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Secret Sales

Global Witness has been investigating how two major international mining companies – Glencore and ENRC – are linked to the controversial secret sales of prize mining assets in the Democratic Republic of Congo.

Between 2010 and 2012, the Congolese state sold off major mining concessions in secret and at prices steeply below market value, losing out on at least $1.36 billion in the process – equivalent to twice the country’s health and education budgets combined. Rather than the state collecting most of the profits from these deals, the bulk of the money instead went to a series of offshore companies. These companies are mostly registered in the British Virgin Islands and are linked to Dan Gertler, a businessman and friend of President Joseph Kabila.

The offshore companies sometimes paid under five per cent of market valuation for their mining rights, before striking immensely profitable deals with international companies. If the state had dealt directly with the international companies, Congo could have kept the profits for itself.

The scandal over these sales led the International Monetary Fund to halt its loan programme to Congo in December 2012 and helped spur nthe UK’s Serious Fraud Office to launch a criminal investigation of ENRC (the Eurasian Natural Resources Corporation) in April 2013.

The following month, the Africa Progress Panel, headed by former UN Secretary-General Kofi Annan, said that Congolese “state companies are systematically undervaluing assets”.

Global Witness believes the deals make little commercial sense for the Congolese state and has expressed concern that figures from the Congolese elite could be corruptly benefitting from the deals, possibly through involvement in offshore companies whose beneficial ownership is unknown. A global system allowing companies to keep shareholders secret helps make this possible.

Mr Gertler vigorously disputes this, saying that all the offshore companies in the Fleurette Group, his holding company, have solely members of his family as beneficiaries. His spokesman has also argued that he did not obtain assets at knock-down values. Glencore and ENRC also deny any wrongdoing. We have published official responses from Mr Gertler’s representatives and Glencore on our website.

This is too important a matter to let rest. The companies involved must explain the role they have played in these secretive and questionable deals and full light must be shone on the beneficiaries of the offshore companies and their transactions.

The core documents:

The two main publications by Global Witness on the “secret sales” scandal were our memos to shareholders of London-listed companies Glencore and ENRC. Both memos were published on the eve of the companies’ annual general meetings in 2012. They were followed by a series of shorter briefings.

We would recommend that those new to the issue start with the Q&As on the subjects. Click here for the Glencore Q&A and here for the ENRC Q&A.

Global Witness’s May 2014 report, ‘Glencore and the Gatekeeper’, traces the commodities giant’s entry to Congo and the evolution of its ties to Dan Gertler, the middleman at the centre of some of the nation’s most controversial mining deals. Click here to read it.

Another must-read on the subject is the Africa Progress Panel’s 2013 report, to which Global Witness contributed. Click here for a link to a pdf containing only the pages related to the DRC, with graphics describing two of the major deals.

The full list of Global Witness’s “secret sales” publications:

19/05/14: Glencore and the Gatekeeper

10/02/14: Global Witness response to allegations over Congo oil report

23/01/14: Congo fails to reveal loss-making oil deal with controversial businessman’s offshore firm

18/10/13: Secretive plans to sell a lucrative Congolese mining asset raise further Congo corruption concerns

9/5/13: Global Witness welcomes Kofi Annan’s call for financial transparency in African resource deals

26/4/13: Global Witness welcomes SFO announcement of formal investigation into ENRC

2/1/2013 Latest coverage on controversial ENRC activities & $550 million Congo deal (blog post)

23/12/2012 ENRC shareholders should reject $550 million Congo deal (press release).

5/12/.2012 Corruption risks mean the IMF was right to halt Congo loan programme

22/10/12: Global Witness comments on Daily Mail report of ENRC anti-corruption moves (updated 23rd October)

27/7/12: Press releasse: Possible new ENRC deal raises fresh corruption risks

29/6/12: Press release: News over ownership of Congolese oil blocks raises further corruption concerns

18/6/12: Press release: Congo’s mines ministry reacts to Global Witness reports on

“secret sales” controversy

11/06/2012 FTSE 100 mining company ENRC must openly address Congo corruption concerns  (press release)

12/6/12: Global Witness memo to ENRC shareholders

11/6/12: Briefing: Global Witness Q&A on ENRC in the Democratic Republic of Congo

5/5/12: Memo to Glencore shareholders:”secrecy surrounding glencore’s business deals in the Democratic Republic of Congo risks exposing shareholders to corrupt practices (briefing)

5/5/12: Press release: Glencore ‘should explain potentially corrupt deals in Congo’ – Global Witness

5/5/12: Global Witness Q&A on Glencore in the Democratic Republic of Congo

21/12/2011: Submission to the Foreign Office Overseas Territories consultation

01/12/2011: Why the EITI Rules need to cover licensing: the case of the DR Congo

13/9/11: Corrected transcript of oral evidence to the UK’s International Development Committee

7/9/11: Further written evidence to the UK’s International Development Committee

8/6/11: Written evidence to the UK’s International Development Committee

11/4/11: Press release: DR Congo must publish deals to prove its commitment to transparency  

Associated material

5/12/12: Straker incorporation documents (http://www.globalwitness.org/sites/default/files/library/Straker%20incoporation%20document.pdf)

5/5/12: Questions submitted by Global Witness to Glencore in respect of Kansuki, Mutanda, Kipushi, and loan agreements and stock trades.

5/5/12: Responses by Glencore to Global Witness

5/5/12: Questions submitted by Global Witness to Dan Gertler

5/5/12: Responses by Dan Gertler to Global Witness

5/5/12: Additional responses by Dan Gertler to Global Witness

18/6/12: Congolese ministry of mines statement in English

11/6/12: Questions submitted to ENRC on 15 May 2012 in respect of business activities in the Democratic Republic of Congo

11/6/12: ENRC statement to Global Witness

11/6/12: Questions Global Witness posed to Mr Gertler in relation to ENRC

11/6/12: Statement by Dan Gertler's spokesman regarding Global Witness

22/3/12: UN radio station Radio Okapi interview with Global Witness’s DRC Campaign Leader Daniel Balint-Kurti as part of a panel on its flagship programme Dialogue entre Congolais (Congolese Dialogue).