Tuesday, 14 February 2017

DRC: Glencore's deal

Mining giant ''Glencore'', widely regarded as a maverick in the global commodities sector, struck a deal worth nearly $1 billion to purchase shares of two mines in Democratic Republic of Congo, from a controversial Israeli magnate: Dan Gertler.

According to the terms of the deal, ''Glencore'' will pay Dan Gertler's ''Fleurette group'' $960 million for ''Fleurette's 31 percent share in the Mutanda mine an 10.25 percent stake in the Katanga mine, resulting in Glencore assuming full control of the Mutanda mine and 86 percent of Katanga.

The partnership between ''Glencore'' and Dan Gertler, a close friend to DRC President Joseph Kabila, has been closely watched, following allegations that the ''Fleurette'' chief paid bribes during his dealings in the country. This deal raises yet more serious questions for Glencore over its decade-long business partnership with Dan Gertler.

DRC  NGO's  have raised a number of concerns related to Mr Gertler’s involvement in the secret sales of prize mining assets in DRC and his business relations with FTSE-100 mining companies Glencore and ENRC. They allege that Mr Gertler has benefited from his friendship with President Joseph Kabila to obtain the mining assets.

Mr Gertler and Glencore have challenged these allegations. A spokesman for Mr Gertler has questioned the commercial valuations for some of the mines concerned, while both Glencore and Mr Gertler’s representatives categorically deny any involvement in corruption in DRC. Glencore's refusal to release the full list of its shareholders, fuel the allegations that there is a risk that the shareholders could include corrupt DRC government officials or their proxies.

Mr Gertler has been a key intermediary through whom Glencore has acquired stakes in Congolese mining assets. He is also a partner in all three mining ventures in DRC in which Glencore acquired stakes that have been collectively valued at an estimated $4.6 billion. Two of those ventures, the Kansuki and Mutanda mines, together are expected to add at least 40% to the world’s cobalt output and increase DRC’s copper production by about 40% (compared to 2011 production figures) once they are fully developed.

Since 2010 a number of offshore companies associated with Dan Gertler have secretly bought stakes in several mines from the state, paying only a small fraction of their commercially estimated values. The mines were sold without public tenders and limited details were only released long after the assets were sold off. After buying the assets, those offshore companies made huge profits by selling on shares in them soon afterwards. Others are positioned to profit by collecting the mining revenues.

For example, some of the proceeds of mining sales in 2011 were used by the DRC government to cover costs related to the 2011 election, which returned incumbent president Joseph Kabila to power. The polls were condemned as flawed by international diplomats and election observers and were marred by killings committed by government security forces.

With this new deal, Glencore may have been anxious to end its partnership with Dan Gertler to protect itself from the political uncertainty shaking the Kabila's regime. The DRC President is facing unprecedented pressure to stand down after his second final term expired in December. As political tensions soared, he struck a power-sharing deal with the opposition on New Year's Eve that provides for elections late this year.

DRC’s natural resource wealth should benefit the country as a whole. Yet hugely profitable deals are being struck by secretive offshore companies and multinationals; the Congolese state is getting peanuts and the Congolese people are being deprived of billions of dollars.

By Guylain Gustave Moke
International Affairs Expert
Political Analyst/Author

Photo Credit: AFP photo