An Angolan worker watches over a floating oil platform Photo: Getty Images

Lessons learned

By Thalia Griffiths | Published:  05 March, 2012

As Africa’s emerging oil producers mull legal systems and regulations, they are looking to their neighbours and international peers for advice on what to do, and what not to do

States developing their fledgling oil industries are looking to their new Asian partners, and to big African players like Sonangol and Sonatrach, as models for their national oil companies.

NOCs can play a vital role in developing and retaining skills and talent as the industry grows. International finance institutions like them as they have the potential to enable governments to separate their regulatory and licensing functions from their status as stakeholders in exploration and production acreage, but politics are never far away.

And within Africa some strong industry leaders have emerged. While campaigners criticise its lack of transparency, Angola’s efficient, tightly-run Sonangol is a key role model for African NOCs. An established borrower in the trade finance markets, it employs thousands of staff across four continents with interests in airlines, telecommunications, banking and food. Sonangol Holdings has a stake in Swiss-based downstream player Puma Energy, and upstream contracts in northern Iraq. Sonangol’s corporate logo adorns Formula One racing cars and African football strips. Many of Angola’s bright young business stars receive scholarships from Sonangol largesse. Oil deals are negotiated by hard-headed lawyers, securing a sizeable government take when many other resource-rich developing countries have undersold. The company publishes professionally audited accounts, unlike many of its peers, though they do not detail, for example, the domestic and international activities of its expanding Chinese joint venture, China Sonangol.

“Sonangol are certainly regarded as efficient, but the question is who benefits from that efficiency?” says Diarmid O’Sullivan of UK-based campaign group Global Witness.

A new report from Global Witness observes that foreign donors have long been calling on Angola to address the conflict of interest arising from Sonangol playing the dual role of commercial oil producer and regulator of the oil sector, without any visible effect. Sonangol is closely controlled by the leadership of Angola, and its long-serving chairman Manuel Vicente is a member of the politburo of the ruling MPLA who has been tipped as a potential successor to President José Eduardo dos Santos. There are also difficulties in tracing the relationship between Sonangol and the government, with the IMF last year identifying a $32bn accounting discrepancy in Angola’s state coffers, linked to “quasi-fiscal” operations by Sonangol on the government’s behalf but not accounted for in official budget accounts, according to Reuters reports.

In the early 2000s, pitifully little of Angola’s oil revenue was spent on social services, but more recently, and especially since the 2006 election, spending has approached an acceptable level, says Ricardo Soares de Oliveira, an Angola expert at the University of Oxford. While new roads and the refurbishment of colonial-era infrastructure are proving beneficial, even if they are concentrated on coastal areas rather than inland, corruption is finding new outlets. Rather than oil revenue disappearing at the treasury level as it may in a state like Equatorial Guinea, the problem in Angola is downstream appropriation; he says public procurement contracts are a particular hotspot.

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