Chinese Investments at Risk in Angolan Anti-Graft Campaign

New president seeks return of stolen state money

By: Toh Han Shih

With Isabel dos Santos, daughter of the former Angolan president and Africa’s richest woman, facing charges of embezzlement and money laundering, some China-related companies risk collateral damage. One recent action targeted China International Fund (CIF), a Hong Kong-based entity believed to be linked to secretive Chinese parties. 

In early February, Angola’s national asset recovery agency, Serviço Nacional de Recuperação de Activos (SNRA), recovered US$280 million dollars found in the bank account of a captain in the Angolan Presidential Guard that is said to have come out of the accounts of China International Fund. The asset recovery agency also seized buildings held by CIF and built with public funds, with an estimated value of US$607 million, according to Christine Gordon of Africa Risk Consulting, a risk consultancy focusing on Africa. 

The Angolan Attorney General’s Office said the seizure of these properties were part of criminal proceedings. President João Lourenço, the successor to José Eduardo dos Santos, who ruled the country for 38 years until 2017, has become an unlikely and energetic reformer, according to African reports. 

“Lourenço is clawing back state money loaned to privately-owned Angolan companies which was never repaid to the government,’ Gordon said. “These are companies linked to elite players, and China International Fund is one company affected. This type of Chinese investment, which has links to corrupt elite players in the previous government, is losing out.” said Gordon. 

CIF is part of a secretive family of companies nicknamed the “Queensway group” after the conglomerate’s former Queensway address in Hong Kong’s Central district. Dos Santos cultivated close ties with China, which saw the creation of joint ventures between Sonangol, the Angolan state-owned oil company, and the Queensway group. 

“In the course of its investigations, HSBC has discovered that the network of companies is a highly complex one: over 30 separate entities have been identified in the so‑called Queensway group in various jurisdictions across Africa, Latin America, Southeast Asia and the United States,” said a document on February 4, 2016, by Wu Wing Chuen, then the Hong Kong head of financial crime compliance at HSBC. 

“The opacity of such corporate structures alone would warrant further investigation by HSBC in light of its attendant risk of Financial Crime,” said the document quoted in a judgement by Hong Kong Deputy High Court Judge Paul Lam on March 7, 2016.

In a phone call to the conglomerate’s office in Singapore, a woman replied that no questions by email or phone would be entertained. CIF has not replied to questions sent by email. 

At a press conference in Luanda on February 17, US Secretary of State Michael Pompeo said the US is committed to helping Angola “hold some individuals accountable who engaged in corrupt activities here” without naming anyone. 

One individual recently charged with money laundering and embezzlement by the Angolan Attorney General’s Office is Jose Eduardo dos Santo’s daughter Isabel. She has denied all wrongdoing. An earlier investigation by Asia Sentinel reported she was the biggest depositor in the Cyprus branch of the notorious FBME Bank, which was put out of business by the US Treasury Departments Financial Investigation Crimes Network, or FinCEN. 

In 2015, an Angolan construction company she controlled, Landscape, partnered a Chinese state-owned construction firm, China Road and Bridge Corp., in winning a road construction contract, as part of a US$1.3 billion project to develop the Areia Branca district in Luanda. China Road and Bridge is a subsidiary of China Communications Construction Company (CCCC), a Chinese state-owned infrastructure firm listed in Shanghai and Hong Kong. CCCC did not reply to Asia Sentinel’s questions. 

When the project incurred a US$232.5 million budget overrun which the Angolan Ministry of Finance had difficulty covering, Isabel dos Santos led a group of banks to fill the shortfall, according to documents obtained by the US-based International Consortium of Investigative Journalists (ICIJ). 

At the press conference on February 17 during his visit to Angola, Pompeo took an implicit swipe at China when he told a reporter, “We don’t impose debt burdens that nations can’t resolve. You suggested somehow this was different than the Chinese model. I’ll leave others to make that analysis, but I can tell you how America operates. When we come, we hire Angolans. When we come to Angola, we show up with money that will benefit the Angolan people.”

Angola’s debt to China was US$22.8 billion as of March 31, 2019, estimated the Centre for Scientific Studies and Research of the Catholic University of Angola.

During their meeting on February 17, Pompeo and Lourenco discussed boosting commercial ties between their nations, said the US State Department on its website. 

“On global issues, the two discussed the role of China in Africa,” added the department in a hint of Sino-US rivalry over Africa. 

Since Lourenço took office in September 2017, he has broadened the international range of investment in his country, so China is less dominant as a lender and investor, Gordon said. “This does not mean that Chinese investment is less important in Angola in practical construction terms - there have been new Chinese infrastructure projects announced in the last two years.”

Laurenco’s anti-corruption rhetoric hasn’t been anti-Chinese explicitly, said Nikos Asimakopoulos, a director of Alaco, a London-based risk consultancy. “Apart from the family members of the former president, there hasn’t been any consistent efforts to punish Chinese companies that did business with them.” 

One example of Isabel dos Santos being penalized while Chinese companies were not is the Marginal da Corimba project to develop a coastal area in Luanda. 

In a presidential decree on May 15, 2019, Lourenco cancelled all contracts for this project signed in 2016 by his predecessor Jose Eduardo dos Santos. A company owned by Isabel dos Santos, Urbinveste - Promoção e Projectos Imobiliários, and China Road and Bridge were among the companies which won the 2016 contracts worth a total of at least US$1.3 billion. Lourenco ordered a renegotiation of the contracts, which will exclude Isabel dos Santos but still include China Road and Bridge. 

“In addition to his corruption drive he needs to deliver economically and China is basically his only source of investment at this stage,” Asimakopoulos pointed out. 

China is one of the biggest investors in Angola and the volume of Chinese investment has exceeded US$20 billion, the Chinese Ambassador in Angola, Gong Tao, was quoted by Portuguese news agency Lusa saying in September 2019. In Angola, China has helped build and repair 2,800 kilometres (km) of railways, 20,000 km of roads, 100,000 housing units, over 100 schools and 50 hospitals, Gong said. Such massive infrastructure has been financed largely by loans from Chinese state banks and Angolan crude oil exports to China. 

The lion’s share of Angolan exports to China is crude oil. Angola is the third largest crude oil supplier to China after Saudi Arabia and Russia. In 2018, China was Angola’s largest trading partner, with bilateral trade reaching US$28 billion in 2018, according to official Chinese data. 

Toh Han Shih is a Singaporean writer in Hong Kong.