Angola launches $5 bln sovereign wealth fund

LISBON Wed Oct 17, 2012 11:29am EDT

Angola's President Jose Eduardo dos Santos talks to journalists at Sao Bento Palace in Lisbon March 11, 2009. REUTERS/Hugo Correia

Angola's President Jose Eduardo dos Santos talks to journalists at Sao Bento Palace in Lisbon March 11, 2009.

Credit: Reuters/Hugo Correia

LISBON (Reuters) - Angola on Wednesday launched a $5 billion sovereign wealth fund to invest in domestic and overseas assets by funnelling its vast oil wealth into infrastructure, hotels and other high-growth projects.

Africa's second-largest crude oil producer is looking to diversify its oil-dependent economy by developing infrastructure outside the energy industry. The country was devastated by a 27-year civil war that ended a decade ago.

Nigeria, the continent's top oil producer, has already set up a similar $1 billion fund, although its progress has been hampered by political wrangling.

"The Nigerian fund is mainly for liquid, low-yield assets, while the Angolan fund's mandate is broader, with investment in the real economy domestically," said Richard Segal, head of emerging markets strategy at Jefferies in London.

The Angolan Sovereign Fund (FSA), which will also invest in financial securities, will be headed by President Jose Eduardo Dos Santos' economic affairs secretary, the fund's board said in a statement.

Jose Filomeno dos Santos, one of the president's sons, will also sit on the three-person board, an appointment likely to raise further questions about government transparency. President Dos Santos has led the country for 33 years and was sworn in for a new five-year term last month.

The fund said its first investments will be in projects to develop agriculture, water, power generation and transport, with an early focus on the hotel industry in sub-Saharan Africa.

OIL REVENUES

Until now the southwest African country was one of the few OPEC member states without a sovereign wealth fund.

Oil revenues represent over 95 percent of Angola's export income and around 45 percent of gross domestic product. After years of double-digit growth, Angola's economy suffered a rapid slow down after oil prices tumbled in 2008.

GDP, which the World Bank estimated at $101 billion last year, is set to grow between 8 and 10 percent this year thanks to higher oil prices and output.

Filomeno dos Santos told Reuters in a telephone interview the fund was not a stabilisation tool in the event of an oil price shock, but was aimed at diversifying the economy and creating wealth.

It will grow from further oil revenues transferred by the government and from returns on its investment projects, he added, although he declined to estimate the fund's growth.

"There may be a lot of good intentions, but in a country where there is no transparency, corruption is high and key places go those close to the leader, we see little chance of this plan working to help Angolans," Alcides Sakala, spokesman for main opposition party UNITA told Reuters.

The FSA board said it will be assisted by a council composed of senior ministers and the central bank governor, and will publish accounts annually and have them audited by an international audit firm.

"The transparency of the fund will be guaranteed by our strict reporting and auditing rules and an investment policy to be announced soon," Filomeno dos Santos said.

It was not immediately clear when the investment policy would be announced, or if it would be enough to assuage concerns about governance.

"It seems there will be more transparency on this than is typical in Angola, but it will still be less than in other countries' funds," Jefferies' Segal said.

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