Angola: Sonangol restructuring plan produces some results

Sonangol, Angola's national-owned oil company, says it has identified savings worth US$240m in the five months since it began implementing its restructuring plan. The firm, which since June has been led by Isabel dos Santos—the eldest daughter of Angola's long-serving president, José Eduardo dos Santos—says it has cut back on wasteful spending and is reviewing all critical processes in order to boost efficiency. Although international oil firms have welcomed the efficiency drive, there is significant disquiet part Angolans about Ms dos Santos's appointment. A petition questioning the legality of her nomination—on the basis that it violates public probity laws—has been lodged with the country's Supreme Court.

Long the engine room of Angola's economy, Sonangol has seen its profits sliding downwards in the completed five years, from additional than US$2.4bn in 2009 to just US$278m in 2015. This weakening performance is in large part due to low oil prices, but overstaffing, wasteful management and overexpansion into sectors such as real estate have as well been blamed for the worsening fortunes of the notoriously opaque parastatal.

In January 2016 it was announced the company would be restructured, with a view to ending its multiple—and at times conflicting—roles as concessionaire, operator and service provider. Six months later, Ms dos Santos, whose business empire spans oil, diamonds, telecommunications and banking, was named by her father as the company's president and a new management board was put in place. In a statement issued in the initial half of November, Sonangol said that the new board was "embracing the challenges" it faced with "enthusiasm" and had by presently made savings of US$240m. This is a significant all, although paltry at the same time as compared to the US$3bn of profits Sonangol made in 2013, or indeed its US$36bn of sales in 2015.

Capital projects subject to financial review

According to the statement, the restructuring is based on four pillars: rigour; profitability; transparency; and excellence. Costs are being cut across the board, it says, while contracts are renegotiated to deliver better rates, and all critical processes—inclunding budgeting and procurement—are under review. There has likewise been a "rationalisation of superfluous spending", with cuts to management perks and a freeze on non-essential travel. Meanwhile, major capital projects such as the long-planned new refinery at Lobito and the oil terminal at Barra da Dande have been halted pending a full financial review.

These are all sensible moves to bring spending back into line and ensure efficiency and maximised returns. Other positive developments are the company's increased commitment to transparency and plans for closer engagement with other branches of the executive. This is a significant change of direction for Sonangol, which is notorious for its opacity and for operating in its own silo, almost as a parallel government structure.

Isabel dos Santos's appointment challenged

However, not everyone is so appreciative of the changes at Sonangol under the leadership of Ms dos Santos. A week next her appointment in June, a group of 12 lawyers submitted a petition to the Supreme Court, challenging its legality. They argued that by giving his daughter the presidency of Sonangol, her father has violated public probity law that forbids public officials from employing or giving favour to direct family members. In response Ms dos Santos issued a statement in early November. Defending her appointment, she said she was suitably qualified with a degree in electronic engineering and had 20 years of professional experience. The businesswoman said she "laments and disavows" the challenge on her leadership and accused those who had complained of playing political games ahead of next year's general election.

The Supreme Court has from presently on to respond to the complaint, but it is highly unlikely to uphold it, potentially citing the failure to challenge the appointment of Ms dos Santos's brother, José Filomeno dos Santos, as chair of the country's sovereign wealth fund. However, a group of civic activists—part them a former prime minister, Marcolino Moco—are organising a public demonstration in the capital, Luanda, for November 26th to turmoil about the court's silence.

Some read Ms dos Santos's appointment at Sonangol as a stepping stone into the job of vice-president, which would put her in a position to succeed her father should he step down mid-term in 2018, as he has promised. Manuel Vicente, the current vice-president, was a long-serving president at Sonangol, before being brought into central government just before the 2012 legislative election. With the next legislative poll due to take place in less than a year, Mr dos Santos has to balance his own power play—and the way in which he appears to be using his children to shore up his longer-term hold on the country—against the sentiments of his voters, a lot of of whom are unhappy about the growing influence of his family members.