As if being brought to its knees by a corrupt family-owned conglomerate wasn’t enough, Portugal’s beleaguered Banco Espírito Santo (BES) is now facing further losses due to the failure of its Angolan subsidiary.
BES owns 55 percent of Angola’s second-largest bank, BES Angola (BESA). In recent years, BESA has become critically dependent on BES for funding because of its extraordinarily high loan/deposit ratio and deteriorating loan book. When the ESG empire collapsed, BES had not only an equity stake, but a loan exposure to BESA of around EUR3bn.
On the face of it, Portuguese investment in Angola makes sense. Angola is oil and mineral rich, and has experienced fast economic growth in recent years, though its economy has slowed recently due to falling oil prices. As the former colonial power, Portugal has strong historical and cultural ties to Angola.
But the Angolan regime is among the most corrupt on earth and its people among the poorest. Over 40 percent of the Angolan population live on less than $2 a day and the majority have little access to running water, sanitation or electricity. But the Angolan president is one of the richest men in Africa and his eldest daughter, Isabel, is the richest woman in Africa according to Forbes. There have been numerous allegations that the dos Santos family have systematically enriched themselves and their cronies at the expense of the Angolan people, but so far there are no signs of political instability and the regime appears well entrenched. Doing business in Angola is virtually impossible without the direct involvement of politicians in the Angolan ruling party, the MPLA. Businesses are either “partners of the state” or they don’t operate.
BESA is undoubtedly a “partner of the state”, though not because it has invested productively in the Angolan economy. No, it is because it has done its duty by the Angolan powers-that-be. According to the investigative journalist Rafael Marques de Morais at makaangola.org, much of BESA’s loan book is made up of loans to Angolan political interests, many of them directly connected with the dos Santos family.
Written by Fances Coppola/Read more at Forbes