Can Angola’s sovereign wealth fund break with a murky past?
JOSE Filomeno dos Santos, the son of Angola’s longtime president, is a very affable and charming person, I discovered at a meeting with him in Luanda last week. We spoke at the launch of Angola’s new sovereign wealth fund, Fundo Soberano de Angola, where it was announced that he has been appointed to the board of the fund along with the president’s economic adviser, Armando Manuel.
With a background in the world of finance and close connections right to the top of the political heap, Dos Santos seems eminently suited to a leading role in a country where these are highly prized assets. But the news of his powerful position on the board, which will define the fund’s investment strategy and oversee its activities and assets, was generally met with dismay by Angola watchers.
The compilation of the board is viewed by many people as a signal that the fund is not likely to be the hoped-for break from a past in which oil revenues earmarked for development were often squandered and diverted into private bank accounts.
The government is the sole shareholder and President Jose Eduardo Dos Santos will approve the fund’s investment policies based on recommendations from an advisory council that includes the ministers of finance, economy and planning.
Dos Santos is a member of a family that has exploited its access to state patronage at every turn to build enormous wealth.
A banker pointed out that it is not illegal or frowned upon in Angola to be employed by the state and have business interests simultaneously.
That situation is not unusual in a country where business and politics are tightly intertwined.
This is partly a consequence of the civil war in which trust was built in the trenches to keep the war effort going and many of the same people ended up with postwar spoils — key positions in government and business.
Politicians run their affairs largely unfettered by the inconvenience of independent institutional watchdogs and concerns about flouting internationally accepted business practices.
Angola’s president began the process of establishing a sovereign wealth fund after the 2008 economic crisis starkly exposed the shortcomings of the country’s fiscal management, policies, economic planning and reliance on oil, in effect bankrupting it.
The $5bn in the fund’s start-up kitty is less than two years’ worth of receipts from the sale of the equivalent of 100,000 barrels a day (Angola produces 1.8-million barrels a day).
This stream of revenue will continue to top up the fund as it builds up more assets through local and international investments.
A fiscal council will assess the fund’s performance and it aims to secure a rating from the Linaburg-Maduell Transparency index, developed by the Sovereign Wealth Fund Institute to measure the transparency of such funds globally.
The accounts will be audited by international auditors and the results reported in the Angolan media, and the fund will adhere to best practice in all its operations, according to its supporting documents.
In last week’s interview, Dos Santos seemed committed himself to the transparency of the fund, the redistribution of wealth and the need to improve social indicators. He had ideas about how the fund could improve people’s lives. He told journalists that he would be resigning as a director in Banco Kwanza, Angola’s first investment bank, in order to concentrate on his new responsibilities.
It is clear he knows what needs to be done. But talk is cheap. The question is how far he, his colleagues and associates in the fund, want to — or can — fight the system that many of them are inherently part of in order to bring about the change he speaks of.
If the sovereign wealth fund is to be a credible investor in a world of ever-tighter corporate governance codes and principles, it will have to show it can operate in a way that can withstand international scrutiny.
It may become another slush fund and that would — or should — embarrass everyone involved. But if all the safeguards and oversight that are built into the plan actually work, the fund has a fighting chance to deliver on its mandate. It is important to keep an open mind for now.
• Games is CEO of Africa At Work, an African business consultancy.