Date first published: 12/12/2017
Key sectors: oil and gas
Key risks: political instability; frustration of process; poor financial performance
Just 50 days after his inauguration, President Joao Lourenco (popularly known as “JLo”) dealt a potentially fatal blow to the not only the legacy but the current status of the 38-year dos Santos empire by sacking Isabel dos Santos as CEO of Sonangol, arguably the commanding height of the Angolan economy, and referred to by Lourenco himself as the “golden goose”.
While Lourenco campaigned on a platform pledging an end to corruption, few believed he would keep his promises given that he was then-president Jose Eduardo dos Santos’ handpicked successor. Yet, weeks into his presidency, JLo fired the governor of the central bank and the head of the national diamond company, Endiama. Indeed, shortly before Isabel’s sacking, JLo suspended a contract between Angola’s national broadcaster, TPA, and Semba Comunicações – controlled by two other children of the former president. The moves signal Lourenco’s determination not to be seen as a puppet of Angola’s dynastic politics, and also serve as a clear demonstration of the new president acting to shore up his own power base within the ruling MPLA. Rumours prevail that Jose Filomeno dos Santos, head of Angola’s sovereign wealth fund and another of dos Santos’ offspring, will be next. Lourenco has already suspended a contract with Bromangol, a company that had a monopoly on food lab analysis with ties to Jose Filomeno.
With an estimated net worth of over US$3bln and Africa’s richest woman, Isabel dos Santos, commonly referred to as the “princess” in Angola, also controls Unitel, Angola’s largest mobile phone company. She also owns supermarket chain Candando, and holds substantial equity in a number of Angolan and Portuguese banks and other commercial entities. Her appointment as CEO of Sonangol by her father in June 2016 proved far from popular, and was even the subject of a Supreme Court case after a challenge by a group of lawyers.
Yet, despite Isabel’s widely-praised business credentials, Sonangol’s profits fell by 72 per cent, despite a 36 per cent growth in EBITDA over the 12 month period since June 2016. While the task of restoring Sonangol after years of rentier behaviour, poor management, and cronyism is an extremely difficult one, fundamental reforms were not forthcoming.
Indeed, in October 2017 subsidiaries of multinational oil corporations including BP, Chevron, Eni, Esso, Statoil, and Total are believed to have called a meeting at the presidential palace saying that the oil sector was being crippled by delays in project approvals at Sonangol and a backlog of payments owed by the state oil economy. They also demanded direct action to approve exploration activities, and warned that absent swift action that oil production would decline from 2019. This unprecedented meeting is likely to have provided the grounds for the dismissal given that foreign firms operate nearly all of Angola’s production. Lourenco swiftly reinstated the experienced Carlos Saturnino – former president of Sonangol’s exploration and production unit who was sacked by Isabel dos Santos in 2016 – as head of the company. Having spent a large part of his career at Sonangol, including leading the company’s contract negotiations for over 10 years, Lourenco will be hoping that Saturnino is the best appointment to head the “golden goose”.
Moreover, with oil accounting for over 95 per cent of exports and a third of output, the success of Angola’s economy, and Lourenco’s political credentials will depend on it.