Angola wealth fund looks to invest in Southern Africa

Windhoek – The son of Angolan President Jose Eduardo dos Santos says that country’s new US$5b sovereign wealth fund will look for investment opportunities in the southern Africa region in a bid to grow returns that are key to improving infrastructure in the oil-rich nation.
Jose Filomeno de Sousa dos Santos, Director for Strategy at the Sovereign Wealth Fund of Angola (FSDEA), says the fund’s priority is to invest in industries, manufacturing and infrastructure. It is keen to put that cash in Angolan projects, as well as those of key ally South Africa, and possibly Western economies.
Sovereign wealth funds are commodity-backed state investment vehicles created to provide stability when an economy is thriving or in decline. They are used to stabilise an economy’s financial structures when there is excess revenue and to invest in projects that provide economic security for future generations by using current wealth.
Algeria’s fund, with assets worth US$56.7b, has been the pioneering sovereign wealth fund in Africa, but other oil producers such as Libya, Nigeria, Gabon, Mauritania and Equatorial Guinea now have similar funds.
In the Southern African Development Community (SADC), Botswana has a sovereign fund with nearly US$7b in assets, with proceeds coming from its diamonds and other minerals.
“The critical thing for me is that the fund plays its part in improving the prospects of the people of Angola. We will look to invest in the infrastructure projects that improve lives and benefit ordinary Angolans,” the 34-year-old Dos Santos said during an interview in South Africa on the sidelines of a conference of African sovereign wealth funds.
“The fund was created by parliament with an initial endowment of US$5b. It will also benefit from continuous endowments of 100 000 barrels of oil a day in cash equivalent. But where we see real gains is in investment in projects and programmes to improve the lives of the people,” says the soft-spoken, British-schooled executive.
Asked why he took up the appointment to manage the fund’s strategy and portfolio, Dos Santos reflects ruefully on his country’s past: “People from my generation, while we were growing up, we had no prospects for the future. A lot of the people were drafted and went to war.
“Luckily, some of us were given the opportunity to study and to be ready for the future of the country, which at the time we did not conceive because the country was at war. Now that the conflict is finished, and things are looking up, we are the people to drive things forward.”
Dos Santos fends off criticism that his appointment smirks of nepotism, arguing that he has a role to play to build his country. He says transparency and integrity are important to him and the fund, which is why the advisory board includes the ministers responsible for finance, planning and the economy, as well as governor of the reserve bank.
Angola’s 27-year civil war ended with the battlefield death of veteran rebel UNITA leader Jonas Savimbi in 2002. The return to peace has inspired a decade of frenetic growth that has lifted Angola from a low-income country to an upper middle-income country, according to World Bank data.
However, Dos Santos acknowledges that income disparities are huge and millions still live in poverty.
“After the war, democracy has consolidated and the rule of law reaffirmed. We are building stronger institutions and we are seeing greater stability into the future. This has allowed us to plan better and to deliver services better to our people.
“But the gap is still big. We had a long war and to right the problems brought by war is not easy,” he says. Some of those challenges include a backlog in housing and provision of essential services such as schools and hospitals. Angola’s planners have, using Chinese oil-backed loans, built new residential cities in and outside of the capital Luanda, to meet some of the growing demand.
One such development, created for a population of 500 000 on the outskirts of Luanda, is the Chinese-built Nova Cidade de Kilamba. It stands on 5 000ha of land with 100 retail units, a dozen schools and 750 eight-storied apartment blocks. It has been dubbed a “ghost city” because it had been unoccupied for a while, apparently due to pricing structures.
Dos Santos says he understands the criticism but it is the state’s duty to do all it can to provide basic needs for its people, including decent housing such as that in Kilamba. “If it doesn’t work, we have to look at why it doesn’t work and fix it … The important thing is that Kilamba is now occupied and we look forward to other developments like that.”

March 2013
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