A state mining company in the Democratic Republic of Congo (DRC) has sold the royalty rights of a lucrative copper mining project to a company owned by Israeli businessman Dan Gertler. According to a statement published by London-based NGO Global Witness, Gertler confirmed that his company, Africa Horizons Investment Limited, holds the royalty rights of the project, after acquiring it from Generale Des Carriers et Des Mines (Gecamines).
Gertler has challenged the NGO’s valuation of $880 million, which includes the yet-to-be disclosed royalties emanating from last year’s deal between Gecamines and African Horizons.
The project in question is the Kamoto Copper Company, a venture under Katanga Mining Company, which explores and mines copper. Both companies are owned by Gecamines.
According to Global Witness, Gecamines transferred its royalties in Katanga Mining to African Horizons last year. It’s still unclear exactly what Gecamines received from the the deal and whether it will have a trickle-down effect on DRC citizens.
“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,” explained Pete Jones, who is a campaigner at Global Witness.
Pattern of Shady Deals
Gertler, who is a friend of DRC President John Kabila, has a history of using his companies to controversially obtain oil blocks in the eastern part of the country.
Businessman Dan Gertler, pictured at DRC President Joseph Kabila’s wedding. Photo Credit: Mail & Guardian
According to the International Consortium of Investigative Journalists (ICIJ), Gertler once had a monopoly of diamond rights in the DRC, in which the precious stones were used to buy arms during African civil wars during the 1990s, which was in contravention of the United Nations arms embargo.
According to Global Watch, Gertler has also been affiliated with U.S. hedge fund Och-Ziff Capital Management Group, which financed his illicit payments to DRC officials in order to secure diamond and mining assets between 2008 and 2012. In exchange, Och-Ziff earned more than $90 million in profits in the deal, notes the U.S. Department of Justice.
Off-Ziff has since been accused by the Securities and Exchange Commission of violating the Foreign Corrupt Practices Act (FCPA). In September, it agreed to pay back the U.S. government more than $2.2 million, which is inclusive of other illicit payments between the hedge fund and other African countries.
Global Witness argues that such deals only end up hurting the country’s citizens: proceeds of DRC’s minerals, such as gold, copper, and oil, have been used to fund armed conflicts and pamper the elite.
According to the World Bank, the GDP of DRC was $35.2 billion in 2015, representing an economic growth of 6.9 percent, down from 9.5 percent in 2014. The poverty rate of the country was rated to be 176 out of 187 in 2015 in the UN Human Development Index.
The World Bank further observes that DRC has 1,100 minerals and precious metals as well as 80 million hectares of arable land.
A 2016 report by KPMG notes the country was the largest global producer of cobalt in 2012. In the same year, DRC was also the second largest global producer of industrial diamonds. These resources have been under threat due to political instability in the country and the rise of foreigners looking to exploit them, an issue that was highlighted in the 2010 U.S. Dodd-Frank Act.
Such data helps explain why Global Watch is pushing for proceeds from DRC’ s minerals and precious metals to be used to improve the human development of its population, estimated to be 77 million in 2015.
