CMI REPORT
BUDGET, STATE AND PEOPLE
R 2007: 7
Although aggregate revenue data are public, tax receipts from individual oil companies are not and the oil companies are not allowed to publish their tax payments. Revenue collection in the expanding diamond industry remains unclear. Both factors may explain why Angola has not yet signed the Extractive Industries Transparency Initiative (EITI) or Publish Whay You Pay (PWYP). During a 2006 bidding round of the relinquished part of Blocks 15, 16 and 17, signature bonuses and contributions to social funds were around 1 billion USD for each of the blocks.28 In contrast to previous bidding rounds, this bidding round seems relatively transparent as it is based on a set of predetermined criteria and a sealed bid process in which all the participants were present when the bids were opened. The latest Country Economic Memorandum by the World Bank (World Bank, 2006) gives an outline of the progress in governance and transparency in the important oil and diamond areas of Public Finance Management which is summarized below: The CEM finds a number of problems in the management of oil and diamond wealth in Angola. Improvements in the areas of governance, transparency and institutional capacity are needed in the following areas; The conflicts of interest which arise because of the double functions of Sonangol and Endiama (the national diamond company) as operators and regulators should be removed by reassessing the role of Sonangol and introduce a transparent licensing, regulatory, and tax structure that would avoid conflicts of interest and privileged access to development rights in the diamond sector. While Government’s move to reflect quasi-fiscal activities in the budget, and Sonangol’s steps to identify and audit activities undertaken on behalf of the Government are welcome, concrete efforts to phase out the offsetting mechanism have yet to materialize. The present system a) is not transparent; b) leads to frequent disputes; and c) misrepresents Sonangol’s position on taxes. Sonangol can contribute more effectively to the development of the country by focusing on its core business. The Bank finds that Government has addressed governance and transparency since 2002. Angola has adopted a number of recommendations made by Oil Diagnostic Study and in the 2005 PEMFAR, such as • • • •
publishing details of oil payments received on the Ministry of Finance website Conducting audits of the petroleum sector but has yet to publish them Progressing with roll out of the SIGFE, but with weak inclusion of revenue data Using a model for oil revenue forecasting.
Progress is however found to be slow in some areas of the oil sector and the following are points for action: • • • • •
Lack of a timeframe for phasing out Sonangol's quasi-fiscal operations Indications of no change in Sonangol’s dual role at least until 2010. Certain information on the Ministry of Finance website continues to be outdated. High level workshops on petroleum revenue management should be complemented jointly with civil society. Angola has been cautious about announcing formal adherence to the principles and objectives of the Extractive Industries Transparency Initiative (EITI), despite the encouragement of the Bank, IMF and bilateral partners.
28
In Block 15, ENI won the sealed bidding competition with a signature bonus of 900 million USD (in addition come 50 million USD in social funds. Social funds are administered by Sonangol and do not constitute part of the public budget). Statoil is part of the consortium. A Sinopec (Chinese company)/Sonangol joint venture) won contracts in Block 17 in cooperation with Total, and Block 18 in cooperation with Petrobas. In both cases, the signature bonus was 1.1 billion USD and social funds constituted 200 million USD.
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