Blog / May 20, 2014

Glencore unfazed by muddy Congo deals

Three AGMs as a public company and three times Global Witness has publicly asked Glencore’s board to commission an independent investigation into its Congo deals. Glencore’s Chairman Tony Hayward was unequivocal in his response today: “there is absolutely no basis for any investigation and we have no intention of carrying one out”.

Let’s remember, this is the man who presided over BP during the calamitous Gulf of Mexico spill in 2010. His response then was no more reassuring. “The Gulf of Mexico is a very big ocean,” he said. “The amount of volume of oil… is tiny in relation to the total water volume.”

Glencore unfazed

Our latest report, “Glencore and the Gatekeeper” details how Glencore has lent over half a billion dollars to Dan Gertler, a friend of the Congolese president who has become central to almost all major copper deals in the country. We also detail how complex transactions between Glencore and Gertler between 2007 and 2010 ended up enriching Gertler by $67 million in cash and shares. Glencore appears to have entered these deals knowing they were loss-making, while Gertler bore no risk. If so, what did Glencore get out of this? We think shareholders should know.

Glencore and Gertler say nothing’s amiss. His spokesman, the UK’s Lord Mancroft, said that any suggestion “that Glencore offered Mr Gertler preferential treatment is wholly misconceived” and that “there are legitimate commercial reasons for every transaction we are involved in”. “Mr Gertler got absolutely zero preferential treatment,” said Glencore CEO Ivan Glasenberg.

Yet Glencore is still being cagey about its deals with Gertler. For example, in June 2010 Glencore lent a company of Gertler’s – the British Virgin Island-registered Triways – about $145 million (see the Times piece at http://bit.ly/1gKkskd). We’ve asked Glencore and Gertler what the loan was for. They won’t say.

Our latest report discusses deals around Toronto-listed Katanga Mining. But we’re still puzzled by Glencore and Gertler’s dealings in their two other jointly-owned mines in Congo, Kansuki and Mutanda. Glencore waived its right of first refusal to buy stakes in the minesin 2011, inviting Congo’s national copper company to sell them to Gertler at rock-bottom prices instead. Glencore and Gertler again deny any wrongdoing. Gertler even denies he got the assets cheaply – that appears scarcely credible. Again, see the Times on this: http://thetim.es/1gfn2dU.

The Africa Progress Panel showed why these deals mattered. They estimated that just five deals involving Gertler – as well as Glencore and ENRC – meant the Congolese state lost out on at least $1.4 billion. That’s about twice annual spending on health and education combined.

Corruption investigators in the UK and the US are investigating Gertler’s deals in Congo with two companies: the Eurasian Natural Resources Corporation (http://bit.ly/1lCH7Lf) and hedge fund Och-Ziff (http://on.wsj.com/1kllqS4). If Glencore isn’t worried about this, maybe it should be.