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Role Reversal: Angola's investments and export markets provide relief to its former colonial master, Portugal

Article - December 2, 2014

In a historic role reversal, Angolan companies have been investing heavily in Portugal since 2008, aiding the former colonial power to survive the economic crisis. This “strategic partnership” has not been without controversy, but is likely to continue as Portugal´s economy recovers and Angola’s continues to grow apace.


A traveler passing through Lisbon and its environs these days will notice the stylishly-dressed Africans window shopping in the upscale neighborhood of Chiado, or taking their leisure at the beachside cafés of nearby Cascais, the resort that was once a favorite watering hole for European monarchs.

These visitors are almost certainly from Angola, and are here to buy up real estate properties or look after their investments in a wide range of companies, both listed and private. They are the visible evidence of an historic role reversal in which the once impoverished colony that was ruled and exploited by Portugal for more than 400 years has become the financial savior of its cash-strapped and debt-ridden former master.

Angola certainly has the deep pockets to help Portugal. Africa’s second-largest petroleum producer, with an average output of about 1.7 million barrels per day in 2013 and huge reserves, the country also boasts sub-Saharan Africa’s third-largest economy.
Petroleum and gas provide 75% of government revenue and 43% of GDP, or more than $40 billion per year to Angola, one of the fastest-growing economies in the world.

Angolan investment in Portugal began to take off in 2008, when the African nation’s state-owned oil company, Sonangol, along with Banco Privado Atlantico, purchased a 47.3% stake in the Angolan branch of Portugal’s biggest private bank, Millennium BCP. (Sonangol is today the largest shareholder of the parent Millenium BCP, with 15.08%.)

That same year, cracks began to appear in the Portuguese economy and the country eventually followed many of its neighbors into the Euro zone debt crisis which led to devastated economies, bankrupt businesses and millions of people out of work.

In 2011, the Portuguese government agreed to a 78 billion euro ($106 billion) bailout from the European Union and the International Monetary Fund, which forced the country to enact stringent austerity measures and painful economic reforms.

Along with its extensive financial resources for investing in Portugal, Angola was also considered by the Portuguese as a growing market for their now-struggling companies, which were facing tough times as the domestic economy shrank along with their traditional export markets in neighboring countries.

Making Angola even more attractive was the fact that Portugal and its former colony shared a common language, culture and legal framework, as well as financing structures.

Portuguese banks had already been long established in Angola, led by Banco Espírito Santo, the country’s biggest bank by market capitalization and the second-largest private bank, and which set up operations there in 2001 as Banco Espiritu Santo Angola (BESA).

The Banco Espiritu Santo story illustrates how the problems of Portuguese companies can spill over into their Angolan units. In August, after Portugal announced a $4.9 billion bailout of the ailing Banco Espiritu Santo,  Angolan authorities placed BESA under administration and revoked a $5.9 billion loan guarantee issued previously.

Portuguese companies involved in everything from construction to consumer goods and from electronics to health care flooded into Angola. They were aided by the government’s eagerness to enlist foreign companies in its development plans, aimed at turning the country into a regional, and eventually, an international player and diversify the economy away from oil and mining.

Angolan officials are also keen to provide jobs, housing, health care, clean water, reliable electricity and other benefits for the country’s 20 million people.

Eventually, 10,000 Portuguese companies were trading with Angola and tens of thousands of Portuguese executives, managers, technicians and other workers had moved south, many fleeing their homeland’s high unemployment rate, which at the height of the crisis hit a painful 17 percent.

Illustrating just how deep historical ties are, many of the Portuguese packing their bags for Africa were born or raised in Angola before their families fled back home during the decades-long struggle for independence and subsequent civil war which devastated the country.

Today, almost 40% of the foreign companies operating in Angola are of Portuguese origin.

By 2012, Angola had become Portugal’s fourth-largest export market after European Union partners Spain, Germany and France. That year 3 billion Euros ($4 billion) worth of Portuguese products were sold to Angola, accounting for 7 percent of total exports.

As Portuguese investments and businesses grew in their home country, Angolan investors were quick to return the complement. Between 2002 and 2009, Angolan public and private investment in Portugal skyrocketed from 1.6 million Euros ($2 million) to 116 million Euros ($ 157 million).

According to one leading Portuguese think tank, by 2012 Angolan investors owned around 3.8 percent of companies listed on the Lisbon stock exchange in a wide array of sectors including telecoms, energy, media, agribusiness, construction and banks.Total Angolan investment is now estimated to have reached between 10 billion Euros ($13.6 billion) and 15 billion Euros ($20.4 billion). Further investment is expected as the government puts state companies and assets on the block as part of the program to put the economy back on course.

Hailing these new economic ties as the base for a “strategic partnership” that would deeply benefit both countries, Angolan and Portuguese leaders cooperated closely on fostering relations while urging their country’s entrepreneurs to continue their bilateral investing.  

Indeed, one of Angola’s main investors is Isabel dos Santos, the British-educated eldest daughter of President José Eduardo dos Santos. Forbes magazine describes her as Africa’s wealthiest woman and the continent’s first female billionaire.

Over the last several years, she has purchased more than 50 per cent of the Zon multimedia and telecoms conglomerate; a large stake in Banco Portugues de Investimento, or BPI, the country’s fourth-largest private financial group and shares in Amorim Energia, a Netherlands-based Portuguese company which owns 40 percent of petroleum producer Galp.

These holdings make Ms. dos Santos the third-richest investor in the Lisbon stock exchange with a personal fortune estimated at around $3 billion. Isabel dos Santos also sits on the board of Banco BIC Portugal, a subsidiary of one of Angola’s biggest banks and she has extensive interests in many Angolan companies, including Unitel, one of the country’s two mobile telephone operators.

Angolan company Newshold, which owns stakes in several prominent Portuguese media companies, including Impresa, Cofina, the weekly newspaper Sol, two leading magazines, business publication Jornal de Negocios and other titles.

On a visit several years ago to Angola, Portuguese Prime Minister Pedro Passos Coelho, who spent part of his childhood there, said : “Angolan capital is very welcome (in Portugal).”

And while that is no doubt the case among government and business leaders, some in Portugal are not so enthusiastic, questioning whether it is a good idea for their country to partner with Angola because of its reputation for alleged corruption and crony capitalism.

The International Monetary Fund has reported that there is $32 billion in missing government funds believed linked to Sonangol, and Transparency International rates Angola as one of the most corrupt countries in the world, ranking it in 153rd position out of 175 for its lack of transparency.

As charges like these mounted, Portuguese chief public prosecutor Joana Vidal began a probe into the activities of a number of unidentified and highly-placed Angolan business and political leaders. Apparently alarmed that the investigations might torpedo Angolan investments, Portuguese Foreign Minister Rui Machete appeared on Angolan radio to apologize for the prosecutor’s actions.

But when opposition politicians howled for Machete’s resignation, claiming he had infringed on the judiciary’s independence, the foreign minister took back his apology and recanted. Machete’s backtracking unleashed an angry response from President Dos Santos.

While Angola had good relations with most major countries in the world, the president said in his annual state of the nation address to parliament in October 2013, “with Portugal, unfortunately things are not going as well. There have been misunderstandings at the highest level of state and the current political climate does not advise the implementation of the strategic partnership.”

“In the battle against corruption,” dos Santos continued, “the anti-corruption organizations in the West are deliberately creating misunderstandings in order to intimidate Africans who are generating wealth and who want access to it.

“They are creating the general impression that a rich African is invariably a corrupt one,” he said. “Elementary research in the oil sector would expose that American, English and French firms, along with Portuguese companies and commercial banks are extracting from Angola double digit billion dollar sums.

“Why should they be allowed to own such huge corporate firms that are denied to us Angolans?” dos Santos concluded.

Shortly after his speech, the government-controlled newspaper, the Journal of Angola, weighed into the fray, chastising Portugal for what it termed as “intolerable aggression.”

The flap prompted 14 Portuguese parliamentarians to rush to Luanda to try and make amends.

Portugal’s economy now appears to be on the mend after bottoming out. In May, 2014, the country passed all the reviews by the architects of its bailout imposed three years earlier, the European Commission, the European Central Bank and the International Monetary Fund.

“Everybody in the government shares with all Portuguese a feeling of mission accomplished,” Deputy Prime Minister Paulo Portas said at a news conference announcing the favorable reviews.

With Portugal apparently on its way to financial health, it will almost certainly continue to be a tempting destination for Angolan investment and with so much shared history and so many billions of dollars at stake, the ex-colony and its former master will likely patch things up to restore their strategic partnership. 

By Benjamin Jones