April 13, 2010

II. Reforms Since 2004

The Angolan government has taken a number of steps to improve transparency in its accounting of incoming oil revenues. The most notable and widely praised is the detailed publication of oil revenues on the Ministry of Finance's website. More recent is the implementation of the Integrated Financial Management System(Sistema Integrado de Gestão Financeira do Estado, SIGFE) to allow the government to better track its use of funds. The government has also undertaken audits of Sonangol and other institutions. And in 2009, President dos Santos began to publicly denounce government corruption.

However, these steps toward transparency have not been as successful as stated. Nor have they led to greater accountability or major gains in the realization of rights for Angolans. This is due to the fact that some efforts are not working, such as SIGFE, and important data has not been made public, including audits of Sonangol. As detailed in the next chapter, it is also because the government has done little to improve transparency on the expenditure (as opposed to the revenue) side: government expenditures too often continue to be too opaque for Angolans to discern how money is spent.

The president's statements and subsequent actions by government officials may signal a new commitment to cracking down on corruption. However, they should be treated with a high degree of skepticism considering that the president and ruling party have been in power for more than three decades, including throughout the entire period in which oil-fueled corruption has been rampant. Moreover, the pronouncements come in a context in which, following 2008 parliamentary elections, the president and ruling MPLA party have secured a near stranglehold on political power in the country: they have almost complete control over the pace of reforms and the extent to which they will allow themselves to be held accountable.

Publication of Oil Revenues: The Ministry of Finance Website and Signature Bonus Payments

The government has significantly increased the transparency of oil revenues. Since at least 2004 the Angolan Ministry of Finance has published the details of oil production by oil block on its website and the government has disclosed massive signature bonus payments. It also provides more limited information on diamond revenues through the ministry's website.

The ministry publishes detailed monthly data on oil production and oil exports, as well as the revenues that accrue to the government from those sales. It is relatively current, with the data on the website going back to 2007, and with an approximate two to three month time-lag at this writing.[8]

The government undertook this measure in response to widespread criticism of its lack of transparency about oil revenues and critical findings and recommendations contained in the 2002 Oil Diagnostic study. That study was a requirement of an IMF agreement with the government in 2000.[9]

The website has significantly increased transparency in government oil revenues and, to a lesser degree, diamond revenues. The government has also received widespread praise from the international community. The World Bank noted that "this level of published detail is virtually unique among oil producing countries."[10] United States Secretary of State Hillary Clinton praised the publication of the data during her trip to Angola in August 2009.[11]

Signature bonus payments-large cash payments from oil companies to the government in exchange for lucrative offshore oil blocks-had long been a controversial issue in Angola. The government rarely disclosed the amount and use of those funds. In the late 1990s, approximately US$970 million in bonus payments were used for opaque arms purchases.[12] That changed in May 2004, when Sonangol announced that Chevron had paid a $210 million signing bonus and an $80 million social bonus payment to extend its concession on Block O in Cabinda until 2030.[13] It was the first time that the government or Sonangol had disclosed such a payment and it coincided with President dos Santos's trip to Washington, DC, to meet then President George W. Bush. In 2006 Sonangol announced the winners of a new oil license bidding round and disclosed a world-record set of bonuses worth more than $3 billion.[14]

Although the publication of revenue data beginning in 2004 was unprecedented in Angola and an important step forward, the government has not provided comparable transparency on government spending nor taken steps necessary to effectively combat corruption. Moreover, the government and others have cited the website as a reason not to join the Extractive Industries Transparency Initiative (EITI), as detailed below.

The Integrated Financial Management System (SIGFE)

SIGFE is a system that the Angolan government has implemented, with international assistance, to track all government revenues and expenditures at the national and provincial level. It has been highlighted as a major step for government accountability and to combat corruption. The World Bank reported that the system would be fully operational by 2008.[15]

In March 2009, Human Rights Watch asked World Bank staff in Angola about government corruption and whether there were sufficient controls in place to prevent mismanagement and corruption. In response they highlighted SIGFE. A World Bank staffer told us that "we do not audit government expenditures, so we cannot say how much was lost to corruption or other factors. It would be useful for your group to look at the SIGFE, which provides detailed accounts of expenditures to see if they were used properly."[16]

Despite this implicit plug for SIGFE, others who have worked closely with SIGFE data paint a troubling picture of SIGFE's status and efficacy. In a report published a month before Human Rights Watch spoke to the World Bank, Development Alternatives, Inc. (DAI), a US-based consultancy firm hired by the US Agency for International Development (USAID) in Angola to evaluate elements of a fiscal reform project funded by USAID, raised several red flags. In its report, DAI noted that the Fiscal Programming Unit (UPF), the Angolan government entity set up to monitor revenues and expenses, could not do so adequately because of severe problems with SIGFE, including the fact that "[g]overnment spending information by some agencies is not yet in SIGFE and so subject to error, non-reporting or tardiness in reporting" and that it would be "some years" before SIGFE will be fully operational.[17] The IMF reported some improvements in November 2009 when it said that all agencies use SIGFE, but did not comment on the accuracy of the information that the DAI report noted. Nor is the information in the SIGFE system public, so there is no way for Angolans to assess how the government uses public funds. Given its limitations, SIGFE cannot yet be seen to provide adequate tracking of expenditures, let alone to serve as an effective tool for combating corruption.

Audits of Sonangol

One of the most crucial steps the government could take is to audit Sonangol and publicly disclose the results. Historically the company has been very opaque. For example, the first Oil Diagnostic study showed that Sonangol had underpaid the central bank of Angola by more than $2.1 billion, even though it was legally required to remit those funds to the bank.[18] Moreover, Sonangol had never been audited until 2003, when the international accounting firm, Ernst and Young, was first hired to annually audit the company.[19] However, those have not been made public. Under the Stand-By Arrangement with the IMF, Angola committed to finish a full audit of the 2008 accounts of Sonangol and to "publish Sonangol's audited financial statements."[20] Human Rights Watch believes that the Angolan government should publish the Sonangol audits and that the IMF and its board members should require such publications as a prerequisite to the disbursement of the tranches of the IMF Stand-By Arrangement loan.

President dos Santos Criticizes Corruption

Since November 2009 President dos Santos has made several strong statements against government corruption and has announced investigations into corruption within state institutions. The bulk of these announcements occurred just before the IMF announced the Stand-By Arrangement in November 2009 and just after the US Senate released its report on corruption in February 2010.

On November 21, 2009, President dos Santos called for a "zero tolerance" policy against corruption within the government during an address to the ruling party's central committee meeting. Dos Santos noted that "[t]he transparency of management actions and good governance are an aspect where there is still much work to do." He also scolded the ruling party and said it had been "timid" in combating corruption.[21] His speech was given a few days after Transparency International released its 2009 Corruption Perceptions Index, ranking Angola 162nd out of 180 countries and just two days before the IMF announced the $1.4 billion Stand-By Arrangement for the country.[22]

Local NGOs urged dos Santos to put his words into action. For example, Antonio Ventura, the director ofthe Association for Justice, Peace, and Democracy (AJPD), called for "concrete action by the president and his inner circle to end corruption.... "[23] The Angolan anti-corruption campaigner Rafael Marques published what he called "a brief investigation into the practices" of the president's own philanthropic foundation, the Fundação Eduardo dos Santos (FESA). In it he claims FESA has ignored several pieces of legislation which outlaw "the use of public powers to personal ends, conflict of interests, influence-peddling and other corrupt practices."[24]

A few days later on November 25, the Angolan government appeared to respond to these criticisms when the attorney general's office said that it had launched an investigation into illegal transfers from the central bank and Ministry of Finance to banks abroad and said it would bring "the alleged authors of these illicit acts to court" and "return the money taken from the national treasury."[25] On February 18, the attorney general announced the arrest of 21 individuals for allegedly having embezzled $137 million from the central bank and Ministry of Finance in 2009, though without revealing their names.[26]  This step demonstrated that the government could address allegations of corruption when it had the political will to do so.

Dos Santos renewed his call to combat corruption on February 8, 2010, four days after the US Senate released a report and held public hearings on corruption in Angola, Equatorial Guinea, Gabon, and Nigeria. During a speech to mark the passage of a new constitution, he announced that a new Law on Administrative Probity would be passed in order to "discourage those that want to use public goods as a source of illicit enrichment."[27] That law includes provisions for the mandatory declaration of revenues inside or outside of Angola (including all kinds of assets, such as real estate) forpublic officials; and penalties ranging up to two to eight years of imprisonment for state officials who usetheir powers and position to prevent the application of a law or orders from the judiciary or any other public authority.[28]

He also noted that the international accounting firm Ernst and Young would help the government reform the management of public funds.[29]

The February announcements could signal an important development if followed through on, but it is important to note that they were made during a swearing-in ceremony for a new cabinet that symbolized President dos Santos's lock hold on power. The swearing-in came just three weeks after a new constitution was ratified on January 21, 2010. The new constitution eliminates a presidential vote and instead gives the party with the most seats in parliament the right to name the president.[30] The constitution was approved in record time-less than two months after the three final proposals had been presented to the public-and with a minimum of public discussion. The approval came after the ruling MPLA party won an overwhelming 81.7 percent of the vote and 191 of 220 parliamentary seats in elections held in September 2008, the first election in the country since 1992,[31] and after dos Santos was re-elected to a five-year term as the MPLA party leader in January 2010.[32] Under the new constitution, presidents are limited to two five-year terms beginning in 2012, but the provision is not retroactive and does not apply to dos Santos's previous 30 years as president. If dos Santos remains party leader, as is highly likely, he could remain president until 2022, 43 years after he came to power.[33]

[8]Ministry of Finance of Angola, "Petróleo e Diamantes," http://www.minfin.gv.ao/docs/dspPetrolDiamond.htm (accessed February 18, 2010).

[9] Human Rights Watch, Angola-Some Transparency, No Accountability: The Use of Oil Revenue in Angola and Its Impact on Human Rights (New York: Human Rights Watch, 2004), http://www.hrw.org/en/node/12195/section/1.

[10] The World Bank, "Angola, Country Economic Memorandum: Oil, Broad-Based Growth, and Equity," Report No. 35362-AO, October 2, 2006, p. 44.

[11] US Department of State, Secretary of State Hillary Rodham Clinton, "Remarks with the Angolan Foreign Minister Assuncao Afonso dos Anjos," Luanda, Angola, August 9, 2009.

[12] Human Rights Watch, Some Transparency, No Accountability.

[13] "ChevronTexaco Awarded Extension to Block O Concession in Angola," ChevronTexaco press release, May 13, 2004.

[14] Economist Intelligence Unit, "Angola Country Report," June 2006, p. 21.

[15] The World Bank, "Angola, Country Economic Memorandum: Oil, Broad-Based Growth, and Equity," Report No. 35362-AO, October 2, 2006, p. 44.

[16] Human Rights Watch interview with World Bank staff member, Luanda, March 30, 2009.

[17] Development Alternatives, Inc., "USAID: Report on the Impact of the Angola Fiscal Reform Project on the Capacity of the Fiscal Programming Unit of the Ministry of Finance," February 2009, pp. 2, 5.

[18] Human Rights Watch, Some Transparency, No Accountability.

[19] The World Bank, "Angola, Country Economic Memorandum: Oil, Broad-Based Growth, and Equity," p. 44.

[20] International Monetary Fund, "Angola: Request for Stand-By Arrangement," IMF Country Report No. 09/320, November 2009, p. 9.

[21] "Angolan President Calls for 'Zero Tolerance' of Corruption," Platts Commodity News, November 22, 2009.

[22]"Corruption Threatens Global Economic Recovery, Greatly Challenges Countries in Conflict," Transparency International press release, November 17, 2009; "IMF Executive Board Approves US$1.4 billion Stand-By Arrangement with Angola," International Monetary Fund press release, November 23, 2009.

[23] Henrique Almeida, "Angolan President Calls On Party to End Corruption," Reuters, November 21, 2009.

[24] Rafael Marques de Morais, "Presidential promiscuity has corrupted society," post to "Maka Anti-Corruption Watchdog" (blog), November 10, 2009, http://makaangola.com/?p=138&lang=en-us (accessed March 30, 2010).

[25] "Angola to Probe 'Illegal' Transfers from Central Bank," Agence France-Presse, November 25, 2009.

[26] "Fraudes no BNA em finais de 2009 lesam o Estado em cerca de 137 miliões de USD," Angop, February 18, 2010.

[27] Henrique de Almeida, "Angolan president warns new govt against corruption, Reuters, February 8, 2010, http://www.reuters.com/article/idUSLDE6171O920100208 (accessed April 12, 2010).

[28]David Filipe, "Law on Administrative Probity divides MPLA," Novo Jornal, March 12, 2010.

[29] "Angolan President Warns New Government Against Corruption," Reuters, February 8, 2010.

[30] Economist Intelligence Unit, "Angola Country Report," February 2010, p.10.

[31] Human Rights Watch, Democracy or Monopoly: Angola's Reluctant Return to Elections, February 2009.

[32] Economic Intelligence Unit, "Angola Country Report," February 2010, p.11.

[33] Ibid.