After the strongman: What’s next for Angola?

FOR nearly four decades the fortunes of Angola, Africa’s third largest economy, have been decided by one man. Ruling with an iron fist, wily strongman and former independence fighter, Jose Eduardo dos Santos, has wielded control over the country, ruthlessly crushing his opposition while recompensing those loyal to him. His autocratic rule – and Angola’s lucrative oil wealth – has enriched those closest to him, even as a large majority languish in poverty.

On  March 11, however, dos Santos announced that he would be retiring from office in 2018, following the general elections next year. The declaration, which was met with public scepticism, surprised observers: while speculation over a possible political transition has mounted, President dos Santos remained tight-lipped on the topic.

Still, while the President made clear his intention to step down in 2018, much remains uncertain. Crucially, dos Santos gave no indication as to the time-frame, a possible successor, or whether or not he intends to lead his party, the Popular Movement for the Liberation of Angola, or MPLA, into next year’s election.

Such political uncertainty, moreover, comes at a time when Angola faces unprecedented economic challenges. Given this, research analyst Andrew Manners asks: what’s next for Angola?

Dos Santos’ announcement was met with scepticism initially. ‘The fact the President has made such promises before, only to later backpedal, has left many distrustful and, without a clearer succession plan,  some believe the announcement is designed to distract attention from a worsening economic crisis,’ Manners said in an article for Global Risks Insights (GRI).

But with the 73-year old President reportedly in poor health, and with the following election not until 2022, dos Santos now has a small window in which to orchestrate a political succession. Given this, Manners believes it is likely that he intends to compete – and win – the 2017 election. An orderly transition, carefully managed by dos Santos, will almost certainly follow in 2018.

Vice-president Manuel Vincente: A high-profile corruption scandal has badly damaged his reputation and standing within the ruling party
Vice-president Manuel Vincente: A high-profile corruption scandal has badly damaged his reputation and standing within the ruling party

Angola’s constitution provides that presidential duties be passed to the vice president in the event that the top spot becomes vacant. Former Sonangol Chairman and current Vice President, Manuel Vicente, might have been the frontrunner; but a high-profile corruption scandal, in which he allegedly bribed a Portuguese prosecutor, has badly damaged his reputation and standing within the ruling party. Additionally, with the country’s economy highly dependent on oil revenues, appointing a former oil chief as president would not embody the diversification drive that Angola so sorely needs.

Another potential candidate is dos Santos’ son, Jose “Zenu” Filomeno. The relatively untested Zenu manages the country’s $5bn sovereign wealth fund and has firmed as the favourite of late. But a dynastic succession which overlooks senior MPLA members would outrage the old brass within the party. As such, dos Santos could favour a compromise candidate: a senior figure outside his immediate family that can be trusted to protect his interests and uphold the current political system. Minister of defence, Joao Lourenco, could be one such person.

In any case, investors in Angola should closely watch developments in the run-up to the MPLA congress in August this year. The congress will cut trough much of the current uncertainty: as well as revealing whether dos Santos plans to contest the election, which is likey, succession frontrunners will also emerge, with the new vice president set to replace dos Santos in 2018.

Any change is likely to result in some instability and unrest, despite dos Santos’ desire to implement a managed transition. Most ostensibly, the President’s succession plan could set into motion a fierce battle between various factions eyeing the top spot.

Lourenco is regarded as the sort of compromise candidate dos Santos might wish to appoint, especially given the discontent that would follow a dynastic succession. ‘The defence minister, therefore, is likely to try to consolidate his position as frontrunner, increasing the risk of contract reviews for businesses associated with vice-president Vicente and General Manuel Helder Veira Dias Jr.,’ says Manners.  ‘Already there have been investigations into contracts awarded under Vicente.  Given he still harbours hopes of becoming president, further investigations can be expected, although a major shakeup of  investor policy is unlikely at this stage,’ Manners adds.

While dos Santos will attempt to keep infighting to a minimum, reminding MPLA members of the importance of keeping the status quo – and their privileged positions, – some factional squabbling appears inevitable, with a number of moves and shake-ups within government possible.

A less likely dynastic transition, meanwhile, would result in widespread unrest in Luanda and elsewhere. Dos Santos’ family, and especially his daughter Isabel – the richest woman in Africa – are reviled in the country, and many would take to the streets to vent their anger and frustration. With the government sensitive to unrest in the coming years, dos Santos’ reaction would be extremely harsh and violent clashes and a larger police crown down would ensue.

The likely succession will come at a sensitive time, with the ensuing instability and unrest threatening to undermine the government’s ability to manage the country’s deteriorating economic prospects. With growing debt and a fiscal deficit of $8bn, or roughly 9 percent of GDP, the country’s financial situation is quickly deteriorating. A bullish rally in the price of oil has brought some immediate relief, but will not be a  panacea government’s fiscal woes.

Given these challenges, Angola approached the IMF for a $1.5bn three-year EFF support programme in April. Unlike its previous Stand-by Agreement in 2009, EFF’s are designed to support middle income countries (Angola graduated to middle income status in 2012) service their debts and diversify their economy, something Angola must do imminently with oil accounting for 95 percent of its export earnings and 52 percent of government revenue. The IMF arrangement, in theory at least, represents a unique opportunity for Angola to obtain finance and address its economic challenges. Importantly, it should anchor Angola’s fiscal adjustment, allowing it restructure its debt obligations while eliminating its yawning budget deficit.

Still, the 2017 election and following succession will put further strain on public finances, especially as the government and MPLA factions exploit state resources to reward loyalists. Consequently, there is some risk of non-payment in state tendered contracts. It also remains to be seen how seriously the new president will take Angola’s IMF commitments; in the past, the government has used loans as a short-term measure, boosting liquidity until oil prices eventually recover.

But with Angola’s population amongst the poorest in Africa, and with the country still at the mercy of fluctuating oil prices – which could stay low for the foreseeable future – the new government must put its differences aside in order to secure a brighter economic future.

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