UPDATE: Multi-million dollar corruption exposed in Angola’s biggest dam project

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THE Lauca dam is Angola’s largest dam and the second-largest in Africa. The mega-project is meant to provide 8 million people with electricity, reaching the central provinces of Huambo and Bié. The project was endorsed by the IMF and received $512 million from the World Bank. But the shady financial deals behind it have only proven that it is business as usual in Luanda.

In 2018, Brazilian construction giant Odebrecht told the Angolan government it needed $400 million to build the dam – but only received under $300 million.

The remaining $100 million was held by the project’s lender, Gemcorp Fund I. They loaned the Angolan government two loans: one for $250 million and another for $150 million.

According to leaked documents seen by investigative outlets, Odebrecht and Gemcorp – with the knowledge of the Angolan Ministry of Finance – entered into secret agreements enabling them to skim around $70 million from the $250 million instalment, and a further $30 million from the $150 million instalment.

The African Development Bank (AfDB) currently has a funding portfolio of $797 million for nine projects in Angola not including the Lauca Dam.

The agreement was billed as ‘risk-sharing,’ where a portion of the credit facility was retained by the lender in an account handled by a third party. This is where the missing $100 million went. Oderbrecht received neither the full $250 million nor the full $150 million instalments as both times around 25 percent of the financing reverted to the financier itself, in this case, Gemcorp.

Oderbrecht is one of the central suspects in the ongoing Operation Car Wash in Brazil to uncover large-scale corruption. Mirco de Jesus Martins, son-in-low of controversial former vice president Manuel Vicente, also had a joint venture with Oderbrecht in a failed Angolan real estate project. Vicente has had a swirl of corruption allegations made against him, but has yet to be tried in Angola.

Gemcorp is a third-party provider of syndicated loans with a frequent lender named Gemcorp Fund I. It raises money from a group of lenders for a single borrower, and this often happens when the borrower needs more money than anyone lender is willing or able to provide. The borrower then pays back the loan with premium interest rates, allowing both the investors and the third-party provider of syndicated loans to profit. The risk here, of course, is that the borrower defaults.

These deals mean that the money borrowed and the money sent to Oderbrecht to complete the dam do not match, which led to Angola’s decision on  October 28, 2019, to ask for yet another loan from Gemcorp for ‘coverage of expenses incurred with the implementation of the Hydroelectric Power Plant of Lauca.’

So murky are the details surrounding the dam’s financing that it is difficult to even accurately find out just how much borrowing Joao Lourenco is taking on: estimates of how much the 28 October is worth range between $400 million and $600 million.

Earlier, in 2016, Brazil’s state development bank, BNDES, froze funding for Laúca (and other works) as part of a corruption probe, forcing the Angolan minister of energy to seek alternative financing, which it has now secured. According to two presidential decrees published in late December of that year, $87 million of financing will come from Standard Chartered Bank, and the rest from a British private equity group, Gemcorp. However, a source at the Standard Chartered Bank has denied any involvement by the bank in the financing.

President Joao Lourenco did succeed in convincing then South African president Jacob Zuma to also come on board the project. The Development Bank of Southern Africa (DBSA), the South African government’s development finance arm, approved a $75 million loan towards the project, which had been almost been called off as a result of the Petrobas scandal.

Officials in Angola are tight-lipped over Gemcorp’s facilitation of $500 by Gemcorp Fund I as an original lender but the firm is being investigated by the country’s Criminal Investigation Service nonetheless.

As is to be expected, both Oderbrecht and Gemcorp have shielded themselves through confidentiality agreements. Gemcorp defended themselves by saying financing for the dam was ‘initiated on a competitive basis and provided the best possible solution for both counterparties, who have access to several financial providers. Specifically, sovereign debt transactions were carried out at advantageous rates for the Angolan government – at market rates or below. This solution has allowed the continuation of the work of an important infrastructure project for the Angolan economy.’

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