President Jacob Zuma' s first State visit in Angola.Jacob Zuma meets the Angolan President Jose Eduardo Dos Santos at the Presidentila palace in Lunda. Picture: Peter Fabricius

Lisbon - Angola’s president had personally ordered that the state guarantee up to $5.7 billion (R60bn) in troubled loans belonging to the Angolan unit of Portugal’s financially compromised Banco Espirito Santo (BES), a Portuguese newspaper said on Saturday.

BES, one of Portugal’s best-known banks, is struggling to contain a crisis that erupted after an audit into its major shareholder, Espirito Santo Financial Group, revealed irregularities there, leaving a network of other companies controlled by the Espirito Santo family under scrutiny from investors and regulators.

The scale of those problems – and potential losses linked to unpaid debt – is not yet clear, but the fallout has spread to Portugal’s former colony, where the bank’s BES Angola unit is a major financial player with links to the ruling elite and the Dos Santos family.

On Saturday Portugal’s weekly Expresso published what it said was a copy of the “Internal Presidential Order Number 7” signed by President José Eduardo dos Santos on December 31 last year.

The document, whose authenticity could not be independently verified by Reuters, instructed Angola’s finance minister to issue the guarantee for BES Angola for up to $5.7bn “to protect fundamental interests for the equilibrium of the Angolan financial system”.

While BES Angola has already said that an Angolan state guarantee covered $5.7bn, or 70 percent, of its loans, the fact that the guarantee was ordered by the president reveals his direct involvement in the move to protect the unit.

The order noted BES Angola had a “relevant” loan portfolio financing Angolan companies that were helping to advance the government’s 2013-2017 National Development Plan. The plan seeks to boost the non-oil sector of the Angolan economy, which relies heavily on oil revenues.

Many banks in Africa’s second-largest oil producer have been hit by a surge in bad loans in recent years as a result of an economic slowdown.

The International Monetary Fund sees Angola’s real gross domestic product growth slowing to 3.9 percent this year from 4.1 percent last year and 5.2 percent in 2012.

Luanda broke its silence on the BES affair last week, when Angolan central bank governor José de Lima Massano admitted to parliament on Thursday there were problems with BES Angola’s credit portfolio that included bad loans. He provided no figures and made no mention of the guarantee.

Asked about the guarantee on Saturday, Angolan presidency spokesman Aldemiro Vaz da Conceicao, who on Friday redirected questions to the central bank and finance minister, said “this has nothing to do with the presidency”.

But when told Expresso had published what it said was a copy of the presidential order giving instructions for the guarantee, he said he would double-check. He did not then respond to follow-up e-mails and calls.

On Friday Banco Nacional de Angola spokeswoman Amelia Borja Neto said that questions about the sovereign guarantee should be addressed to the “emitting entity”, indicating it was not the central bank in this case.

Bank of Portugal governor Carlos Costa said the Angolan guarantee had helped to eliminate uncertainty around BES, which holds a 55.71 percent stake in the Angolan affiliate.

In December, Ricardo Espirito Santo Salgado, then chief executive of BES, met the Angolan president. Salgado has said the guarantee was agreed at that time.

Dos Santos, in power since 1979, is one of Africa’s longest serving leaders. Rights groups and transparency campaigners say his rule is personalised and autocratic and does not do enough to share out the country’s oil wealth. – Reuters