Angolan President Brings Reform to Critical Oil Industry
Angolan President Brings Reform to Critical Oil Industry
(Bloomberg) -- Angolan President Joao Lourenco is changing the face of the nation’s all-important oil industry, implementing reforms directed at rousing the economy from a production slump, while at the same time boosting his political standing.
Since taking office 18 months ago, Lourenco has announced the breakup of state oil company Sonangol EP and set up a new agency to allocate exploration and drilling permits -- moves he says are aimed at luring new investment. He’s also fired Isabel Dos Santos, Africa’s richest woman and his predecessor’s daughter, as Sonangol’s chairwoman.
Sonangol has been given two years to sell off stakes in more than 72 non-core ventures and to transform itself into more of an operator than a passive partner. The government also intends auctioning off dozens of new oil blocks and building as many as three refineries to reduce dependence on fuel imports.
While it’s unclear if the targets will be met, a shakeup is both necessary and overdue. The International Monetary Fund and civil-rights groups have alleged that oil revenues weren’t properly accounted for during former President Jose Eduardo dos Santos’s 38-year rule and that billions of dollars were looted from government coffers.
Increased transparency and investment are also key to reviving an industry that accounts for almost three-quarters of government revenue and more than 90% of exports. Production is at its lowest level in more than a decade, a hangover from three years of low prices and under-investment, and government data shows a further 50% drop by 2025 unless new projects come on stream.
The changes should benefit Lourenco -- his appointees are now in control of key levers of the economy, while his moves to sideline members of the Dos Santos family will help cement his control over the ruling party and are likely to go down well among an electorate that blames them for decades of misrule and nepotism.
Lourenco’s administration also desperately needs to bolster revenue. Business risk consultancy EXX Africa notes that the nation’s Treasury derives no income from more than half of Sonangol’s oil exports because they go to China to service existing loans.
Eurasia Group sees reforms at Sonangol slowing as a result of its recent change in leadership, although it envisions some progress being made in the sale of its non-core assets.
--With assistance from Candido Mendes.
To contact the reporters on this story: Paul Burkhardt in Johannesburg at pburkhardt@bloomberg.net;Mike Cohen in Cape Town at mcohen21@bloomberg.net
To contact the editors responsible for this story: James Herron at jherron9@bloomberg.net, Gordon Bell, Alastair Reed
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