Executive Summary
The Executive Summary forms an abstract and an overview of the initial report. It sums up the main
facts and discoveries that are included in the detailed context of each chapter. Thus, the Executive
Summary can be read by itself, in case the reader desires to obtain a deeper level of knowledge on the
precedents of the work accomplished and the main related facts and discoveries identified.
Objectives of this study
The objective of the project “Diagnуstico Financeiro e Monitorizaзгo das Receitas Petrolнferas
Estaduais” (Financial Diagnostic and Monitoring of the State Oil Revenues) is to perform a diagnostic
study on the upstream petroleum sector, since it affects the public finances of the nation. The
objectives of the diagnostic are to help the Angolan Government to increase the transparency related
to the flows of revenues originating in the production of oil and create a management ability to
supervise and anticipate the values and flows of these revenues.
Structure of the initial report
The structure of the initial report is the following:
- Chapter 1 is an introduction to the report and supplies the precedents of the project;
- Chapter 2 presents an evaluation of reserves, production and exports of oil;
- Chapter 3 examines the legislative, normative, contractual and fiscal agreements;
- Chapter 4 evaluates the arrangement of inflows of oil revenues to the State;
- Chapter 5 evaluates the arrangement of outflows of oil revenues ; and
- Chapter 6 examines the operation of the Petroleum Account and of the Sonangol accounts and the management report of the BNA.
The appendices are in the same document of the Initial Report and include the following:
- Appendix A: Technical data on Reserves and Production;
- Appendix B: Evaluation of the measurement of exports, data management and export terminals;
- Appendix C: Consortium Relationships;
- Appendix D: Evaluation of Administrative Procedures;
- Appendix E: Analysis of Sonangol’s Accounts; and
- Appendix F: Description of all current fixed term contracts relative to the sale of oil from Sonangol in 2000.
Limitations and Analytic Restrictions
This Report shall not be seen as suitable to be used beyond the Government, IMF and World Bank.
If that is not the understanding of the Government, it should indeed direct the attention of the analysts
to central, fundamental and indispensable aspects to be taken into account.
Namely:
In Angola there is a national currency, the Kwanza, a symbol of sovereignty. This currency has
suffered year after year very sharp depreciations that even forced the introduction of several decimal
places and even the replacement of the face designation: Kwanza, New Kwanza, Readjusted Kwanza,
etc.
Not wishing to “dollarize” their economy, the Government and the Central Bank (Banco Nacional de
Angola - National Bank of Angola) have been allowing private and state companies, institutions and
public entities to have “accounting books” in two currencies, the Kwanza and the Dollar.
However, the accounting procedures adopted by those economic entities have major weaknesses.
The accounting procedures almost never handle in the best way the complexity of working with two
currencies, the large devaluations and the big inflation indexes, which require a high degree of
organization and substantial investments in information technologies1
so that exchange rate variations and the reevaluation of third party balances can be handled in a proper way.
For those reasons, the reconciliations both intra- and inter-accounting processes are difficult and
sometimes even impossible. Notice the difficulty in processing through accounting any documents in
Kwanzas to Dollars, and vice-versa, at the date the operation was transacted, by the issuer and by the
receiver, knowing the existing limitations in terms of territorial coverage, even in small perimeters, of
telecommunications systems and document flows.
There are great difficulties, in an economy where exchange rates vary daily, to work with uniform
exchange rates of the issuer and the receiver of the document issued and to be processed in
accounting.
There is a lack of “quantification” logic in the conversion of Kwanzas into Dollars, at the end of each
year, at the time of the issuance of financial reports in private and public companies and in State
entities, when the conversion is done at the exchange rate for the end of the year.2
For that reason, the data that exists at the Ministry of Finance, at Sonangol and at the BNA can change
internally.
The recording of a financial document in these institutions should be done at the same exchange rate
as the entity that issues the document, but this never (or almost never) happens and for that reason the
reconciliations become obviously very difficult.
The financial records of the BNA and Sonangol themselves, which are processed and presented in
national currency, and which, for practical reasons such as reading and the perception of magnitude,
are also prepared and converted in Dollars, are using the exchange rate for the end of the year, which
misrepresents the magnitude itself in an analysis at the date of their occurrence.
All these limitations and restrictions should always be taken into account, and any time the charts and
tables existing in this Report are analytically observed.
The Final Report will deal with this matter under the aspect of recommendations and procedures.
We show below, for better understanding, and as an example, the “usual” procedures of two receivers
of the same document in foreign currency for financial recording:
| Example |
Recording of financial document |
Document conversion end of year 2000 |
| Document |
Amount |
Entity |
Date |
Exch. rate |
KzR |
KzR |
Exch. rate |
UsD |
1
1
|
1,000,000
1,000,000
|
A
B
|
30/Jun/00
31/Oct/00
|
10,501
13,898
|
10,501,000,000
13,898,000,000
|
10,501,000,000
13,898,000,000
|
16,860
16,860
|
622,835
824,318
|
| |
|
|
|
Difference |
3,397,000,000 |
Difference |
201,483 |
The same financial document of UsD 1,000,000 is recorded at the entity A at the date of the recording,
30/Jun/00, at the official exchange rate of 10,501, and entity B, due to reception difficulties, records
the same document at the official exchange rate of 13,898, of 31/Oct/00, which is the day of its
recording.3
The “accountings” of the two entities for the same financial document show values in national
currency which are different (a difference of KzR 3,397,000,000).
When at the end of the year the conversion of the balances is made from Kwanzas into Dollars, the
“accountings” of the two entities do the conversion at the exchange rate of the end of the year, which
in December 2000 was of 16,860.
For the same initial financial Document of UsD 1,000,000, at the end of the year, the resulting values
presented are for one entity of UsD 622,835 and for the other of UsD 824,318.
That is:
-
the same financial document of UsD 1,000,000 cannot be reconciled between the entities A and B, presenting a difference of UsD 201,483;
-
the same financial document cannot be reconciled between the issuing entity and the receivers A and B, presenting a difference of UsD 377,165 and UsD 175,682 respectively.
Footnotes:
-
requiring changes of procedures and functional polyvalence
-
this procedure is usual and generally adopted for analytical finals in order to make “accountings” more intelligible and perceptible
-
when it should have been at the date the operation was transacted, which originated the issuance of the document
|
- 147Kb ~ 1 min (42 pages)
