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A news alert from Executive Research Associates (Pty) Ltd

Issue 113 5/2/2020
ANGOLA – Dos Santos prosecution: Real reform or cosmetic change of guard
In an interview published on 3 February 2020, Angolan President João Lourenço said that his government would not negotiate with those who had allegedly taken their assets out of Angola illegally. This was a thinly veiled reference to Isabel dos Santos, the billionaire former chairperson of state oil company Sonangol, who is currently the subject of a high-profile investigation by Angolan authorities.

On 22 January 2020, Isabel dos Santos was charged with money laundering, influence peddling, harmful management, forgery of documents and other economic crimes relating to her tenure as chair of Sonangol from 2016 to 2017. Authorities also ordered her Angolan assets frozen and requested assistance from other governments in countries where she has business interests.

The much-publicised efforts to investigate and prosecute Isabel dos Santos are part of a larger effort by Lourenço’s government targeting the Dos Santos’ family and its supporters.

Isabel dos Santos is the daughter of long-time Angolan leader José Eduardo dos Santos who ruled Angola from 1979 until 2017. During this time the Dos Santos family built substantial economic and political patronage networks in the country. José dos Santos frequently appointed loyalists and family members to head state organs. Notably appointing his son José Filomeno dos Santos to head the country’s sovereign wealth fund and Isabel to head the struggling Sonangol in 2016. When the former president stepped down in 2017 it was estimated that the Dos Santos family was worth billions of dollars and it was generally expected that it would continue to control and benefit from Angola’s state companies. This expectation was underscored by the fact that Dos Santos intended to remain as the leader of the ruling People's Movement for the Liberation of Angola (MPLA/Movimento Popular de Libertação de Angola Trabalho).

However, when Lourenço, the former defence minister, became president after the 2017 elections, he began introducing a series of anti-corruption measures targeting the Dos Santos family and their allies and side-lining the former president. This included removing Isabel dos Santos as head of Sonangol and José Filomeno dos Santos from the sovereign wealth fund. Within a year Lourenço had successfully outmaneuvered Dos Santos and replaced him as the head of the MPLA by September 2018.

Once he had control of both the party and the state Lourenço increased pressure on his predecessor’s family and loyalists under the guise of his ongoing anti-corruption campaign and widespread structural reforms.

José Filomeno dos Santos was among the first targeted and was charged and arrested for money laundering and embezzlement in September 2018 for allegedly transferring US$500 million of public money from the sovereign wealth fund to a private account in the United Kingdom (UK) in a transaction flagged and reversed by UK. His trial before the Supreme Court began on 9 December 2019 and is ongoing.

Since his arrest, neither José Eduardo dos Santos nor Isabel have returned to Angola alleging political prosecution by Lourenço. However, the family’s financial and political networks in the country continue to be targeted with Isabel under particular pressure after the recent publication of thousands of leaked documents detailing her business networks and allegations of corruption. This has led to scrutiny of her business affairs in multiple countries.

It is difficult to yet ascertain whether the ongoing corruption crackdown is motivated by a legitimate desire for reform or is merely a factional changing of the guard. Sceptics emphasise Lourenço’s long involvement in the Dos Santos government before becoming president while the extent to deep entrenchment of the Dos Santos family and its patronage systems in the state has made it difficult to separate a legitimate anti-corruption campaign from a politically motivated vendetta.

However, there is evidence that Lourenço is trying to drive substantive and permanent change within Angola. His appointments to Sonangol and the state diamond firm, Sodiam, have met general approval while ongoing economic reforms such as increasing ease of foreign investment and liberalising key sectors have decreased state control and reduced patronage. This is best exemplified by the reform permitting direct foreign investment without requiring a local partner.

Realistically, Lourenço is likely being driven by necessity rather than benevolence. Since Angola’s return to pluralistic elections in 2008 the MPLA has consistently lost support and in 2017 only won 61.1% of the national vote losing its two-thirds legislative majority. Lourenço, therefore, needs to secure the faith of Angolan voters to ensure the MPLA maintains its political dominance especially in the face of a resurgent opposition National Union for the Total Independence of Angola (UNITA/União Nacional para a Independência Total de Angola). To this end, Lourenço and the MPLA will need to improve the country’s economy, boost job growth, stabilise the national currency and address Angola's exposure to fluctuating commodity markets. The MPLA will also need to prove to voters that it is effectively combatting corruption, in previous elections, this has been the most effective line of criticism leveled at the ruling party.

In addition, Angola is struggling economically. The country’s exposure to falling oil prices and fluctuating commodity markets has hurt the economy in recent years. This is underscored by the state’s significant debt levels; Angola is estimated to have a debt to GDP ratio of 90%, leaving it in desperate need of foreign investment. This investment will be in large part predicated on perceptions that corruption is being tackled. These economic troubles also explain the pursuit of the Dos Santos machinery as the effort is also aimed at recovering misappropriated funds. In fact, despite Lourenço’s claims that the state will not negotiate with those who have moved funds abroad, Angola is reportedly willing to offer prosecutorial amnesty to members of the Dos Santos network, including José Eduardo dos Santos himself, if they return the money. This could return an estimated US$60 billion to the country.

Irrespective, Angola is ranked 146 out of 180 countries on Transparency International’s (TI’s) Corruption Perceptions Index (CPI) and the ongoing reforms are unlikely to substantively change this in the short term. However, the anti-corruption and reform moves appear legitimate and will continue at least until the 2022 national elections. Should the MPLA continue to lose significant amounts of support, or return to total dominance of the legislature, it is possible it could return to historic levels of corruption. However, given the structural reforms which have already taken place and the ongoing deconstruction of the Dos Santos network, at least of the recent changes are likely to be permanent, even if extent of their success is debatable.

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