The business success of São Vicente

In August 2020, news of a bank account in Switzerland belonging to Carlos São Vicente sparked off scandalized reactions in the Angolan press and social networks. Shortly afterwards, he became the target of an intense media campaign in the state-controlled press organs, which referred to him as a “hornet”^[1], alleging the criminal origin of those funds and publicly condemning him. Indeed, regardless of his business activities, how could Carlos São Vicente have accumulated so much money legally? Not even the most impartial observers remained indifferent to the revelation of those figures.

However, Carlos São Vicente has always claimed that the money comes from the business activities he carried on legally and to which he dedicated himself, for almost two decades, with his competence and great commitment. 

So, does this money come from fraudulent activities or from his business success?

Business opportunity 

In the late 1990s, Carlos São Vicente was Risk Management Director of SONANGOL EP. He understood and explained to the Concession Holder the fragility of the ways in which petroleum activity was being insured and the considerable risks and consequences resulting from current practice, given the exposure of the entire national economy to the risks of that activity. This study and the recommended solutions led to the issue of Decree No. 39/01, of 22 June (published in the Angolan Official Gazette (Diário da República) DR, No. 28, Series I, of 22 June 2001), which approved the Regulation of the Risk Management Activities of Petroleum Operations. According to this legislative text, SONANGOL EP was responsible for ensuring the protection of all persons, assets, and income in the Concession Areas, with an adequate methodology for the identification, assessment and analysis of risks and the implementation of a structure that included the activities of insurance, reinsurance, mediation, brokerage, and related services.

Angola was experiencing a period of pacification, liberalization of the economy and encouragement of private initiative. Law No. 1/00 ​​(General Law of Insurance Activity), of 3 February (published in DR No. 5, Series I, of 3 February 2000) was approved, which ended the monopoly of the state insurance agency. The Government and the ruling party announced the intention and need to create a strong Angolan business community, for the development of projects with technical, economic, and financial viability. This policy was immediately promoted and later enshrined with the coming into force of Law No. 14/03, Law for the Promotion of Angolan Entrepreneurship. The public-sector companies with greater financial capacity, such as SONANGOL EP, were defined as promoters of this policy and were empowered to establish partnerships with persons or private entities, and also to finance them, to grant them subventions and, initially, to participate in their capital, which was subsequently to be sold, preferentially to Angolan partners once the project’s viability had been validated. 

In this context, the opportunity given to Carlos São Vicente to participate, with his own interest, in the creation and operational start-up of companies in the insurance and reinsurance field with the aim of implementing the risk management strategy for oil activities, under the supervision of SONANGOL EP, appeared to be viable and even natural.

Acquisition of companies

The formation in Angola of companies identified by the shared brand AAA, received its initial impulse from SONANGOL EP in the year 2000.  In this context, AAA SERVIÇOS FINANCEIROS, LDA, the group’s former holding company, was created in 2000.

In 2002, two years later, in 2002, by a unanimous decision of its Board of Directors, SONANGOL EP sold 49% of its shareholding in this company to AAA (ANGOLA) INVESTORS LTD. This transfer of capital was done in compliance with all legal requirements, namely adoption of the decision by the Board of Directors, approval by the Angolan National Private Investment Agency (ANIP), control by the National Bank of Angola (BNA), formalization by notarial deed, and publication in the Official Gazette (DR). For the payment of this equity participation, capital was imported, under the terms of a capital import license issued and controlled by the BNA. 

AAA SERVIÇOS FINANCEIROS, LDA’s audited accounts for the 2002 financial year expressly confirm the shareholding structure’s evolution and also confirm that the share capital was fully subscribed by SONANGOL EP and AAA (ANGOLA) INVESTORS LTD.

About two years later, the Board of Directors of SONANGOL EP decided, again unanimously, and ANIP approved, the sale of a further 21% of the share capital of AAA SERVIÇOS FINANCEIROS, LDA.

The acquisition of this 21% share was also verified and is reflected in the Audited Accounts of AAA SERVIÇOS FINANCEIROS, LDA for 2004, which attest to the new distribution of the share capital.

The Share Capital was fully subscribed and paid up, and the Company’s shareholder structure is as follows:

                               Entity:                                                      % participation

                               SONANGOL, EP                                                     30

                               AAA (ANGOLA) INVESTORS, LTD.                        70

The entire process of transmission of these equity participations was duly authorized, documented and the payments are proven, according to the quittance given and the accounts of AAA SERVIÇOS FINANCEIROS, LDA, audited by one of the most prestigious major international auditors.

As regards the Angolan insurance company AAA SEGUROS SA, a capital increase took place in 2012, in which SONANGOL HOLDING S.A. decided not to participate, thus diluting its percentage stake in that company. This capital increase was formalized by notarial deed dated 10 May 2012, published in Diario da Republica No. 178, Series III, of 14 September of the same year, and its implementation is, once again, documented in the Audited Accounts of the company AAA SEGUROS SA for 2012.

The Share Capital is fully subscribed and paid up, and the Company’s shareholder structure is as follows:

Entity:	% participation
AAA ACTIVOS LDA	87.89%
SONANGOL HOLDING, SA	10.00%
AAA PENSÕES	1.0%
CARLOS MANUEL DE SĀO VICENTE	1.0%
BAI – BANCO ANGOLANO DE INVESTIMENTO SA	0.11%

Consequently, the acquisition or subscription of these various equity participations, as well as their payment and formation, are absolutely undeniable, contrary to what is claimed in some press media.

On the other hand, in 2001, AAA SERVIÇOS FINANCEIROS LDA obtained financing from all the partners of the AAA group for the formation of several subsidiaries and their operational start-up.

In Bermuda and the United Kingdom, several companies were formed by AAA SERVIÇOS FINANCEIROS LDA to provide reinsurance, mediation, brokerage, and related financial services, such as engineering and risk services. An inactive company was acquired from SONANGOL EP and later renamed AAA REINSURANCE LTD. 

All the transactions of partner financing, formation of companies, transfer of shareholdings and reimbursement of financing are documented in the accounts of AAA SERVIÇOS FINANCEIROS LDA, audited by a renown international auditing company. These transactions were carried out with transparency and are proven by documental evidence.

Business development and transparency

The company’s business consisted of providing financial protection services for oil activities, through insurance and reinsurance of the risks related to those activities, as well as providing related financial services. AAA SEGUROS S.A. was given the role of leader in the co-insurance of petroleum activities, which involved all the other insurance companies present in the country. 

The risks related to oil activity were insured by AAA SEGUROS S.A. which, in turn, reinsured them with international reinsurers. Due to the national insurers’ lack of financial capacity, no net retention of any part of the risks was taken on by them, a state of affairs that did not differ from the pre-existing situation. In the past, the insurance risks related to oil activities covered by the Angolan national insurance company ENSA had always been transferred in their entirety to foreign reinsurers.

The integration in the AAA companies of the various services provided, the level of efficiency introduced, and the close link to the Concession Holder allowed the identification and assessment of risks in oil activities that until then had not been covered or not correctly assessed.

Insurance premiums were calculated based on the values assessed by the reinsurers, to which were added the brokerage commissions charged in the insurance business, in accordance with international best practices. Once an insurance proposal had been drawn up, it was discussed in meetings with the Block Operator, which also included the Chairman of the Block Operations Committee and representatives of SONANGOL EP’s Risk Management Department. In addition to this, a part of the reinsured risks was reserved to the captive reinsurers of the Operators, so that they also had the information and control of the structure of the premiums. The premiums were, therefore, fixed in a transparent manner, with the participation of all parties involved or having an interest in the operations.

A study conducted by a prestigious international auditor, concluded that the insurance premiums charged by AAA SEGUROS S.A. were below the average of the premiums charged in oil activities in other African countries.

Reinsurance

When the value of risks is too high, insurers pass them on to reinsurers who accept the risks insured by the insurers, which allows the latter to accept risks much greater than their own financial capacity. In turn, the reinsurers share parts of the accepted risks among themselves, thus managing their own exposure to these risks. Reinsurers are the insurers of insurers, huge financial companies that control the insurance business worldwide. 

Operators have their own reinsurers, the so-called captive reinsurers, who also participated in the sharing and acceptance of the reinsured risks.

Insurers, with a much smaller financial capacity, may not even take on the net retention of any part of the risk and limit themselves to earning retrocession commissions from reinsurers. The insurance premiums were therefore transferred, almost entirely, to foreign reinsurers.

This was the case with the acceptance of the risk related to oil activities in Angola: since there was no reinsurer in Angola and due to the lack of financial capacity of the national insurers, the risks accepted by AAA SEGUROS S.A. were placed with foreign reinsurers. This was already the case before the formation of AAA SEGUROS S.A., when these risks were taken on by ENSA, and the procedure continued unchanged, with ENSA, after the withdrawal of the co-insurance leadership from AAA SEGUROS S.A.

Notwithstanding the interest of insurers in the acceptance and placement of these risks, it is easy to understand that it is in fact the reinsurers who earn the greatest profits from this activity.

The Group’s reinsurer obtained the necessary financial protection to be able to take on the net retention of a part of the reinsurance alongside the other reinsurers who shared the acceptance of these risks. This became the main source of income for the AAA group.

Economic context of business activity development

At this point, the question remains: how could this kind of activity have generated such high results as the existence of a credit balance in a Swiss bank seems to indicate?

The truth is that it is and was possible.

Firstly, the period 2000-2015 represents the boom time for the oil industry in Angola and the high growth of the country’s economy, which was due to the strong investment of oil companies in exploration in deep waters and in the pre-salt layer.

Indeed, massive investment was made in oil exploration and production, oil discoveries were made, and new fields were developed; the traditional exploration platforms witnessed the appearance of FPSO (Floating Production Storage and Offloading) units, which are gigantic floating facilities for the production and storage of hydrocarbons, essential for deep-water exploration, and their unit price can reach billions of dollars. Angola’s output reached 2,000,000 barrels/day, vying with Nigeria for the place of largest oil producer in sub-Saharan Africa.

The sharp increase in investment made in oil operations resulted in a substantial increase in the number of people, operations, assets, and output, necessarily triggering insurable risks and, consequently, the value of premiums, which were no longer comparable with those of previous years.

This situation continued until 2015, when the oil price crash and some of the policies that had been adopted led to disinvestment in oil operations by the Operators.

Secondly, AAA SEGUROS S.A. introduced greater rigor into the identification, analysis, and assessment of insurable risks, in order to effectively protect the national economy, putting an end to the lack of efficiency previously revealed by ENSA in this regard. 

In addition to the enormous growth in the value of premiums for the reasons mentioned above, Angola was fortunate to record a low accident rate in oil operations (a situation which, incidentally, also existed before and after the period in which AAA SEGUROS SA was the leader of co-insurance).

Lastly, it is worth remembering that the earnings were not generated in just a few years, but rather over the 16 years during which AAA SEGUROS SA led the co-insurance of oil activities, which allowed AAA to accumulate earnings that were much higher than what was expected when the group was formed. 

To the results generated by the insurance and reinsurance activity were added financial gains from various applications, in Angola and abroad, and the results of various investments (e.g. real estate and hotel activity, etc.) in which, meanwhile, AAA had invested.

AAA SEGUROS S.A. has always paid the taxes due on the results of its activity, thus fully complying with its tax obligations. Foreign reinsurers complied with their own tax obligations in the countries where they were incorporated and carried on their activity.

Investment in Angola

While, both before and after the leadership of coinsurance by AAA SEGUROS S.A., none of the foreign reinsurers invested a single cent of their high profits in Angola, Carlos São Vicente invested heavily in the country, creating important real estate assets and the largest hotel chain in the country; in total, he built more than 100 buildings, spread across all provinces of the country; he created jobs that supported hundreds of Angolan families; he created wealth and, with the taxes he paid, he fed the coffers of public finances. 

Currently, since Carlos São Vicente has been prevented from managing the hotel network, most of the AAA hotels are closed and the rest operate with minimal services; the employees who were not fired now receive their salaries months late, the suppliers are not paid, and the tax obligations are no longer met. 

It is legitimate to ask: if Carlos São Vicente was authorized to carry on the described activity and if he did so in an entirely legal manner; if it is demonstrated that the wealth accumulated in about 20 years was due to business opportunity, his own competence, and the favourable market circumstances; if the evidence in the file demonstrates the legality of these activities and the related proceeds; if, in short, Carlos São Vicente is innocent of the charges brought against him, why was he arrested? This is a story that will be told soon, but anyone who is not naive already knows the answer.

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^[1] Translator’s note: “marimbondo”, literally a species of hornet, but applied in Angola to people associated with corruption, traffic of influence and nepotism.