Angola’s Sonangol: mystery of bankruptcy?

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A WAR of words has been raging between two former heads of Angola’s oil parastatal, Sonangol, the main engine of Angola’s oil-focused economy.

The spat between the two former heads, Isabel dos Santos and Carlos Saturnino, was triggered by an order of $38 million payment by Sonangol to Mater Business Solutions of the United Arab Emirates (UAE) in November 2017 when dos Santos was the chair of the Sonangol board.

In an interview with the Portuguese news agency, Lusa, in October, dos Santos gave an in-depth explanation on the payment that Saturnino sensationalised.  Records show, she said, that the payment to Mater Solutions was executed after she was removed from seat, but the procedure for payment approval had started before.

In a direct criticism of her successor Saturnino, dos Santos told Lusa, ‘I think there was a good use and bad faith on the part of my successor [Carlos Saturnino] who wanted at some point, for his own reasons, I think it was personal reasons, not business reasons, to create a climate of distrust about the previous administration .’

Isabel dos Santos: ‘nothing more than a circus’

Santos stressed that although the international transfer was executed following her departure, the order was given on ‘13 or 14 November,’ not being processed until 15 November after she was removed.

‘No one had any idea that the Sonangol chairperson would be dismissed, and on what date this would happen even when it was announced. In fact, everyone was taken by surprise. Thinking back it is no wonder, definitely it would have lost shareholder confidence and that the new government could have other plans for Sonangol,’ she recalled.

On 28 February 2018, Carlos Saturnino, then Chairman, openly accused the outgoing management, led by Isabel dos Santos, of making the $38 million transfer after her dismissal.

‘When I went to Sonangol I went with a great sense of duty and above all with a spirit of mission. I’ve been working for over 20 years, I’ve built several businesses successfully, so I certainly wouldn’t go to Sonangol to be my first job or to effectively solve my or my family’s financial problems,’ he said.

On 15 November 2017, about 18 months after being appointed by her father, former President José Eduardo dos Santos, Isabel dos Santos was replaced with immediate effect by Carlos Saturnino as Chairman of the Board of Directors of Sonangol, directly appointed by João Lourenço, the elected President of the Republic.

‘The transfer was not made after I had left Sonangol. Payment concerned completed work that had been contracted months before, where invoices were due for payment. Invoices from September, October, August,’ dos Santos stressed adding, ‘This wouldn’t even be possible, I didn’t even physically have access to the buildings, to the computers.’

In March 2018, the Attorney General’s Office launched an investigation into the accusations made by Carlos Saturnino (who was removed from Sonangol in May 2019), but no development has been announced since then.

Carlos Saturnino

Dos Santos said that ‘regardless’ of who led Sonangol, these ‘are contracts that exist,’ they are ‘contracts with the company,’ and that is why ‘they are honoured.’

About the decision to accept, in June 2016, the invitation from her father and then head of state, José Eduardo dos Santos, to lead Angola’s oil company, she assures – as she had done before – that it was due to the need to ‘save the company,’  and was aware that it represented ‘some personal and reputational risk.’

She said if given the chance she would accept the challenge again: ‘I would come back because I believe that we have done an extraordinary job during difficult times at Sonangol. In the beginning, when I took the seat as Chair, there was no money to pay salaries. As an Angolan, I have always been proud of Sonangol, I thought and believed that it was the  leading force of a company in our country, that it was really our pillar, that it was an establishment that inspired all of us, our pride, and the management team was completely taken back, when finding out that this institution was operating without paying salaries.’

Day by day, more was found out: a debt of almost $20bn.  On-going contracts with banks going into default. She cited an example of a letter from ‘one of the largest banks in England’ that she received on the third day in office, demanding payment in 48 hours.

‘Payment for which there was no money. It was difficult to believe it, I had to get on a plane, go to an emergency meeting with this bank and say: “Look, give me time. I need 15 days, I need 10 days, let us find solutions.” And we worked very hard with the financial sector, with the banks, we worked very hard in the financial sector in restructuring. I was fully committed to fixing the situation, in the 18 months, the company cut down its costs by 40 percent and halved its debt of over $20bn.

‘We made a very big difference. Therefore, I have no regrets.’

She believes her dismissal in 2017 was part of the government’s plans to privatise the oil company. ‘The government intended to privatise Sonangol, but the board of directors was not created for privatisation. We were put in place for restructuring. In fact, today I believe that the project was to privatize Sonangol and it would not have been, the right board for that work,’ she said.

During the 18 months restructuring of the Sonangol group’s management and processes, they used the support from an external consultancy. Among several projects that were implemented, there was the creation of the National Petroleum Agency.

‘It is an initiative that came from me, from my team, and which was executed. It is there today and it exists,’ she said.

‘I give this interview today because a lot of the people were under my payroll. I feel an enormous responsibility for the livelihood of many families, so it is important that things are clearly put in place and that it is visible that we worked at Sonangol with a spirit of mission, with a spirit of saving the company, and we succeeded. The company is alive and still operating there,’ she concluded.

The restructuring announced in October 2018

In October 2018, the Angolan state said that it would spend 43.85 million euros on consultancy to restructure Sonangol.  A presidential order issued on 25 October of that year, authorised the contract payment and the simplified contracting procedure for services with the ‘urgent need to hire a company with the requisite experience to support such a restructuring process.

The 43.85 million euros would be used for the ‘simplified contracting for the acquisition of consultancy services for the implementation of the Sonangol Renewal Programme’ and its subsidiaries.

Carlos Saturnino, then Chairman of the Board of Directors of Sonangol, was mandated by the order to implement the process.

Sonangol’s regeneration was part of the 2018-2022 National Development Plan, which the document considered ‘a fundamental intervention’.

Since João Lourenço was sworn in, in September 2017, the state oil company has undergone several changes, with both the president and Carlos Saturnino, blaming Isabel dos Santos’ for the rot in the company.

Angola’s Minister for Mineral Resources and Petroleum, Diamantino de Azevedo, handed over a list of 53 companies – subsidiaries or with the participation of Sonangol – to the body responsible for privatisation. These privatisations are apparently part of a campaign to restrict Sonangol to its core activities.

The President previously said that the main aim of Sonangol’s restructuring plan was to concentrate the company’s activity in the oil and gas value chain. However, it appears that the main objective is to try different strategies to see if the ‘golden goose’ of the State/MPLA does not starve to death.

‘In order for it to focus on its core activities, the process of privatising a large part of its non-core companies, whether they are subsidiaries or affiliates, will soon begin,’ said João Lourenço.

‘It was with astonishment that I followed the statements made at the Sonangol press conference on 28 February 2018. I cannot fail to demonstrate my total indignation at the way in which, under the title “Findings/Facts”, serious accusations and insinuations were made, some of which were slanderous, against my honour and against the serious, professional and competent work that the team of the previous Board of Directors carried out over the course of 18 months,’ said Isabel dos Santos at the time.

‘Do you remember? Maybe people don’t remember anymore. But surely Carlos Saturnino and João Lourenço remember each other every day until the famous phrase “spine crossed in the throat” is soon to be updated with a lexical update, called ‘Isabel crossed in the throat”.’

She added, ‘This is nothing more than a circus, a staging! To seek a scapegoat, to hide Sonangol’s black past, and choose to make accusations against the previous Board of Directors! This is nothing more than a diversion to deceive the people about who sank Sonangol. And surely it was not this Board of Directors that I chaired, and which lasted 18 months, that brought Sonangol to its knees!’

Isabel dos Santos said that ‘in 2015, after the presentation by Dr. Francisco Lemos, then Sonangol’s PCA, of the ‘Report on the Rescue of Business Efficiency’, the Angolan executive became aware of the seriousness of the Sonangol problem, which was supposed to be the second-largest company in Africa, it suddenly became known that it was bankrupt, and unable to pay its bank debt.

‘As a result, the government decided to create the Oil Sector Restructuring Commission and to hire a group of external consultants. Today, the government is advancing with consultancy to support restructuring. After all, who was wrong?’

The Oil Sector Restructuring Commission established by Presidential Decree 86/15 of 26.10.2015 was composed of Minister of Petroleum, Minister of Finance, Governor of BNA, PCA of Sonangol, Minister of the Civil House of the Presidency of the Republic.

Thus, on behalf of the Angolan government, signed by the Ministry of Finance, a consultancy contract for the restructuring of the oil sector in Angola was signed with Wise Consulting, as co-ordinator of a large group of identified consultants.

The government requested that this group of consultants design the solution and also support the implementation of the solution, and to do so should support and work with the management of Sonangol.

According to dos Santos, this contract was later assigned to Mater, for reasons of the internal organisation of the group of consultants, and at their request. Mater, co-ordinated  the project, managing the various consultancy programmes provided under the restructuring of Sonangol namely, by consultants PriceWaterhouseCoppers, Boston Consulting Group, ODKAS, UCALL, VDA, McKinsey, etc., and was responsible for optimising the costs, services and results of the consultancy.

The assignment of the contractual position and contracting was official, and with the authorisation of the Board of Directors of Sonangol, and its ECP, Chairman of the Executive Committee.

‘To question today the decisions taken by the Angolan government in 2015 and 2016, to question the presence of consultants, to raise suspicions about the work done and payments made, means to deny the fact that Sonangol was bankrupt,’ said Isabel dos Santos.

‘With regards to restructuring Sonangol: the fact of announcing a “so-called new decision to restructure Sonangol”, and to simultaneously engage in a public campaign  to insinuate that the previous administration brought in incompetent consultants and/or with private interests, is indication that there is a conscious malicious effort to spread false information, and point the finger at others for someone else’s responsibilities of Sonangol’s bankruptcy.’

Angola’s oil poduction dropped in October

Meanwhile, latest data released by the Organisation of Oil Exporting Countries (OPEC) show a drop in Angola oil production. According to the figures released this month, the country produced 1.356 million barrels of oil per day in October, down 43,000 from September.

The published figures, based on data from secondary sources, show a decline in Angolan production, following a downward revision of September figures, from 1.411 to 1.399 million barrels per day.

Angola maintained its position as the second-largest African crude producer in OPEC, behind Nigeria.

Nigeria, the African leader in oil production, saw its daily output drop to 1.811 million barrels a day, a drop of 37,000 barrels from September’s 1.848 million barrels (down from the previous report, which pointed to 1.859 million).

Throughout most of 2016 and until May 2017, Angola led oil production in Africa, a position it has since lost to Nigeria.

Production in Nigeria was conditioned between 2015 and 2016 by terrorist attacks, armed groups and internal political instability.

The latest OPEC report also states that in terms of ‘direct communications’ to the organisation, Angola will have produced 1.391 million barrels a day in October, 22,000 barrels a day more than in September.

The figures were obtained through ‘direct communications’, thus contradicting the break in the figures obtained by OPEC from secondary sources.

Data from official Nigerian sources point to a drop of 16,000 barrels per day, a figure that puts daily production at a total of 1.78 million barrels.

OPEC agreed, in December 2018, together with other producers who are not part of the organisation, to cut oil production.

OPEC and the ten allies, which together account for half of world oil production, decided in December to cut production by 1.2 million barrels per day and the strategy worked as the price of a barrel rose by 30 percent in the first quarter before stabilising.

In early July, these allies joined the extension of production cuts until March 2020.

 

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