What must Chevron’s CEO John Watson be thinking as he sits in his office in San Ramon, California and ponders the future of his Angolan subsidiary, the Cabinda Gulf Oil Company Ltd (Cabgoc)?

How much longer does he estimate that he needs to keep on the good side of José Eduardo dos Santos’s corrupt and kleptocratic MPLA government to ensure Cabgoc can continue to operate? Is he hedging his bets? Or is he staking Chevron’s African corporate future on the faint chance that the Dos Santos family and their acolytes will not be brought to justice for their crimes?

While oil industry analysts around the globe were divided about the merit of the President’s nepotistic appointment of his daughter Isabel to head the restructured Angolan state oil company, Sonangol, Watson’s man in Angola, the Cabgoc director John Baltz, was telling a US-Angola Chamber of Commerce conference that he was “optimistic” about the move.

“The government has acted. It is clear the direction they want to go. I am always optimistic. I certainly support the direction Sonangol is taking,” John Baltz said.

That’s an interesting position given Chevron’s position as one of the doyens of international oil companies in Angola.

The Chevron website proudly boasts of nearly six decades of operations in Angola. Last year alone, its subsidiary Cabgoc produced 110,000 barrels of liquids and 55 million cubic feet of natural gas from its Angolan wells. Over those years it claims to have invested $215 million US dollars in programmes to support the health, education, environmental and social needs of millions of Angolans.

As anyone who has visited the Cabgoc ‘enclave-within-an-enclave’ in Cabinda knows, it has certainly invested millions in creating a slice of California, separated by barbed wire from the remainder of Cabinda which shows little evidence of material benefits in health, education, environmental or social needs from such oil company benevolence.

How did Chevron channel these funds to the millions of Angolans it claims to have benefited? To whom were those checks made out? Given the well-documented reality of doing business in Angola, is it possible the funds had to be routed through the governing MPLA party and its notoriously corrupt leadership?

It must be quite the predicament for the Chevron Johns. On the one hand it would be foolhardy to jeopardize their current cozy corporate status in Angola by publicly acknowledging that the head of state has flouted the laws of the land by abusing his status to appoint a direct family member to run Sonangol.

On the other hand, if and when the Dos Santos family’s grip on Angola comes to an end, if the presidential family is called to account for their actions, then the actions of many rich and powerful corporations who have done business with them over decades will surely also come under close scrutiny.

There have been previous allegations that Chevron was able to influence the Justice system in Angola because it benefits from its clout with the ruling MPLA. Would such influence survive beyond the Dos Santos regime?

And what about the US Justice system? And in particular, that 1977 US federal law known as the Foreign Corrupt Practices Act?

If Isabel dos Santos’s appointment to head Sonangol survives the coming legal challenges, the Chevron Johns may want to take note that Isabel’s “track record of getting deals done” may have been based on the improper use of state funds and remember the old adage that ‘he who sups with the devil, should have a long spoon’.

Angola’s state oil giant, Sonangol, is running out of time to prove it has a credible plan to repay US $13 billion in loans it obtained from a syndicate of European banks.

The loans’ agreements came with a contractual obligation to produce annual balance sheets showing a healthy ratio of debt to capital and it appears Sonangol has been unable to honour this.

Last month the London-based Standard Chartered Bank set a 45 day deadline for Sonangol to explain its failure to comply with the debt ratio obligation stipulated as part of the loan agreement, and to provide documentary evidence that is has the capacity to honour the terms of the loan.

Sources close to the Board of Directors of Sonangol have indicated to Maka Angola that the company may not be in a position to make the repayments on time.

It is alleged that Sonangol’s long-term auditor EY raised objections to some creative accounting which the Angolan company hoped would diminish the scale of its financial problems, improve the debt ratio and satisfy its syndicate of creditor banks.

One aspect of the plan was to transfer US $5 billion of Sonangol’s debt off the books overnight, on the grounds that this was a sum disbursed towards the National Housing Project and is therefore a debt “owned” by the state. This expediency would reduce by almost half the amount of debt being carried by Sonangol.

In addition, the new Sonangol board wants to change the way it reports its revenue.

Corporate income statements listing revenues and expenses for the accounting period typically show more than one measure of pre-tax profits, e.g. EBIT (Earnings before interest and taxes) and EBT (Earnings before taxes). The primary difference between the two is that EBT factors interest into its calculation, while EBIT does not, and as a result this provides a slightly different perspective on the financial health of the company, depending on how much interest is owed on any loans taken out by the company.

Since 2013, Sonangol’s annual balance sheet has only shown a credit because of successive re-valuations of its assets rather than cash flow, valuations which the auditors were unable to justify.

Thus, after 11 years, EY has been replaced by another of the ‘Big Four’ auditors, KPMG. The man in charge of KPMG Angola is none other than Sikander Sattar, who has been in charge of KPMG Portugal, where he came under fire for the part he played (or failed to play) in the contentious collapses of the Banco Espírito Santo (BES) in Portugal and its Angolan subsidiary (BESA).

KPMG was the official auditor of both BES and BESA. It was blamed for failing to avert BES’s over-exposure to risk when BESA offered unsecured loans worth more than three billion euros. Some analysts suggest that as a result, international financial markets have lost confidence in KPMG.

Added to this there are scant reasons for optimism about the short-term financial health of Sonangol. Last year, the former chairman of the board of Sonangol, Francisco Lemos, went public with a claim that the national oil company was effectively bankrupt.

Despite subsequent official denials, time has shown that Francisco Lemos wasn’t far wrong. Given the iconic status of Sonangol as Angola’s primary source of foreign revenue, it took courage to turn whistleblower and alert the public to Sonangol’s impending implosion.

Evidence of this came in the stunning announcement made recently by President José Eduardo dos Santos that Sonangol had been unable to make any contribution to the State Budget since last January.

His response to the impending disaster has proved a source of further anxiety to the international financiers who have lent so much to Sonangol. Contrary to law and common sense, he appointed his daughter, Isabel, to take over as chair of the Board. Isabel lost no time in assigning to herself direct responsibility for the key portfolio of financing (Sonangol Finance).

That places Isabel dos Santos squarely in charge of the Money. Additionally, there is a clear conflict of interest given Isabel dos Santos is both a shareholder and debtor of thanks to her business interests in UNITEL and GALP, in a joint-ventura with Sonangol.

President José Eduardo dos Santos admits Angola is running out of money but he has yet to outline any sort of rescue plan. Is Angola teetering on the precipice of economic disaster? Or is it already in the abyss?

In spite of international entreaties to diversify the economy and reduce its dependence on imports, the MPLA government has so far failed to make meaningful changes to ensure self-sufficiency. So if the national bank has run out of money to pay for imported goods, what is the alternative?

How can the government guarantee a continued supply of food to the Angolan people? Are they to starve? Can the President tell us where he expects to find the resources to avert calamity?

With Angola already having to service billion dollar loans, the President may have run out of collateral. Clearly his generation of governing officials won’t have to bear the burden of having to repay these loans, that will be the sorry legacy they leave to their children and grandchildren. But if Angola’s borrowing options are limited, where can the President turn to find the money?

How fortunate then that the Angolan leadership, with significant public backing, established the Sovereign Wealth Fund as a buffer against economic crises. This was such a good idea that other governments followed suit: investing the budget surplus from the good years for capital growth to protect the national economy against any hard times in future. Who would have predicted that a crisis of such magnitude would be upon us so soon?

Has the government overlooked this potential solution to the cash shortfall brought about by plummeting oil prices? Unless the President has a better plan up his sleeve, what is to prevent him from drawing down funds from the Sovereign Wealth Fund?

Some may argue that this is not the best time to sell Angola’s holdings in the fund and that a delay of a year or more could secure a better return. Are these the same ‘experts’ who prepared budgets last year based on the assumption that oil prices would remain steady at more than US $100 a barrel? Can Angola afford to hold on? Surely not if the price would be mass starvation.

Unless Angola secures an immediate alternative source of revenue to fund its import dependency, or conjures up at short notice sufficient diversification to ensure the country can feed itself, then the future could be very bleak indeed. But if the Sovereign Wealth Fund has been well managed by the President’s son, José Filomeno dos Santos “Zenú”, and if the government is prepared to draw down funds to import food rather than weapons, the solution may be at hand. And then what?

Tanzania’s low cost airline Fastjet (AIM: FJET) recently introduced the option to pay for flights using new PesaPal mobile money platform.

PesaPal provides various payment options through the internet, for which it works with banks, mobile network operators and credit card companies.

Fastjet Update

Fastjet forecasts a passenger load of 390,000 for the semester ending 30th June 2016 (2015: 363,726), which is lower than expected, according to the company’s latest trade update.

In order to improve operations, Fastjet has appointed a new CEO, Nico Bezuidenhout, who will join the Group on 1st August 2016.

Nico is an experienced executive in the civil aviation industry having been CEO of Mango Airlines, a subsidiary of South African Airways, for 10 years.

The Board of Fastjet and Nico have already identified a number of opportunities to stabilize the business and address many of the challenges it faces.

These include a fundamental review of the company’s fleet, the size and type of aircraft operated, the routes flown, the relocation of Fastjet’s head office to Africa, and the introduction of revenue generation initiatives.

“[…] Although market conditions are currently challenging, I am confident that we can build on the airline’s existing operational base to strengthen and develop the business and deliver on its considerable potential,” Nico commented.

Fastjet is a British-based low-cost carrier operating in Africa in Tanzania, Kenya, Uganda, Zambia, Zimbabwe and South Africa.

The company is Africa’s first low-cost pan-African airline, having started operations with the acquisition of now defunct Fly540, which operated in East Africa.

Fastjet’s branded flights commenced in November 2012 in Tanzania and the carrier has since then flown nearly 2m passengers with fares as low as USD10 one way.

The African Development Bank together with the government of Cote d’Ivoire this week held discussion on the country’s water sector.

The event took place during the World Water Day on March 22, 2016 in Abidjan. It was led by Louis-Andre Dacoury-Tabley, the Minister of Water and Forests, and Anne Ouloto, the Minister for Urban Safety and Sanitation. Also present was Jean-Michel Ossete, Coordinator of the African Water Facility (AWF), an initiative hosted and managed by the African Development Bank, among others.

They deliberated at length on the role of water in job creation, in line with this year’s World Water Day theme, Water and Jobs.

Discussions focused on Integrated Water Resources Management (IWRM) in urban areas. Minister Dacoury-Tabley outlined the many challenges faced. “We are facing major challenges and IWRM represents the most adapted way to address them. Ivory Coast is fully engaged in IWRM, gradually moving from sectoral management to integrated management. The time has come to put IWRM at the center of the land use planning,” he said.

The African Development Bank demonstrated its experience in IWRM in a film on rehabilitation of the Gourou watershed in Abidjan. About 800 direct jobs and 2,300 indirect jobs have been created as part of the works for rehabilitation of the watershed. Previously, inhabitants were victims of a heavy and anarchic urbanization, and poor management of solid waste. They were therefore facing heavy and repeated flooding, an insalubrious environment and the stilting of the Ebrie Lagoon.

Jean-Michel Ossete, Coordinator of the AWF, noted that the Bank’s projects included a strong job creation component. “At the African Development Bank, we facilitate the conditions for job creation, while keeping with our goal to ensure inclusive development and green growth in Africa,” he said.

He added: “The action of the Bank is not limited to infrastructure development; we also seek to include labour force in our development schemes. For instance, when we consider an agricultural water project, on top of the irrigated perimeters dedicated to private sector operators, we try to make sure that we provide land for family-run farming or for young people ready to invest in agriculture,” he added.

Millions of people working in the water sector are often not recognized or protected by basic labour rights. Today, almost half of the world’s workers – 1.5 billion people – work in water-related sectors and nearly all jobs depend on water and those that ensure its safe delivery. The 2016 World Water Day theme focuses on how the quantity and quality of water can change workers’ lives and livelihoods.

Angola should introduce a value-added tax (VAT) to complement the recently adopted non-oil tax reform, the International Monetary Fund (IMF) has said.

The long-awaited non-oil tax reform was approved by the National Assembly on July 4, 2014. The IMF welcomed the package as a “crucial step toward reducing the budget’s heavy reliance on oil revenue.”

After running a surplus over the last four years, the authorities expect an overall fiscal deficit of about four percent of GDP in 2014, reflecting a ten percent decline in oil revenue during the first quarter of 2014. “While this is unlikely to be a permanent phenomenon, significant steps have been taken in non-oil tax reform under the recently approved fiscal legislation aimed at diversifying the sources of non-oil revenues,” the IMF said.

The reform included the adoption of three laws: the general tax code, the tax procedure code, and the tax collection code. In addition, changes to personal and corporate income taxes were introduced to boost consumption and investment.

The corporate income tax rate was reduced from 35 to 30 percent, while the personal income tax threshold was increased to a monthly income of 34,450 kwanza (USD353), from 25,000. At the same time, the tax base was expanded by closing loopholes. A partial tax amnesty for some tax debts prior to December 2012 was also approved.

“Staff welcomes the recent approval of the core decrees comprising the non-oil tax reform. The approval of this legislation should be followed by improvements in the tax and customs administrations to fully realize the potential for higher non-oil revenue collections. A value added tax (VAT) could also be introduced in due course and, if implemented diligently, would provide more stable revenue for the budget, thus reducing the dependency on oil revenue and shielding the budget better from oil revenue volatility,” the IMF concluded.

Dar es Salaam — Many people believe that the growing influence of China on the Tanzanian economy and global politics is a new phenomenon. Last week, the Chinese Cultural Centre in Dar es Salaam provided a case study to prove otherwise.

In fact, at one time, around 618 AD, China was indeed a global economic power, specialising in silk trade.

Thousands of years ago, the people of East Africa, for example, used to trade with China, mainly in silk and porcelain, according to a recent report released by the Chinese embassy in the city.

The only difference is the manner in which trade between Tanzania and other African countries is conducted under the present economic conditions.

China, for many years, was not a member of the International Monetary Fund (IMF) and the World Bank. It only opened up its economy to the world in recent years.

Last November marked a turning point with the Bretton Woods Institutions (World Bank, and the International Monetary Fund), approving the Chinese currency, yuan, as one of the reserve currencies influencing the global financial market.

At the time of announcing the decision, Christine Lagarde, IMF managing director, was quoted as saying that the decision is “an important milestone in the integration of the Chinese economy into the global financial system”.

A senior officer at the Dar es Salaam-based Chinese Cultural Centre, Mr Gao Wei, said recently Beijing’s economic power could be traced back to the Tang dynasty, between 618 and 907 AD.

“During that period, Chinese porcelain was always at the centre of world cultural communication, and was the most loved, admired and widely imitated product in the world,” reads part of report which the Centre circulated to the media recently. Trade in Chinese silk and porcelain between the people of East Africa lasted for thousands of years before the slave trade era and coming of colonialists, according to experts.

This implies that the acceptance of the yuan by the IMF to join other five currencies as global reserve currencies is the re-emergence of the old glory of Chinese power in global trade, according to Mr Wei.

Speaking to the media on the sidelines of a recent forum organised by the Financial Management Institute for Eastern and Southern Africa (MEFMI), Bank of Tanzania (BoT) governor, Prof Benno Ndulu said Tanzania’s participation in the international bonds market should focus more on the Chinese currency, a.k.a renminbi, because of the current state of the global economy.

Tanzania now keeps five per cent of foreign exchange reserves to harness trade opportunities from the giant Chinese economy.

The BoT governor says: “Following the decision by the IMF to approve the yuan as one of the reserve currencies, we have done the right decision to keep five per cent of our foreign currencies’ reserve in yuan. Yuan has become the most important foreign currencies in international stock market trading. Our experience has shown that we have benefitted much from trading in Yuan in the international bonds market.”

With that decision, the yuan joined the US dollar, Euro, Japanese yen, Swiss Franc and British pound in the list of currencies the IMF uses as an international reserve asset, according to the BoT governor.

MEFMI executive director Caleb Fundanga says countries of Eastern and Southern Africa must focus more on trading with China to gain more from international trade. China, he notes, is now the world’s largest economy on a purchasing-power-parity basis. The Asian giant roiled a significant part of the African economy by cutting back on resource imports.

Tanzania e-commerce is growing at an average of 50 per cent, thanks to government and stakeholders’ initiative to improve mobile data.

Speaking at the launch of premium services yesterday at the Dar es Salaam International Trade Fair, online shopping portal-Kupatana.com Acting Manager, Makusaro Tesha, said access to internet is changing people’s attitude and now the majority people are gaining interest in online shopping.

According to Tesha, online shopping in Tanzania is not a new service with the company alone having more than three years of undertaking its operations. He explained that the new services launched by the portal will enable online payment processing for small and medium-sized businesses as well as marketplaces.

“The costs are relatively affordable and will enable a subscriber with an advert an advantage of 25times more than the conventional method,” said Gift Joshua, Kupatana.com Head of Marketing.

He said the firm has been registering at least 2000 advertisements daily, about 60,000 a month, allowing more customers to make online purchases from a largest range of products.

The site offers a growing portfolio of over 7,500 products, with a commitment to keep sourcing new, innovative and premium products to satisfy the needs of all its loyal customers.

 

ZAMBIA has signed a bilateral trade agreement with Angola to increase trade between the two countries. The trade stands at US$8 million in exports and US$175,000 in imports

The bilateral trade agreement will further exempt some products from customs duty.

Minister of Commerce, Trade and Industry Margaret Mwanakatwe, who signed for the Zambian government, said that the bilateral trade agreement will have a positive impact on the diversification programmes being pursued by the two countries.This is according to a statement issued in Lusaka yesterday by Ministry of Commerce Trade and Industry permanent secretary Kayula Siame

Mrs Mwanakatwe said the agreement is designed to facilitate the expansion of trade between the two countries and further strengthen economic and political ties.

The minister said in Luanda during the signing ceremony last week that: “Synergies between trade promotion and investment promotion will be critical to harnessing the benefits associated with the implementation of the bilateral trade agreement.”

She urged Zambian exporters to take advantage of the trade agreement and the Angolan market by ensuring that their goods meet international standards and to work with the Zambia Bureau of Standards.

“The Zambia Development Agency will be on hand to provide any facilitation the exporters will require to access the Angolan market,” Mrs Mwanakatwe said.

Angola’s Minister of Commerce, Rosa Escorcio Pacavira De Matos said the agreement will enhance trade, improve market transactions and the movement of people and goods.

Ms De Matos said the agreement will also foster public and private investments between the two countries.

The agreement is intended to make Angola one of Zambia’s largest export markets and further create an opportunity for investment, competition and innovation for the private sector, thus, enhance job and wealth creation in areas such agriculture, tourism, energy and construction.

The trade agreement has provided a list of products that will be exempted from custom duty.

The agreement will further compliment other initiatives such as the development of the Lobito Corridor, which is aimed at renewal of the Benguela Railway Line which was commissioned last year.