Global Witness reveals that the state mining company in Democratic Republic of Congo last year signed over royalty rights in its most lucrative mining project, owned and operated by giant London-listed commodities trader Glencore, to an offshore company belonging to a friend of the president.
The contract does not explain what, if anything, Congo’s state mining company received in compensation for handing over these rights, and neither Gecamines nor the offshore company involved has provided a full explanation.
Global Witness estimates that the royalties could generate as much as $880m – more than Congo’s annual health spending. Typically royalties like this are for the benefit of the population. This is especially vital in Congo, which ranks near the bottom of the UN Human Development Index and has one of the lowest rates of GDP per capita in the world.
Under the terms of the agreement, dated January 2015, the royalties due to state mining company Gecamines from Glencore’s KCC copper project in southeast Congo were assigned to an anonymous Cayman Islands company called Africa Horizons Investment Limited.
Africa Horizons is part of Dan Gertler’s Fleurette Group. Gertler is an Israeli billionaire mining magnate and close friend of Congolese President Joseph Kabila. He was the Congo partner of US hedge fund Och-Ziff in deals for which it was charged by US authorities for foreign corruption, eventually paying out over $400m in a settlement. Gertler has been linked to several other suspicious mining deals in Congo, some of which involved Glencore.
“It’s troubling that the state miner Gecamines has signed away rights to potentially huge flows of cash that should go towards building Congo’s future. It’s even worse that it has handed them to this unknown, anonymous company belonging to an individual with a track record of suspicious deals,” said Pete Jones, campaigner at Global Witness. “The state mining company should be trying to make money for the Congolese people, but here it is signing away its rights to potentially huge royalties.”
“The contract we have seen provides no reason for Gecamines giving away these royalties. Neither Gecamines nor Gertler’s representatives have told us whether Gecamines received any payment in return. It is imperative that Gecamines and Gertler explain what is behind this agreement. If they can’t show that this is a good deal for Congo, there should be an investigation into what’s really behind the agreement,” said Jones.
A spokesperson for Gertler’s holding company, Fleurette, from Powerscourt public relations firm did not comment after having been granted extra time to respond to questions from Global Witness.
As Global Witness went to press it became aware of a statement from Fleurette via Powerscourt that said the agreement between Africa Horizons and Gecamines ends in early 2019, and that this information is “publicly available”. Powerscourt did not respond to requests to provide this information or explain where it could be located. Fleurette also said the valuation of the royalties was “entirely wrong” and said it had made a “considerable loss” on the deal.
Glencore confirmed the transaction to Global Witness, asserting that Gecamines had “sold its rights to certain royalties” from its subsidiary KCC to Africa Horizon. It added that KCC was not involved in the original discussions and had subsequently “acted in accordance with the instructions it received from Gecamines” after having taken “reasonable measures” to check out the validity of the sale. Gecamines representatives did not respond to emailed questions and a phone call from Global Witness.
At the time of the deal, KCC was Congo’s third-largest copper mine by production volume and its largest tax contributor, according to statistics published by the Extractive Industries Transparency Initiative (EITI). EITI reported that KCC paid royalties totalling over $63m to Gecamines in 2014, but now any such payments will go to Africa Horizons. The document seen by Global Witness suggests that royalty payments were made from KCC to Africa Horizons beginning 9 July 2014 under a separate earlier agreement. Gertler’s representatives did not say how much had been transferred to date in royalties under the agreement.
Congo is in the midst of an escalating political crisis. Kabila is obliged by the constitution to step down when his second term ends in December, but elections have been postponed and the opposition has accused Kabila of clinging to power. Riots against Kabila’s government have led to the deaths of at least 80 civilians in two major protests in January 2015 and September 2016, according to Human Rights Watch. Global Witness warned in May that off-the-books sales of natural resource rights could be used to finance a political campaign.