Incompetence and Corruption Sinks Angola’s Development Bank

Angola’s state-owned banks, businesses and investment funds are all reportedly in trouble: either loss-making or on the brink of bankruptcy. The state oil giant, Sonangol, is floundering amid unpaid debts amounting to hundreds of millions of dollars; the crisis at the Credit and Savings Bank (the BPC, Banco de Poupança e Crédito) has led to a clean sweep of the board; and far from accumulating interest, the Angolan Sovereign Fund is losing hundreds of millions.

The common denominator to their misfortunes is – according to the government – the disastrous plunge in oil prices.

Not so, say economic analysts in Angolan and beyond. They say the drop in the price of oil simply uncovered factors that would send any business anywhere to the wall.

The interruption to the flow of petrodollars made a continued cover-up of endemic corruption and incompetence impossible. All of a sudden their clandestine existence was revealed, like shining a flashlight into a tropical kitchen during the darkest hours of the night, illuminating the cockroaches mid-swarm.

In this catastrophic litany of state-organized disasters, another is now unfolding at the Angolan Development Bank (the BDA, Banco de Desenvolvimento de Angola). BDA chairman Manuel Neto da Costa has revealed that the bank is facing accumulated losses of US $400 million, a result of what Mr Neto da Costa describes as “execrable credit risk management and controls”.

He revealed that a staggering 70 per cent of the loans extended by the BDA were for badly-structured projects without collateral. This is the same situation that led to the collapse of the Banco Espírito Santo Angola (the BESA). It loaned billions of US dollars to ‘persons unknown’ who promptly defaulted, ensuring not a single cent was repaid.

Who are these people who submitted a paper project, took the money, and ran?

Is it surprising that many financial experts conclude that “Angola’s banks are designed to funnel cash to friends?” In other words, they suggest that the regime run by President José Eduardo dos Santos has ensured the banking system has inadequate (or no) controls, precisely because a leaky system allows the regime to sustain itself in power by channeling funds to its supporters.

The BDA owes its existence to a Presidential Decree signed by José Eduardo dos Santos in 2006. The funds for this appear to have come largely from lines of credit issued by China and Spain. They were specifically intended to fund agricultural and industrial development.

Apparent shortfalls in the funds meant there was no coherent or consistent programme. The bank served to pour money into large schemes, such as agro-industrial parks and major irrigation projects, with no funds directed towards traditional farming models, or agricultural cooperatives.

Inevitably, these ‘grand schemes’ rarely got off the ground. They submitted the plans on paper, gratefully received the bank loans, then disappeared.

For seven years, the man entrusted with overseeing the development projects was
Paixão Franco Júnior, the BDA’s first chairman, a position he held from the bank’s inception in 2006 until he was sacked by President dos Santos in 2013 to make way for Mr Neto da Costa.

Mr Paixão Franco’s chairmanship of the bank is enveloped in controversy. Somehow in just the four years between 2006 and 2010 he became one of the 50 richest men in Angola. By 2013 reports emerged linking him to numerous scandals, such as in the case of Cruval, Materias de Construção, Lda.

Cruval was given US $8 million to finance works that never got off the ground. Yet strangely Mr Paixão Franco made no attempt to seek the return of the funds, which had been directly approved by him alone, without any consultation with other board members or any of the bank’s technical advisors.

Suspiciously, the BDA seemed to focus most of its loans on one area of the country: the province of Kwanza-Sul, whose Governor, General Brito Teixeira, has notoriously awarded himself and members of the Presidential family (such as José Eduardo’s son-in-law Sindika Dokolo) generous grants of public land.

A blanket of silence from the BDA has made it impossible to date to confirm the identity of any of the recipients of the 70% of bad loans cited by Mr Neto da Costa as ill-conceived projects.

Before its crash, remember what happened to BESA? Its principal debtors were named as the President’s sister Marta dos Santos and the then MPLA Vice-Presidente, Roberto de Almeida.

At this stage, would anyone be surprised if the BDA’s principal ‘bad debtors’ also turn out to be linked to the Angolan regime?