Citizen action leads to investigation and new anti-corruption law

Angola is still rebuilding after the devastating 1975-2002 civil war and is ranked as one of Africa’s most corrupt countries. Despite being Africa’s 2nd largest oil producer and enjoying annual petroleum exports valued at more than US $57 billion in recent years, the majority of Angolans remain mired in poverty. The country has one of the world’s lowest life expectancies (52 years), and more than half of its people live on less than $2 per day.

Against this backdrop, a joint investigation by Angolan and international civil society organisations revealed budget losses amounting to $750 million due to alleged corruption and money-laundering by major public officials and arms dealers.

Angola’s economy is heavily dependent on its extractive sector, which accounted for 90% of the country’s exports and 80% of government revenues in 2011 and 46% of Gross Domestic Product (GDP) in 2010. Angola’s state-owned oil and gas company, Sonangol, oversees production of oil and gas and is directly engaged in exploration and production in the country’s oil blocks.

In 2013, two civil society organisations, Associação Mãos Livres and Corruption Watch, with support from the Open Society Initiative of Southern Africa (OSISA), published the report Deception in High Places, which relies on detailed court records, banking records and other documentation to highlight an alleged corruption and money laundering scheme involving a debt deal between Angola and Russia that cost the government of Angola $750 million.

In 1996, Angola owed Russia $5 billion, a large burden for a country with a total (then) GDP of $7.5 billion. The two countries negotiated a debt restructuring deal that reduced the debt burden to $1.5 billion, to be repaid in 31 instalments.

According to the Deception in High Places report, the deal was negotiated through a small group of intermediaries, which established a shell company named Abalone Investments. Soon after the debt deal was negotiated, Abalone allegedly signed two agreements: one with the Russian government and one with Sonangol that enabled Abalone to purchase Angolan Debt Notes from the Russian government for half their face value before then selling them to Sonangol at full face value, enabling the intermediaries controlling Abalone to pocket half of the $1.5 billion paid by Angola to Russia without providing any meaningful service.

Bank documents indicate that these transactions, as well as subsequent transfers from Abalone to private accounts, were facilitated by the Swiss Bank Corporation (SBS, which later became UBS following a merger), with involvement by Glencore, a multinational commodity trading and mining company listed in the top 10 of Fortune’s 2015 list of world’s largest companies.

Through this arrangement, Abalone allegedly transferred millions of dollars to a group of high ranking public officials in Angola, including President Dos Santos, as well as to the private accounts of at least two convicted arms traffickers.

The report was broadly disseminated among major Angolan political, judicial and legislative bodies. Associação Mãos Livres organised a roundtable discussion to discuss the possible policy responses, which was attended by parliamentarians, representatives of political parties, academics and civil society groups. The conference catalysed the formulation of anti-money laundering (AML) and anti-terrorism (CFT) policies and parliamentary oversight rules.

In February 2014, the Angolan Parliament passed a new AML/CFT law, which included rules to freeze and seize assets related to money laundering.

Key Lessons:

  • The existence of independent judicial systems is critical for ensuring that corruption cases are impartially investigated.
  • Publicising the results of corruption investigations can be impactful and help to bring about policy change, particularly in a context in which the government may otherwise be reluctant to act.

Website: http://www.osisa.org/angola/osisa-angola