The Angola Oil Companies Don't Want You to See

The Angola Oil Companies Don't Want You to See
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It would make for a tough trivia question:

Where are you?

This young nation boasts huge reserves of oil and diamonds, plus international investors — from the United States, France, China, Russia, Brazil — lined up to score a piece of it.

Its capital, which hardly ever sees tourists, bears the bizarre distinction of being the most expensive city in the world, costlier than Paris, London, Tokyo, Singapore. Here, a run-of-the-mill restaurant meal will set you back $100 per person. A cold Coke can cost $10. Its upscale mall comes with price tags that choke even well-heeled foreigners.

While economic disparities are common in many rapidly developing countries like this one, the difference between rich and poor here is gargantuan. Outside the gleaming windows of $500-a-night hotel rooms, shantytowns extend like ragged carpets, hugging flatlands dense with humanity, denuded of greenery. Those smudges of color wending through narrow, garbage-strewn alleyways — those are people. Lots of them. Who lack education and basic medicines, not to mention jobs.

Yet this same nation’s leading citizens profit immensely from the sale of oil. They are renowned for their gated homes, blingy parties and Dubai shopping sprees. If it bothers them that their country has one of the highest child mortality rates in the world, they do not show it; they are happy to putter around the harbor on yachts while their countrymen starve.

Those disparities exist, after all, for one reason: corruption. Of a sophistication and scope found nowhere else, enriching only the smallest sliver of the population.

And, oddly enough, Houston’s handprints are all over this place.

You are in the African nation of Angola. While few of your fellow Americans can name it, much less locate it on a map — it is on the Atlantic coast of southern Africa, between Congo and Namibia, two hints that probably don’t help at all — this 41-year-old country with a population of 26 million is a rising world power, an economic mover and shaker.

Thanks to its newly acquired status as Africa’s biggest oil producer, it is intricately tied to Houston. You probably never noticed, but Angola’s national oil company, Sonangol, houses its headquarters for the Americas in a handsome complex in the Energy Corridor. Two of Sonangol’s most important partners are Chevron and ExxonMobil, which maintain corporate offices in Houston. Many other companies with local bases, such as Baker Hughes, Halliburton, Technip and VAALCO, have a significant presence in Angola, too.

The ties are so numerous that a luxury charter service flies oil execs and workers direct from Houston to Luanda, Angola’s capital and one of Houston’s sister cities, three times a week in specially fitted 747s whose elegant meals and reclining seats are lauded online. Bright Angolan students, many of them sons and daughters of the elite, study under oil-industry scholarships at the University of Houston.

Yet you’ll likely never hear a word from these companies about their lucrative work in Angola. Asked for interviews by the Houston Press, Chevron, ExxonMobil, Sonangol USA, the Houston Express, the U.S.-Angola Chamber of Commerce and the Houston office of the American Petroleum Institute, the oil industry’s powerful lobbying group, all either declined to speak, pulled a disappearing act when asked for comment or, in the case of the API, ducked the Press’s inquiries like scared little boys.

“Angola rings all kinds of bells with public relations,” one source with extensive experience in Angola and numerous oil-industry contacts finally explained. “There’s a great fear that the downside outweighs any upside of giving you an interview.”

Just three years ago, Angola billed itself as the vanguard of “Africa rising,” the idea that the continent had shed its beggarly image and was at last taking its place on the world stage. Angola, with its record of peace and stability since the end of civil war in 2002, its explosive economic growth and the frenetic pace of new construction in Luanda, seemed the exemplar of this welcome narrative.

So why has Angola become so radioactive these days?

Because oil prices have tanked, along with Angola’s economy.

Because a Houston oil company, Cobalt International Energy, has become the subject of international investigative reporting, a class-action lawsuit and a federal investigation that have opened an ugly window into Angola’s business practices.

And because the world is finally listening to what a handful of courageous Angolan activists and journalists have been saying all along, that their country’s rags-to-riches story is a fraud, built on massive government-led corruption and a callous disregard for Angola’s millions of poor. They say the United States is one of Angola’s chief enablers, looking the other way while profiting from the nation’s prodigious mineral wealth.

Companies such as ExxonMobil and Chevron point to their community health initiatives in Angola, and their efforts to hire and train Angolans for their own operations, as evidence of their goodwill toward the Angolan people.

Without a doubt, most American companies do their best to operate aboveboard in what Christopher McMullen, a former U.S. ambassador to Angola, calls one of the world’s most difficult and complex business environments. But Angolan activists remain unimpressed. They see American oil companies as knowing participants in an evil system.

Elias Isaac, a Luanda-based anti-corruption activist, put it most succinctly. “You cannot be a saint in your own town and a devil in someone else’s home. It doesn’t work that way.”

*****

The students who end up in the University of Houston’s brand-new Global Energy, Development, and Sustainability program are looking for a springboard into the professional world. Instead, they get an eye-opener.

They learn about this thing called the “Natural Resource Curse.” It is the twisted dynamic by which some of the most resource-rich countries in the world, including Angola, absorb billions of dollars in new wealth from mining and oil extraction yet somehow come out the other side just as impoverished as they started, and hopelessly corrupt.

The revelation comes when Dr. Kairn Klieman, an associate professor of history and Africa specialist, traces this dynamic all the way back to the horrors of the Atlantic slave trade. White American students can’t escape their forebears’ culpability. But surprisingly, it is the same for many African students, too.

Angola is actually the textbook example. Its Portuguese colonizers extracted human beings from the African interior and shipped them to the Americas as slaves, Klieman says. Working hand in hand with the colonists was a group of largely mixed-race people centered in what is now the Angolan capital, Luanda. These mestiços sold their neighbors down the river and shared in the profits.

“A thread running through Angolan history,” writes Ricardo Soares de Oliveira, an Oxford University professor and one of the world’s top Angola experts, “is the disregard, even cruelty, with which the powerful have treated the powerless: whether reigning locals or venal outsiders, the enduring design has been the extraction of the riches of the land, with most Angolans counting for nothing.”

The same holds true today. After a revolution that saw Angola gain its independence in 1975, followed by a traumatic, 27-year civil war in which as many as 500,000 people lost their lives, the descendants of those same privileged few rule Angola and carve up its riches for themselves, operating through a network of patronage that benefits a tiny, Luanda-centered elite.

At the top of the pyramid is Angola’s president of 37 years, José Eduardo dos Santos, a onetime Marxist whose family has amassed a fortune during his years in power. Every appointee to major roles in Angolan government and business does so only with dos Santos’s approval.

Dos Santos can point to real accomplishments. His ruling party, the MPLA, has kept the peace in Angola and has overseen the rebuilding of roads, railways and other infrastructure destroyed during the war years.

Angola has also negotiated shrewd contracts with foreign oil companies, all of which are required to partner with Sonangol, the national oil company. And Angola, once one of the poorest nations in the world, keeps sprouting billionaires — the most well-known of whom is dos Santos’s daughter, Isabel dos Santos, Africa’s first female billionaire. In June, Isabel dos Santos took over Sonangol. One of her half-brothers runs Angola’s sovereign wealth fund.

While technically a democracy, Angola is firmly under the control of the fabulously wealthy dos Santos family. A general election is scheduled for 2017, but no one expects the president to abandon his seat of power. It has been too profitable for his family and friends.

Meanwhile, the majority of the population lives in wretched poverty.

The United States, for its part, has veered every which way in its policy toward Angola. When Cuba and Russia supported Angola in its Marxist days, the United States countered by channeling support to rebels. Yet all along, American oil companies such as Chevron and Gulf Oil were happily doing business with Sonangol.

Tom Mitro, Klieman’s colleague in the GEDS program and a former oil exec and Sonangol consultant, recalls one particularly surreal experience from those days. He visited a Gulf Oil base in Angola in 1980, and its perimeter was guarded by Cuban soldiers, who were protecting the American-run base against attacks by CIA-sponsored South African soldiers.

Today, the United States considers Angola an important strategic ally for security and economic matters. “For this reason,” former ambassador McMullen says, “the U.S. has to balance many competing interests in Angola.”

Amid all this complexity, Klieman and Mitro avoid easy answers. “There is no one solution or set of actors that can fix” the resource curse, Klieman says. “Our goal is to get students to embrace that complexity,” rather than relying on stereotypes of the “evil oil company” and the “corrupt African.”

“I’m not convinced we can say that the Angolan elite’s principles and practice are so different from our own,” Klieman adds. “The fundamental problem is the wealthy don’t want to share their wealth with people they feel no obligation toward.”

Her hope is that some of her students will go home to places like Angola and use their intelligence and creativity to bring change for future generations. But no one expects that change to take place under dos Santos. And when the Press asked to speak with some of the University of Houston’s Angolan students (42 were enrolled at the school last year), Klieman demurred. The Angolan government was “clamping down” on dissent, she said.

*****
The Houston Express luxury charter, operated by Atlas Air, goes nonstop to Luanda three times a week, ferrying oil-company workers to their jobs in Angola.
The Houston Express luxury charter, operated by Atlas Air, goes nonstop to Luanda three times a week, ferrying oil-company workers to their jobs in Angola.

When oil-company workers take the 15-hour flight to Luanda on the posh Houston Express, they go from one bubble-wrapped milieu to another. All of Angola’s wells are offshore, so workers end up on rigs and in well-stocked, tightly secured, air-conditioned compounds, where they have little or no contact with everyday Angolans. Higher-ranking employees live in exorbitantly priced hotels, apartments and suburban homes in Luanda, equipped with maids and drivers, all paid for by the company.

A few American expats have blogged entertainingly about their experiences. “Adventures at My Age” talks about morphing into hunter-gatherer mode to take advantage of food finds in a city where everything Americans eat is imported, sold at extravagant prices and available only sporadically in the supermarkets catering to expats. She crows about some of her picks, including puff pastry and that frozen, flavorless staple of the modern American kitchen, boneless chicken breasts. “I have 19 packages,” she writes. “I have literally gone over the gathering deep end…But hey if I get sick I won’t starve.”

The “absolute best thing” about Angola, she concludes, is never having to iron.

A blogger for WanderWisdom goes a bit deeper. Though she lives in a luxury hotel, where she enjoys $27 hamburgers and a personal trainer, she ventures outside, too — and gets mugged “in broad daylight.” She visits the exclusive Belas Shopping Center, where the security guards tote AK-47s, and concludes that the target clientele clearly is not “the ladies who walk around the sides of the roads selling all kinds of goods in plastic bowls balanced on top of their heads.”

It is safe to say that most American travelers never see the real Angola. The few who do never forget it. “I was in some of the worst slums I’ve seen in my entire life,” a Western diplomat says. “And if Dante talked about the 12th circle of hell, then Angola had to have the 13th circle. And I visited it.”

More than 60 percent of Angolans live on less than $2 a day, even though Angola is approaching the economic level of what the United Nations considers a “middle-income” nation.

Elias Isaac spoke to the Press from Luanda, where mountains of garbage lay putrefying in the streets, even in expensive neighborhoods, because the government was strapped for cash and had proved incompetent over the years to deliver basic services. (Google “Luanda garbage crisis” for some choice images.) Isaac, Angola country director for OSISA (Open Society Initiative for Southern Africa), dismissed the garbage as Luanda’s “perpetual problem.” He had more important things on his mind.

“The Angolan oil is the property of the president, the property of Sonangol. So the people, Angolans, we do not benefit directly from the oil business,” he said. “So what happens is we just receive the crumbs. The majority of Angolans can’t access this wealth, and that is why poverty is so prevalent in our country.”

What foreign oil companies produce, Isaac contends, “goes directly to government coffers. It doesn’t go to the people. It feeds into the national budget, and that’s where all the corruption, all the pillaging of public assets, happens.”

*****
The United States’ relationship with José Eduardo dos Santos, Angola’s president of 37 years, is fraught with complications. Angolan activists weren’t pleased when Secretary of State John Kerry spoke words of praise for dos Santos.
The United States’ relationship with José Eduardo dos Santos, Angola’s president of 37 years, is fraught with complications. Angolan activists weren’t pleased when Secretary of State John Kerry spoke words of praise for dos Santos.
U.S. State Department

A recent book titled The Looting Machine explains how corruption goes down in Angola, using Houston’s Cobalt Energy as a case study. The 2015 book, by London Financial Times correspondent Tom Burgis, names names and goes into extensive detail showing why Africa’s resource wealth seldom reaches the majority of its people.

Burgis’s research on Cobalt began with groundbreaking reports by Angolan journalist Rafael Marques de Morais, who maintains a website, Maka Angola, that exposes Angolan corruption and government shenanigans in well-written articles posted in English and Portuguese. The Oxford-educated Marques has been jailed and beaten in Angola because of his work.

Marques’s investigative reporting is also the genesis of a federal class-action suit filed against Cobalt, top Cobalt officials and Cobalt financiers in Houston in late 2014.

By then, Cobalt had already ridden a roller coaster of incredible success, followed by a series of disasters that have left its shares trading at about $1 on the NYSE today. Cobalt was founded in 2005 by Joe Bryant, a former BP executive. Burgis writes in his book that Bryant had cultivated close ties with top Angolan officials, who preferred his friendly demeanor to that of “haughty” Frenchmen, such as those, say, of the French oil company Total. Business in Angola operates on person-to-person relationships, and Bryant, the former head of BP’s Angolan operations, excelled in this environment.

After obtaining $500 million in financing to launch Cobalt in Houston, Bryant used his contacts to negotiate offshore oil exploration rights in Angola’s “pre-salt” frontier — which Cobalt hoped would prove as lucrative as the same type of geologic formation had in Brazil. In 2010, Cobalt signed an agreement with the Angolan government that gave it a 40 percent stake in certain oil exploration “blocks” in offshore Angola. Sonangol retained 20 percent, and two little-known Angolan companies, Nazaki and Alper, held 30 and 10 percent, respectively.

This deal is typical of the way Angola and Sonangol structure relationships — and it is one that left ample room for corruption, several Angola experts say. Big business operates in Angola behind layers of secrecy, which leaves foreign partners guessing whom they’re really doing business with. For that reason, “due diligence” is extremely important in a business climate that Transparency International ranks as one of the worst in the world for corruption.

Many Americans’ perceptions of corruption in Africa look like scenes from Blood Diamond or Lord of War, with shifty white guys exchanging piles of cash with African kingpins guarded by thugs wielding AK-47s. Angola is nothing like this.

Its top officials are well-educated, sophisticated individuals. Sonangol, in fact, has a reputation for professionalism, for honoring its financial commitments, the University of Houston’s Tom Mitro and others say. It is an oasis of competence and stability in Angola, employing the nation’s best-qualified people. But it is still beholden to the president, even more so now that Isabel dos Santos is in charge — which enrages many Angolans.

Angola’s stipulation that Cobalt enlist Nazaki as a partner proved disastrous. As Marques and Burgis would report, three of the most powerful men in Angola had secret stakes in Nazaki, including Manuel Vicente, who was boss of Sonangol at the time of Cobalt’s deal.

The Angolan government would later admit that Nazaki lacked the “proven competence and financial capacity” to participate as a partner in Cobalt’s operations, according to the class-action suit against Cobalt, brought by the New York law firm Bernstein Litowitz Berger & Grossmann. In other words, Nazaki was a shell company. “In truth, Cobalt obtained access to its Angolan wells from the Republic of Angola through apparent bribery and by partnering with shell companies in Angola that were partially owned by high-level Angolan officials,” the suit alleges. “In addition, Cobalt misrepresented the value of its wells in Angola after the Company learned that they contained very little or no oil.”

Cobalt’s “improper business relationships with Angolan government officials” put the company at “serious risk of enforcement action” by the SEC and the U.S. Department of Justice for possible violations of the Foreign Corrupt Practices Act, which prohibits payments to foreign government officials to assist in obtaining business.

The suit accuses Cobalt of paying “an apparent bribe” to Angolan officials by providing millions of dollars to support an Angolan research center “that does not appear to exist.”

Cobalt has denied any wrongdoing.

In early 2012, Cobalt disclosed that the SEC was investigating it for possible violations of the Foreign Corrupt Practices Act. Though the SEC later closed its investigation, choosing to take no action, the U.S. Department of Justice is still investigating.

All of these revelations caused Cobalt’s stock price to crash, which resulted in the loss of billions collectively for investors represented in the suit, including the Fire and Police Retiree Health Care Fund of San Antonio. The suit alleges that Cobalt knew about the problems with Nazaki long before it disclosed them, defrauding investors who bought the stock at inflated prices.

Bryant resigned as Cobalt’s CEO in May, and Cobalt is trying to sell its interests in the Angolan offshore blocks. The lawsuit is scheduled for trial in 2018.

The Cobalt saga didn’t elicit a single note of surprise from the Angola experts interviewed by the Press. “Corruption today is much more sophisticated than it was 20, 30 or 40 years ago,” explains Ricardo Soares de Oliveira. “And many things that happen in Angola, it’s not all bags of money being given to intermediaries. You have a lot of laws that create compulsory partnerships with local businessmen...but they tend to benefit people who are close to the regime.”

Another Angola insider concurred. “It’s not people simply sticking money in their pockets as they walk out the door,” he said. “In Angola’s business world, it is very often a dos Santos ally getting a contract or a joint venture with a foreign company…And when American companies engage them, they never really know what they’re getting. It’s a very difficult environment to do business in. It’s like a house of mirrors.”

*****
Angola’s gleaming capital and its beautifully designed shorefront are symbols of the once-poor nation’s incredible growth. Not visible in this picture: the slums, which one Western diplomat likened to Dante’s hell.
Angola’s gleaming capital and its beautifully designed shorefront are symbols of the once-poor nation’s incredible growth. Not visible in this picture: the slums, which one Western diplomat likened to Dante’s hell.

All of this seems far removed from the lives of everyday Angolans, who were so traumatized by the civil war that many are simply relieved not to be shot at anymore. But corruption takes a big bite from their lives, especially now that their government is crying poor. Oil accounts for three-fourths of Angola’s government income, so the collapse in oil prices has severely strained the national budget.

Public hospitals lack doctors, nurses and medicines; public administration doesn’t work; public education is a joke, says Fernando Macedo, an Angolan university professor and human-rights activist, listing the many areas where corruption takes a toll. “And Mr. dos Santos wants to play one of the big leaders in the world,” Macedo says.

As recently as 1973, when the Portuguese were still in power, Angola was self-sufficient in food, says Macedo, who is studying for his Ph.D. in South Africa. Now it imports everything and barely has a commercial agricultural sector.

Ironically, some of the little help available to poor Angolans comes from the American agency USAID, which assists farmers, and American mission organizations that provide invaluable medical care and education to poor Angolans in rural areas that the Angolan government neglects.

“In Angola there is no accountability,” Macedo says. “People are starving in Angola.”

This seemed to be an astonishing claim, but the facts — and eyewitnesses — bear it out. UNICEF figures rate Angola as second-worst in the world for its child mortality rate, with nearly one in five children dying before the age of five. “Malnutrition is an underlying cause in most child deaths,” the UN children’s agency reports on its Angola background page.

An Angolan Catholic priest in the interior province of Huíla brought it closer to home. “Many, many, many” people in Father Jacinto Pio Wacussanga’s area, Gambos, have died because of famine. “Since 2012, we have a lot of droughts, and the rainfalls are very, very short,” Father Pio said. “Therefore, we have a lot of issues of malnutrition among the children and the pregnant women, and also the elders.

“You don’t see like those Ethiopian images of those children with the very big bellies. You don’t see that,” he added. “But you look at their faces, and they don’t get enough food.”

Though the government has provided some aid in the past, he said, there has been none so far this year. “We felt the government had ample funds to attack the famine,” Father Pio said. “We send a letter, we talk to ministers, we did a lot of interviews to remind those people in the government, but to no avail.”

Isaac, the Luanda activist, backed up Father Pio’s account. He visited the priest’s area just a few weeks ago, and “saw with my own eyes the misery. I saw families, mothers and children, crowding his parish during lunchtime when he had run out of food for himself.”

Most families in Father Pio’s area scratch out a living from their lavras, or family fields. Here, they grow manioc, millet, maize and vegetables. Except when the rains fail to come. Cash is always scarce, as are opportunities to improve their lot; schools in Father Pio’s area can consist of a poorly paid teacher gathering his pupils under a tree.

The lack of health care pushes some of his people to the traditional healers. “It’s a real crisis. Medicines are nowhere to be found,” Father Pio said. “And if you are bitten by a mad dog, you are in serious trouble.”

But Father Pio faces a bigger threat than rabid dogs — his own government, which, he said, isn’t accountable to the people for the oil money it raked in when prices were high.

“We know that must have been put into their pockets,” Father Pio said. “Most of the investments they are doing are not in Angola but outside the country. And we are all aware of that.”

The provincial members of Angola’s elite drive “fancy cars,” Father Pio said, and their children never attend local schools. When they are ill, they go abroad for medical treatment.

“Our people in Huíla are far from oil benefits,” he said. “But we could see that the people in power, yes, they have built up a very strong wealth.”

*****

Why haven’t you heard anything about Angola before? Because the nation carefully tends its public image, preferring to tell you about Isabel dos Santos’s latest business achievements rather than famine in an outlying province. Faced with bad news, the government goes on lockdown, Angola experts say. And Americans themselves are preoccupied with mad bombers, terrorist cells and unwanted immigrants.

American agencies, businesses and NGOs work in a difficult, fraught environment in Angola. Businesses could lose their contracts with a jot of the president’s pen, so they don’t rock the boat. But in addition to pumping oil, ExxonMobil supports community-based malaria projects in Angola. Chevron invests in technical training for Angolans, an area of great need considering the government’s pitiful record in education.

Isaac and other Angolan activists, however, see American oil companies as enablers — by working in an environment of secrecy that would never be tolerated in the United States; by barely listening to the concerns of civil society; by meekly signaling their acquiescence to Isabel dos Santos’s elevation as head of Sonangol.

Steve Hardy, an American educational consultant for NGOs, has made two dozen trips to Angola over the years, interacting with Angolans of all social strata as well as American oil workers. He offers a more charitable view. “I really doubt that these are evil-intent companies,” he says. “I just think they’re working in…what has become a very evil system.

“The human heart is unbelievably deceptive,” he continued. “And not only do we need to be kept from doing evil, so we have police and laws and cameras to keep you from taking what you shouldn’t; we also need to be encouraged to do what is right.”

That, he concluded, “is not happening in Angola.”

The Press spoke with a Western diplomat who daily faced the dilemma of providing services, such as health care, that the Angolan government itself should be providing. He realized that well-meaning Americans were perpetuating “one of the most callous governments” he’d ever seen.
The diplomat had to find his own peace. And he did, by asking himself a single question: “If we don’t help, who the hell is gonna help them?”

julie.lyons@voicemediagroup.com


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