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Irina Slav

Irina Slav

Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.

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Angolan Oil Confident Ahead Of Critical Elections

Oil

After Angola’s critical elections, the oil will still flow, unabated—despite talk of a potential opposition upset.

Angola is—on any given day—Africa’s first or second-largest producer. In recent months, it’s been the second largest, but late last year and early this year, it had overtaken Nigeria for the top spot as that country grappled with militant attacks on its fossil fuels installments.

When a major oil-producing country holds elections that will see the region’s second-longest reigning leader step down, the world holds its breath, and the speculators hedge their bets.

But in Angola, where President Eduardo dos Santos will hand over leadership in the 23 August polls after 38 years in power, the ruling party is unlikely to succumb to regime change—at least not without a great deal of bloodshed.

This is a family empire of enormous proportions. The money it generates and the influence it wields is likely enough to ensure ruling party loyalty with or without a dos Santos at the helm.

Dos Santos and his wife and children together control the bulk of the country’s economy, and the president’s daughter, Isabel dos Santos, controls its beating heart—Sonangol, the state-run oil giant.

She’s worth an estimated $3.2 billion, and is said to be the richest woman in Africa. Her personal empire extends into telecommunications, banks, sports and more. The president’s son, Jose Filomeno dos Santos, enjoys the chairman’s seat on Angola’s $5-billion sovereign wealth fund (SWF), and a 49-percent share in Standard Bank Angola. His younger daughter, Welwitschia José dos Santos Pego (Tchizé), and younger son, Jose Paulino (Coreon Dú), run a production company that is alleged to receive multi-million-dollar government contracts. And Tchize also sits on the ruling party (MPLA) committee and plays a controlling role in the state TV channel. And the list goes on…

Related: Oil Rises, But Saudis Face Daunting Dilemma

That empire is not likely to crumble in an election where the favored to win by a landslide is current Defense Minister João Lourenço—the general handpicked by dos Santos as his successor.

Many had earlier speculated that one of the dos Santos children would be picked to succeed their father when he stepped down; but this is not necessary when you control the country’s economy. It’s more prudent to have a loyal ruling party leader and avoid sticky conflicts of interest.  

Ruling Party Victory Expected

General Lourenço has the backing of the ruling People’s Movement for the Liberation of Angola (MPLA) and from wide perspectives, his victory appears secured. That he’s campaigned on an anti-corruption platform does not mean he is bent on targeting the dos Santos family, or he wouldn’t be running at all. The ‘anti-corruption’ platform is the favored (and almost singular) campaign platform in Africa.

And MPLA—the party that fought for, and won, Angola’s independence holds immense power, even if that is somewhat threatened by economic instability that has created a disillusioned youth trying their hands at the country’s two largest opposition parties.

But keep in mind that in the last elections in 2012, MPLA won 72 percent of the vote, while its closest rival, UNITA, won only 18 percent.

However, Reuters noted in a recent report, the opposition party is ready for coalitions should MPLA lose. The chances of this happening are difficult to gauge as there are no reliable pre-election polls in Angola. Should it happen, the level of instability would be bloody.

The opposition is hoping that economic issues will drive more voters to the polls in their favor. They are banking on the fact that despite positive oil differentials, the Angolan economy is still reeling from the recession it slipped into after the 2014 oil price crash.

Again, however, the odds are not in their favor. Last year, Angola was still strong enough to refuse a bailout loan from the International Monetary Fund (IMF), deciding to go it alone.

But UNITA is insistent that the time is ripe for change, and the opposition party is placing its bets on disillusioned youth, anger over a low ($500/month) minimum wage, over 20 percent unemployment, and calls for diversification away from oil.

The dos Santos aren’t scared of the opposition, and they aren’t scared of losing control over the ruling party and their massive empire.

As Engebretsen notes, any attempt by the hand-picked successor to go after the dos Santos family could backfire, endangering Lourenço’s own position. There is ample precedent in other regimes of a similar structure, with power concentrated in a circle close to the person at the helm, with everyone in that circle benefiting from this power.

Angolan Oil, and the Dos Santos Empire

After Isabel dos Santos took over as the head of Sonangol last year, her stated aim was to overhaul the state-owned giant and make it more resilient in the face of depressed oil prices. But her takeover was highly controversial.  

Related: This $65 Billion Oil Opportunity Will Never Be Tapped

Detractors said she was driving it into the ground with the hammer of mismanagement.

The numbers give her enemies little ammunition, though. Sonangol has been faring well, despite its obligation under the OPEC agreement to reduce output.

The country’s crude oil exports will reach the highest in 13 months this October, Reuters reported yesterday, quoting a revised loading program. Angola will export 1.7 million barrels daily in October, according to loading data, thanks to robust demand from Asia and a continuing decline in oil output in Venezuela.

In the meantime, it will be difficult for an opposition that is not unified amid a decided lack of electoral transparency to swing this election against a ruling party that has been in power since 1975.

The opposition parties want change, but change can only be funded by Angolan oil at this point, and neither UNITA nor the other opposition parties offer any concrete details on how they might modernize or reduce poverty in the country. On the flip side, the ruling party is pushing continuity, which suggests a high level of confidence in the outcome on 23 August.

By Irina Slav for Oilprice.com

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