April 13, 2010

IV. Achieving Greater Transparency and Accountability

While recent reforms have not gone far enough to remove barriers to transparency and accountability in Angola, there are renewed prospects for reform. The most promising may come from international pressure, particularly through the IMF and its key member governments, provided they exercise pressure on Angola to be more accountable. Another possible avenue for change, the Extractive Industries Transparency Initiative (EITI), is less likely to play a significant role primarily because the Angolan government has consistently rejected it. While the Publish What You Pay Campaign (PWYP), a global coalition of civil society organizations pressing for greater transparency and accountability in the use of natural resource revenue, has regularly pressed the government to join, there is little external government pressure on Angola to do so.

The International Monetary Fund

A new Stand-By Arrangement between the Angolan government and the IMF offers a significant opportunity for greater transparency and accountability. That arrangement, prompted by a severe economic downturn due to the collapse in the price of oil and signed in November 2009, has several provisions that could foster greater accountability over the use of oil revenues.

The government and the IMF have had a strained relationship since at least the 1990s. There have been at least four Staff Monitored Programs-agreements between governments and the IMF to undertake economic reforms as a precursor to lending-since 1995. They were all motivated by severe economic distress and often came at a time when the price of oil had fallen. All of them failed to achieve their objectives and Angola ultimately abandoned efforts to enter into a formal program with the IMF. The last effort lapsed in 2001. That effort led to the Oil Diagnostic study by the international accounting firm KPMG that highlighted gross mismanagement of oil revenue. Later, in 2002, the IMF detailed massive corruption and mismanagement by the government in a still-confidential staff report on the Angolan economy.[78]

Between 2002 and 2009 the IMF and Angola continued to discuss cooperation, but very little materialized. The principal reason for the lack of lending was that the government was bolstered by revenue from skyrocketing oil prices and did not want to submit itself to IMF requirements for greater transparency. As recently as July 2009, for example, the Economist Intelligence Unit noted that, "Although Angola is continuing with the IMF's Article IV consultations, it has never had a full programme with the Fund, reflecting fundamental differences over economic policy, opposition from vested interests and the Fund's limited influence in the face of high oil production."[79]

However, by August 2009 the government acknowledged that its economic circumstances had precipitously deteriorated. The fall in world oil prices brought on by the global economic crisis had significantly weakened the government's fiscal position and it sought an emergency loan from the IMF.[80] On November 23, 2009, the IMF announced that it had reached an agreement for an approximately US$1.4 billion Stand-By Arrangement with the government.[81]

Full disclosure of the government's oil revenues, a public audit of Sonangol, and, critically, audited accounts of its expenditures are vital measures that should be part of an agreement.

As noted earlier, the government continues to publish oil revenue data on the Ministry of Finance's website. There is a two to three-month lag on the publication of data, but it does do a reasonably good job of making that data available.

The Stand-By Arrangement specifically includes a commitment that the government will publish a 2008 audit of Sonangol that was due to be completed by mid-November 2009.[82] This measure, if implemented, would shine a much needed light on the activities of the notoriously opaque state-owned oil company. The IMF did not require an audit of government expenditures as part of the arrangement, but it urged the government to conduct a mid-year review of its budget to ensure that it is adhering to its commitments.[83] While this step is useful, especially when combined with other efforts to make basic budgetary data public, it is insufficient given the massive levels of corruption and mismanagement in Angola. Still, if the commitments under the Stand-By Arrangement are fulfilled it will be a significant step forward for accountability in Angola. But there is reason to be vigilant; the government has committed to reforms before and has not implemented them. In its 2009 report, the IMF noted that many reforms suggested to the government as early as 2004, including the auditing of budgets and timely disclosure of accounts, have not been implemented or have barely begun to be implemented.[84] The $1.4 billion is supposed to be disbursed in seven tranches from November 2009 to December 2011. The IMF will conduct a performance review under the program and the Fund's board will have to approve each disbursement.[85] Human Rights Watch urges the IMF and its board members to make subsequent disbursements contingent upon full public disclosure of the Sonangol audits and accurate accounting of expenditures through regular disclosure and updating of the government's actual budget expenditures.

The Extractive Industries Transparency InitiativeThe Extractive Industries Transparency Initiative (EITI) was launched by British Prime Minister Tony Blair at the World Summit on Sustainable Development in Johannesburg, South Africa, on September 2, 2002. It is a voluntary initiative that aims to increase the transparency of natural resource revenues by developing standardized reporting requirements for companies and governments. The initiative has broad support from multinational and national companies, industry, organizations, governments, NGOs, and multilateral institutions. At this writing, 35 countries participate in the initiative. Only two, Azerbaijan and Liberia, have been certified as "EITI-compliant."[86] Since its inception, EITI was intended for governments like Angola's that are opaque and resource rich. However, Angola has never joined. At this writing, any meaningful pressure to force the government to join has subsided. For example, World Bank officials in 2009 told Human Rights Watch that Angola has done far more than other countries that have signed on to EITI. It has published more information on revenues than other EITI countries. When Human Rights Watch asked why the government should not join if it had already exceeded EITI's requirements, bank staff told us that the government does not see any "value-added" from EITI because it is "a Tony Blair and George Soros thing."[87] Human Rights Watch believes that Angola would benefit from joining EITI, but given the lack of interest on the part of the government and perhaps the lack of pressure from elsewhere, the IMF program appears to be a more meaningful avenue for reform.

The Role of Foreign GovernmentsSeeking to diversify its foreign relations, Angola has strengthened its relations with South Africa, Russia, and its traditional allies, Portugal and Brazil. The latter two countries have provided new lines of credit to Angola, including a combined $400 million loan to help the country through its economic crisis.[88] Although they have interests and are pressing for investment in the country, India, Japan, and South Korea are not dominant investors, particularly in the oil sector.[89] Angola's biggest trading partners are China and the United States. The changing economic dynamics have led to a decrease in international pressure on the Angolan government to be more transparent and accountable. This is partly due to the growing influence of China and Chinese investments in Angola, which have served as a counterweight to Western pressure for reform. Western governments have also abandoned pressure due to their own commercial and strategic interests. Perhaps the most important development is that Angola is one of the top two oil producers in sub-Saharan Africa and has been able to strategically diversify investment and diplomatic relations with a number of major oil consuming countries in Europe and Asia and with the United States: if it feels it is being pressured by one investor to adopt transparency measures or other reforms it finds onerous, it can turn to the others.

ChinaWhile the rise of China has been cited as a threat to good governance in Angola, it is not the sole reason for the government's resistance to reform. The bulk of Angola's mismanagement and corruption occurred when western companies and governments were the largest investors and trading partners of the country. Western companies are still the largest investors in Angola's oil sector and the United States is the second largest consumer of Angolan oil.[90] Nonetheless, the rise of China as Angola's main trading partner has helped the Angolan government resist reforms, not least because China and Chinese companies do not call for good governance. China has had diplomatic relations with Angola since 1983, but made its major economic push into Angola in 2004 when China's Export-Import Bank extended a $2 billion loan in exchange for oil to rebuild the country's infrastructure. According to Chatham House, China had supported between $13.4 billion and $19.7 billion in loans by 2009. In addition, China's overall bilateral trade with Angola increased from $1.8 billion in 2000 to $25.3 billion in 2008. At this writing, China is the world's largest importer of Angolan oil and Angola is China's largest trading partner in Africa.[91] China has built roads, railways, and other key infrastructure crucial to the reconstruction of the country.

The Chinese government's economic influence as a key trading partner is substantial, but it has avoided discussing governance or transparency, helping to slow Angola's path towards accountability. President dos Santos has described relations between the countries as a "pragmatic" partnership with no "political preconditions."[92]

One Angolan executive who has close ties to the government and is now in a major multinational corporation told Human Rights Watch, "the West demanded conditions and didn't give any money while China built roads and didn't ask for anything. The government feels strong with oil and the Chinese and doesn't feel the need to change."[93] That perception was repeatedly reinforced by civil society, foreign diplomats, and other individuals in Angola. The Royal Institute of International Affairs confirmed this view when it noted, "From Angola's perspective, the Chinese provide funding for strategic post-conflict infrastructure that donors do not fund" and that "China provides a new model of cooperation based on credit lines, economy and commerce, which contrasts with Western efforts of cooperation based on aid attached to conditionality."[94] While it has not been an advocate for greater transparency and accountability, the Chinese government, as noted above, has taken steps to distance itself from the China International Fund (CIF). But while Chinese authorities have emphasized that CIF is not an arm of the government, they have not asked CIF to fully disclose its activities nor provided a full accounting of the use of Chinese Export-Import Bank credits to Angola. The Chinese government's principal opportunity to promote greater accountability in Angola may be as a board member of the IMF. In that capacity, it can insist that the government comply with the terms of the Stand-By Arrangement, most notably, by publishing an audit of Sonangol (CIF's partner in many ventures) and by publishing accurate accounts of budget execution.

The United StatesThe United States is the second largest consumer of Angolan oil and US companies are some of the biggest investors in the country.[95] Despite its significant oil interests, the US government has been a forceful proponent of transparency since the beginning of the decade. It was one of the first governments to regularly point out the widespread corruption, mismanagement, and lack of transparency in the oil and diamond sectors. For example, the US Ambassador to Angola from 2001 to 2004, Christopher Dell, was an outspoken critic of corruption. He supported the IMF's call for greater transparency in public finances.[96] While the United States raised issues of transparency, it also provided high level access to Angolan officials. For example, Presidents dos Santos and George W. Bush met in Washington in May 2004; while corruption and transparency were discussed, the photo-op with Bush strengthened dos Santos's standing in Angola and abroad.[97] The Obama administration has not shied away from discussing corruption and transparency, but has been somewhat gentle on the government. During her August 2009 trip to Angola, Secretary of State Hillary Clinton was asked by Mary Beth Sheridan of the Washington Post, "Good governance has been a major theme of your trip through Africa. In Angola, there's a very high level of corruption, according to Transparency International, and the President seems to be delaying the elections. Could you tell us how much did you press these two issues?"[98]

Clinton noted that

Corruption is a problem everywhere. And where it exists, it undermines people's faith in democracy and distorts governance and prevents the full involvement of people in their societies and the delivery of services to citizens ... But I think it's only fair to add that Angola has begun taking steps to increase transparency. The Angolan government is now publishing online the revenues they receive from the oil industry. They are working with United States Treasury officials on how to bring more transparency and efficiency into the government budget and fiscal affairs. The government has already begun and is committed to using its revenues to build up the infrastructure of Angola, as evidenced by the many roads that are being built throughout the country. And of course, the government is acting. After 27 years of conflict that undermined the fabric of society, Angola has accomplished not only a peaceful resolution but the reconciliation of its citizens, one with the other. And so the issues of good governance, rule of law, anti-corruption efforts will be part of the strategic partnership that the minister and I will lead.[99]

During her trip, the Secretary announced a bilateral Strategic Partnership Dialogue with Angola. In the first dialogue meeting in November 2009, the parties announced two working groups: Energy Cooperation and Security Cooperation. The meeting does not appear to have dealt with transparency; a US statement described it as focused on "a dialogue with representatives from the private sector, a discussion on Angola's renewable energy sector priorities, and a roundtable on the best practices used to incorporate wind mapping, solar power, biomass, and hydro-electric power into a renewable energy strategy."[100]

Prior to that meeting, Clinton had announced that improved transparency was part of the administration's strategy to combat corruption in oil-rich states like Angola. In an October 1, 2009, speech to the Corporate Council on Africa's Business Summit, she noted:

[W]e encourage Nigeria, Angola, and other energy-producing countries to manage their resources and escape the natural resource curse that has plagued much of the continent. We have a new position in the State Department. It's the Coordinator for International Energy Affairs ... to work with our partner countries. We will help new producers devise transparent revenue management systems to help them avoid the challenges other countries have faced with large new flows of money from oil, gas, or mining.
And to that end, we are pleased to have contributed $6 million last week to the World Bank's multi-donor trust fund for the Extractive Industries Transparency Initiative. We believe that within the right legal framework Africa can be an enormous market for investment and for economic growth, as well as a secure producer and supplier of energy.[101]

While the goals are laudable, Angola has steadfastly refused to join EITI and it already publishes reasonably up-to-date information on oil revenue, which is what EITI strives to achieve. The problem is that there is not an adequate accounting of expenditures, Sonangol is still very opaque, and individuals such as Jaime have not been investigated or held accountable for their actions.

The United States would be better served by taking other steps, such as using its position as a board member on the IMF to press for full adherence to the terms of the Stand-By Arrangement, including, most notably, a published audit of Sonangol and an accurate accounting of expenditures; further investigating the activities of Jaime and other officials with respect to US institutions; and denying visas to individuals alleged or found to have been engaged in corruption so that they cannot siphon wealth out of Angola and into the US. More broadly, the Obama administration should adopt the recommendations contained in the report on corruption by the Senate Permanent Subcommittee on Investigations regarding strengthening enforcement of existing anticorruption laws and policies and suggesting new legislation to curb the activities of kleptocrats in the US.

FranceThe Angolan government's actions towards the French government and France's response provide a good illustration of how Angola has used its status as sub-Saharan Africa's largest oil producer to retaliate against countries that try to address corruption in the country. Beginning in 2004, the Angolan government repeatedly criticized French authorities for the "Angolagate" scandal, the French inquiry into the series of suspicious transactions involving Pierre Falcone and Angolan authorities described above. The government then retaliated against French commercial interests to express its displeasure. For example, on November 5, 2004, the French oil supermajor, Total, announced that Sonangol would not renew an oil license for a small oil block. The move was in retaliation for the arrest of Pierre Falcone and the ongoing arms-for-oil investigation.[102] China's Sinopec was awarded the block at the end of February 2005.[103]

The tension between Angola and France continued throughout the Angolagate investigation. The situation was severe enough that French president Nicholas Sarkozy travelled to Angola in May 2008 to "turn the page on the misunderstandings of the past" related to the Angolagate affair.[104] The visit took place just before the beginning of the Angolagate trials in France. The trial ended on October 27, 2009, with the court sentencing Falcone to six years in prison.

French-Angola tensions have risen again since January 2010, following an armed attack against a Togolese football team in the Angolan oil-rich enclave province Cabinda on January 8. A faction of the separatist guerilla Front for the Liberation of the Enclave of Cabinda (Frente para a Libertação do Enclave de Cabinda, FLEC), based in French exile, claimed responsibility for the attack that killed two Togolese and injured at least nine others. The incident, on the eve of Africa Cup of Nations football tournament in Angola, drew worldwide attention to the unresolved separatist conflict in Cabinda that has persisted since 1975. The Angolan government immediately demanded extradition of FLEC leaders from France to Angola, and accused the French government of inaction against the presumed authors of the "terrorist attack."[105] The French authorities, however, insisted on judicial prosecution in France and called for a proper fact-finding investigation into the incident.[106] In February, the Angolan state-owned daily Jornal de Angola, in opinion pieces written under pseudonyms, launched fierce attacks against France and Agence France Press, alleging a French conspiracy against Angola and dubbing it "Francegate."[107]

V. Recommendations

To the Government of Angola

  • Provide full details of the national budget and issue regular updates that accurately detail expenditures. Information on government revenues and expenditures should be made easily accessible and presented in a form that can be understood by the public.
  • Conduct a full audit of the state-owned oil company Sonangol and make the results public.
  • Require Sonangol to disclose all of its business relationships with the China International Fund.
  • Investigate the suspicious US$50 million transactions initiated by Aguinaldo Jaime in 2002.

To the Government of China

  • Fully and publicly disclose whether there is any relationship between the Chinese government and the China International Fund, including whether any government officials hold concurrent positions within CIF and whether CIF officials ever make representations on behalf of the Chinese government; government assistance or financing, if any, provided to CIF; and the nature of contacts between CIF and government officials, including the scope of efforts by government officials on behalf of CIF's commercial interests.
  • Require the China International Fund to fully disclose its business interests in Angola and with Sonangol.
  • Insist that CIF disclose its global holdings and make that a requirement of any new Chinese government financing for CIF.
  • Insist that the government of Angola provide full accounts of its revenues and audit expenditures, particularly if Chinese government or private financing is implicated.

To the Government of the United States

  • As a board member of the IMF, support the provisions of the IMF Stand-By Arrangement and ensure that the Angolan government complies with them. In particular, insist upon greater transparency-including publication of Sonangol's audits and regular updates detailing government expenditures-before subsequent tranches of the IMF loan are released.
  • Investigate the case of Aguinaldo Jaime and his efforts to transfer $50 million to the United States through US banks.
  • Adopt all of the recommendations in the February 2010 report by the Senate Permanent Subcommittee on Investigations.
  • Organize an interagency task force on kleptocracy to coordinate diplomatic, economic, and development assistance and the law enforcement measures necessary to effectively combat kleptocracy.

To Other Board Members of the IMF

  • Support the provisions of the IMF Stand-By Arrangement and ensure that the Angolan government complies with them before voting to approve subsequent tranches of the loan. In particular, insist upon publication of Sonangol's audits and regular updates detailing government expenditures.

To the International Monetary Fund (IMF)

  • Insist that the government publish regular and timely audits of Sonangol as part of its agreement under the Stand-By Arrangement.
  • Prior to convening votes on whether to release new tranches of financing under the Stand-By Arrangement, report on the Angolan government's progress in improving transparency, including its publication of Sonangol's audits and regular updates detailing government expenditures.

[78] For a full account of the IMF and Angola, see Human Rights Watch, Some Transparency, No Accountability.

[79] Economist Intelligence Unit, "Angola Country Report," July 2009, p. 5.

[80] "Statement at the Conclusion of an IMF Mission to Angola," International Monetary Fund press release 09/278, August 7, 2009.

[81] "IMF Executive Board Approves US$1.4 billion Stand-By Arrangement with Angola," International Monetary Fund press release 09/425, November 23, 2009.

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

[83] Ibid., p. 7.

[84] Ibid., pp. 33-34.

[85] Ibid., p. 32.

[86] Extractive Industries Transparency Initiative (EITI), "EITI Countries," www.eitransparency.org/countries (accessed February 16, 2010).

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

[88] Economist Intelligence Unit, "Angola Country Report," February 2010, p.5, 13-14.

[89] Vines et al., Thirst for African Oil: Asian National Oil Companies in Nigeria and Angola, p. 31.

[90]Ibid., p. 56.

[91] Ibid., pp. 5, 40-41.

[92] Ibid., p. 33.

[93] Human Rights Watch interview with company executive, Luanda, March 30, 2009.

[94] Vines et al., Thirst for African Oil: Asian National Oil Companies in Nigeria and Angola, pp. 55-56.

[95] Ibid., pp. 40-41.

[96] See, for example, "Peace Prospects in Angola," Voice of America, March 11, 2002.

[97] Ken Silverstein, "The Politics of Petroleum: Gusher to a Few, Trickle to the Rest; Courted by Oil Firms and the U.S., the Elite of Impoverished Angola Have Extracted Wealth from the Boom, Documents Say," Los Angeles Times, May 13, 2004.

[98] 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.

[99] Ibid.

[100] "US and Angola Hold Strategic Dialogue," US Department of State press statement, November 16, 2009.

[101] US Department of State, Secretary of State Hillary Rodham Clinton, "Remarks at the Corporate Council on Africa's Seventh Biennial US-Africa Business Summit," Washington, DC October 1, 2009.

[102] Olivia Amaewhule, "Angola Carries Out Earlier Threats to Total Over French Arms Allegations," World Markets Research Centre Daily Analysis, November 8, 2004.

[103] "China's Sinopec Replaces Total," Africa Energy Intelligence, March 2, 2005.

[104] "France, Angola, to Turn Page of 'Misunderstandings'-Sarkozy," BBC, May 23, 2008.

[105] "Governo Angolano instaura processo contra autores de ataque terrorista," Angop, January 13, 2010.

[106] "Luanda e Paris no combate a FLEC," Rádio Nacional de Angola, January 21, 2010.