, Nazaki Oil and Gáz and Alper Oil, were given 30 percent and 10 percent, respectively. What Cobalt had not revealed—indeed, what the company maintains it did not know—was that three of the most powerful men in Angola owned secret stakes in its partner, Nazaki Oil and Gáz. One of them was Manuel Vicente. As the boss of Sonangol at the time of Cobalt’s deal, he oversaw the award of oil concessions and the terms of the contracts. The other two concealed owners of Nazaki were scarcely less influential. Leopoldino Fragoso do Nascimento, a former general known as Dino, has interests from telecoms to oil trading. In 2010 he was appointed adviser to Nazaki’s third powerful owner, General Manuel Hélder Vieira Dias Júnior, better known as Kopelipa who as the head of the military bureau in the presidency, presides over security services that keep the Futungo protected by whatever means necessary. Delivering a suitcase stuffed with cash is only the simplest way to enrich local officials via oil and mining ventures run by foreign companies. A more sophisticated technique involves local companies, often with scant background in the resource industries. These companies are awarded a stake at the beginning of an oil and or mining project alongside the foreign corporations that will do the digging and the drilling. Sometimes genuine local businessmen own such companies. Sometimes, though, they are merely front companies whose owners are the very officials who influence or control the granting of rights to oil and mining prospects and who are seeking to turn that influence into a share of the profits. In the latter case the foreign oil or mining company risks falling foul of anticorruption laws at home. But often front companies’ ultimate owners are concealed behind layers of corporate secrecy. One reason why foreign resources companies conduct what is known as “due diligence” before embarking on investments abroad is to seek to establish who really owns their local partners. In some cases due diligence investigations amount, in the words of a former top banker, to “manufacturing deniability.” Cobalt’s lawyer said, “Success naturally brings with it many challenges. One of those challenges is responding to unfounded allegations.” The problem for Cobalt was that the allegations were not unfounded.

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