…many African SWFs are exemplary. For example, Botswana’s Pula Fund has not suffered any scandals and has been around for much longer than the ones that have recently been fraught with problems. In any case, there is a need for greater scrutiny of these institutions to keep them honest.


In late March, news broke that Jose Filomeno dos Santos, son of the former Angolan president, Jose Eduardo dos Santos, and now former chairman of Fundo Soberano de Angola (FSDEA), the $5 billion Angolan sovereign wealth fund (SWF), had been charged by his country’s prosecutors for fraud over the transfer of $500 million from the the central bank’s account with Standard Chartered in the United Kingdom. Former Banco Nacional de Angola governor, Valter Filipe da Silva was also charged.

A month later, the still new government of President João Lourenço fired Quantum Global Investment Management as FSDEA’s fund manager. The revelations about FSDEA’s governance troubles during the dos Santos era are not entirely surprising: Quantum was the sole investment manager; albeit it had a good performance record. When queried about potential governance issues while still chairman of FSDEA, José Filomeno usually cited the Santiago Principles, a set of good governance rules and principles drawn up by the International Forum of Sovereign Wealth Funds (IFSWF) that the FSDEA had signed up for. And to its credit, FSDEA was ranked 8 out of 10 by the Sovereign Wealth Fund Institute (SWFI) in February 2015 for its transparency.

This begs the question of how, in spite of such supposedly stellar governance values, the FSDEA became enmeshed in its current controversy. A development financial institution (DFI) chief executive who spoke to African Business on condition of anonymity put the FSDEA dilemma rather well: “It is not about what you sign up to but what you actually do.”

He has a point. Even so, many SWFs are indeed accountable to their parliaments and do adhere to strict rules. The Angolan case is an exception, not the norm. And there is probably more politics at play than a genuine concern about governance. Because had power not change hands in Luanda, the less-than-flattering revelations about FSDEA and its former chairman may have simply been resolved quietly. So, the investigations are probably more motivated by President Lourenço’s seeming determination to purge the patronage structures of his predecessor, whose long rule means his supporters and loyalists still permeate Angolan officialdom.

Ex post Exposure

In some cases, the problem is not so much about poor governance as it is a lack of experience. In June 2016, 10 years after its founding, the $67 billion Libyan Investment Authority (LIA) took Goldman Sachs, an investment bank, to court in London over what it deemed risky investments made on its behalf in 2008 during the rule of former longtime leader Muammar Gaddafi. LIA also took issues with Société Générale, a French bank, over about $2.1 billion worth of controversial trades in 2007–09, a matter which also ended up in court. In the end, the banks were exonerated. Why? It came to light that the investment managers at LIA did not actually understand the complex derivative products sold to them by the banks. As it is their responsibility to know what they are investing in and ultimately their decision whether to invest or not, the banks could not be blamed.

There are six African members of the IFSWF: Agaciro Development Fund (Rwanda), FSDEA (Angola), Ithmar Capital (Morocco), LIA (Libya), Nigeria Sovereign Investment Authority (Nigeria) and The Pula Fund (Botswana). Should there be concern about them having similar governance issues?


Even with strongman Gaddafi no longer around, the LIA is still fraught with problems which are more political than governance-related as well. Until 2016, there were two claimants to the chairmanship. AbdulMagid Breish, was appointed head of the LIA in June 2013, about a year before rival political factions jostling for power in the aftermath of Gaddafi’s demise, split the fund. The second, Hassan Bouhadi, was appointed in October 2014, by the ruling faction of the country stationed in the east. Although Mr. Bouhadi later resigned in August 2016, the saga speaks to the governance quagmire in the SWFs of countries where the rule of law is either weak or that are ruled by strongmen and monarchies. Or both.

There are six African members of the IFSWF: Agaciro Development Fund (Rwanda), FSDEA (Angola), Ithmar Capital (Morocco), LIA (Libya), Nigeria Sovereign Investment Authority (Nigeria) and The Pula Fund (Botswana). Should there be concern about them having similar governance issues? The above-mentioned African DFI chief executive posits the Nigerian case thus: “It is less likely to happen in Nigeria as we are not yet “owned” by one family like Angola was.”

Uche Orji, chief executive of Nigeria Sovereign Investment Authority (NSIA) explains why such troubles are not likely to happen at the institution he runs: “The NSIA board is an independent and professional board with proper oversight of the activities of NSIA through five committees which meet regularly. We publish our annual audited accounts as well as quarterly audited accounts. Our investment guidelines limit the exposure we can have to any one portfolio manager… who has to meet a minimum qualification criteria to manage our funds… Just for our private equity allocation alone we have more than 15 different portfolio managers”.

Watch Actions, Not Words

“Rest assured the issues mentioned in the press about the Angola SWF (I must caveat that I don’t know the veracity) can never happen at the NSIA. Will there be occasions when investments could have challenges, that is for sure, but we have sophisticated risk management tools (provided by UBS [a Swiss investment bank]), a strong board and processes that guide management’s action”, Mr. Orji says.

Examples would help surely to demonstrate how these processes operate in practice. Orji obliges: “For example, I deliberately asked the board to keep management spending limits very low for over five years at no more than N20 million ($56,000) and anything above that requires board approval. We undergo audits more than six times a year… four by PwC, one by [Nigeria’s] auditor-general and one by [Nigeria’s] accountant-general. [And] the internal auditor reports to the board directly.”

Is the Nigerian government not able to interfere in the NSIA like past ones did with the central bank, to allocate more funds than are allowed in its investment policy statement, to infrastructure, say? Orji insists the NSIA’s independence has been respected thus far. He also cites how the fund’s governing law is a source of restraint to all stakeholders.


Regardless, concerns remain about potential interference in the affairs of the NSIA (as is indeed the case with other African SWFs). Is the Nigerian government not able to interfere in the NSIA like past ones did with the central bank, to allocate more funds than are allowed in its investment policy statement, to infrastructure, say? Orji insists the NSIA’s independence has been respected thus far. He also cites how the fund’s governing law is a source of restraint to all stakeholders.

Orji buttresses his points further: “We reject 99 per cent of project requests that we get. There are some we have asked for and we did not get. If we don’t think we’ll get our money back, we won’t do it. Every dealing with government is governed by contract.”

What if the government cannot fulfill its obligations or chooses not to? The NSIA chief says every contract entered into specifies how the fund would get its money back, including arbitration and litigation. Besides, risk management strategies are also employed to reduce the probability of potential losses or holdups.

Could the NSIA, perhaps, be the role model for other African SWFs? Time will tell. The fact is, many African SWFs are exemplary. For example, Botswana’s Pula Fund has not suffered any scandals and has been around for much longer than the ones that have recently been fraught with problems. In any case, there is a need for greater scrutiny of these institutions to keep them honest. Questions have been raised about the real motivations of some investments in state-owned enterprises (SOEs) by South Africa’s Public Investment Corporation (PIC), for instance. And recently, it came to light that The Abraaj Group, a United Arab Emirates private equity investor with significant African interests, may be liquidated on the back of issues related to poor governance than performance. Incidentally, there was no evidence of fraud. But the bad press from what were largely internal failures, whether at the FSDEA, LIA or The Abraaj Group, may have longer term consequences for investor confidence. Global investors would almost certainly re-evaluate how they choose to invest on the African continent. There is probably not much damage that has been done, though; especially if these incidents spur stronger governance standards and practices.

Rafiq Raji, a writer and researcher, is based in Lagos, Nigeria. Twitter: @DrRafiqRaji

An edited version of this article was published by African Business magazine in July 2018.