CEDESA Warns of Sonangol’s Structural Decline, Urges 45% Privatization and Governance Overhaul
A recent analysis by the Center for Studies of Economic and Social Development of Angola (CEDESA) warns that Sonangol, Angola’s state-owned oil company, is in structural decline and requires comprehensive reforms, including the privatization of 45 percent of its capital and the removal of political party members from management positions.
The report, authored by Rui Verde, states that Sonangol’s challenges cannot be explained solely by external factors such as the COVID-19 pandemic or fluctuations in international oil prices.
Verde emphasizes that the company is experiencing a “structural erosion,” driven by institutional weaknesses and an inability to increase oil production. Investments outside the oil sector—such as in health, transportation, telecommunications, and real estate—have proven unsustainable, accumulating hundreds of millions of dollars in losses and placing a lasting financial burden on the company.
Governance issues, including corruption, nepotism, and fuel diversion schemes, have further undermined Sonangol’s credibility and exposed its institutional vulnerabilities.
According to the report, “Sonangol’s decline is not cyclical but structural,” resulting from mismanagement, weak parallel businesses, and stagnating production.
The report highlights multiple indicators of decline: falling profits, opaque relationships with the Angolan state, lack of accounting transparency, absence of public audits, and stagnant production levels.
Domestic oil production has fallen sharply, from over 1.8 million barrels per day in 2008 to less than 1.1 million barrels in 2024, with no significant recovery from new technologies or enhanced oil recovery projects.
Investment in exploration and development has also declined, as resources have been diverted to debt repayment, opaque financial operations, and non-strategic assets.
While partial privatization plans—including a potential initial public offering of up to 30 percent—have been announced, doubts remain about the reliability of financial information and internal governance, which discourages potential investors.
CEDESA proposes a major reform package, including privatizing 45 percent of Sonangol’s capital on international markets. One-third of this stake would be reserved for workers to democratize ownership, align employee and management interests, and attract international capital and expertise.
The report also recommends passing legislation to prevent political party members from holding management positions at Sonangol. Verde emphasizes that administrative independence is essential to restore public trust and attract international investment while protecting the company from political interference.
Additionally, CEDESA suggests selectively privatizing chronically unprofitable segments, such as Sonangol Distribuição, allowing the company and the state to focus on strategic, profitable areas like exploration and production. Privatization could also increase domestic market competition, improving pricing and service quality.
On the social front, the report advocates allocating a portion of oil revenues directly to producing provinces to fund infrastructure, education, and health programs. This redistribution would reduce regional inequalities and enhance the legitimacy of resource exploitation.
Finally, the report calls for increased investment in research and development, particularly in energy efficiency, renewable energy, and decarbonization technologies.
CEDESA is an independent research group of academics and international experts analyzing public policy and economic governance in Angola.
