CARLYLE GROUP VISITS ANGOLA LOOKING FOR NEW MARKETS

C O N F I D E N T I A L SECTION 01 OF 02 LUANDA 000695 SIPDIS SIPDIS E.O. 12958: DECL: 07/10/2017 TAGS: ECON EFIN EINV AO SUBJECT: CARLYLE GROUP VISITS ANGOLA LOOKING FOR NEW MARKETS Classified By: CDA Francisco Fernandez for reasons 1.4 (b) and (d) ¶1. (C) Summary. The U.S. investment company The Carlyle Group brought its heavy hitters to Angola to meet with President Eduardo Dos Santos and the leaders of the GRA,s economic team and to persuade the Angolan national oil company Sonangol, the Ministry of Finance and perhaps the Angolan Development Bank (BDA) to invest a portion of Angola,s petroleum revenues with Carlyle. Carlyle also announced the launch of its new USD 5 billion Africa Fund, which will invest in South African and Angolan projects. Carlyle is betting that Angola,s financial elite from the BNA, Ministry of Finance (MOF),Sonangol,s AAA Insurance Company and other financial institutions are are looking for ways to ensure greater financial security for themselves and their institutions. With the GRA,s limited capacity at spending its oil wealth and still nascent financial market expertise, investing with well-established financial houses would be a safe way for the GRA to park its money while it prioritizes a future investment strategy. End Summary. Carlyle Group Delegation in Luanda -------------- ¶2. (SBU) On June 11 and 12, 2007, a high-level delegation from the U.S.-based investment company, The Carlyle Group, including David M. Rubenstein, its co-founder; former Secretary of Defense Frank Carlucci, William Hasselberger of SIPDIS Washington Global Energy Investors; and David Alverson, Carlyle,s General Manager, met with President Eduardo dos Santos, as well as with the members of Angola,s economic team: Deputy Prime Minister Aguinaldo Jaime, Minister of Finance Jose Pedro Moraes and Director of the Bank of Angola (BNA) Mauricio Amadeo. The BNA hosted the Carlyle delegation during its visit, and news of the meetings was closely held. Carlyle,s Africa Fund -------------- ¶3. (SBU) William Hasselberger of the Carlyle Group and Washington Global Energy Investors, LLC, briefed the Ambassador and Emboffs on Carlyle,s plans to initiate an Africa investment fund in the fall of 2007 with USD 1 billion from private investors, plus an additional USD 4 billion from banks. Through the multiplier effect, the fund would effectively invest USD 15 to 20 billion, mostly in international financial markets. In addition, Hasselberger said that Carlyle,s direct participation would attract many of the companies that have connections to Carlyle, further raising the level of investment. Hasselberger said that Carlyle,s Africa fund would be invested almost exclusively in projects in South Africa and Angola, although he did not specify where Carlyle would find suitable investment projects in Angola,s less-developed non-extractive economy. (Note: The GRA has only executed half of its public investment project budget for the past two years. End note.) Hasselberger expressed confidence that Angola,s investments with Carlyle would insure Carlyle s investments in Angola. He added that for each fund in which the GRA invests money, Carlyle would accept one trainee to work in Carlyle,s offices, who would gain hands-on experience in managing private equity investments. Angolan Investments in the Carlyle Group -------------- ¶4. (SBU) The BNA has invested funds with the Carlyle group for several years, according to Hasselberger. The Carlyle group also hopes that the Ministry of Finance (MOF) and Sonangol, the national oil company, will join in investing a portion of their revenues in Carlyle,s private equity ventures, said David Rubenstein. Rubenstein explained that the Carlyle Group is seeking new markets in order to continue growing at a rate which Rubenstein claimed has exceeded 30 percent per annum since 1987. In Africa, private equity ventures have produced returns as high as 48 percent, he added. Much of the investment has been directed at South Africa. Carlyle, said Rubenstein, has designed its Africa fund to invest in both South Africa and Angola. No fund manager has yet been chosen for the Angolan fund. Public Treasuries in Private Equity -------------- ¶5. (SBU) Rubenstein attempted to sell Angola,s financial managers, many of whom have private fortunes, on the growing importance of private equity investments as a financial instrument and as a transforming element of the economy. Buyout funds, private equity vehicles devoted mergers and acquisitions (M&A),fueled by investments from retirement funds and university endowments, now account for 25 percent of M&A in the world. Deepening pockets have permitted the investment funds to participate in ever-larger buyouts, including major public to private transfers. Rubenstein told the Angolans that Carlyle had created Kuwait,s offshore fund and wants to help the GRA to protect its wealth after its oil LUANDA 00000695 002 OF 002 runs out. Comment -------------- ¶6. (C) The Carlyle Group has chosen a good time to strengthen its relationship with Angola, just when the GRA is looking for the best way to protect the value of the money it cannot use at home. As such it joins a number of large US financial institutions trying to strike up a relationship with the GRA, such as Citigroup and JP Morgan. Carlyle or any overseas company provides the GRA with a discreet place to invest its money, permitting GRA ministries to verify and track the amounts without making the information publicly available. At the same time provides the GRA with a relatively low-risk investment for its growing oil wealth. Some of the wealthy Angolans may also have been persuaded to make individual investments with Carlyle from their own fortunes. FERNANDEZ