Down to the wire
Ivan Glasenberg’s gambles may have caught up with him
● Ivan Glasenberg’s Glencore has built a reputation for risk-taking and a culture of tapping into countries that other miners would think twice about entering.
One source who has interacted with Glencore in business deals in South Africa said Glasenberg was known to be aggressive. He said Glasenberg’s political links had given Glencore the confidence to believe that the miner could enter into any business deal it wanted to, and in most cases it had indeed got what it wanted.
A classic demonstration of Glencore’s risk-taking culture and political links was the Optimum coal mine case in South Africa. Glencore was forced to put Optimum under business rescue because of Eskom’s refusal to increase the price of coal supplied to its power stations.
The controversy around Optimum arose when then mineral resources minister Mosebenzi Zwane flew to Switzerland, where Glencore has its headquarters, to meet Glasenberg where he helped facilitate the sale of Optimum to the Gupta-owned Tegeta Resources.
Glasenberg is known to entertain and do business with high-level politicians such as Zwane and Cyril Ramaphosa, Glencore’s former BEE partner.
However, Glencore’s high-risk business culture practised over the past decade or so might have finally caught up with it.
The multinational mining and trading business might find itself involved in a long and ugly investigation by the US department of justice over alleged bribery, corruption and money laundering in some of the countries where it operates.
The news that the department had subpoenaed Glencore for documents dating back to 2007 involving its businesses in the Democratic Republic of Congo, Nigeria and Venezuela came as a shock to the market two weeks ago and led to a 14% drop in the Glencore share price on the day of the announcement.
The subpoena, which has sparked a lot of questions about the company’s business dealings and has grabbed the market’s attention, has led to Glencore setting up a board committee to respond to the US probe.
The company said it would co-operate with the US justice department.
Glencore has operations in 50 countries and trades about 90 commodities across the world. The transition from being mainly a trading business to becoming a mining company happened after Glencore merged with Xstrata in 2013. After the merger 80% of the group’s earnings came from mining.
Of the countries the US justice department is looking into, only the DRC, where Glencore operates two copper and cobalt mines, makes a significant contribution to the group’s earnings.
Nigeria and Venezuela, from where it ships oil, are marginal to the group. Glencore ships about 7 million barrels of oil a day.
In the DRC, Glencore accounts for more than a quarter of the world’s cobalt supply; the DRC itself produces about 60% of the world’s cobalt. The company entered the country in 2007, when it acquired its first copper mine, followed by a second one in 2008. By-products of copper include cobalt.
Because the US is asking for documents dating back to 2007, when Glencore entered the DRC, some industry pundits believe the investigation, if and when it happens, will be largely about the company’s dealings in the Congo.
This may be true, given the company’s dealings with Israeli billionaire Dan Gertler, who is close friends with the president of the DRC, Joseph Kabila, and had sanctions imposed on him by the US late last year. Gertler assisted Glencore in acquiring its DRC copper operations but Glencore denies this. Gertler continued to receive royalties even after Glencore had bought him out of the business in 2017.
This was because in April this year, Gertler took Glencore to court after the company had ceased to pay him royalties. He wanted up to $3-billion (R40.05-billion).
Glencore was forced to pay Gertler his royalties, but in euros, for fear of its operations being frozen by the courts in the Congo and by the US sanctions.
One industry pundit, who refused to be named due to company policy, said he was not sorry for Glencore because it knew the risks it was taking when it went into business with Gertler. “They are in a difficult position but it’s a mess of their own making.” Nobody has a clue
However, Peter Major, an analyst at Cadiz Corporate Solutions, said the US could find anything wrong with anyone it wanted to and Glencore was a big company with businesses in a lot of countries, so one could slip up at any time.
“Nobody has a clue where this will go,” he said. “It puts a dent on the share price. It’s impossibly difficult to do business in those areas [Congo, Nigeria, Venezuela]. You know they [local politicians] are corrupt but you try to deal with them in a transparent manner.”
Global Witness, an NGO that specialises in investigating and exposing corruption linked to the exploitation of natural resources, said it had pressed for an investigation into Glencore for years, so it was encouraging to see the first steps in information-gathering being taken.
“The subpoena is just an informationgathering phase but it is fair to say there have been questions raised about Glencore’s dealings in the DRC and their relationship with Gertler,” Pete Jones of Global Witness said. “We have been saying for many years that Glencore has many questions to answer about its dealings with Gertler. We can’t explain those deals adequately.”
What oil is to Saudi Arabia, mining is to the DRC — the backbone of the economy, which means the government is heavily reliant on it when it comes to revenue.
Therefore, if the mining sector is rife with corruption, it has a huge negative effect on the economy.
This is especially problematic for a country such as the DRC, which has high levels of poverty.
Analysts speculate that if, after years of investigation, there is found to have been any wrongdoing by Glencore, the company may be fined millions. Even worse, some executives or board members may face criminal charges.
Glasenberg and Glencore were not available for comment.