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The Use of Oil Revenue in Angola and Its Impact on Human Rights

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The Use of Oil Revenue in Angola and Its Impact on Human Rights Human Rights Watch January 2004, Vol. 16, No. 1 (A) Some Transparency, No Accountability: The Use of Oil Revenue in Angola and Its Impact on Human Rights I. Summary...................................................................................................................................................1 II. Recommendations.................................................................................................................................4 To the Government of Angola............................................................................................................. 4 To the International Monetary Fund................................................................................................... 4 To the World Bank................................................................................................................................. 5 To Donor governments, the G-8 and Member Governments of the Extractive Industries Transparency Initiative........................................................................................................................... 5 To Oil Companies Operating in Angola............................................................................................. 5 III. Background: The IMF and Angolan Government........................................................................6 Staff-Monitored Programs: 1995-2001................................................................................................ 6 The Oil Diagnostic ............................................................................................................................... 11 Delays in Implementation and a Failure to Publish Reports ......................................................... 13 IV. The Oil Diagnostic: Oil Revenue Discrepancies..........................................................................16 KPMG’s July 2002 Inception Report and the July 2003 Executive Summary............................ 17 Incoming Revenue Discrepancies...................................................................................................20 Taxes and Royalties...........................................................................................................................20 Sonangol’s Tax and Royalty Discrepancies....................................................................................... 23 Sonangol’s Profit Oil Discrepancies...............................................................................................24 Reconciling Incoming Revenues ........................................................................................................ 27 Other Sources of Revenue................................................................................................................... 28 Signature Bonus Payments...............................................................................................................28 Production Discrepancies.................................................................................................................31 V. Expenditure Discrepancies.................................................................................................................33 The March 2002 and July 2003 IMF Staff Reports ......................................................................... 33 Missing Funds........................................................................................................................................ 35 Inadequate Record Keeping................................................................................................................ 38 Indications of Corruption.................................................................................................................... 39 War as an Impediment to Economic Reform.................................................................................. 43 VI. Government Attempts to Restrict Information............................................................................47 Domestic Laws that Would Criminalize and Restrict Information .............................................. 47 Failure to Provide Information to the IMF...................................................................................... 48 Threats Against Governments............................................................................................................ 51 Switzerland..........................................................................................................................................52 France..................................................................................................................................................52 Efforts to Prevent Companies from Publishing Data..................................................................... 54 VII. The Impact of Lack of Transparency and Accountability on Human Rights and Development ..............................................................................................................................................57 Freedom of Information...................................................................................................................... 60 Underfunding of the Judiciary and the Right of Access to Justice................................................ 60 Inadequate Funding of Health, Education, and Social Services.................................................... 64 Social Bonus Payments from Companies ......................................................................................... 69 The Angolan Government’s Obligation to Fulfill Economic, Social and Cultural Rights........ 71 Emerging Issues: HIV/AIDS............................................................................................................ 75 Lack of Democracy .............................................................................................................................. 76 VIII. International Initiatives to Promote Transparency....................................................................79 IMF and World Bank........................................................................................................................... 79 The IMF..............................................................................................................................................79 The World Bank ................................................................................................................................82 The Extractive Industries Transparency Initiative (EITI).............................................................. 85 The Publish What You Pay Campaign (PWYP).............................................................................. 86 The G-8 Statement ............................................................................................................................... 87 The Soros Announcement................................................................................................................... 88 IX. Conclusion............................................................................................................................................91 ACKNOWLEDGMENTS ......................................................................................................................93 I. Summary The Angolan government has consistently mismanaged its substantial oil revenues and, despite rhetorical commitments, has yet to demonstrate a meaningful commitment to reform. In recent years, literally billions of dollars in oil revenues have illegally bypassed the central bank and remain unaccounted for. Such missing revenues reflect a failure of government accountability more generally and are directly linked to the Angolan government’s continuing failure to foster institutions that uphold the rule of law and human rights. The sums involved are staggering. From 1997 to 2002, unaccounted for funds amounted to some U.S.$4.22 billion. In those same years, total social spending in the country—including Angolan government spending as well as public and private initiatives funded through the United Nations’ Consolidated Inter-Agency Appeal— came to $4.27 billion. In effect, the Angolan government has not accounted for an amount roughly equal to the total amount spent on the humanitarian, social, health, and education needs of a population in severe distress. Due at least in part to such mismanagement and corruption, the government also has impeded Angolans’ ability to enjoy their economic, social, and cultural rights. It has not provided sufficient funding for essential social services, including healthcare and education. As a result, millions of Angolans continue to live without access to hospitals and schools, in violation of the government’s own commitments and human rights treaties to which it is a party. In recent years, as oil revenues surged, the Angolan government has refused to provide information about the use of public funds to its population, undermining their right to information. It has failed to establish hundreds of courts and allowed the judiciary to become dysfunctional, undermining Angolan’s ability to hold government officials and others accountable. And it has not fully committed to free and fair elections, thus removing another avenue of accountability. Had the government properly accounted for and managed the disappeared funds it is likely that more funds would have been allocated to the fulfillment of economic, social, and cultural rights, such
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