Isabel dos Santos and the Right of Reply

Isabel dos Santos, self-described ‘African billionaire businesswoman’ and head of the Angolan national oil company, Sonangol, (appointed by her father, the President of Angola, José Eduardo dos Santos) was clearly rattled by the report published here on Maka Angola last week, entitled ‘Sonangol’s Slush Fund Salaries’ and has sent an official response.

Maka Angola is delighted to afford the Sonangol President the right of reply.

Sonangol’s ‘Official Reaction’ states (without offering proof) that the report was incorrect. And yet, instead of supplying alternative data, the response serves to confirm the inside information supplied to Maka Angola.

(1) Sonangol’s whistleblowers reported elevated salaries for the board. And outrageous expenses and consultancy fees for a cabal of Portuguese nationals, effected overseas to avoid paying Angolan tax.

The President’s daughter confirms that fees for the board of directors were raised to keep pace with inflation – in effect at the very least a 40% increase since she was named as head of Sonangol – and to reflect comparable salaries in the oil sector. Was the same increase offered to any of Sonangol’s Angolan managers and workers? Not so far as we have been able to ascertain.

The Sonangol response does not explain how it arrived at rates “comparable to other oil sector companies” as it neither specifies the salary scales for the Sonangol board or for any other. The fact is that no comparison is possible. To take just one example – before he was named US Secretary of State, Rex Tillerson was President of the Board of Exxon with a declared annual salary of US $24.3 million. Was that really the benchmark for Isabel’s remunerative package?

(2) Sonangol goes on to confirm that internationally-matched payments to foreign consultants are indeed very high but says that the benefits from their input are expected to be even greater, without giving any basis for such an ‘expectation’. The letter refers to “international practices”. It’s not clear if by this Isabel dos Santos is referring to the practice of using a percentage of the business turnover, or an hourly honorarium.

No international oil firm or similar institution publishes a fee scale from which comparisons could be drawn. To attribute this to “international practice” is meaningless. However, Isabel dos Santos has repeatedly promised to run Sonangol with transparency so would it not be in her interest to publish the consultancy fees and put an end to speculation?

It should also be pointed out that the role of consultants is not a substitute for company management. They are meant to offer unbiased recommendations for efficiencies and/or improvements in one or other sector or process. Flooding a company with foreign consultants suggests that the President has no faith in the capacity of her home-grown managers and staff. If they are inadequate to the task, then why are they kept on the books to do nothing when their work is being farmed out to consultants?

(3) Sonangol also confirms that payments to the consultants are being made outside Angola. The argument is that their “parent companies” are located abroad and their contracts were drawn up to reflect that and were approved by “higher authority”.

Isn’t it extraordinary that the contracts for work in Angola were drafted in such a way – and apparently approved by Isabel’s father (or some other senior figure who owes his job to Isabel’s father)?

All the same this has no bearing on whether such contracts comply with Angolan laws. How can such contracts be justified when they relate to work performed in Angola which should be subject to the Angolan tax regime? Sonangol is silent on this issue.

The fact that the consultants’ parent companies are overseas is only relevant
(i) if there were no possibility of effecting money transfers from Angola to their home countries; or,
(ii) the cost of paying the fees in Angola resulted in elevated costs, such as the inconvenience of having to pay tax on that income at source.

The fact that the consultants are working in Angola but are not paid in Angola suggests that, at the very least, Sonangol is engaging in tax avoidance if not tax evasion. The former would require the consent of the Finance Ministry upon scrutiny of the books – the latter is illegal. Sonangol could solve this mystery very easily.
(4) As for Sonangol’s ability to honor its commitments: regardless of any communique from the Sonangol Board the reality is that fuel shortages at petrol stations, along with the wave of power cuts in recent weeks, are both due to delays in Sonangol paying what it owes because of its cash flow shortages.

Many critics both inside and outside Sonangol suspect that Isabel dos Santos does not possess the expertise and experience to make her competent to lead Sonangol through a difficult period of rock-bottom oil prices. They say this is likely why she feels the need to surround herself with so may consultants on princely salaries. In reality, an effective managing director or chief executive officer has no need of multiple consultants because they have a clear vision and know how to execute it. They take the reins and turn the company around.

Sadly, from Isabel’s point of view, her inability to improve the situation at Sonangol has unmasked her lack of business acumen. Her involvement in the companies and institutions that led to her billion-dollar boast, was thanks to her father’s position and the use of seed money provided by the Angolan state. This is why her rejoinder is short on facts and figures and instead reflects the old Soviet tactic of disinformation – if you have no answer to the argument then try to discredit your accuser to divert attention from the actual accusation.

If her intent was to deflect the serious allegations made in the report (as would seem to be the case given her derogatory remarks about Maka Angola and its editor, Rafael Marques de Morais), then Isabel dos Santos has failed spectacularly.

Facts are facts. No matter how much smoke and mirrors are employed to try to divert public attention, Maka Angola will continue to publish leaks from those unable to stand by in silence as they watch the catastrophic mismanagement of the company responsible for Angola’s primary source of income.