LITMIR.BIZ

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Gécamines, Congo’s state-owned mining company, and a small mining company from Canada.⁶¹ SMKK held rights to a tract of land in the heart of the copperbelt. It sits beside some of the planet’s most prodigious copper mines, making it a fair bet that the area the company’s permits cover contains plentiful ore. Indeed, Gécamines had mined the site in the 1980s before Mobutu’s looting drove the company into collapse.⁶² After a string of complicated transactions beginning in November 2007, involving a former England cricketer, a white crony of Robert Mugabe, and assorted offshore vehicles, 50 per cent of SMKK ended up in the hands of Eurasian Natural Resources Corporation (ENRC), whose oligarch owners had raised a few eyebrows in the City of London in 2007 when they obtained a London Stock Exchange listing for a company they had built from privatized mines in Kazakhstan.⁶³ The Congolese state, through Gécamines, still owned the remaining 50 per cent of SMKK.

      Toward the end of 2009 ENRC bought an option, only made public months later, to purchase the 50 per cent it did not already own. The strange thing was that ENRC did not buy that option from the owner of the stake, state-owned Gécamines, but from a hitherto unknown company called Emerald Star Enterprises Limited.⁶⁴ Emerald Star was incorporated in the British Virgin Islands, one of the most popular secrecy jurisdictions, shortly before it struck this agreement with ENRC, which suggests that it was set up for that specific purpose.⁶⁵ There is nothing in Emerald Star’s registration documents to show who owns it. But other documents related to the deal would later reveal the identity of its principal owner, Dan Gertler’s family trust.⁶⁶

      At this stage all Gertler had was a deal to sell to ENRC a stake in SMKK that he did not yet own. That was soon rectified. On 1 February 2010, Gertler’s Emerald Star signed an agreement with Gécamines to buy the Congolese state’s 50 per cent share in SMKK for $15 million.⁶⁷ ENRC duly exercised its option to buy the stake by buying Emerald Star for another $50 million on top of the $25 million it had paid for the option. The interwoven deals were done and dusted by June 2010.⁶⁸ All the corporate chicanery masked a simple fact: the Congolese state had sold rights to a juicy copper prospect for $15 million to a private company, which immediately sold the same rights on for $75 million – a $60 million loss for the state and a $60 million profit for Gertler.

      The Congolese people were not the only losers in the SMKK deal. ENRC’s would seem to have suffered too. When it bought the first 50 per cent of SMKK, ENRC had also acquired a right of first refusal should Gécamines decide to sell the other half.⁶⁹ That meant that ENRC could have bought the stake when it was offered to Dan Gertler’s company for $15 million. Instead, it paid $75 million a few months later, once the stake had first passed to Gertler’s offshore vehicle. ENRC has not disclosed the terms of its right of first refusal and did not reply to my questions about it. Perhaps there was some stipulation in it that meant buying the stake directly from Gécamines would have been more expensive for ENRC than buying it via Gertler. But based on the details that have emerged, it is hard to see how the oligarch founders of ENRC thought the SMKK manoeuvre was in the best interests of the rest of the investors who had bought shares in the company when it floated in London.

      ENRC was a member of the FTSE 100, the prestigious list of the UK’s biggest listed companies, in which pension funds invest savers’ money. Investors who bought shares when ENRC listed some of its stock in December 2007 paid £5.40 a share, raising £1.4 billion for the company. Over the six years that followed, ENRC’s boardroom was a scene of unceasing turbulence, as the oligarch founders continued to exert their influence over a company that was supposedly subject to British governance rules for listed corporations.⁷⁰ ENRC snapped up assets in Africa, including SMKK, and struck other deals with Gertler in Congo. The Serious Fraud Office was in the middle of an investigation (still active at the time of writing) into ENRC’s activities in Africa and Kazakhstan – and its share price was sliding precipitously downward – when the oligarchs announced that they planned, with the help of the Kazakh government, to buy back the stock they had listed in London, thereby taking the company private again.⁷¹ The offer was valued at £2.28 a share – less than half of what investors who bought in at the start had paid for them.⁷²

      If some British pension funds and stock-market dabblers felt burned by their investments in ENRC, their losses were relatively easy to bear compared with those that Gertler’s sweetheart deals have inflicted on Congo. The best estimate, calculated by Kofi Annan’s Africa Progress Panel, puts the losses to the Congolese state from SMKK and four other such deals at $1.36 billion between 2010 and 2012.⁷³ Based on that estimate, Congo lost more money from these deals alone than it received in humanitarian aid over the same period.⁷⁴ So porous is Congo’s treasury that there is no guarantee that, had they ended up there, these revenues would have been spent on schools and hospitals and other worthwhile endeavours; indeed, government income from resource rent has a tendency to add to misrule, absolving rulers of the need to convince electorates to pay taxes. But no state can fulfil its basic duties if it is broke. Between 2007 and 2012 just 2.5 per cent of the $41 billion that the mining industry generated in Congo flowed into the country’s meagre budget.⁷⁵ Meanwhile, the shadow state flourishes.

      Since at least 1885, when Congo became the personal possession of Belgium’s King Leopold II, outsiders have been complicit in the plunder of Congo’s natural wealth. King Leopold turned the country into a commercial enterprise, producing first ivory then rubber at the cost of millions of Congolese lives. In 1908 Leopold yielded personal ownership of Congo to the Belgian state, which, keen to retain influence over the mineral seams of Katanga following independence in 1960, encouraged the region’s secessionists, helping to bring down the liberation leader Patrice Lumumba in a CIA-sponsored coup that ushered in Mobutu, who became one of the century’s most rapacious kleptocrats.⁷⁶ Richard Nixon, Ronald Reagan and George H. W. Bush welcomed him warmly to Washington. Only once his usefulness expired after the end of the Cold War did the United States abandon Mobutu to flee from Laurent Kabila’s advancing rebels.

      In the era of globalization the foreign protagonists in Congo’s looting machine are not monarchs or imperial states but rather tycoons and multinationals. As well as the likes of Dan Gertler, there are the companies that do business with him. ENRC is one. Another is Glencore, the giant commodity trading house based in the Swiss town of Zug, which listed its shares on the London Stock Exchange in 2011, immediately becoming one of the UK’s biggest listed companies. In 2010 and 2011 Glencore was involved in transactions in which, according to calculations by Kofi Annan’s Africa Progress Panel, the Congolese state sold mining assets to companies connected to Gertler for hundreds of millions of dollars less than they were worth.⁷⁷ (Both ENRC and Glencore insist there has been nothing improper in their Congolese dealings.⁷⁸)

      From multibillion-dollar copper deals in Katanga to smuggling rackets shifting coltan out of the East, Congo’s looting machine extends from the locals who control access to the mining areas, via middlemen to traders, global markets and consumers. During the war UN investigators described companies trading minerals as ‘the engine of the conflict’.⁷⁹ A senior Congolese army officer remembered Viktor Bout, a notorious KGB agent turned arms dealer who was implicated in the illicit coltan trade – and whose exploits inspired the 2005 film Lord of War – dropping in to do business.⁸⁰ ‘He did terrible things here,’ the officer told me.⁸¹ The trade in minerals from eastern Congo spans the globe. In 2012, according to official records, North Kivu’s declared exports of raw minerals went to Dubai, China, Hong Kong, Switzerland, Panama and Singapore.

      When Wall Street nearly imploded in 2008, triggering economic havoc far beyond Manhattan, the world was reminded of the extent of the damage that a complex cross-border network combining financial, economic and political power can do. The reforming legislation in the aftermath of the crisis dealt mostly with the financial quackery that had grown rife in US banks. But toward the end of the 848-page Dodd–Frank Act of 2010 was an item that had nothing to do with subprime mortgages or liquidity ratios. ‘It is the sense of Congress that the exploitation and trade of conflict minerals originating in the Democratic Republic of the Congo is helping to finance conflict characterized by extreme levels of violence in the eastern Democratic Republic of the Congo,’ read a clause in the Act that responded to years of pressure from campaigners. In the future companies

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