The fact that 30% of Angola’s population lives on less than $1.90 (R27) a day, when the country is the second-largest oil producer in Africa, makes such sophisticated corruption networks a grave crime against the people of this continent.
This week, Africa was rocked by the “Luanda leaks”, which uncovered more than 700 000 documents that expose the collusion between billionaire Isabel dos Santos, the daughter of former Angolan president Jose Eduardo dos Santos and the “Big Four” Western accounting firms, top consulting companies and banks that facilitated the looting of Angola.
The International Consortium of Investigative Journalists was behind the release of the documents and has alleged that the international system has allowed powerful individuals like Dos Santos to move assets around the world without question. The documents were investigated by 37 media organisations in 20 countries.
Dos Santos has been dubbed the richest woman in Africa, with an estimated net worth of $2 billion. But last month an Angolan court froze her and her Congolese husband Sindika Dokolo’s assets, claiming they, with Mario Leite da Silva, chairperson of Banco de Fomento Angola, caused the state to lose $1.1bn. The government now wants her extradited to Angola to face charges of money laundering, embezzlement and fraud. She denies the charges and claims a politically motivated witch hunt against her.
What the documents point to is that Dos Santos’s business empire was built on privileged access to state funds, much of which was facilitated through presidential decrees issued by her father. It is estimated that 400 companies in 41 countries are linked to her and her husband.
As early as 1999, she was given a telecoms licence by her father. She acquired a 25% stake in the largest mobile phone provider, Unitel, from a high ranking government official. But much of her fortune was based on ownership of a stake in a Portugese energy company, Galp, one of her companies bought from the Angola state oil company Sonangal in 2006.
In 2012, Dokolo signed an agreement with Sodiam, the trading arm of the Angolan state diamond company. It was to be a 50-50 partnership in a deal to buy a stake in the struggling Swiss jewellery company De Grisogono. But Sodiam invested $79million while Dokolo only invested $4m. Sodiam then awarded Dokolo a $5m success fee for brokering the deal. Sodiam then borrowed $98m from Banco BIC in Angola, in which Dos Santos was the largest shareholder. Sodiam had to pay 9% interest on the loan that was guaranteed by presidential decree.
Sodiam chairperson Eugenio Pereira Bravo da Rosa, who was appointed in November 2017, said the state mining company had not profited a single dollar from the investment in De Grisogono, and that by the time it has paid off its loans it will have lost $200m. Sodiam announced its intention to divest from the jeweller in 2017.
By 2013, Citibank, Barclays and Deutsche Bank had cut ties with the Dos Santos business empire over concerns about the sources of money. In 2014, the Spanish bank, Santander, designated Dos Santos a “politically exposed person”, a term used by financial regulators for officials and family who may be vulnerable to bribery or corruption. Dokolo had already been designated such in 2001.
Despite the fact that major banks had serious questions over the legitimacy of the Dos Santos business transactions and had turned their backs on them, accounting firms continued to do work for their companies, and made millions. It was in this way that it has been alleged that Western firms facilitated the looting of the Angolan state, most particularly the Big Four - PwC, KPMG, Deloitte, and EY.
It is alleged PwC played the biggest role in providing tax and financial advice on creative ways to reduce taxes and use tax havens. Companies like PwC helped sustain the Dos Santos business empire for years after Western banks had cut them off.
The Big Four have declined to answer specific questions about their involvement, but claim to engage in “rigorous screening for potential clients”. PwC has taken action to terminate ongoing work for entities controlled by the Dos Santos family, and launched investigations.
What has become clear is that the Big Four are central to the operation of global capitalism, and while they are supposed to verify the role of financial accounts for stakeholders, they have instead developed tax avoidance practices and become facilitators of corruption and corporate malfeasance.
The coalescing of the auditing and accounting functions of the Big Four with corporate consultancy and tax advice services has become deeply problematic. They have global networks of affiliated firms which help to conceal, accumulate and move massive volumes of illicit wealth. While the companies of KPMG, for example, operate under a common name and common standards, they are not under common ownership, which reduces legal and regulatory risk. In this way, KPMG international cannot be held liable for what happens with its Angolan or South African partners.
As the South Africa-based economist Iraj Abedian has noted, companies like KPMG have become efficient enablers of illicit financial flows. In emails leaked from the Gupta companies, it was exposed that KPMG was involved in illicit financial transfers. KPMG’s affiliate companies in South Africa helped to structure the Gupta’s companies, especially the Dubai-based precious metals trade, so they could avoid paying South African taxes.
KPMG audited the Gupta family accounts in South Africa and Dubai for years, but only cut ties with the family in April 2016. While the company has since culled its management team in South Africa and issued a public apology, their actions led to South Africa losing tens of billions of rand and dealt the economy a major blow.
While the US has imposed some of the toughest anti-money laundering laws on banks, there is no federal law forcing accountants to vet potential clients or report on suspicious activity to law enforcement agencies. The US has set up an Accounting Oversight Board, a measure that African states should take to ensure some regulation over accounting firms. There also needs to be support for financial whistle-blowers, who take great risks by exposing financial corruption.
It is up to South Africa and Angola to learn the lessons from the past, where greedy and self-centred political elites have worked in tandem with Western accounting and consulting firms to loot the state. We can no longer afford to tolerate the politics of self-aggrandisement, or firms that give corruption a veneer of respectability.
* Shannon Ebrahim is Independent Media's Foreign Editor.