For two decades under former President dos Santos, Angola repeatedly awarded multi-million-dollar contracts for complex projects to ‘johnny-come-lately’ companies with no track record. Invariably these were shell companies set up by Dos Santos cronies that never had the wherewithal to deliver on their promises. It was a scam by which the state kleptocrats diverted public funds into their own bank accounts. Under reformist President João Lourenço, things are supposed to have changed. But have they?
An investigation by Maka Angola into a billion-dollar deal for the supply and maintenance of locomotives for the National Institute of Angolan Railways suggests the authorities may need to take a much closer look at what, if anything, they got for their money.
We focus on one of three contracts from May 2015, all signed on the same day on behalf of the Angolan government by the then Secretary of State for Transport, Mário Domingues, and the legal proprietor of AEnergia S.A., Ricardo Filomeno Duarte Leitão Machado, a Portuguese national who owned a 99.9% majority share of the company.
One of these contracts, worth 500 million US dollars, was for the rebuilding, modernization and adaptation of the railway maintenance yards in the cities of Luanda, Lobito, Huambo and Lubango.
In 2013, the Ministry of Transport had signed a Memorandum of Understanding with General Electric to get Angola’s railway system up to date and working again.
For two decades under former President dos Santos, Angola repeatedly awarded multi-million-dollar contracts for complex projects to ‘johnny-come-lately’ companies with no track record
Two years later, AEnergy presented itself as GE’s business partner to draw up and sign three contracts to turn the plans in the Memorandum into reality. The very next day, AEnergy submitted its invoice for an advance of US $75 million against future works and, surprisingly, the invoice was paid straight away – before any of the required checks and balances had been effected.
The contract contained a stipulation (in Clause 20) that it would only take effect once it had been reviewed and signed off by the Tribunal de Contas (the national audit office) and the Angolan President. Neither had done so.
AEnergy’s owner, Ricardo Machado, says: “We were advised by the Ministry of Transport that it had submitted the paperwork to the national audit office in good time, in compliance with the legal requirements it was obliged to observe.”
Mr Machado say that the US $75 million received by AEnergy was an advance against expenses: “Bearing in mind the requirements of the entities that were financing the work, the government agreed to make an immediate first payment so as not to delay the process of manufacturing the priority equipment needed for both the new and updated locomotives.”
He says the problem was that financing of the project was due to come from GE Capital (part of the General Electric group) as outlined in the Memorandum of Understanding, but the money was simply not available in 2016 and 2017. To date, he says, there still hasn’t been funding for the contract to be complete.
But according to Mr Machado Energy “delivered the priority supplies earmarked by Mintrans (the Ministry of Transport) and the value of the services and rolling stock supplied was exactly equal to the amount disbursed.”
Unfortunately the Ministry has no record of any of this.
Where’s the Proof?
A well-informed source as the Ministry of Transport (speaking on condition of anonymity) told Maka Angola that US $75 million could not have been authorised by the Ministry as it didn’t have that money in its budget. Our source believes that the only possible source of the funds was the Angolan Central Bank, the Banco Nacional de Angola (BNA), whose governor at that time was José Pedro de Morais.
Our source says: “Someone must have given orders to the BNA to pay the US $75 million. There ought to be documentation to prove who gave the order and on what basis. Surely if AEnergy had undertaken any contractual work, there would also be records showing how that sum was spent – but we (at the Ministry) have not received any documentary evidence. We simply have no idea what AEnergy did with the money.”
“Furthermore, AEnergy has no justification in citing equipment donated to Angola by General Electric as part of its corporate social responsibility programme as though these were materials purchased by AEnergy with the advance payment.”
“We are talking about mobile medical clinics, training simulators and drones for checking rails; none of these were purchased by AEnergy. None. In fact the Ministry had to order AEnergy logos to be removed from these items because they were donated by GE and had no connection whatsoever with AEnergy.”
Our source has seen nothing to suggest that AEnergy has used any of the US $75 million to make any investment towards infrastructure or training: “Do the math. Then ask yourself: Were we robbed?”
Senior officials at the Ministry of Transport are said to be furious at the lack of any concrete information regarding the project, telling Maka Angola “mislaying just one million dollars would be important, let alone US $75 million, when like every other government institution we desperately need sufficient financial resources.”
In previous years the Ministry could count on a budget of US $1.5 billion for projects – this year its budget is barely US $100 million. Officials there say the government should conduct an exhaustive audit to recover all the missing millions – that would be a huge boost to investment in essential infrastructure.
Was the Contract Even Legit?
Maka Angola’s legal analyst, Rui Verde, emphasises that the process of entering into a contract with AEnergy was incomplete and that the huge sum handed over to the company was not legally justifiable.
“There is the possibility that this was a criminal act,” he says, “and the authorities should be looking into whether any fraud, peculation or money laundering took place.”
He notes that from a legal perspective it is perplexing that the contract fails to identify the equipment, or works, necessary to remodel and modernize the rail yards. It gives AEnergy carte blanche to draw up a Plan of Work and make its own decisions about what it is going to do. “The terminology ‘to remodel and modernize’ is ambiguous and vague and Clauses 3 to 8 in the contract seem to give the private company total discretion over how to spend US $500 million without having to account for it,” says Rui Verde.
“A properly-drawn contract would include a specific Plan of Work, spelling out what equipment is required at each stage. This had none of the specifics required to guarantee how public money was to be used – it was the equivalent of handing AEnergy US $500 million in a brown envelope and letting them decide what to do with it.”
Senior officials at the Ministry of Transport are said to be furious at the lack of any concrete information regarding the project, telling Maka Angola “mislaying just one million dollars would be important, let alone US $75 million, when like every other government institution we desperately need sufficient financial resources
As Rui Verde reminds us, “this brings to mind a similar scheme already before the courts in which the accused argued they needed the US $500 million upfront as surety to secure a US $30 billion loan. In fact, there was no loan on offer.”
Was this really another dodgy deal? In the words of social activist Luaty Beirão, was it just another case of the “embezzlement without end” that was part and parcel of the Dos Santos Administration. In the meantime Angola is still waiting to find out.
Multi-billion-dollar deals between the government of Angola and the US corporate giant General Electric for showpiece rail and energy infrastructure projects are under investigation after reports of scandalous “irregularities” involving an intermediary company.
As reported by Maka Angola, the projects were all part of a Memorandum of Understanding, signed by GE and the Angolan government in 2013. Two years later, three separate contracts by which these proposals would be executed were drawn up by Aenergy (Aenergia, S.A.) acting as GE’s intermediary or “channel” partner, whose legal owner is Ricardo Leitão Machado, a Portuguese national.
This was how the former Angolan administration did business with the world. Under President José Eduardo dos Santos, foreign investors and businesses were required to enter into partnership with the Angolan private sector. All too often, these were companies with nominal owners shielding the involvement of politically exposed persons whose primary goal was to divert Angolan public funds into their private bank accounts.
The Railway Network Deal
Maka Angola reported concerns over the first of those deals: a contract signed with Angola’s Transport Ministry for the modernisation of the Angolan railway system. The project was supposed to be fully funded by a loan from a GE subsidiary, GE Capital, yet the Ministry of Finance coughed up (without prior approval) US $75 million US upfront to Aenergy, with little to show for it several years down the line.
Exercizing its right to reply, a lengthy statement from Aenergy (via PR firm Hill+Knowlton Strategies) says that all its actions in connection with that contract were legal and transparent and that the 20% of costs not covered under the deal with GE were due to logistics and import costs.
Angola’s Transport Ministry has a different opinion.
The Electricity Turbine Deal
This investigation looked in detail at another of those contracts with Aenergy from May 2015, in this instance with the Angolan Ministry of Water and Energy, by which GE would provide turbines for hydroelectric projects in Angola, also to be financed by GE Capital.
Allegedly, a version of the Aenergy contract suggests GE Capital’s U$1.1 billion would cover the cost of 8 GE turbines. In fact, GE supplied additional turbines but somehow the Ministry says it was persuaded by Aenergy’s legal owner, Ricardo Leitão Machado, that the surplus turbines had no connection with their deal.
As Angola’s increased needs for energy in the regions became clearer, by 2018 Energy Minister João Baptista Borges submitted a proposal to President João Lourenço that Angola revise its requirements to increase capacity for Lubango (in the central highland province of the same name), Dundo (in the Northeastern province of Lunda Norte) and Tômbwa (on the coast of Namibe province. He argued they could achieve this with just four extra turbines, by reducing the turbine capacity for the Soyo I power station (in Northwestern Zaire province), thus remaining within the budget agreed with GE Capital.
When this was put to Aenergy and GE at a meeting in December 2018, there was uproar. Aenergy was set to sell an extra four turbines on to the Angolans, for more than US $120 million, but the GE Angola representatives were adamant that the additional turbines were already included in the deal, as confirmed in writing by GE’s regional executive director, Elisee Sezan.
In short, GE had funded and supplied 12 turbines to Angola; Aenergy had supplied only eight of them while asking the Ministry to pay again for the extra four.
This investigation looked in detail at another of those contracts with Aenergy from May 2015, in this instance with the Angolan Ministry of Water and Energy, by which GE would provide turbines for hydroelectric projects in Angola, also to be financed by GE Capital.
Within days the Energy Minister sent a written report to President Lourenço (dated December 18, 2018) citing a breach of trust and no confidence in Aenergy. From that date onward, Angola began the process of extricating itself from its contractual obligations to Aenergy to deal directly with General Electric (as arguably should have been the case from the very start). On completion of the audit of their contractual relationship, Aenergy was found to owe Angola close to US $118 million.
President Lourenço was finally able to issue a decree authorizing the revocation of the contracts with Aenergy on the grounds of “violation of the principles of trust and good faith” in August 2019 and the following month a detailed dossier was sent to the office of the Attorney-General of the Republic, to launch a criminal investigation and request the seizure of the as yet undelivered turbines. On December 6, 2019, the Provincial Court of Luanda ordered the seizure of equipments in possession of Aenergy, worth US $114.2 million, all of which had been acquired with public funds.
It was only to be expected that Aenergy would react and launch an appeal against the Ministry’s injunction and for now the ponderous legal process is in course. One more mess, left by the Dos Santos kleptocracy, for which the Angolan people pay the price.
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This article was originally published by our partner MAKA Angola.
