Recent talks ostensibly aimed at ending a three-year civil conflict were more aimed at ‘window-dressing’ than seeking a permanent resolution of the crisis. As a result, the US has terminated preferential trade status, yet Cameroon’s economy will be shielded by an IMF programme and continued trade with key partners China and Brazil.
Although Abu Bakr Al Baghdadi played little more than a symbolic role within Islamic State affiliate groups in Africa, his death is likely to achieve the undesired effect of increasing the terrorism threat in many African countries primarily through renewed intent and unchanged capabilities.
As Ethiopia readies itself for a referendum in November that is expected to usher in the creation of its tenth federal state, EXX Africa explores the details of the vote and the potential impact it is expected to have on political and social dynamics in the country.
A sprawling IMF-backed privatisation programme creates exceptional opportunities for investors across diverse sectors. State assets selloffs may also be the only course for Angola to reduce its massive public debt burden, to diversify away from the oil sector, and to slip out of an extended recession. Yet tenders and auctions will need careful management, transparency, and accountability to have their desired effect.
On 19 September, Angola’s privatisation programme’s technical group, the so-called ProPriv Programme, announced that 195 companies had been shortlisted for privatisation over the next three years. Most of the country’s state-owned or partially state-owned companies will be divested by next year, while larger state companies such as oil firm Sonangol will sell off key assets by 2022. Most companies and assets will be sold through public tender, with only 17 to be sold through the stock exchange.
The most well-known companies shortlisted for privatisation are state oil company Sonangol, diamond company Endiama, and airline TAAG, as well as banks BCI, BAI, BCGA, and Banco Económico, insurance firm ENSA Seguros, and the Angola Debt and Securities Exchange (Bodiva). Other state asset selloffs are planned in the textile, construction, brewing, agro-processing, and telecommunications sectors. Revenues from the sales are earmarked to bringing down the country’s high debt levels.
Angola’s government and the International Monetary Fund (IMF) are aiming to limit Angola’s government debt to gross domestic product (GDP) ratio to 90 percent. The IMF reported in June that Angola’s public debt stood at 91 percent of GDP in 2018. The country’s debt has increased significantly in recent years due to falling foreign currency oil revenues, which has led to a depreciation of the local kwanza currency and a rise in inflation. The privatisation programme is at the frontline of efforts to curb public debt to below 80 percent of economic output over the next two years.
However, two years into the presidency of João Manuel Gonçalves Lourenço and almost one year into the IMF’s three-year Extended Fund Facility, there remain significant challenges to recovering Angola’s economy, while foreign investors will remain cautious of committing to the privatisations. Nevertheless, the ProPriv Programme creates substantial opportunities for investors, particularly those in the banking sector.
Angola’s government aims to privatise a number of companies later this year, including ENSA-Seguros de Angola S.A., which is Angola’s largest insurance company. The state also seeks to sell its share in the breweries of Cuca, N’gola, and Nocal. Various smaller privatisations have also already been completed earlier in 2019, yet the largest divestments will commence from next year.
In 2020, the government aims to sell off its shares in another large group of state-controlled assets, including some major banks and construction company Mota Engil Angola, in which the Angolan government has a 20 percent stake. The banks prescribed for state divestment are Banco Angolano de Investimentos (BAI), Banco de Comércio e Indústria (BCI), and Caixa Angola.
The state will also sell its interests in mobile phone company Unitel and telecommunications operators Angola Cable, MSTelcom, TVCabo, and NetOne. Two cement companies are lined up for privatisation, namely Nova Cimangola and Secil Lobito, as well as three textile producers: Textang, Satec, and Africa Textile. Other companies shortlisted are bioenergy firm Biocom, agro-communal fund Aldeia Nova, and the Empresa Nacional de Exploração de Aeroportos e Navegação Aérea E.P. (ENANA), which operates Angola’s airports and controls civilian air traffic.
In 2021, the government intends to privatise the Angola Debt and Securities Exchange (Bodiva), downstream fuel distributor and marketer Sonangalp, telecoms firm Angola Telecom, airlines Sonair and TAAG Angola Airlines, and another bank – Banco Económico. TAAG, Angola Cable, Sonair and Banco Económico are some of the few companies that will be sold via the stock exchange, as will firms MSTelcom, ZEE, Multitel, Caixa Angola, and Aldeia Nova. This should give the newly privatised Bodiva a boost from 2021.
In 2022, ProPriv will proceed with the partial privatisation of some of Angola’s largest and most prominent state companies, including state oil company Sonangol, diamond mining firm Endiama, and postal service Correios de Angola. These companies have large assets both within Angola and internationally that may offer some of the most lucrative opportunities for both foreign and domestic investors. Sonangol is by far Angola’s largest company and one of the largest firms within Africa.
Sonangol asset selloffs
Sonangol has published an extensive list of foreign and Angolan commercial interests. The company is set to sell 50 subsidiary companies over the course of three years, as well as other assets. By the end of this year, the state oil giant is expected to dispose of 20 companies and assets. Within Angola, Sonangol also retains stakes in a broad variety of commercial sectors including healthcare, transportation, fuel refining, telecommunications, banking, construction, and mining.
Next year, the assets that are set to be sold off include the company’s subsidiaries in Cape Verde and São Tomé and Príncipe, as well as foreign interests in companies such as Founton (Gibraltar), Sonatide Marine (Cayman Islands), Solo Properties Knightsbridge (UK), Societé Ivoiriense de Raffinage (Cote d’Ivoire), Puma Energy Holdings (Singapore), WTA (France), and Sonandiets Services (Panama). Other foreign assets to be sold off include Portuguese real estate companies Puaça, Diraniproject III and Diraniproject V, in Sonacergy – Serviços e Construções, Sonafurt International Shipping and Atlantis Viagens e Turismo.
Sonangol chairman Sebastião Gaspar Martins retains the lead on the company’s asset selloffs, while working in close collaboration with Minister of State for Economic Coordination, Manuel Nunes Júnior, who oversees the ProPriv Programme. Both men are close confidantes of President Lourenço’s influential economic policy ‘czar’ Manuel Vicente, who is a former chairman of Sonangol and former deputy president. Much of the controversy surrounding the appointment of Gaspar Martins in May has centred on his role as CEO at Angolan junior oil firm Somoil, which was founded by Vicente almost 20 years ago and retains stakes in offshore oil blocks and interests in onshore production permits (See ANGOLA: SONANGOL RESHUFFLE PUTS ANTI-GRAFT CAMPAIGN INTO THE SPOTLIGHT).
Public tenders in the spotlight
Any sign that Sonangol chief Martins seeks to line up the elite to benefit from politically influenced tenders in privatisations would undo much of the economic benefits of the ongoing IMF programme. There are particular concerns that Somoil, which is affiliated to both Martins and Vicente, could improperly benefit from Sonangol asset sales. There is ample precedent that the loyalist network supporting President Lourenço is seeking to capitalise on their new positions of patronage.
In April, the government awarded the country’s fourth telecommunications license to little-known Telstar Telecomunicacoes, which beat 26 local and international firms. The deal triggered broad condemnation, since Telstar has no track record in mobile operations and being incorporated just over a year before the licence tender. The public fall-out earlier this year over the deal was mimicked on social media to such an extent that President Lourenço annulled the tender and ordered a new process. The IMF has also been critical of various other tender processes, including for the planned purchase of new aircraft earlier this year.
Such incidents have raised concern that the government is using President Lourenço’s liberalisation and transparency campaign not only to disarm political opponents, but also to ensure the support of its own favoured network of allies and supporters. Last year, EXX Africa released several analysis briefings and special reports, accurately forecasting such a scenario, raising particular flags over the influence of the new president’s family and the exceptional clout of Manuel Vicente (See SPECIAL REPORT: POLITICAL INFLUENCE AND PATRONAGE IN THE ‘NEW’ ANGOLA).
Manuel Vicente has a known background of opaque deals during his time as chairman of Sonangol and as deputy to then president dos Santos. His family and closest associates control an extensive network of business interests in Angola, Nigeria, Mozambique, and Europe. Many of these commercial interests have been tainted by allegations of corruption or mismanagement through various international probes. There is less publicly known precedent of impropriety on the part of Lourenço, who served as defence minister under dos Santos.
However, in EXX Africa’s publicly released report last year, we raised several questions over his purported role in the acquisition of military equipment during his time as defence minister through the same network of companies and individuals that has been implicated in Mozambique’s ‘hidden debt’ and corruption scandals. So far, the Angolan government has refused to respond to the report and questions remain over the due process over such procurements (See SPECIAL FEATURE: FALL-OUT OVER MOZAMBIQUE DEBT SCANDAL RISKS SPILL-OVER INTO ANGOLA).
The government has highlighted that transparency in tender processes will be a crucial tenet of the upcoming privatisations. The International Finance Corporation (IFC) of the World Bank, the country’s financial sector, business associations, and chambers of commerce are closely monitoring the government’s progress and the implementation of the ProPriv Programme. IMF approval for the release of another tranche of the USD 3.7 billion Extended Credit Facility will also hinge on transparency in the tender process. Angola has already received a total of USD 1.24 billion in less than a year from the Fund. The IMF programme has anchored Angola’s policy framework and shored up confidence in the country’s economy.
However, privatisations alone will not be sufficient to turn around Angola’s shrinking economy. Oil production is expected to continue to decline over the next year. The country has struggled to meet its quota agreed with the Organization of Petroleum Exporting Countries (OPEC) of 1.481 million barrels per day. As older wells deplete, and a lack of investment hampers the drilling of new wells, economic output is set to shrink by 2.6 percent this year and 3.6 percent in 2020. Moderate growth is only expected from 2021 once the economic restructuring and IMF-mandated reforms begin to benefit the broader the economy. Non-oil sectors will provide for the economic recovery, yet this is based on assumptions of improved transparency and accountability in coming years.
Meanwhile, painful reforms demanded by the IMF programme will begin to have their effect. We expect more strikes and protests, including from skilled workers in the cities and public sector employees who are exposed to any economic downturn due to public payroll cuts and high inflation which is expected to hover around 20 percent for the next three years. The IMF is mandating fiscal discipline that includes unpopular measures such as scrapping fuel subsidies and further devaluing the kwanza.
Loyalists of former president dos Santos are capitalising on mounting grievances over the economy and IMF austerity. The government is meanwhile seeking to scapegoat dos Santos loyalists for the economic malaise, claiming acts of economic sabotage lie at the heart of ongoing fuel shortages. This is starting to rip apart the usually unified MPLA ruling party that has ensured Angola’s political stability since the end of the civil war. Local well-placed sources tell us that the party could permanently split unless there is an improvement in the economy and the so-perceived ‘show trials’ of dos Santos family members and associates stop.
SEE COUNTRY OUTLOOK: ANGOLA
The government will capitalise on Robert Mugabe’s legacy to consolidate its authority and establish further control over patronage networks in the banking and agricultural sectors. However, it is failing to make headway on an economic recovery, taming inflation, and restoring power supply. The opposition is set to resume protests and strikes in coming weeks, raising the risk of a complete economic shut-down. Foreign partners, even benevolent ones, will struggle to push through any form of debt relief and a mooted bailout as the crisis deepens.
The latest outbreak of anti-immigrant violence in South Africa has been unusual only because of its timing coinciding with a major investment conference and the potential political motivations behind the attacks on foreigners. EXX Africa investigates the political and economic drivers of such violence, as well as the commercial impact of retaliatory action against South African interests elsewhere in Africa.
Algeria’s ruling general is either preparing to install himself as a strongman-president of an Egyptian-inspired securocratic state or he is seeking to transition political power to a civilian administration that will protect the military’s interests. EXX Africa investigates the probability and implications of both scenarios.
EXX Africa reflects on some of the political and economic challenges facing Africa’s last absolute monarchy, as the small landlocked nation emerges from recent contested elections and finds itself in an economic crisis.
The incoming transitional government will need to address three priorities if it is to last its three-year term: namely seeking prosecution of those held responsible for war crimes and violence against protestors; unravelling Sudan’s ‘deep-state’ of competing power networks that continue to control lucrative assets; and driving a sustained economic recovery, most likely with Gulf financial support.
State-owned enterprises in Africa have a notorious reputation for being mismanaged and for repeatedly requiring financial bailouts. EXX Africa unpacks this notion by looking at some of the best and worst-performing entities across the continent. Our analysis spans from examples in Morocco, Ghana, and Ethiopia to Zambia and South Africa.
- EXX Africa director Robert Besseling presented a geopolitical risk outlook for African investments at Willis Towers Watson in London, UK
- CAMEROON: THE UNSPOKEN CIVIL WAR
- EXX Africa director Keri Leicher participates at the Africa Investment Forum in Johannesburg to discuss investments into Africa
- ETHIOPIA: TELECOMS SECTOR LIBERALISATION IS KEY TEST FOR PRIVATISATION STRATEGY
- UGANDA: PROTESTS, TRADE DISRUPTION, AND OIL DELAYS DESTABILISE POLITICAL OUTLOOK