Business & Economy News & Analysis

João Lourenço walks reform tightrope

João Lourenço walks reform tightrope
  • PublishedJanuary 1, 2018

After years of economic mismanagement, a newfound sense of restrained optimism has gripped Angola as the country’s fledgling president begins to suggest that a leopard can change its spots. Report by Tom Collins.

Upon taking the helm of Africa’s second-largest oil producer, João Lourenço has surprised many by immediately peeling back the layered patronage of his predecessor: José Eduardo dos Santos.

Making it clear he is no puppet, he has also broken ranks with a number of long-standing Angolan policies, especially with regard to the economy and foreign policy.

This new sense of direction would be a welcome change to a country reeling in the wake of years of kleptocratic abuse and suffering from high levels of public debt, unemployment and inflation.

Yet politics and economics often walk hand-in-hand in Angola and it remains unclear whether Lourenço’s refurbishment is a sincere attempt to revitalise the economy, or simply to change the guard.

“I think its unclear at present to what extent these moves are really just moves against the Dos Santos clique or if they are more substantive moves to diversify and open up the economy,” says Claudia Gastrow, anthropologist at the University of Johannesburg. 

A new trajectory?   

A number of economic reforms and bold political manoeuvres suggest a change of tack for Angola.

Dismissals have come thick and fast since Lourenço entered office in late September, starting with the chief of police and the head of the intelligence service, and culminating with the dismissal of the former president’s daughter, Isabel dos Santos, as head of the national oil company Sonangol.

Many of the new faces hail from the barracks, as Lourenço served as defence minister and is heavily associated with the military.

The overhaul, however, has not been absolute and his cabinet reflects the delicate tightrope Lourenço must walk between old Dos Santos loyalists and his own cadres. Perhaps his real focus is on the economy, as Lourenço himself has suggested.

In the run-up to the election, he described himself to a local journalist not as the Gorbachev of Angola – the political reformer – but as the Deng Xiaoping, the great economic reformer.

Certainly this statement bears some weight in its current context.

Lourenço has opened up the Angolan business space in a variety of ways which show stark contrast to its ancien isolationist policies.

Angola will allow a fourth mobile operator to enter its profitable telecommunications sector.

“We are increasing competition to improve the service, and will work on pricing and quality of service,” says Telecoms Minister José Carvalho da Rocha.

Movicel and Unitel are currently the largest providers and both include state ownership.

In another liberalising move, Lourenço quickly visited Jacob Zuma in South Africa in order to bolster bilateral cooperation, and the two countries have agreed to scrap visas for all passport holders.

“In the past there was almost a protectionist stance regarding South Africa and this has shifted,” says Paula Cristina Roque, research coordinator at the South African Institute of International Affairs.

“It’s unheard of and it’s going to bring incredible opportunities by increasing the possibility of regional trade.”

Another inhibitor to inclusive Angolan growth is undoubtedly corruption, something which Lourenço took a hard line on during his electoral campaign.

In one of his boldest policy moves to date, the president has told Angolans they risk prosecution if they do not repatriate funds illegally held abroad within the coming months.

Speaking at the end of a ruling MPLA party conference, he said a grace period would be announced during which money could be repatriated and invested in the Angolan economy with no questions asked – a thinly veiled warning to those rich in oil money that the heyday may be coming to an end.

These reforms suggest a new economic path for Angola.

The challenge ahead will be if Lourenço can gather enough support from his party to properly implement the reforms, and indeed if they are indicative of a long-term strategy rather than mere minor calibrations.

“If he tried to shake up the system too much he would lose his support base. I imagine it would be extremely difficult to totally abandon a system that has been steeped in corruption and patrimonialism, so I think there is a real concern that the initial symbolic move might eventually be replaced by another entrenched system,” says Gastrow.

The only incident, so far, to remind us that Lourenço is from an old breed of MPLA civil war fighters after all, has been his reaction to the diplomatic spat with Portugal concerning the trial of Manuel Vicente over corruption allegations.

Lourenço has defended his vice-president and has been reluctant to help the Portuguese with proceedings.

Oil in Angola

After the dismissal of Isabel dos Santos, all eyes turn to the country’s state oil company Sonangol and its new head Carlos Saturnino, as an answer to Angola’s economic woes.

Indeed, public debt was estimated at 59.2% of GDP at the end of 2016 and net international reserves have decreased by 20.4% since the beginning of the year.

Inflation now stands at around 27%.

As oil accounts for a third of economic output in Angola and over 95% of exports, it is clear the sector needs a revamp, irrespective of rising oil prices.

According to the five majors – Chevron, Total, BP, Eni and ExxonMobil – the Angolan oil sector was being devastated by delays in project approvals at Sonangol and a backlog of payments owed.

The Lobito refinery is one such project hanging over the head of Sonangol, whose completion has been “hiccoughing” for years due to irregularities in the contract and financing disagreements, says Roque.

A refinery would do wonders for downstream production in Angola, and it is yet to be seen how Saturnino will tackle the issue.

Sonangol owes huge sums of money to its biggest lenders – the Bank of China, Standard Bank and Standard Chartered – as well as $3bn to majors, contractors and traders.

The government itself lent Sonangol $6.9bn last year, a sum procured from the China Development Bank.

That said, Lourenço remains optimistic about the company’s potential and sees it as a “golden goose”, instructing the new board to “take good care of her.”

Lourenço’s recent pragmatism suggests progress for the sector.

Under José Eduardo dos Santos, the French major Total was unofficially partially excluded from the local market, due to the Angolagate scandal and the ensuing fallout between Luanda and Paris, says Roque.

Total and Sonangol have just signed new project pipeline agreements to develop upstream and downstream projects, and this seems to indicate Lourenço’s growing wish to open all areas of Angola to new players and investments.

“He is trying to signal there is an alternative,” says Gastrow.

Whether or not any of Lourenço’s recent moves will come to define his administration will depend on how genuine the reforms are and how much his party allows.

For now, the signs are good.  NA

Written By
Tom Collins

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