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The Zambian government must investigate Glencore’s twenty years in Zambia, and the deal

By James Musonda (Phd) Socio-Political Anthropologist (University of Liege).

Just recently a subsidiary of Glencore pleaded guilty to seven counts of bribery in a London court. According to “The UK’s Serious Fraud Office Glencore was involved in “profit-driven bribery and corruption” across Glencore Energy UK’s oil operations in five African nations”. But the amount of money this company will pay in fines will only be known at a sentencing in June. On top of that, the company agreed to pay more than $1bn (£800m) to resolve similar claims with the US and Brazil. It previously set aside $1.5bn to cover the investigations it faced in the UK, US and Brazil.

These revelations show that Glencore has not weaned itself of its deserved bad reputation and character of its founder Marc Rich. Until his famous pardon by US president Bill Clinton on his last day in office, after Rich’s wife Denise Rich had donated more than US$ million to the Democratic Party, Rich was on the FBI’s most wanted fugitives list. He was facing charges of, among others, tax evasion, racketeering and evading US sanctions in trading with Iran. He later sold the company his trading business to the company’s managers. The company is registered in Zug, Switzerland went public in 2011 and merged with Swiss mining giant Xstrata.

In 2000 Glencore acquired a majority stake in Mopani copper mines in Zambia, the largest employer on the Copperbelt – comprising Nkana and Mufulira mines, two concentrators, one smelter, one refinery and two cobalt plants for only $30 million dollars. For two decades of its operations, the company consistently declared losses and hence refused to pay taxes. Together with Vedanta’s KCM, Mopani consistently responded to global commodity fluctuations by: retrenching workers massively; subcontracting most of its operations to companies who were paid less and who consequently offered their workers precarious working conditions; withdrawing social benefits such as housing, children’s education, water and electricity and so forth; transferring the blame for safety on workers; weakening trade unions by recognising seven more unions besides MUZ and; facilitating and encouraging workers to obtain loans instead of increasing their wages.

Business-wise, Glencore’s mines sold much of their copper to Glencore’s trading segments, mostly through Glencore UK. Put simply, Mopani sold its copper cheaply to another Glencore owned company in the UK cheaply, before that company sold the same copper expensively on the global market. As such Glencore could declare losses in Zambia and transfer the profits in foreign countries. Similarly, FQM sells all of its copper to just two other companies: Trafigura, long headquartered in Geneva, and Metal Corp Trading registered in Zug Switzerland. Metal Corp is a fully owned subsidiary of Metal Corp (Sweden) AB, itself a fully owned subsidiary of FQM. In short, Metal Corp Trading ‘buys and sells all of FQM’s metals and, in the process, carries out sophisticated derivatives management to handle price risk’ (Dobbler and Kesselring 2020).

In 2015, Mopani was one of the companies named alongside Vedanta’s KCM for tax evasion and avoidance resulting in the Zambian government losing over $3billion every year. Zambia Revenue Authority (ZRA) audit of Mopani Copper Mines conducted between 2006 and 2009, revealed that the transactions between the company and its Swiss parent multinational, Glencore International AG (GIAG) violated the Arm’s Length Standards (ALS), which requires a buyer and seller act independently without one party influencing the other. In May 2020 the Supreme Court of Zambia ruled in favour of ZRA and fined Mopani Copper Mines $13 million. Besides avoiding taxes, Glencore also continued to pollute and endanger the lives of many people living in surrounding areas especially Kankoyo, including causing deaths. For example, in 2016 the Zambian High court found Mopani guilty for the death of Beatrice Miti after she inhaled toxic fumes of sulphur dioxide negligently released beyond the legal limits into the atmosphere by Mopani. On appeal by Mopani, this fine was raised to K1 million. This is a company that refuses to pay taxes using doggy means, pollutes and kills, and yet is able to remorselessly defend itself in court.

The recent revelations should refocus our attention to that Mopani deal which saw the Zambian government purchase Mopani for US$1.5 billion-plus-interest for a company that made a US$91 million net loss in the same year the transaction was concluded. Glencore bought from the Zambian government for just US$50 million in 2000, and sold it back at US$1.5 billion-plus-interest or US$2billion plus or minus. This is more than twice the amount at which the entire ZCCM was sold. In short, we sell cheaply, and buy back expensively, yet more than 60 percent of Zambians live on less 2$ per day, have no electricity, decent water, and hospitals have no medicines. But this is not all.

Under the purchase agreement Glencore: retained buying rights for Mopani’s copper output until the transaction debt is fully repaid; ZCCM-IH must repay the loan PRINCIPAL by giving Glencore 3% of Mopani’s gross revenue from 2021-2023 and 10-17.5% of Mopani’s gross revenue until the debt is fully repaid; to pay quarterly interest of LIBOR plus 3%. Mines Minister Richard Musukwa estimated that this may upto 17 years depending on copper prices. This deal Glencore denied Zambians benefits for twenty years when it owned and operated the mines and has continued to do so even when it handed over the company to the Zambian government. The Glencore deal is an example of nationalisation with zero benefits.Indeed Glencore invested $2.4 billion between 2000 and 2015. However, given the above revelations, one would argue that this is the money they raised by selling the Zambian Copper. The Zambian government must investigate Glencore’s twenty years in Zambia, and the deal. The nationalisation of Mopani clearly demonstrates that it was meant to bankrupt the country already suffocated with an external debt of over US$14 billion. There was no need to pay all this amount because Glencore has already got its due.