Old habits rendering Angola a no-go area for investors

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From Pedro Agosto in Luanda, Angola

Just recently, organisers of a major oil and gas
summit scheduled for Angola this year bragged how the country was set to
attract much-needed foreign direct investment (FDI) in 2020.

Yet, prevailing crises, including a recurrence of corruption in the
awarding of state contracts and government's contractual breaches,
indicate otherwise.

These make such projections far-fetched.

The Southern African country looks increasingly likely a nation that is
a deterrent to investments as the issues prevail in the midst of
so-called sweeping reforms by the government of President Joao Lourenco
to address corruption and subsequently make the major oil producer a
destination of choice for investors.

Two major projects – one a hydroelectric scheme and the other an oil
refinery project - are cases in point.

The Laúca Hydroelectric Plant project is synonymous with the disgraced
Brazilian firm, Odebrecht, which is at the centre of one of the biggest
corruption probes in its home country and beyond, over bribes for public
works contracts.

These were paid between 2001 and 2016.

Angola was not exempt apparently with the beleaguered company that has
since pleaded bankruptcy in a bid to restructure a US$13 billion debt,
owning up to paying bribes to Angola between 2006 and 2013.

Oderbrecht admitted to paying $50 million in bribes to secure contracts
worth $261 million. The admission was part of a guilty plea in a New
York court at the end of 2016.

Despite the vaunted anti-corruption crusade by Lourenco, Angola has not
probed the expose.

Rafael Marques de Morais of the anti-corruption and democracy watchdog,
Maka Angola, led calls for a probe into the illegal payments.

"I asked for the case to be investigated in Angola, including Odebrecht
and the said government officials. My request and the evidence provided
were met with silence," de Morais said.

Perhaps unsurprisingly, the Laúca Hydroelectric project has been fraught
with irregularities and inconsistencies.

Firstly, the cost of the exercise set to be largest civil engineering
project ever in the country and befitting 8 million Angolans with about
2 000 megawatts of energy is uncertain.

Odebrecht's website values the project at $750 million but government
figures fluctuate between $400 million and $600 million.

Despite reports in some section of the media of Standard Chartered
interest in financing the project, the global financial firm has
distanced itself from Lauca.

Another project entangled in tumult that analysts believe is a deterrent
to investors is the Cabinda mega refinery project.

Anticipated to be the panacea to Angola's sporadic fuel shortages, it
has degenerated into an episode of government's failure to honour
agreements. Africa's second largest producer of crude oil, behind
Nigeria, Angola imports about 80 percent of oil products due to lack of
domestic refining capacity.

United Shine, the Hong Kong company aggrieved by the government's
decision to terminate its contract on the refining project is
contemplating legal action.

State-owned Sonangol has backtracked on the partnership agreement
confirmed with United Shine in June. United Shine belongs to Jose
Tavares, a longtime friend of Lourenco's.

Sonangol said the decision to cut ties was on the grounds of
"non-compliance with the agreed actions."

Peculiarly, the refinery contract has been awarded to British investment
fund, Gemcorp, without it participating in the international tender call
in 2018.

Gemcorp is not new in Angola's political economy landscape, with its
role prominent in recent years, particularly when the influential Manuel
Vicente was deputy president to dos Santos. Germcop first came to
prominence in 2014 when it provided dos Santos' government with a $300
million loan.

Vicente remains an advisor to Lourenco and during his role as Sonangol
chair, was credited with securing Angolan investment in China, including
China/Sonangol International Limited (CSIL) and China Sonangol
International Holding (CSIH). CSIL is a partnership between Sonangol and
China International Fund (CIF).

Battling economic challenges because of the issues in the global oil
markets, Angola has gained uncanny reputation of courting questionable
partners notably in Asia.

Thus, with such developments, hoping for more investment inflows to
Angola appears a pipedream.

– CAJ News

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