/ 6 December 2017

The exit of Africa’s richest woman could revitalise Angola’s cash cow

Isabel dos Santos has been fired as head of the Sonangol state oil company.
Isabel dos Santos has been fired as head of the Sonangol state oil company.


Now we know: new Angolan president João Lourenço is not sitting idle while the descendants of former president José Eduardo dos Santos rule over the country’s most profitable and important institutions. The take down of Sonangol’s board of directors and, specifically, Isabel dos Santos, who was ousted from the company last month, is a decisive statement designed to show that Lourenço is now truly the president of Angola, and not a puppet of the previous administration.

The speed of the new president’s actions took even supporters by surprise. It took just 50 days into the new administration for the former president’s daughter to be replaced as boss of Sonangol, along with three other top officials at the national oil company.

He also suspended a contract between Angola’s national broadcaster, TPA, and Semba Comunicações, for the management of the broadcaster’s second channel. Semba Comunicações is a media company controlled by Welwitschia dos Santos and José Paulino dos Santos, two other children of the former president. While another son, José Filomeno dos Santos, remains at the helm of Angola’s sovereign fund, the new president has suspended a contract with Bromangol, a company that had a monopoly on food lab analyses in Angola, which has ties to José Filomeno. Demands for Filomeno to resign from the sovereign wealth fund are coming from several corners of society.

Goodbye to the old
Family feuds aside, however, this is an important moment for Sonangol. The company has sustained the Angolan state since independence and built a reputation for being one of the most technically capable and competent national oil companies (NOCs) across the continent. But that reached a breaking point in 2015, when it verged on bankruptcy.

Years of rentier-like behaviour by Angola’s leadership, rewarding party cronies with high positions at the helm of the oil company and its many subsidiaries, endangered the very core of the company’s activities.

This summer, Isabel dos Santos gloated about the successful financial results she had achieved as president of the company since June 2016. According to her, the fact that the earnings before interest, taxes, depreciation, and amortization (EBITDA) grew by 36% over the 12-month period was a demonstration of the fundamental reforms she had undertaken at the helm of the company. She preferred not to focus on the fact that, despite that, the company’s profits fell by 72%.

The two previous administrations of Sonangol, first led by former vice-president Manuel Vicente and then by his right arm Francisco de Lemos, had left the company in dire straits. Isabel dos Santos’ rise to the top, with her credentials as the most successful business woman in Africa, created a lot of expectations for reform, which never materialized. There was cosmetic change, rather than action to address the fundamental issues, arguably because the leadership lacked the technical know-how that had once made Sonangol a company respected across the industry.

Above all, the Dos Santos daughter forgot the company’s position as regulator of the oil industry. Left and right, oil operators complained about delayed licensing and project approval. Without those, companies were unable to invest in exploration and production.

Sonangol itself walked out of its exploratory efforts. In 2014, the company drilled 27 wells; in 2015 it drilled seven; and in 2016 it drilled just three wells. Seismic acquisition saw similar developments. Without exploration there are no discoveries, and reserves deplete rapidly. It is hard to overestimate the consequences of this strategy for the sustainability of the Angolan oil industry, the lifeblood of the country’s economy.

The situation became so dire that, just this October, the oil operators in the country held direct meetings with president João Lourenço. Never in 40 years of oil industry history had that been necessary. On October 6, BP Angola, Cabinda Gulf Oil Company (Chevron), Eni Angola, Esso Angola, Statoil Angola and Total E&P met at the presidential palace. Six days later, a working group led by Diamantino Azevedo, recently-appointed Minister of Petroleum, was formed to design, within 30 days, a strategy to answer the needs of the companies.

New beginnings
Now, with the appointment of Carlos Saturnino, the former president of Sonangol’s exploration and production unit, to president of the board of directors, there could be hope for a return to the company’s old ways. He was fired by Isabel dos Santos in 2016.

Saturnino has led Sonangol’s contract negotiations for over 10 years, is an experienced negotiator and knows the ins and outs of the company like few others. He is well known by all the industry’s players and is well placed to rebuild relationships of trust with them.

His leadership, grounded in technical know-how, represents a sharp break from that of Isabel dos Santos. If coupled with tough and well-informed contract negotiations, and a genuine separation between company management and politics, this could represent a return to the days when Sonangol was known as an island of competence in an otherwise chaotic economy.

NJ Ayuk is a leading energy lawyer and a strong advocate for African entrepreneurs, A Global Shaper with the World Economic Forum, one of Forbes’ Top 10 Most Influential Men in Africa in 2015, and a well-known dealmaker in the petroleum and power sectors. He is the founder and CEO of Centurion Law Group.

João Gaspar Marques is an energy analyst and a seasoned Africa specialist with in-the-field reporting experience from Africa’s petroleum hotspots.