Derided as a puppet of the former dos Santos regime, President Joao Lourenco is proving his doubters wrong, says Yigal Chazan.
Expectations were low when he came to office in the autumn of 2017, yet Joao Lourenco has confounded many by moving with surprising swiftness to begin the challenging task of bolstering foreign investment in Angola, seen as crucial to his bid to revive the fortunes of his country’s debt-ridden, oil-dependent economy, the third-largest in sub-Saharan Africa.
As the hand-picked successor of Jose Eduardo dos Santos, the widely-held view was that Lourenco would serve as little more than a placeman for the ex-President, who ruled Africa’s second-largest oil producer for 38 years, during which time much of nation’s petrodollars are believed to have been squandered through government corruption and mismanagement. Yet Lourenco, it seems, was not prepared to be dos Santos’s “chauffeur” as the opposition mockingly portrayed the new president.
Evidently determined to transform the sluggish economy, burdened by public debt estimated to be more than 60 per cent of GDP and inflation of over 20 per cent, the former defence minister has cracked down on endemic graft, sought to loosen the dos Santos family and its associated cronies’ grip on the economy and introduced a number of business friendly reforms. All of which was long overdue. The World Bank ranks Angola amongst the 20 worst countries for doing business. With the collapse in the oil price, Lourenco needs an infusion of investor funds to galvanise the economy.
Yet some of his critics suggest that Lourenco is not moving as quickly as he might and question his commitment to eradicating the corruption and cronyism so rampant under the dos Santos regime. Some argue that his tenure so far has been more about consolidating power than dealing with Angola’s entrenched problems.
On coming to office in September, Lourenco soon signalled that it would not be business as usual, dismissing dos Santos’s eldest daughter Isabel, reputed to be Africa’s richest women, as chair of the state oil company Sonangol. He also terminated a big state TV contract with a media company run by two of dos Santos’s younger children. Then, in March, the former President’s son Jose Filomeno, earlier sacked as head of Angola’s $5 billion sovereign wealth fund, was charged with fraud connected to an alleged attempt to transfer $500 million out of the country. Filomeno denies the charges.
Other casualties of Lourenco’s purge of dos Santos-era officials included the heads of the national diamond and iron ore companies, the governor of the national bank and the boards of state-owned media outlets. The chief of staff of the armed forces, commander of the national police and the head of the intelligence agency have also been removed, despite legislation, passed last summer, stipulating that the post-holders would retain their positions for eight years.
At the same time, corruption probes have led to the arrests of senior figures within the treasury and the national tax authorities for the alleged misappropriation of public finances. And Lourenco has required Angolans illegally holding funds abroad to reinvest them in the country’s economy or face prosecution – though the provision of an amnesty for those who comply has been dismissed by some as overly lenient.
Foreign investors, long concerned by the sheer scale of corruption and cronyism, will have been cheered by Lourenco’s drive to encourage them to engage. In recent months a new investment law has removed a requirement that they offer Angolan partners a 35 per cent stake in local projects, and provided other fiscal incentives. New competition legislation will create the country’s first competition authority and Lourenco has pledged to break up state monopolies – plans to privatise over 70 state companies over the next few years were announced last week.
Moreover, the President appears determined to get the economic fundamentals right. He devalued the national currency, the kwanza, in response to a severe foreign currency shortage, a problem made worse by the loss of correspondent banking relationships for dollar transactions. He also elicited an IMF pledge to support – through non-financial assistance – economic reforms aimed at increasing the country’s ability to attract foreign direct investment. An IMF statement indicating its willingness to help acknowledged “the important steps” Lourenco had taken to “toward improving governance and restoring macroeconomic stability”. It predicts growth will increase from 1% last year to 2.25% in 2018, with higher oil prices also contributing to the upturn.
Private financial inflows are critical to Lourenco’s over-arching goal of diversifying an economy dominated by the oil industry – to date the main recipient of foreign investment – which accounts for over 90 per cent of exports. New industries need to be developed not only to lessen the dependence on petrodollars but also to create more jobs. The government could expand agriculture substantially – currently only representing 11 per cent of GDP – but the sector lacks the necessary transport infrastructure and skills base. Mining too has huge potential. Angola is the third-largest producer of diamonds in Africa and possesses a wealth of other minerals and metals that remain underexploited.
Yet for all Lourenco’s actions and plans, there are some who question his commitment to putting Angola on a new course. A thorn in the side of the dos Santos regime, the Angolan journalist and transparency activist Rafael Marques de Morais, on trial with another journalist for exposing alleged corruption, remains sceptical of the country’s new leadership. An April editorial on his website, Maka Angola, says that while Lourenco has taken some steps to crack down on graft, “self-awarded perks, favouritism and influence peddling” remain a problem within government. And this month, Morais declared that “the only clear strategy” from Lourenco, who will replace dos Santos as leader of the ruling MPLA party in September, “seems to be the consolidation of his personal power”.
It is hard to say how widely such views are held, since media censorship has only just started to ease. Lourenco might quieten some critics if he were to bow to opposition demands for an independent audit of the country’s public debt to find out what happened to its natural resource wealth. But notwithstanding lingering concerns over Lourenco’s intent, he appears to have done enough at least to begin restoring international investor confidence.
Yigal Chazan is an associate at Alaco, a London-based business intelligence consultancy.