Tag Archives: Dan Gertler

Glencore buys out Dan Gertler, Israeli businessman accused of bribing DRC’s President Joseph Kabila

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It’s hard to imagine a more fitting embodiment of the sad story of economic vandalism in the DRC than the friendship between Israeli businessman Dan Gertler and President Joseph Kabila. Regular readers know that Gertler’s pillage of the DRC is a pet topic on this blog – see here, here, here and here, for example.

Now FT’s Tom Burgis has yet another story on how mining giant Glencore has been forced to buy out Gertler over accusations of bribery:

After years of doing business together in one of the world’s poorest countries, Glencore has dissociated itself from Dan Gertler, an Israeli mining tycoon implicated in the payment of bribes to the ruler of the Democratic Republic of Congo.

Glencore’s announcement last month that it would pay $534m to Mr Gertler to buy him out from their shared prize assets in the DRC — two giant copper mines — is designed to insulate the London-listed mining cum trading behemoth from the fallout of a widening corruption investigation involving the Israeli businessman, say people who have followed the saga. The decision by Ivan Glasenberg, Glencore’s chief executive, highlights the risks of doing business in the resource-rich, war-torn central African country, where Mr Gertler wields influence by virtue of his close friendship with Joseph Kabila, the DRC president.

Settlement documents released in September by US authorities in a scandal involving Och-Ziff, the New York hedge fund, alleged that an “Israeli businessman” — whose description clearly matches Mr Gertler — had paid bribes to Mr Kabila in order to obtain special access to mining rights in the DRC.

One banker who does dealmaking in the mining sector and owns Glencore shares says the company’s purchase of Mr Gertler’s stakes in the two DRC copper mines is defensive. “Buying out Gertler is primarily about detoxification for Glencore,” he adds. “The Och-Ziff investigation in the US has made it very risky to have clear ties to him.”

More on this here. Definitely worth a quick read.

President Joseph Kabila was paid $7m in bribes. Dan Gertler’s buyout is worth $534m in cash, paid by Glencore.

Mineral Assets and Corruption in the DRC: Israeli “businessman” Dan Gertler linked to Och-Ziff bribery convinction

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What does Dan Gertler and his business associates think of term limits in the DRC?

This piece from The Globe and Mail has some answers:

The cellphone message from the Israeli businessman was blunt and vulgar: The Canadian mining company must be “screwed and finished totally,” he told an associate as they negotiated a massive bribe to Congolese court officials to guarantee that the Canadian company would lose control of its copper mine.

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President Joseph Kabila and Dan Gertler 

Within hours of that 2008 message, the businessman and his associate had arranged a bribe of $500,000 (U.S.) to judges and other officials in the Democratic Republic of the Congo, according to court documents released in a U.S. corruption case.

A day later, the Israeli businessman obtained assurances that Congolese officials would ensure the Canadian company would lose its court fight against a local takeover of the copper mine, the U.S. documents say. Then, a week later, the Israeli won majority control of the company and the valuable asset.

The documents were released on Thursday in the settlement of a corruption case against Och-Ziff Capital Management, a U.S. hedge fund that manages $39-billion.

Och-Ziff agreed to pay $412-million in criminal and civil penalties, one of the biggest payments ever approved under the U.S. Foreign Corrupt Practices Act.

The U.S. documents show the hedge fund paid more than $100-million in bribes to officials in Congo, Libya, Chad, Niger and Guinea – including Congolese president Joseph Kabila – to gain corrupt influence and mining assets.

……. The hedge fund, Och-Ziff, went into partnership with the Israeli businessman and was involved in using intermediaries and business partners to funnel large bribe payments to officials in Congo and other African countries, according to the U.S. Securities and Exchange Commission. Och-Ziff was directly involved in financing the businessman’s acquisition of Africo, including his “legal expenses” in the case, the U.S. documents say.

As I have noted here and here, the DRC is a cherished playground for thieves foreign investors who do not give a rats behind about the political, institutional, and economic consequences of their actions.

That said, Gertler would be advised to talk to Benny Steinmetz. There is a precedent of a change in leadership leading to repossession of a fraudulently obtained concession.

Kabila will not be in power in Kinshasa forever.

More on the Och-Ziff story here.

Political Developments in the DRC

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Podcast: Renowned Africanist historian Crawford Young talks with Jason Stearns about politics in the Democratic Republic of Congo.

It looks like Joseph Kabila may be able to extend his stay in office at least until 2018. The constitution bars him from being in office beyond 2016.

The decision to extend Kabila’s stay in office is likely the beginning of a bloody phase in the DRC’s political saga. Opposition groups claim that at least 50 people have died since Monday in clashes with the army and police.

Kabila now joins his neighbors Paul Kagame of Rwanda and Denis Sassou Ngwesso of the Republic of Congo as the latest in a small but growing list of African presidents who continue to buck the trend by abrogating constitutional presidential term limits.

This should not come as a surprise to students of political development.

Leadership transitions are notoriously difficult to manage. Especially in relatively shaky states like the DRC. In case it is not obvious, there will not be any easy solutions to the current impasse. Kabila clearly has the support of a sufficient number of elites that want him to stay in power — primarily for their own benefit. Enough that they are willing to send in the troops to kill protesting civilians.

This means that moralizing about Kabila’s disrespect for electoral democracy will not work. It is not just Kabila on the hook here. His domestic elite-level allies and foreign business associates who pillage the DRC’s resources are also on the hook. And they can’t simply be wished away. Furthermore, the ghosts of the Two Congo Wars will likely inform any regional intervention to try and resolve the constitutional crisis. Nobody wants to ignite more killings and instability.

Unfortunately for Congolese people, Kabila and his allies know this. And have revealed that they are willing to blackmail everyone into letting him stay in power.

On Predatory Investment in Africa’s Extractive Industries

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The U.S. military’s African Center for Strategic Studies has a pretty interesting and detailed report on Sam Pa, his group of companies, and involvement in shady deals in the extractive sector in Africa. In Mr. Pa we have got the Hong Kong/Chinese equivalent of the shady Israeli billionaire Dan Gertler who’s playground is mainly the DRC (Global Witness has a thick dossier on Mr. Gertler; See also an FT piece on his partner, Benny Steinmetz, who recently got (figuratively) burned after a too-good-to-be-true deal went sour in Guinea).

Focusing on Mr. Pa and his business network in several African states, the ACSS report examines the networks and (corrupt) practices of the Hong Kong-based 88 Queensway Group. It outlines Mr. Pa’s business strategy as one based on:

Cultivating relationships with high-level government officials in politically isolated resource-rich states through infusions of cash, promises of billions of dollars in infrastructural development, and support for the security sector [….] Starting in Angola in 2003, Queensway has been engaged in the extractive industries in at least nine African countries, including Guinea, Madagascar, Tanzania, and Zimbabwe.

…… In many ways the prototypical predatory investor, Queensway frequently appears in resource-rich states in Africa where it can operate with high levels of opacity. In Angola and Zimbabwe, for example, few details from the contracts pertaining to Queensway’s investments—reportedly worth up to $9 billion in each country—have ever been disclosed to the public. In states where contracts have been unearthed, such as Guinea and Tanzania, the deals were revealed to be flagrantly unfavorable to the citizens of the host country. Having allegedly bribed African government officials and engaged in illicit arms trafficking and diamond smuggling, Queensway’s deals in Africa have often had a disastrous impact on governance.

You can download the full report here.

HT Financial Times

The 2013 Resource Governance Index

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The 2013 Resource Governance Index (published by the Revenue Watch Institute) is out. The top performing African countries include Ghana, Liberia?, Zambia and South Africa, with partial fulfillment. The bottom performing countries are Equatorial Guinea, Zimbabwe, South Sudan, the Democratic Republic of Congo and Mozambique.

The 58 nations included in the report “produce 85 percent of the world’s petroleum, 90 percent of diamonds and 80 percent of copper.” Ghana, where we are doing some evaluation  work on extractive sector transparency initiatives, is the best performing African country on the list. Image

More here. 

And in related news, The Africa Progress Report was released last week. The report details the massive loss of revenue by African governments through mismanagement – either by commission and/or omission – of extractive resources. For instance:

The report details five deals between 2010 and 2012, which cost the Democratic Republic of the Congo over US$1.3 billion in revenues through the undervaluation of assets and sale to foreign investors. This sum represents twice the annual health and education budgets of a country with one of the worst child mortality rates in the world and seven million pupils out of school.

The DRC alone is estimated to have 24 trillion dollars worth of untapped mineral resources.

The most bizarre case of resource management in Africa is Equatorial Guinea, a coutnry that is ranked 43rd on the global per capital GNI index but ranks 136th on the Human Development Index (2011).

Below is a map showing flows related to Africa’s vast resources:

RESOURCE-MAP

More on the DRC

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CFR has a nice interview with Jason Stearns, DRC expert and author of Dancing in the Glory of Monsters. Jason in part notes that:

This crisis has brought about a shift in international donor policy for the region, in particular criticism and financial sanctions against Rwanda, which is something that’s new. However, using aid as leverage only makes sense in the context of a larger political process. Bashing Rwanda just for the sake of bashing Rwanda is not a solution. There needs to be a comprehensive political process into which that kind of pressure can be funneled and channeled. But there is no such process at the moment. What you have are talks mediated by a regional body—the International Conference for the Great Lakes Region (ICGLR)—that has the irony of being presided over by Uganda, which is itself playing a role in the conflict by supporting the M23. These talks have been largely limited to an evaluation of the March 23, 2009 peace deal, and the potential formation of a regional military force to deal with the FDLR and M23. But the causes of the crisis run much deeper and involve the failure of local governance, the weakness of the Congolese army, and the persistent meddling of neighboring countries in Congolese affairs.

This is precisely what informs my contention that there is too much focus on the international dimension of the conflict at the expense of the kinds of reforms that Congo needs in order to improve state capacity in Sub-Saharan Africa’s biggest country.

You can’t do business, implement a human rights regime, or even pretend to have democratic governance in a stateless environment (Unless, of course, you live in a state of nature in which everyone has capacity to defend themselves against aggression by others).

Some, including very serious and influential people, think that the solution to Congo’s weakness is to plea with its neighbors not to prey on it. I disagree. I believe that the best solution ought to be the strengthening of Congo so it can deter its neighbors. The international community just wasted a good opportunity to force a cornered Kabila to agree on a peace deal that is self-enforcing, i.e., that reflects the power balance in eastern Congo.

As things stand the continuation of the power vacuum in the Kivus will continue to attract rebels, foreign-sponsored or not.

More on this here.

Also here is a  glimpse of some of the actions by Kabila and his Kinshasa cabal which make it extremely unlikely that the situation in Congo will improve under his rule.

quick hits

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The Christian Science Monitor reports on the robbery that most African governments (in this case in the DRC) continue to visit upon their people, unabated. Some of the deals they make sound so bad they’d embarrass a two year old.

Gertler was just 27 when he first became involved in the Congo in 2000, obtaining a monopoly of diamond exports (worth around $600 million) in return for $20 million. He had previously been involved in diamonds in Angola and he is the grandson of Moshe Schnitzer, the founder of the Israel Diamond Bourse. He is now one of the richest Israelis.

Industry insiders, however, suggest that the last big round of mining concession acquisitions happened just before the last elections and helped the president raise funds for his expensive campaign. The next elections are in 2011.

More on this here.

Also, Tech crunch has a nice piece on how the future belongs to the global south