All talk and absolutely no action

More than seven months on from its high-profile launch Angola’s Sovereign Wealth Fund has no investment policy, no chairman and despite its huge press team’s best efforts, dwindling credibility.

June 13th, 2013

More than seven months on from its high-profile launch Angola’s Sovereign Wealth Fund has no investment policy, no chairman and despite its huge press team’s best efforts, dwindling credibility.

The US$5billion Fundo Soberano de Angola (FSDEA) was launched last October in the capital Luanda, generating no shortage of global headlines. Journalists – I was among them – were flown in from London, Johannesburg and beyond and were given one-to-ones with board members, shown promotional videos and handed glossy literature packs. These promised investments that would “” and “play an important role in promoting Angola’s social and economic development through the generation of wealth for the people of Angola”.

The fund was well received by economists, pleased that Angola was finally showing willingness to preserve, at least for the medium term, its finite oil wealth on which its economy is so . Politically it also ticked the right boxes, nicely complementing Angola’s ruling MPLA, whose August 2012 election campaign slogan “Grow More to Distribute Better” was directly aimed at the frustrated millions still waiting for their peace and oil dividends.

Despite concerns that one of long-serving President Jose Eduardo dos Santos’ sons, was on the three-man board, and some lingering questions about the role of a run by a friend of his, people generally gave the FSDEA the benefit of the doubt and tried to believe it was a good thing. And in a welcome departure from the typical information vacuum you find inside Angolan institutions, the FSDEA has a functioning, regularly-updated, bi-lingual and a team of helpful PR officers spanning three continents  (though weirdly no-one in Angola) who actually pick up the phone and reply to emails.

But there is a sad irony that the FSDEA should put so much effort – and we presume money – into all this communication when it appears to have so little to actually communicate.

This week it published an “” to say there still was no investment policy – something it had pledged would be in place by the end of Q1 this year. The fund also acknowledged that it still hadn’t replaced Chairman Armando Manuel, who was last month was made Finance Minister in an out-of-the blue mini cabinet reshuffle.

Back in April, when to have the policy in place by the end of Q1, it an opposition party’s unsuccessful court challenge to its constitutionality. However, this time the lack of progress on the investment policy (which I had previously been told was ready and just waiting sign off) is being blamed on the late adoption of the 2013 state budget, along with a new review launched by government to create a fiscal stabilization fund that would operate separately to the FSDEA.

The creation of a stabilization fund is actually no bad thing. since 2009 when they had to lend Angola US$1.4billion to liquidize its economy, which had been badly affected by the fall in oil prices. However, one can only wonder why they couldn’t have thought of this before they launched the FSDEA last year.

Would you launch a business without a business plan? No! So, why would you launch a US$5billion public fund without a strategy?

Insiders have told me they think the FSDEA was rushed out to maintain the momentum after the MPLA election victory and also to keep up with other new African fund launches in Nigeria and Ghana.

I am growing a little tired of the Angolan way of launching big programmes (and announcing them over and over and over again) only for them to fade from sight after a few months without any follow up. You only have to look at how times in recent years government Ministries have changed names and responsibilities and location, and then changed back again. This is the nature of politics the world-over, of course, but I’m just frustrated that there are so many incredibly well-educated and smart people in Angola who allow themselves to be carolled into this dysfunctional pattern of policy u-turns that prioritise political power over people’s needs.

If you unpick the FSDEA what you realise is that it is actually a re-branded version of the Fundo Petrolifero (FP), which was in September 2010 and created by five months later in February 2011. It had been for a while but got buried during the global financial crisis when Angola’s own economy

The FP was to collect the equivalent revenue from 100,000 barrels of oil per day to be able to pay for infrastructure, namely water and electricity supply projects, to complement the ongoing post-war national reconstruction programme. Closer inspection of the FP’s statutes, as published in the government gazette, revealed, that as well as spending money on infrastructure, the fund could also invest in pretty much anything it wanted, short, medium or long-term, and at home or abroad.

But no accounts were ever published for the FP and most people forgot it even existed (like they have ) and no one knows if it actually invested anywhere. Then, in October last year, 17 months later, it re-emerged with a pot of exactly US$5billion, now called the FSDEA. At the launch, then Chairman, Manuela, said that the FSDEA had acquired its money from the FP.

Journalists asked where that money was. “In a triple A banking institution,” we were told (i.e. not in Angola) but no further details were forthcoming. Earlier that day Jose Filomeno had told me that Swiss-based Quantum Global Investment Management were “interim managing the assets” until the investment policy was finalised and a full asset manager tender would take place. Jean-Claude Bastos Morais, a Swiss Angolan entrepreneur, and a co-shareholder with Jose Filomeno in Angola’s Banco Kwanza Invest (formerly called Banco Quantum) to a reporter from Euromoney.com.

It was therefore a little curious to read in this latest press statement that the ‘existing US$5 billion fund remains under the sole custody of the Central Bank of Angola as no investment has been made to date’. I’m sure all will become clear when the fund publishes it audited annual report in Q1 of 2014 as planned, providing of course they can get some investment policies in place before then.

We are told the “Angolan Government is working closely with the Fund’s Advisory Board” (which includes the Finance Minister, aka the former FSDEA Chairman) to appoint a new Chairman. There is a rumour in Luanda it may be Manuel Nunes Jnr, former Minister of State for Economic Co-ordination. Nunes Jnr is a die-in-the wool MPLA man but he is also a well-liked and well-respected and highly capable technocrat. His removal from office in 2011 surprised everyone and though his nephew, Hugo Gonçalves, is already the third member of the board, Nunes Jnr’s appointment would certainly go along way to restoring market confidence in the fund.

But there are a lot of rumours in Luanda. Another noisy one is that Jose Filomeno will be promoted to Chairman, a role he’s ostensibly already doing. Angolans aren't happy that the president's son, who has next-to-no government experience, is even on the board. They see it as another step towards the "Eduardo-isation" of their country since President dos Santos’ other children – Isabel, Tchize and Coreon Du – are already involved in banking, telecoms, diamonds, television and music.

But if Filomeno does become Chairman, it will at least justify the money spent on the global PR team, since its members will have a lot of explaining to do.

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