Thursday, 29 September 2011

Angola: A changing of the guards?

Farewell? The quiet godfather of Angolan politics has signalled his intention to step down from the presidency after more than three decades. However, analysts believe he will continue to be the power behind the throne.
Southern Africa’s longest-ruling leader Jose Eduardo Dos Santos of Angola is a man whose 32 years in office belies the security of his hold on the oil rich country. Ushered to the fore of national life when the country’s founding President Agostinho Neto died of cancer in office in 1979, Dos Santos is moving to ensure that his departure from power is as gradual and planned as his assumption of it was fortuitous and sudden.

In the opaque internal workings of the ruling Popular Movement for the Liberation of Angola (MPLA), which is one of the region’s most hardened liberation movements-turned-governments, it has not often been easy to decipher the party’s plans on the hitherto taboo question of succession. However, in early September the Angolan Novo Jornal newspaper set the country abuzz when it reported that the 69 year-old son of immigrants from Sao Tome and Principe was to stand down as president before or after next year’s elections.

The chosen one? Sonangol's Manuel Vicente
Quoting unnamed MPLA sources, the weekly claimed that Dos Santos had picked Manuel Vicente, head of the state oil company Sonangol, as his successor. Party spokesman Rui Falcao de Andrade also told business news publisher Bloomberg that the MPLA will meet in December to appoint its presidential candidate for next year’s election and was currently ‘talking about probabilities’ although no formal decision by the party had been taken. According to the country’s 2010 constitution, only MPs are now directly elected by the people, and the person who is named at the top of the party list of the winning party automatically becomes president.

The news coincided with planned anti-Dos Santos protests in Luanda, leading to speculation that the MPLA may have sought to pacify increasingly restless opponents by promising impending change at the top. Riding on the coat-tails of the Arab Spring, which toppled longstanding dictatorships in North Africa, Angolan activists have several times this year held protests calling on Dos Santos to step down. On 25 September, a day after MPLA supporters had demonstrated in support of Dos Santos in Luanda, police crushed an anti-government protest by youths.    

The man at the steering wheel of Sonangol and the President share a striking similarity: both are trained engineers with a background in the oil industry. Vicente is a career technocrat who understands the country’s oil industry like the back of his hand. He has been at the helm of Sonangol since 1999 and has spent two decades with the company whilst simultaneously juggling other corporate roles and consultancies. At face value, he has no basis to feature as the leading figure in a cast of MPLA contenders for the leadership of Southern Africa’s most militarised state.

But his appointment to the ruling party’s powerful politburo in 2009 as well as the critical role that Sonangol occupies within the parallel governing structure that is tightly woven around the country’s presidency suggest that Vicente is far much more than a politically connected corporate suit. In a June 2011 situation report on Angola published by the South Africa-headquartered Institute for Security Studies, Africa analyst Paula Cristina Roque described the country’s political order as composed of parallel ruling structures, with the ‘formal, fragile’ MPLA government on one hand, and ‘the more resilient ‘shadow’ government controlled and manipulated by the presidency [on the other], with Sonangol […] as its chief economic motor.’

Among other things, this shadow government is responsible for the formulation of international policy independently of the established government and foreign ministry, Roque added, and ‘to a certain extent, Sonangol is the vehicle used to control the international image of Angola, investing internationally in the strategic areas of telecommunications, gas and petroleum as well as the banking sector,’ she said. Sonangol, and, to a lesser extent, Endiama (the national diamond company), play a central role in the management of the state and in the MPLA’s financial strategy. This background makes Vicente a strong candidate to fulfil for Dos Santos the role that Dmitry Medvedev played in Russia for the outgoing President Vladimir Putin in 2008.

‘The president will likely look to implement an organised hand-off to Vicente or another trusted ally while remaining, like Vladimir Putin in Russia, the power behind the throne for an interim period,’ Philippe de Pontet, Eurasia’s Africa director, wrote in a recently published research note. Analysts say Dos Santos could lead the party to another victory in the 2012 elections and retire from the presidency thereafter whilst remaining MPLA leader, leaving Vicente to run the country without the threat of imminent elections. He could also appoint Vicente as his vice-president in preparation for him to take over the reins at whatever point he wishes to step down. This prospect gained currency in view of Vicente’s own announcement earlier this year that he will be leaving Sonangol before year-end.

The expectant one. Vice President Nando
However, this would mean superseding the powerful securocrat and current Vice President Fernando da Piedade Dias dos Santos who also served as the country’s prime minister from 2002 to 2008. The 61 year-old ‘Nando’, as he is known, is said to control a paramilitary group of 10,000 rapid response units (‘Ninjas’), the police, and is not known to be overly compromised by corruption. Long seen as the President’s right-hand man and a clear front-runner for the top job, his elevation to the vice-presidency was widely perceived as a preparatory step for the ultimate office.

De Pontet said the old MPLA guard would likely be more comfortable with a seasoned party insider such as ‘Nando’ with his security background, although this would raise a bigger question mark for investors. ‘In the past, Dos Santos has stared down such sentiment, and can likely do so again, particularly if party cadres know that he will continue to be the prime power-broker behind the scenes. Defying Dos Santos tends to be a poor career move,’ he added.

‘Vicente’s main weakness in the MPLA is his relatively tepid and only recent commitment to the party, an institution that takes itself very seriously. He lacks a military pedigree or credentials from the civil war, which loses him support from the old guard and influential ex-generals. This could potentially limit his ability to drive economic reforms over internal party opposition.’

In with a chance? The technocratic Feijo
Sebastian Spio-Garbrah, an analyst at DaMina Advisors, a frontier market risk consultancy, expressed surprise at the choice of Vicente as the man to replace Dos Santos saying he will likely have to grapple with tense relations with the dozens of disappointed ministers and ex-military leaders who had always hoped that the President would have drawn his successor from among them. ‘Dos Santos, himself an oil engineer trained in Azerbaijan, was likely drawn to the similar personality and energy savvy of Vicente, as well as their close personal relations. Dos Santos had historically been very weary of allowing any single minister to gain too much popular influence, and regularly reshuffled his cabinet to keep his ministers on their toes,’ he said. 

However, most analysts agree that Vicente’s status as a respected figure in international business circles will likely be reassuring to investors especially if his presidency is backed by Dos Santos’ power exercised quietly from behind the scenes.  In 2008 Angola held its first elections since the advent of peace following the killing of Jonas Savimbi, leader of the-then rebel movement UNITA in 2002. The MPLA romped to victory with 82 per cent of the vote, but presidential elections were put on hold as a cross-party commission drew up a new constitution, which was subsequently approved in January 2010. It abolished the position of prime minister, which was replaced by a vice president. UNITA, which once held 70 parliamentary seats after the 1992 elections, only managed 16 in 2008. 

Having lost its statutory funding of up to $14m in the process, UNITA is certain to offer only feeble opposition to the Sonangol-powered MPLA juggernaut.

Academic and MPLA veteran, Neto
According to a 2011 report assessing risks to stability in Angola, the Washington-based Centre for Strategic International Studies (CSIS) said poverty is the single most important issue which could lead to instability. ‘The mean schooling years for an Angolan adult are just 4.4 years, life expectancy is 48.1 years, and a staggering 22 per cent of newborn babies will not survive beyond their fifth birthday,’ the CSIS report noted. At 2.6 per cent per year, Angola has a rapidly growing population even by Sub-Saharan African standards, and more than two-thirds of it is 20 years of age or younger whilst 70 per cent of the country’s estimated 19 million are crammed in the barely capable urban areas. Coupled with yawning inequalities and rampant corruption, these demographic trends do not augur well for a stable and secure future unless the government moves to deliver basic sanitation, health care, education and jobs faster than it is currently managing. With restless youths becoming more daring in challenging the government, whoever succeeds Dos Santos has his work neatly cut out.

Zimbabwe's indigenisation policy confounds investors

Indigenisation Minister, Saviour Kasukuwere enjoys President Mugabe's full backing

Zimbabwe’s economic indigenisation programme has rendered the country a very uncertain place to do business for white nationals and foreign investors. Harangued by bellicose threats of closure one minute, and mollified with promises of investment protection the next by a government apparently playing good cop-bad cop with foreign-owned banks and mining conglomerates, it is no wonder that they should feel thoroughly confounded.

The controversial black economic empowerment legislation was passed by a majority Zanu PF parliament in 2007, placing statutory requirements on targeted businesses to cede at least 51 per cent of their equity to black Zimbabweans. The deadline for mines to comply with these regulations expired on 24 September, and the fledgling economy has not seen more unpredictable times.

Driven by President Robert Mugabe and his Zanu PF party, the indigenisation programme has faced its most trenchant opposition from Prime Minister Morgan Tsvangirai, who formed a coalition government with the demagogic Mugabe in February 2009 following disputed elections a year earlier. The MDC leader blames his power-sharing partners for the policy inconsistencies that have wrong-footed economic recovery.

‘Mugabe comes out and tells investors, ‘your investment is safe’, and then indigenisation minister Saviour Kasukuwere says, ‘I want to close this and that mine.’ This kind of policy conflict cannot inspire confidence,” Tsvangirai told supporters commemorating his party’s 12th anniversary in Harare last month. He was referring to Kasukuwere’s outlandish threats to shut down foreign banks and mines that failed to comply with the indigenisation regulations.

Only a few weeks earlier, Mugabe had reassured foreign investors saying: ‘Other possible investors are still waiting in the wings, some possibly frightened about Zimbabwe because of its reputation given by the media in the West. We say come, don’t be afraid. But come as friends and not as exploiters.’

But no sooner had the ailing 87 year-old leader given his nebulous reassurances than Kasukuwere emerged to strike fear at the heart of the country’s financial sector with threats to shut down Standard Chartered, Stanbic, and Barclays - the only three foreign banks operating in Zimbabwe. He also announced the imminent closure of more than 50 mines, including the platinum giant Zimplats which is on the verge of proceeding with a planned $460 million expansion project that would bring its total investment in Zimbabwe to close to $1 billion.

The government had in 2006 signed a ‘Release of Ground Agreement’ with Zimplats providing the company – 87 per cent owned by Implats of South Africa - security of tenure over mining claims required for the long-term expansion programme. However, it now sought to amend certain aspects of that agreement and also rejected Zimplats’ idea that firms could sell their shares to black Zimbabweans by listing them on the stock exchange.
In a policy twist that brought relief to Zimplats and other threatened miners, albeit doing little to clear the confusion, mines minister and the country’s mines licensing authority Obert Mpofu sought to calm restive investors by declaring that his ministry had no intention of cancelling mining licenses. It is believed Kasukuwere was leaned upon to accommodate Zimplats.

As the Economist magazine observed, the threats against the foreign mining companies seem reminiscent of a shakedown game: ‘the investors are terrorised with the imminent risk of closure, they are hit with various deadlines and ultimatums, and then they are allowed to negotiate a deal to continue in business.’

Despite these conciliatory remarks, investors still remain unsure as to whether the government could be trusted. The prevailing sentiment at the mining indaba was that this new tone could change any time it suited the government’s ends and that with the rules of engagement so undefined it was impossible to really know what could happen.

The government wants to set up a sovereign wealth fund which will hold shares in various mining businesses, according to Kasukuwere. But the crucial question is how cash-poor Zimbabwe will afford to pay for more than half of all foreign and white-owned equity across the economy. Kasukuwere is on record as having said that with respect to paying for mining equity, the mineral reserves in the Zimbabwean soil were sufficient payment, which suggested that the government seeks to take control of the mining sector without paying a cent for it.

According to Reuters, ‘investors and foreign companies are unsure if they will be compensated if they give up the stakes. Even if compensation is offered, many wonder how the government can afford it with foreign debt already at 115 percent of GDP’.

Chinese firms do not suffer such anxieties, however, as they were exempted from full compliance with the indigenisation regulations because they supported vital sectors of the economy. But Kasukuwere has made it clear that he will not exempt ‘companies from countries which have put our country under sanctions’. The US and the EU have since 2001 and 2002, respectively, maintained targeted sanctions on Zimbabwe in protest at the country’s human rights record.

In the banking sector, Kasukuwere is at war with Reserve Bank governor Gideon Gono, an open critic of the current indigenisation model. Responding to Kasukuwere’s two-week ultimatum to the three foreign-owned banks to submit their indigenisation plans to government, Gono warned the minister against ‘reckless’ and ‘excitable flexing of muscles’ which ‘could irreparably harm the nerve-centre of our recovering economy’.
RBZ Governor Gideon Gono (left) and Finance Minister Tendai Biti

But the abrasive Kasukuwere, who clearly enjoys Mugabe’s full support, insisted he was the authority on implementing the government’s indigenisation law and nonchalantly dismissed Gono’s intervention. Finance Minister Tendai Biti, a key Tsvangirai ally and favourite with the IMF and donor countries, has waded into the banks indigenisation saga to negotiate an agreed threshold with Kasukuwere and the affected banks. ‘One thing that we have made clear to the Minister of Indigenisation is that banks are different from mines. Mines sit on capital. Banks are middleman. They are conveyors of capital. A bank is as good as its deposit base so naturally a different approach has to be taken,’ he said.

The Bankers Association of Zimbabwe is opposed to the statutory indigenisation of Barclays, Stanbic and Standard Chartered banks arguing that it is not necessary since 85 per cent of the country’s banking sector is locally owned. Indeed, many critics of Mugabe’s indigenisation policy hail the indigenisation model that opened up the financial sector to new local investors over the past two decades as it focused on creating new capacity within the economy and bringing competition in the financial services sector.

Critics of the empowerment policy within and outside Zanu PF fear that ministerial discretion over the selection of empowerment partners for foreign firms will benefit Zanu PF’s dwindling patronage system. The party could easily give empowerment-related funds as well as access to indigenised equity only to its loyalists. Mugabe, faced with a deeply divided party and opposition to his plans to fight yet another election as the Zanu PF candidate early next year, is keen to dangle this new carrot to secure the support of party stalwarts.

Critics also say the policy is merely a top-down empowerment strategy that will only indigenise the elite and only saddle average citizens with the negative impact of its failure through declining productivity and job losses. The policy battles within Zanu PF as well as in the coalition government mean that there will be no quick end to the confusion for foreign investors as implementation of the indigenisation programme will remain a slow, grinding affair.