Billionaires Behaving Badly?

GLENCORE is a huge multi-national company making fantastic fortunes from crops to crude oil and copper. But now it is coming under fire from critics who accuse it of everything from exploiting child miners in Africa to destroying the environment.

By Simon Edge

Earlier this week an edition of BBC One’s Panorama called Billionaires Behaving Badly? turned its spotlight on a massively wealthy but relatively unknown company called Glencore. The presenter cycled around central London asking members of the public if they had ever heard of the firm. He then told a story of Colombian farmers massa- cred by militiamen with designs on their coal-rich land; of a river in the Democratic republic of Congo polluted by raw acid from a Glencore refinery; and of child labour at a copper mine in the same country.

Attentive viewers will have noticed that the company was not quite as involved in these outrages as the programme wished to imply. in the case of the Colombian farmers Glencore does not own the coal-rich land and no direct connection was established with the killers.

With the mine, the company said child labourers were trespassers who had invaded its land and whom it had asked the government to remove. as for the refinery, it said the plant had been polluting the river for half a century but that after three years of Glencore ownership the water was about to run clean.

As investigative journalism goes, in other words, this was hardly a slam- dunk. Nevertheless it’s clear that Glencore, which announced the biggest  stock exchange flotation in British history just under a year ago, is one of the world’s most colourful companies. established by a man who ended up on the FBIs most wanted list, it works among the poorest of the poor in countries where most other multi-nationals fear to tread and has created extraordinary wealth for its billionaire founders.

And it is growing all the time. Worth £27billion and on the verge of a £50billion-plus merger deal with mining company Xstrata, it trades 10 per cent of all the world’s wheat, 25 per cent of its barley and 50 per cent of its copper. That’s not bad for a firm that sounds like a brand of whisky and has almost zero name- recognition among the public.

The company was founded in 1974 by Marc rich, who was born in Belgium in 1934 and emigrated to the US with his family to escape the Nazis. Based in New York, he became the biggest commodities trader in the world, buying, transporting and selling oil and metals. But in 1983 he was charged with evading taxes and illegally trading with Iran during the hostage crisis of 1979-81. He fled to Switzerland where he spent 17 years as a fugitive before he was controversially given a presidential pardon hours before Bill Clinton left office.

He has admitted supplying oil to apartheid South Africa in breach of sanctions, bribing officials in countries such as Nigeria and assisting the Israeli intelligence agency Mossad. Israeli statesmen Ehud Barak and Shimon Peres were among those lobbying for his pardon.

In 1993 he spent more than $1bil- lion on trying to control the world zinc market. The attempt failed, the firm came close to collapse and rich lost control in a management buyout. The company’s name was changed from Marc rich & Co to Glencore – perhaps an abbreviation for “global, energy, commodities and resources”. rich has now been written out of the official company history.

The firm built itself up as the world’s biggest middle man, making its money by finding customers for raw materials which it sold at a profit using complex “hedging” instruments to reduce risks posed by such factors as bad weather, market changes, piracy or political upheaval. according to a business profile compiled by the news agency Reuters, employees are hired young and expected to make a career with Glencore. They are either “thinkers”, number-crunching the firm’s complex financial transactions, or “soldiers”, hard-nosed traders striking the deals.

With its head- quarters in Switzerland, the firm remained scrupulously private as it expanded its activities to become a mine owner as well as a trader. as journalist Daniel Amman, author of a book about rich, has said: “They have profited from being extremely secretive. The sort of people they do business with do not want their deals
in the spotlight.”

THE chief executive is ivan Glasenberg, a 54-year-old father-of-two who has competed in “race walking” for his native South africa and israel. a man who treasures his anonymity, he is said to have agonised over the decision to take Glencore public. although the flotation means his stake is worth £4billion, the firm is subject to far greater scrutiny than before.

“According to a report by Deutsche Bank, its four major growth areas are coal in Colombia, copper and cobalt in the Democratic republic of Congo, oil in equatorial Guinea and gold and copper in Kazakhstan,” says Daniel Balint-Kurti, of campaign group Global Witness. “These are also countries where governance standards are low, in other words there’s a lot of corruption. There’s nothing wrong with doing business in these countries but we think it’s important to note that Glencore’s strategy is not solely based on being clever, identifying arbitrage opportunities, margins to be squeezed and so on. It’s also based on the forging of relationships with people who have very close links to power and when you’re doing that in places like the DRC you’re entering morally dubious terrain.

Now the company is listed on the London stock exchange ordinary peo- ple including many UK pensioners have become its shareholders and we think it makes sense for them to be concerned about ethics.”

Glencore this week issued a detailed rebuttal of what it says are unfounded allegations made by Panorama. It says it has no links to paramilitaries, that the effluent outfall from the DRC refinery has stopped and that it has every measure in place to ensure copper ore mined by children is not purchased by Glencore or any subsidiaries.

It insists that it does behave in an ethical way in the desperately impoverished countries where it operates.

“Glencore takes its responsibilities very seriously and sustainability is an integral part of everything we do,” it said in its statement.

“We have created a framework to bal- ance social, environmental, ethical and commercial interests at every level of our group. In the Democratic Republic of Congo and Colombia, Glencore funds schools, hospitals and other projects which Panorama chose not to feature.”

It added that it repeatedly offered Panorama the chance to film its operations in the DRC and see the effects of the billions of dollars of investments it has made but the BBC declined. Whether that’s enough to make the questions go away as the mega-merger with Xstrata looms is another matter.





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