IMF delays Angola meeting for more talks; Eight soldiers killed in Cabinda clash
Welcome to the Angola Economic and Political Risk Briefing for 31 July 2020
Welcome to the Angola Economic and Political Risk Briefing, Issue 17
brought to you by Zitamar News, Moxico Risk Consulting LLP, and Mark Bohlund
Continued haggling over how much of Angola’s debt to China should be included in the debt service moratorium is most likely behind the delay to the IMF approving a planned $1bn loan disbursement - and will also have wider implications for the whole Debt Service Suspension Initiative. However, the IMF is likely to be pleased by the Central Bank Governor hinting that the bank may move towards greater independence. Meanwhile, the security situation in Angola’s Cabinda exclave is deteriorating seriously, with separatists launching multiple attacks, claiming the life of eight soldiers and the loss of arms caches.
In this issue
Economy:
IMF delays Angola meeting on bigger loan to allow for more talks (Bloomberg
Banco de Angola considers leaving Economic Team (Jornal de Angola)
Number of companies seeking economic relief soars (ANGOP)
Politics:
Eight FAA soldiers & 2 FLEC separatists killed in fresh clashes in Cabinda (VOA)
General Dino, Kopelipa and Vicente suffer more property confiscations in Lourenço crackdown (Club-K)
Government to withdraw COVID-19 financial support at end of month (Expansão)
IMF delays Angola meeting on bigger loan to allow for more talks (Bloomberg)
The IMF’s executive board has postponed the third review of its EFF program with Angola until at least the second half of August to allow for more talks with the Angolan authorities about their request for an increase in the size of the programme. The meeting, originally scheduled for 30 July, will now take place once the executive board has returned from its summer recess over the next two weeks.
The delay is not unexpected given the potential for significant disagreement among IMF board members. The many waivers of non-compliance are likely to have been criticised by some board members especially given the proposed increase in the overall size of the loan and to the scheduled disbursement (to $1bn). However, the main reason for the delay is most likely the need for more time to conclude a debt service moratorium on Angola’s Chinese loans. We have previously highlighted that the World Bank and the US, which is the IMF’s biggest shareholder with an effective veto on board decisions, are pushing for the inclusion of loans from China Development Bank in the G20 Debt Service Suspension Initiative. China Development Bank was founded in 1994 to provide subsidised financing for government development projects, but its lending became increasingly commercial over time, including in its lending to Africa. As a consequence, Beijing opposes its inclusion in the DSSI. More than 60% of the $43 billion lent to Angola by Chinese entities between 2003 and 2018 was from China Development Bank, including a $10bn loan to recapitalise Sonangol in 2016.
Banco de Angola considers leaving Economic Team (Jornal de Angola)
The central bank, the Banco Nacional de Angola (BNA), could quit the influential economic council of ministers as part of a revision of its legal mandate, according to a televised interview with its governor José de Lima Massano on 28 July. The economic council, or Equipa Economica (Economic Team) as it is often called, has a wide role in economic policy, among other things reviewing proposed legislation concerning economic affairs. Massano hinted that a revision to the BNA law could be made to clarify the relationship between the central bank and the government. Earlier in the day, the BNA's monetary policy committee had announced that deposits at the central bank would be charged a fee in a measure aimed at boosting bank lending to the real economy.
Massano’s interview with the national broadcaster touches on several topics that have been central in the IMF’s advice to Angola. Narrowing the BNA’s mandate to price stability and banking sector regulation would bring it closer in line with peers across the world and away from the centralised governing model that has characterised Angola since independence in 1975. Moving the BNA towards international standards of central banking has been an ongoing effort since a new BNA act was passed in 1991. The current BNA act dates from 2010 but is seen by many as not giving a strong enough mandate for the central bank to resist political pressure. This was evident in the so-called ‘500m scandal’ in which the son of the former president has been accused of transferring $500m from a BNA account to an account in the UK. The BNA held its policy rate at 15.5% on 28 July as we had predicted, instead opting for other measures to try to boost lending to the economy with less risk of weakening the kwanza.
Number of companies seeking economic relief soars (ANGOP)
The number of companies expressing interest in the Angolan government's economic relief program has increased from 184 to 218 in the last 22 days, and it is estimated it could reach 500 by August, according to a government source. The firms are seeking assistance from a government economic relief programme aimed at helping companies that have suffered losses as a result of the covid-19 pandemic. Most of the companies are in the agricultural sector and an estimated AOA50m will be made available for each company, according to Manuel Machado Quilende, the Director of the Provincial Department of Integrated Economic Development of Huíla.
The article illustrates that the government response to the covid-19 economic crisis is being rolled out, but also the relatively paltry sums involved. If the number of firms reach 500 by August as envisaged then it would inject AOA25bn ($45m) into the economy, less than 0.1% of GDP. The revised 2020 budget, which was passed on 28 July, envisages a 16% drop in overall government spending which will add to the economic pressures on the economy from the ongoing covid-19 lockdown.
Chart of the Day
The BNA stays on the sidelines as inflation expected to stabilise in H2 20
Eight FAA soldiers & 2 FLEC separatists killed in fresh clashes in Cabinda (VOA)
On 28 July FLEC Operational Leader Futi Bonifácio Edinho claimed that the insurgent group had ambushed an FAA patrol, killing eight Angolan soldiers and seizing automatic weapons, rocket launchers and ammunition. Edinho warned that the security situation in the exclave would ‘deteriorate in the coming days’, but reiterated his group’s commitment to a negotiated settlement with the Angolan government.
This attack occurred in Massabi commune, at the village of Chissanga, within a few kilometres of the border with the Republic of Congo, and 90km north of Cabida City. FLEC troops appear to have launched a surprise attack on an Angolan military patrol that was pursuing them. On the same day, in Chimbeti village, Buco-Zau commune, four FAA soldiers were killed in another attack by FLEC. As promised by Edinho, the security situation in Angola’s northern exclave appears to be seriously deteriorating, with FLEC demonstrating the ability to launch multiple attacks over 60km apart on the same day. There is little commercial road traffic between Cabinda City and neighbouring Pointe Noire, so the Chissanga attack has only minor impacts on commercial ground cargo security in the exclave. However, the attack in Chimbeti increases ground cargo and personnel risks to those utilising the EN100 / EN220 through Buco-Zau. This includes companies exploiting the new gold concessions of Buco-Zau and Lufo. Given the trajectory of the conflict and past attacks (see Angola Economic Briefing - 22 June 2020), other projects near Cabinda’s borders, such as in the south-east of the exclave at the Cácata Phosphate Concession, should also be aware of increased armed violence risks in their area from separatist activities.
General Dino, Kopelipa and Vicente suffer more property confiscations in Lourenço crackdown (Club-K)
Four print and broadcasting media assets owned by General Dino, Helder Dias “Kopelipa” and Manuel Vicente’s Media Nova Group will pass into state hands, after action from the Angolan Attorney General’s Serviço Nacional de Recuperação de Ativos. TV Zimbo will be taken over by Televisão Pública de Angola (TPA), while Rádio Mais will be under the control of Rádio Nacional de Angola (RNA). O País newspaper and Exame magazine will also fall under state control.
Media Nova Group used state funds in 2008 when setting up these outlets, so the Attorney General’s argument is that they remain state property. While there are some concerns that this will lead to a dampening of TV Zimbo’s often open criticisms of President Lourenço’s government, this is unlikely to impact on Angola’s overall (slow) improvements in press freedom, which has seen it move from 125th when Lourenço took over in 2017 to 106th in the 2020 World Press Freedom Index. The recovery of these state assets will be viewed positively by international partners such as the IMF, and is another strong indication that President Lourenço intends to move more decisively in his anti-corruption drive against former Dos Santos allies such as General Dino, Kopelipa and Vicente, who were previously viewed as untouchable. This is the second piece of bad news for Vicente in particular this month, following the seizure of one office block and two residential tower blocks located in Ingombota district, Luanda city, on 22 July that Vicente had a share in, but were built with Sonangol funds (see Angola Briefing, 24 July 2020). We are highly likely to see further expropriation of property and businesses belonging to General Dino, Kopelipa and Vicente in the six month outlook, which represents reputational and contract non-payment risks to those partnering with them in Angola.
Government to withdraw COVID-19 financial support at end of month (Expansão)
The grace period for non-payment of certain public goods and services is due to end this weekend, with no extension from the government likely. During the State of Emergency from March to May, individual consumers (though not businesses) were able to defer payments to the Empresa Nacional de Distribuição de Electricidade (ENDE) and the Empresa Publica de Aguas de Luanda (EPAL), due to the economic impacts of covid-19. Workers also received a 3% subsidy on their pay, to allow them to not make social security contributions. ENDE and EPAL were authorised to begin negotiating repayment plans, and cutting off supplies for non-payment, as of 27 July.
The government’s messaging has been last-minute on this issue, with many Angolan consumers expecting an extension to the grace period given the lockdown restrictions still in place in Luanda Province. Likewise, ENDE has not released an official statement clarifying the conditions under which electricity provision will be cut, or what sorts of payment plans they may put in place to help disadvantaged households who are unable to pay. EPAL has done slightly better, with a social media campaign encouraging consumers to pay their bills using the Multicaixa Express App. Significant numbers of Angolans now find themselves in financial difficulties due to covid-19, and unable to pay off their debts in one lump sum. We are therefore likely to see intervention from either the Minister of Territorial Administration Adão de Almeida or the Minister of Energy and Water João Baptista Borges to avoid widespread disconnections, especially in the capital Luanda, which would contribute to increased risks of civil unrest.