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Angola’s uncertain transition

Amid a wave of disruptive elections and political transitions in the Democratic Republic of the Congo, Gabon, The Gambia, Kenya and Zimbabwe, an improbably smooth transition in Angola seems to be taking shape under João Lourenço, who won the 25 August election with 64.5% of the vote. On 26 September 2017, he became Angola’s third president, succeeding José Eduardo dos Santos, his People’s Movement for the Liberation of Angola (MPLA) comrade who had led Angola in an authoritarian and patrimonial manner for 38 years. After less than two months into his mandate, Lourenço had sacked most of the loyalists and relatives that dos Santos had placed in key positions before handing over power. While Lourenço’s speeches during the MPLA’s 2017 electoral campaign focused on reversing corruption and state capture, echoing popular discontent about the ruling elite and particularly the business interests of the dos Santos family, few expected Lourenço to directly challenge the legacy of dos Santos – who remains secretary-general of the MPLA – by unseating most of the former president’s appointees so early in his tenure. This bold change was implausible a year ago. While it does not necessarily indicate meaningful reform to Angola’s governance, it does suggest that the ruling party has rapidly fractured and that Lourenço enjoys strong party and military support.

Lourenço’s ascendance

Following the end of the 27-year-long Angolan Civil War in 2002, dos Santos used booming oil revenues to weaken state institutions and consolidate his power through a pervasive patronage network, while also playing a major role in pacifying the country and bringing about national reconciliation. In 2010, a new constitution concentrated power in the presidency and allowed him to serve two more terms, placing him in power until 2022 (by which time he would have been 80 years old). He had hinted several times that he wanted to retire, only to abruptly change his mind and sideline potential rivals and even designated successors shortly thereafter. Indeed, Lourenço, who was secretary-general of the MPLA from 1998–2003, was the first such victim in 2002, when he was demoted and forced into a long bureaucratic travessia do deserto (desert crossing) from which he emerged 12 years later when he became minister of defence. Accordingly, considerable scepticism greeted dos Santos’s announcement in March 2016 that he would retire from active political life in 2018. But the prospect of succession became salient for a number of coalescing reasons. A fall in oil prices starting in 2014 severely crippled the Angolan economy, damaging the credibility of the ruling party and impairing dos Santos’s ability to continue fuelling his large, rent-seeking patronage network. His popularity deteriorated significantly owing to widespread nepotism, especially with respect to his eldest daughter, Isabel dos Santos – the richest woman in Africa, according to Forbes magazine – whom he nominated chief executive officer of Sonangol, Angola’s national oil company, in June 2016. Perhaps most critically, dos Santos’s health deteriorated, as indicated by increasingly frequent medical visits to Barcelona over the past year.

In 2012, dos Santos had chosen another successor, then-vice-president Manuel Vicente, a former Sonangol CEO. As a technocrat, however, Vicente lacked the necessary credentials to win the approval of the party and the military, which both remain paramount in the state apparatus. With general elections approaching in August 2017 and dos Santos’s health in doubt, the MPLA congress decided in December 2016 to make Lourenço – a well-regarded party cadre and a three-star reserve general – vice-president of the MPLA and the party’s presidential candidate in February 2017. Lourenço had a very conventional career trajectory. He joined the MPLA guerrillas as a teenager during the liberation war, and after independence, he was sent to the Soviet Union to receive military training and study history. Throughout the 1980s, he took part in many military operations and acted as military and party representative in several provinces. In the 1990s, he steadily moved up the party ladder in Luanda, eventually becoming the MPLA’s secretary-general in 1998. After his loss of dos Santos’s favour in 2002, he kept a low profile as vice-president of the National Assembly from 2003, and even after his rehabilitation in 2014 as minister of defence. He remained well regarded by the party and the military, and had an unusually clean record in terms of corruption, that stood to rejuvenate the MPLA’s image. Therefore, from dos Santos’s point of view, Lourenço was both respectable and compliant, which would presumably enable the retiring president to retain appreciable control over the government. In this, dos Santos was mistaken.

Changes within the MPLA

In the final weeks of his long presidency, dos Santos put in place what he believed was an ironclad exit strategy. He nominated people he trusted to key posts in state, military, police and intelligence institutions, and had a law passed in parliament preventing the new president from replacing these office holders for at least eight years. He had already placed his children in key state financial institutions, such as Angola’s sovereign wealth fund, the Fundo Soberano de Angola (FSDEA), and public enterprises that were major sources of state revenue, such as Sonangol, the diamond-mining company Endiama and Televisão Pública de Angola, a key propaganda broadcaster. Nevertheless, Lourenço found sufficient support within the MPLA to steadily dismantle this legacy soon after assuming the presidency, sacking dos Santos’s daughter from Sonangol, and then discharging most of the top cadres in the military, police and intelligence organisations. This show of strength has induced senior members of the MPLA to ask dos Santos to relinquish his post as party secretary-general in favour of Lourenço, which is expected to happen at the next MPLA congress. Even so, the balance remains uneasy between those who see dos Santos as a liability for the party, and those who are highly indebted to and protected by him.

A changing of the guard is apparent in Lourenço’s ruling style. He has a more down-to-earth image than his predecessor, and is seen as much closer to Angola’s citizens. His inaugural speech on 26 September and state of the nation address on 16 October reflected a clear departure from MPLA’s rigidly partisan tradition. His narrative manifested some understanding of the opposition, criticising the MPLA-dominated system and emphasising the need for economic diversification, more transparent and accountable management of public funds, decentralisation, the confrontation of social problems and the development of civil-society organisations. The question now looming is whether this change in ruling style and discourse will produce any real change in governance. While Lourenço’s background, stated vision and actions seem promising so far, he faces colossal obstacles to bringing about a brighter future for Angola. Foremost among these impediments is the country’s crippled economy.

Domestic challenges

Oil dependency has led the Angolan economy to the brink of collapse. A 12-year oil bonanza diminished incentives for economic diversification. By 2016, the oil industry still accounted for 80% of government revenue, half of GDP and 95% of export revenues. Persistently low oil prices since 2014, when they dipped below US$50 per barrel, combined with an oil-production capacity that has stabilised at around 1.5 million barrels per day, have halved government revenue and plunged the Angolan economy into steep decline. The ensuing currency devaluation, cash squeeze and high inflation (42% in 2016) have forced countless businesses in other sectors to close, and led many foreign investors to pull out of Angola, raising concerns about Angola’s medium- and long-term debt sustainability. In order to survive politically and ensure that the MPLA stays in power, Lourenço needs to carry forward over the next four years a structural transformation that reduces the Angolan economy’s dependence on oil, yields more broadly based economic growth and meaningfully reduces poverty to moderate social discontent, particularly among Angolan youth. This is a very tall order, but Lourenço’s ambition appears to match it: in an interview with a Spanish news agency shortly after the elections, he suggested that he would like to become an Angolan Deng Xiaoping.

To do so, Lourenço will have to figure out how to fund an economic-diversification programme despite low oil prices, which analysts expect to persist into the medium term. One possible remedy would be to implement long overdue reforms to the oil industry – to which there is now less resistance – that would make it more transparent and accountable. Of particular concern is Sonangol, from which the outgoing dos Santos-era elite has siphoned billions of dollars. Effective reforms would encourage international investment in the sector and raise production levels, in turn increasing oil revenue and hence making more resources available to support the economic-diversification effort and fight poverty. The dismissal of Isabel dos Santos from Sonangol, and the November 2017 IMF-staff visit to Angola, which laid the groundwork for a formal IMF Article IV consultation mission to begin in early 2018, appear to be steps in the right direction. In the past, however, agreements reached between Angola and the IMF during low oil-price cycles (for instance, in 2009) have faltered after prices rebounded. But the unprecedented severity of the current economic crisis, combined with the political transition, may produce a more durable commitment to structural reforms this time around. If sustained, such diversification plans pursuant to IMF negotiations could yield relatively swift progress. Improving the business environment to the extent required to satisfy non-oil investors will also require major investments in hard infrastructure – in particular, transportation and power-supply networks – and the upgrading of Angolan labour skills so as to increase the country’s overall economic capacity.

Successful diversification, however, also requires improvements in Angola’s business climate. Endemic corruption, nepotism, institutional weakness and fiscal uncertainty (e.g., in foreign-currency policies) have kept Angola near the bottom of the World Bank’s ease-of-doing-business index – the country ranked 175th out of 190 countries in the 2018 edition. The dominant oligarchic business class left behind by dos Santos in the telecommunications, cement, distribution and energy sectors would have to be dismantled, as these sectors are riddled with inefficiencies and high fees that strangle the economy. But Lourenço’s biggest challenge will be curbing government corruption, because it will entail disciplining his own support base: the party and military structures, which comprise the bulk of the national business class. Doing so carries very high political risk for Lourenço, but taking that risk may be necessary to restore the international credibility of the Angolan state. A few high-profile Angolan officials, including dos Santos’s one-time heir apparent Manuel Vicente, are currently under investigation in Portugal, while the European Commission has probed Isabel dos Santos’s business interests in the same country. In addition, authorities in the United States have recently begun investigations into possible collusion between Angolan and US companies to launder money, and private real-estate disputes involving senior Angolan military officers.

Foreign policy imperatives

To become a facsimile of Deng Xiaoping, Lourenço would need not only to implement a challenging set of domestic reforms, but also to pragmatically manage Angola’s relationships with foreign partners to best serve its domestic-reform goals and legitimise the MPLA in the eyes of its citizens. The most critical foreign partners are the United States and China. Low oil prices and decreasing US dependence on foreign oil have deprived Angola of the bargaining power it once enjoyed under dos Santos. In turn, poor governance has become a greater source of tension in Angola’s diplomatic relations. Improvements in that area could, to some extent, offset Angola’s loss of economic leverage. In any case, failure to improve governance could result in significant reductions in foreign direct investment by American oil companies. Since those companies remain the largest producers of Angolan oil, such reductions could have devastating consequences for the Angolan oil industry.

China is a critical partner for Angola for two main reasons: it is Angola’s primary oil-export destination (absorbing nearly 63% of Angolan production in 2016) and Angola’s main provider of oil-backed loans (which total nearly US$20bn over the past 15 years). These loans have funded most of Angola’s post-war reconstruction effort. Towards the end of dos Santos’s rule, however, China was compelled to reassess its engagement in Angola for a number of reasons. Firstly, China’s National Audit Office found the investments of China Petroleum & Chemical Corporation (Sinopec) in the Angolan oil industry to be underperforming, with an estimated US$1.6bn in losses. Secondly, there were increasing complaints from Chinese construction companies over operating conditions in Angola, in which the soliciting of bribes by Angolan officials and pressure to complete projects before the 2017 elections loomed large. Finally, the failure of Sonangol to fulfil the collateral oil shipments necessary to repay a China Development Bank line of credit led to its suspension at the end of 2016.

In this light, Lourenço will have to tread carefully with Beijing to regain its trust. Improvements in Angola’s business environment – and in the country’s governance – will also be crucial for rekindling partnership with China, to attract investment and compensate for Angola’s loss of bargaining power. This is paramount, given that there is no other partner who can play such a transformative role in Angola’s hard-infrastructure improvements. In his favour, Lourenço has made an audacious beginning as president, and Angola’s status over the past decade as one of the top three suppliers of oil to China provides some economic leverage. But China will still assess any new loans very carefully, in light of concerns about debt sustainability and available collateral in the context of low oil prices. Lourenço will also have to attract Chinese investment to non-oil sectors to serve the diversification effort. Furthermore, Angola has retained deep social, business and political ties with Portugal, the former colonial power in Angola. Although many Angolan-Portuguese transactions are suspected of having involved bribes, money laundering and other forms of corruption, Lourenço would do well to stay alert for legitimate economic opportunities and synergies.

Outlook

As with Robert Mugabe’s regime in Zimbabwe, it was profound economic crisis that inflicted the final blow to dos Santos’s rule. His nepotism and patrimonialism came to jeopardise the MPLA’s survival in the face of economic collapse. To his credit, and unlike Mugabe and other ageing African leaders, dos Santos stepped down voluntarily. Angola is now at a crossroads. Recent developments suggest that Lourenço is consolidating a strong support base within the party. But the MPLA is under extraordinary pressure to deliver transformative economic reforms, and it remains unclear whether it is capable of doing so. Much depends on whether Lourenço can exploit his non-partisan instincts and common touch to become a charismatic leader with long-term vision.

Volume 23, Comment 41 – December 2017

 
 
 
 
 
 

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