Exclusive: Data reveal huge sums spirited out of Angola

JOHANNESBURG Wed Apr 6, 2011 10:17am EDT

Speedboats sit beneath the backdrop of Luanda, Angola January 27, 2010. REUTERS/Rafael Marchante

Speedboats sit beneath the backdrop of Luanda, Angola January 27, 2010.

Credit: Reuters/Rafael Marchante

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JOHANNESBURG (Reuters) - Almost $6 billion was spirited out of Angola in 2009, according to new data on Wednesday that highlight how much of the war-scarred African nation's oil wealth is stolen by a corrupt elite.

Calculations provided to Reuters by the Washington-based anti-corruption advocacy group Global Financial Integrity (GFI) suggest funds worth nearly a sixth of Angola's entire annual budget flowed illicitly out of the country in the last year for which data are available.

The bulk of the flows was channelled abroad by a mechanism known as "trade mispricing."

In this case, the way it typically works is that Angolan importers pretend to pay foreigners more for imports than they actually spend. The difference provides cash that can be discreetly put into banks or other assets abroad.

Oil producers seem especially susceptible to this and other kinds of corruption and capital flight. Late last year, GFI estimated that in 2009 $27.5 billion flowed illicitly out of Nigeria, Africa's largest oil producer and a country with eight times Angola's 18.5 million population.

Angola is Africa's largest oil producer after Nigeria and a strategic supplier of crude to the United States.

It has set its sights on producing 2 million barrels of oil a day, and says much of that revenue should be plowed into rebuilding after a long civil war that shattered the former Portuguese colony before it ended almost a decade ago.

But the secretive governing elite at the top of the ruling MPLA party has long been accused of graft on a grand scale and of plundering the oil wealth of a nation where the vast majority of its 18.5 million inhabitants live in squalor and poverty.

There is a tight oligarchy around President Jose Eduardo dos Santos, who has been in that office since 1979, making him one of Africa's longest-serving leaders.

It is a daunting place to do business. On Transparency International's latest Corruption Perceptions Index, Angola ranked 168th out of 178 countries. And though most residents of the capital are all but destitute, more than one consulting firm ranks Luanda the world's dearest destination for foreigners.

Because of the role of trade mispricing, the figures also highlight the extent of commercial graft, which exacerbates the persistent problem of capital flight and hampers the country's chances of attracting non-oil foreign investment.

The GFI calculations suggest an unaccounted $5.8 billion left Angola in 2009 -- $4.6 billion through trade mispricing, and the rest probably via official corruption or criminal activities traced through balance of payments data.

Angolan government officials were not available to comment on the findings.

IMPORT LEAKAGE

GFI lead economist Dev Kar said the mispricing that caused the loss of capital was on the import side of the equation.

"Angola in 2009 said it imported $20.5 billion from the world, and the world said it exported $15.9 billion to Angola. So you have a discrepancy of $4.6 billion," he said in a telephone interview from GFI's Washington office.

In these calculations, costs related to freight and insurance are stripped out.

The mispricing could be on big-ticket items such as oil-sector equipment, but Kar said other goods "are also likely to be involved. Angola has a diversified import base."

In an example of how it could work, a company or official could say a piece of imported equipment costs $100 million when in fact it was exported with an $80 million price tag.

"An Angolan importer overpays the exporter, say in the United States, and asks the exporter to deposit the excess payment in the importer's offshore account or a Swiss bank," said Kar.

And there can a double-whammy for the dodgy importer as the government may make scarce foreign exchange available at favorable rates.

"There is a double gain -- on the exchange rate and on transferring the money outside," said Kar.

There is also often a link between illicit outflows in petrol producers such as Angola, and the oil price.

In 2009, oil averaged $61.80 a barrel. It traded generally higher in 2010 and is currently fetching above $120 a barrel, so the illicit flows out of Angola could swell.

Angola is often held up as a prime example of the "resource curse" that prevents oil and mineral wealth from bringing broader prosperity to a developing country.

This is because it is an easy and opaque source of revenue for governing elites, giving those at the top little incentive to pursue policies to diversify the economy.

Such problems have led to a drive for greater transparency in extractive industries. But U.S. oil majors and lobbies are fighting to water down new rules that would require them to disclose their payments to foreign governments.

In a report last year, GFI estimated that Africa alone lost $854 billion in illicit flows from 1970 to 2008, a key reason behind the continent's high rates of poverty.

(Editing by Jeffrey Heller)