Master of International Business Module B

CORPORATE SOCIAL RESPONSIBILITY

FIRST ASSIGNMENT: CSR IN ANGOLA

Lecturer: Richard Tudway

Student: Jessica N.C Tavira

Corporate Social Responsibility

1. Introduction This assignment presents an overview of Corporate Social Responsibility (hereafter designated CSR) in Angola and focuses on identifying the present approach to conducting CSR within the Angolan jurisdiction. It will also include an analysis of CSR between BP Angola and the national oil company Sonangol, in order to observe how international multinationals are influencing corporate governance and CSR in Angola. The essay will conclude by critiquing the current form of CSR in Angola, its impact on the Angolan society and will suggest that such modus operandi is currently undermined, even considered insufficient by the citizens.

2. Social background and CSR in Angola Angola is a country rich in natural resources and its economy has grown on average at a two digit-pace in the last two decades, which led to a tendency of narrowing relationships between enterprises, government and community. According to Luis Costa Walter (2007), that approximation of organisations and society interests resulted in multiple efforts to accomplish shared goals. The Angolan Government relies consequently on international investment and corporations to fight social issues related to health, employment, housing and education, all profoundly affected by the 1975-2002 Civil War. Luis Walter argues that the elements that projected the country into a new era were the peace attained in 2002, the significant amount of the national production of crude, followed by the increase of oil prices in the international market and foreign investment (Costa Walter, 2007, p. 12). Nonetheless, the Angolan human development index was ranked 148 in 2011 and its infant mortality and life expectancy rates are among the worst-ranked in the world1 (Human Development Report , 2011, pp. 2-3). It is possible to relate the existent condition with the paradox of plenty, where the large revenues derived from extractive industries (such as oil industry) in Angola can be considered to be undermining economic, political and social development by directly affecting the countrys transparency standards and policies. The improvement of the social conditions of the population is prioritised in the Government General Program every year, along with policies and strategies for further development, where
1

Please refer to Appendix 7.1 and 7.2

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the Government social policy decided to focus between 2009 and 2011 to increase Human Capital value (Costa Walter, 2007, pp. 34-36). Thus, the government created a legal instrument designated Angolanization2 which establishes the obligation to recruit, integrate and develop Angolan workers within the oil sector under the 20/82 Decree, mandating a 40% ratio of Angolans in the work force. It further defined that companies have the responsibility to contribute annually to Agostinho Neto University, Catholic University and Open University. (Costa Walter, 2007, pp. 43-44) This noticeably had consequences on major oil multinationals based in Angola. Due to the wording of the several decrees observed it is emphasised the Government depends on the oil industry to solve a big part of workers professional and social issues. In addition, in order to protect the environment, the Law n5/98 was created in June 19th to establish the necessity to perform environmental studies and fixed mandatory concessions of licenses to any activities or projects in the country. (Costa Walter, 2007, p. 51) 3. The importance of Sonangol in the Angolan society Formed in 1976, Sonangol EP is the only national oil concessionary established as a public company under the Angolan Law Decree 52/76. (Sonangol EP, 2002) Under that premise, the company forms partnerships with other oil multinationals, either through contracts for production sharing or as joint ventures. Formally, Sonangol has as a fundamental goal to guarantee the Government the maximisation of benefits derived from petroleum activities while supporting better life conditions for the Angolan population. Sonangol, now has offices in 6 countries3 spread through 4 continents and had a profit of over 3 billion USD in 2010. Following the established law for Public Companies in Angola, Sonangol has the following structure: Administration Council, the Financial Council and Advisory board 4. As indicated in the company Governance page, the Administration council holds maximum power within the company, competes with full authority and answers to the Government for company management. (Sonangol EP, 2002) According to Sonangol literature, the Administration

council is directly involved in their CSR policies, where the Council President Manuel Vicente is present in many major social responsibility events and all CSR programs are directly allied to

English translation of Angolanizao Congo, China, United Kingdom, USA, Venezuela and Singapore 4 Please refer to appendix 7.3 and 7.5 for more details about the company structure
2 3

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the Administration council. A Social Projects Commission was further created under n 175/GPCA/99 dispatch to address contractual conditions, health and other social issues of their employees. (Sonangol EP, 2002; Costa Walter, 2007, pp. 57-59) In addition, Sonangol appears to be implementing a supervisory two-tier structure of governance with its Advisory board of directors and by being associated with the Oil Ministry, that works as a dynamic and technically constituted governing body that guarantees the compliance of social corporate standards. The commitment of Sonangol to the Angolan society to support on the sustainable development of Angola is expressed in the company philosophy, as well as in the budget that annually predicts investments in the social area. Sonangol works to provide better conditions for the population by actively supporting projects concerning education, job, health, culture, sport, environment and science. Examples of such are: Together with the community program, absorbing 6 million USD; Sociedade Cooperativa de Responsabilidade Limitada" which was established to minimise employees housing problems; numerous sponsorships to study abroad and the Sonangol Literature Award. (Sonangol EP, 2002) Nonetheless, on 20th December of 2011, the ONG Human Rights Watch in New York revealed and demanded explanations about a 32 billion USD hole in the Angolan Government funds, further associated to Sonangol. (Human Rights Watch, 2011) That further highlights the paradox of plenty and demonstrates a clear contrast in Sonangol ethical behaviour, as well as in Government transparency standards.

4. Multinationals influencing corporate policies: Sonangol VS BP Angola Its perceivable that oil companies are recognising their impact on the Angolan society and demonstrating broader social concerns in a tangible way. Thus, the latitude of responsibilities endorsed to the oil industry has extended to comprise a more social agenda, focusing specially on sustainability. An example of an oil company that is redefining CSR in Angola is BP, which aimed to be a force of good since their Angola inception in 1951. (BP, 2012 cited in Skjrseth, et al., 2004, p. 10) BP redefined fiscal transparency by publishing details of signature bonus payments they made while investing in the country. Furthermore, by having an approach that balanced rules and

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compliance associated with its management ethos, BP managed to ban bribery and facilitation payments, a common practice in Angola. (Skjrseth, et al., 2004, pp. 10-12) The company also signed the Universal Declaration on Human Rights and voluntary business codes of the Sullivan Principles, which Sonangol promptly followed to abide. The BP management system is based upon performance targets and management commitment, where its business model now focuses on the region through the creation of a regional ethics committee. That was also done in order to increase their credibility in the country. By providing different channels to engage regularly with stakeholders (for example NGOs), BP is considered to have set a benchmark for corporate transparency and accountability in Angola. (Gobal Witness, 1999, cited in Skjrseth, et al., 2004, p. 13) Examples of current BP Angola CSR actions are: implementation of a Business Support Center (CAE) which invested over 60.3 million USD in local companies; University partnerships by financing graduate programs and support to micro-credit programs in Huambo and Benguela. (BP Angola, 2011) Since BP engagements result in a vast responsiveness in the worldwide media, this ultimately creates a higher focus on Angolan corporate governance and social responsibility, therefore indirectly forcing Sonangol to comply with international standards and regulations and become more transparent. 5. Conclusion Having analysed the contribution of the oil sector in Angola, there are no doubts left about the amplitude and importance of Sonangol in the Angolan society. It was also observed how the company has a privileged space in the implementation and management of effective policies to incentivise corporate responsibility. Although it contributes in a decisively and creative way for the professional and social progress of the country, the current corruption levels in the country pierced the company, management methods and that, associated with the slow pace of their social accountability undermined the populations perception of CSR. As an Angolan citizen, I had the privilege to experience Sonangol CSR actions when they sponsored my medical treatment for Turners syndrome in London and my brothers Undergraduate degree in Manchester. Those experiences modified my awareness of the company and made me

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understand that the informal communication network and connections are still the basis of Sonangol CSR programs. The fact that BP Angola is striving to achieve excellence in their social accountability is steadily modifying the decision making process of Sonangol, while they are now competing and assuming international procedures to become a more efficient, formal and global corporate citizen. It is also necessary to take into account that such strategy is influenced by the current political-industrial context of Angola. Nonetheless, following the paradox of plenty concept, neither BP nor Sonangol seems to admit in their literature a causal association between oil revenues and the countrys poor social performance, which can have a direct impact on their legitimacy as corporate citizens. It is necessary to create fundamental conditions that develop the Angolan oil industry in a sustainable and irreversible way, in order to improve social-economic indicators, which I believe will amplify the effects of the public and private investments.

6. REFERENCES
BP Angola, 2011. BP in Angola. [Online] Available at: http://www.bp.com/sectiongenericarticle.do?categoryId=9030994&contentId=7056995 [Accessed 16 JAN 2012]. Costa Walter, L., 2007. Angola: O Papel e Contributo do Sector dos Petrleos de Angola no Desenvolvimento Scio-Econmico do Pas.. [Online] Available at: http://repositorio.iscte.pt/bitstream/10071/656/1/TESE%20NOVEMBRO%20ACTUALIZADA. pdf [Accessed 12 JAN 2012]. Human Development Report , 2011. Sustainability and equity: A better future for all. [Online] Available at: http://hdrstats.undp.org/images/explanations/AGO.pdf [Accessed 15 JAN 2012]. Human Rights Watch, 2011. Angola: Explain missing government funds. [Online] Available at: http://www.hrw.org/news/2011/12/20/angola-explain-missing-government-funds [Accessed 16 JAN 2012]. Skjrseth, J. B. et al., 2004. Limits to Corporate Responsibility: A comparative study of four major oil companies. [Online] Available at: http://www.fni.no/doc&pdf/FNI-R0704.pdf [Accessed 15 JAN 2012].

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Sonangol EP, 2002. About Sonangol EP. [Online] Available at: http://tiny.cc/yvlyc [Accessed 15 JAN 2012]. Sonangol EP, 2002. Corporate Responsibility. [Online] Available at: http://www.sonangol.co.ao/wps/portal/!ut/p/c1/04_SB8K8xLLM9MSSzPy8xBz9CP0os3hDl5 AQUzN_QwMDf38DA09DxyBfbz9_Y4tAY6B8JLJ8gIUbUN4_MMDHx9XQwNyUIt1mBHSHg 1yLU77gSleeQNzcwLyhPSbQeQNcABHA30_j_zcVP2C3NAIg0zPLBNHRUUAdsVfiw!!/dl2/d1/L0lDU mlTUSEhL3dHa0FKRnNBL1lCUlp3Q [Acedido em 16 JAN 2012]. Sonangol EP, 2002. Sonangol Governance. [Online] Available at: http://tiny.cc/n0r9w [Accessed 15 JAN 2012]. Sonangol EP, 2002. Sonangol Social Projects. [Online] Available at: http://www.sonangol.co.ao/socialProjects_p.html [Accessed 15 JAN 2012].

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7. APPENDIX
7.1 Angola Human Development Indicators for selected countries

Source: Human Development Report (2011)

7.2 Angola Human Development Index trends

Source: Human Development Report (2011)

7.2 Administration council of Sonangol EP

Executive Administrators

Non-executive Administrators

Source: Sonangol E.P (2012)

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7.4 The evolution of workforce of BP Angola: Angolanization factor

Angolan citizens in BP Foreigners based in Angola

Source: BP Angola Sustainability Report (2011)

7.5 Macrostructure of Sonangol EP

Macrostructure of Sonangol, E.P and its subsidiaries

Financial Council Advisory board
Offices
-> Communication and Image -> Archives -> Quality, Health, Security and Environment

Administration Council
Committees
-> Concession Control -> Coordination of Social Projects

Source: Sonangol E.P (2011)