The reputational impact of the Luanda Leaks

Four key risk points

Business deals questioned

On 20 January, the International Consortium of Investigative Journalists (ICIJ), a global investigative network, released a series of articles based on an investigation dubbed the Luanda Leaks alleging that Isabel had embezzled millions of dollars from Angolan state coffers over the past two decades. The investigation, based on a trove of leaked financial and corporate documents, claims the misappropriation occurred through the awarding of public contracts and licences during the dos Santos presidency to companies across the world in which Isabel and husband Sindika Dokolo held shares as well as through the use of offshore accounts. Most of these companies are registered in Angola and Portugal and span a range of industries, including energy, banking, telecommunications, diamonds, media, retail, cement and beer. The report also links Isabel to numerous companies and accounts in Hong Kong, the Netherlands and Switzerland as well as in tax havens in Malta and the British Virgin Islands.

Isabel’s business dealings have come under extensive scrutiny in Angola since 2017 when President Lourenço took office and began to target her economic interests. This formed part of Lourenco’s efforts to reduce the influence of his predecessor and entrench his political authority within the MPLA. One of his first and most high-profile moves was to dismiss Isabel as chairperson of state oil company, Sonangol, a position to which her father, then president, had appointed her the previous year. In June 2018, Lourenço again targeted Isabel, issuing a presidential decree ordering the termination of a pair of dos Santos era government contracts with two companies involved in the construction of the USD 4.5bn Caculo Hydropower Project, both of which had links to Isabel.

Lourenço has since cancelled an exclusivity agreement between Angola’s national diamond trading company, Sodiam, and private jeweller, De Grisogono, as well as halted the sale of the stake that Sodiam held in Victoria Holdings – a joint venture with Isabel’s husband, the majority shareholder in De Grisogono. Lourenço has also cancelled most exploration licences held by companies linked to Isabel.

Increased scrutiny

Actions against Isabel’s business interests and associates increased towards the end of 2019 and have continued into 2020 following the Luanda Leaks revelations. Reports emerged in October 2019 that Angola’s prosecuting authority had launched a corruption investigation into Isabel regarding her tenure at Sonangol, and that efforts to remove her as chair of telecommunications company Unitel were ongoing. An Angolan court in December 2019 ordered the freezing of her assets – including personal bank accounts and stakes held in BFA, telecoms firm Unitel and media company Zap Mídia – following an application by the state accusing the three of causing the state losses of more than USD 1bn.

Scrutiny of Isabel’s business interests outside Angola began in 2018. That year, the Bank of Portugal stated it had been looking into evidence brought forward by Angolan judicial authorities that could compromise her eligibility to remain a shareholder at Eurobic, the Portuguese bank whose Sonangol accounts were reportedly used to transfer at least USD 115m in public funds to an offshore company in Dubai controlled by Isabel.

In January 2019, it was reported that Isabel would sell her majority stake in Efacec, a publicly listed Portuguese electrical engineering company as well as her stake in EuroBic. On the same day, Nuno Ribeiro da Cunha, her personal wealth manager and private banking director at EuroBic, was found dead in his house. Cunha managed Sonangol’s accounts at EuroBic, as well as those of other companies linked to Isabel.

On 10 February, Spanish bank, Abanca, announced that it would buy 95% of the shares of EuroBic, including Isabel’s share, estimated at USD 200m. The next day, following an appeal from Angola’s Attorney General for cooperation to help recover more than USD 1bn allegedly syphoned off by Isabel, the Portuguese public prosecutor’s office ordered the freezing of bank accounts belonging to Isabel and her husband.

On 4 March, Portugal’s central bank governor said that any proceeds from the EuroBic sale would likely be confiscated, and on 17 March a Portuguese judge ordered the seizure of all of Isabel’s assets in the country, including her real estate properties and stakes in local companies.

Finally, in Cape Verde, the Luanda Leaks revelations provided the momentum for the government to approve the closure of local offshore banks that serve only non-resident customers. One of the banks affected by the new measure was Banco Bic Cabo Verde, which is owned by Isabel and was repeatedly used to make payments to various other entities under her control. The government decided, however, not to open an investigation into Isabel’s activities in the country at this time.

From political to financial motivations

Upon taking office, Angolan President Lourenço primarily focused on consolidating his political authority through the dismantling of patronage networks built by dos Santos. This reduced the potential for challenges to his reform agenda from individuals in dos Santos’s inner circle who perceived it as a threat to their own power. Tackling links between Isabel’s business empire in Angola and its overlap with the political landscape have thus formed an important part of Lourenço’s strategy to entrench his power.

With the influence of dos Santos diminished, President Lourenço’s continued targeting of Isabel’s assets could be a move to use the dos Santos family wealth as a means to ease Angola’s fiscal constraints. The market is struggling with an estimated debt load of 91% of total GDP and persistently low revenues stemming from ongoing weak commodities prices. Minister of Justice Francisco Queiroz in December 2019 announced that USD 5bn lost through corruption during the dos Santos presidency had been recovered, while the freezing of Isabel’s assets that same month aims to recover USD 1bn in state funds.

Assuring the international business community

Lourenço’s actions signal an attempt to demonstrate to the international business community his commitment to his economic reform programme, with the promise to fight corruption at its heart. Isabel is a high-profile figure, and, given that oil is the lifeblood of the Angolan economy, Sonangol is typically subject to more scrutiny than other state-owned companies. Her dismissal from Sonangol sends a clear signal that Lourenço is serious about tackling corruption.

The reform drive seeks to attract increased foreign private investment into other sectors of the economy to reduce its reliance on the oil sector, which currently accounts for around 95% of total revenue. Economic diversification will only be possible with external financing, which will be difficult to secure if finance institutions have concerns about the improper use of funds. The necessary private sector expertise will also be difficult to attract if firms are worried about the high reputational risks involved in operating in such a market, particularly those that would have to partner with a local business to operate in country.

Although not reflective of a genuine desire to tackle corruption, Lourenço’s efforts have improved transparency in the oil sector through increased oversight at Sonangol. They have also helped Angola to secure much-needed funding from the IMF in the form of a USD 3.7bn loan paid out over three years through to 2021 subject to semi-annual reviews. The country has passed its first review, signalling Lourenço’s commitment to economic revitalisation and the government’s improving relations with international lenders.

No threat to political stability

We do not expect the revelations to have an impact on political stability. Lourenço is secure in his position as president and leader of the MPLA, with no obvious challengers to his rule. Reported infighting within the ruling party led by dos Santos supporters following his appointment in 2017 has largely been quashed through the steady decline in his predecessor’s power and influence.

Any internal criticism that his repeated targeting of Isabel and the broader dos Santos family fortune was overreaching will now be easier to dismiss. The release of the Luanda Leaks by the ICIJ and the subsequent attention of the global business community have lent credence to Lourenço’s actions. Even if questions arise over the government’s prior knowledge of or contribution to the corruption detailed in the report – particularly given that the Angolan authorities had approached Portugal to look into Isabel’s investments in 2018 – the extent of her alleged embezzlement will distract from Lourenço’s involvement. Moreover, the action he has undertaken to dismantle her business empire since 2017 will be regarded favourably.

Nonetheless, there is a threat that the pace of policymaking could slow in the aftermath of the Luanda Leaks investigation. If senior members of the MPLA are implicated in future revelations, particularly those powerful during the dos Santos era and still prominent under the Lourenço administration, infighting in the party would turn attention away from key issues, including economic reform.