Angola seen facing oil-related instability

Angola struggles with economic problems and the potential for political instability as a presidential election approaches, warns an analyst at Verisk Maplecroft, Bath, UK.

The country is a member of the Organization of Petroleum Exporting Countries with production averaging 1.75 million b/d.

According to Senior Analyst-Africa Maja Bovcon at the risk-intelligence firm, Angola during 2010-15 depended on oil for 90% of its foreign currency earnings, 75% of fiscal revenues, and 50% of gross domestic product.

Central to that dependency is the state-owned oil company, Sonangol, which Bovcon says is reported to have ceased paying into state coffers in January because of financial problems related to the oil-price slump.

Doubt grows that Sonangol can honor debt to European banks of $13 billion, the analyst reports. In June, the company failed to provide evidence of a healthy debt-to-capital ratio required by a loan agreement with a UK bank.

Sonangol is as important politically as it is economically, Bovcon notes.

It allows President Jose Eduardo dos Santos “to buy the loyalty of the country’s elites,” she writes in a research note.

In June, dos Santos appointed his daughter, Isabel, to head Sonangol. The move evoked speculation that she was being positioned to replace her father on his announced retirement in 2018. He is expected to win reelection in voting next year.

According to Bovcon, Isabel dos Santos is one of the most trusted members of her father’s “small inner circle” and is considered by many foreign investors to be competent enough to rescue Sonangol.

Foreign oil companies welcomed her decision to retain US-based consultancies to advise her on the company’s overhaul. But the challenge is great.

“Unless there is a sudden rebound in oil prices, the national oil company will not be able to uphold its role in the economic and political system,” Bovcon says.

Economic problems will worsen before next year’s election. This month, the government lowered its growth forecast for 2016 to 1.3% from 3% and cut spending by 20%. The country’s debt-to-GDP ratio is rising rapidly, and spending probably will increase before the election.

Bovcon says dos Santos, having won reelection, might step down as promised and transfer power to “his chosen heir” or postpone retirement, as he has done in the past.

“Either way, Sonangol’s rescue is vital if the dos Santos family wish to retain power,” she says.

Failure would push Angola toward economic collapse and the ruling party, “with a much-reduced oil bonanza to distribute as patronage,” toward a loss of power within a decade.

But if Isabel dos Santos succeeds in turning around Sonangol, “she will strengthen her position to step into her father’s shoes and ensure the survival of Angola’s political and economic system.”

Did You Like this Article? Get All the Energy Industry News Delivered to Your Inbox

Subscribe to an email newsletter today at no cost and receive the latest news and information.

 Subscribe Now


Making DDoS Mitigation Part of Your Incident Response Plan: Critical Steps and Best Practices

Like a new virulent strain of flu, the impact of a distributed denial of service (DDoS) attack is...

The Multi-Tax Challenge of Managing Excise Tax and Sales Tax

To be able to accurately calculate multiple tax types, companies must be prepared to continually ...

Operational Analytics in the Power Industry

Cloud computing, smart grids, and other technologies are changing transmission and distribution. ...

Maximizing Operational Excellence

In a recent survey conducted by PennEnergy Research, 70% of surveyed energy industry professional...