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Glencore’s bankers wary of stirring the pot as group admits international guilt

South Africa's Banking sector is aghast but will not be drawn to take sides on the developing saga involving mining giant Glencore. Picture: Romina Amato, Reuters.

South Africa's Banking sector is aghast but will not be drawn to take sides on the developing saga involving mining giant Glencore. Picture: Romina Amato, Reuters.

Published May 26, 2022


SOUTH Africa’s banking sector remains mum on the developing saga involving mining giant Glencore, which this week admitted to a $1.5 billion (R23.6bn) payment to settle accusations of bribery and market manipulation.

This as authorities in the US, Britain and Brazil announced that three of the company's subsidiaries were guilty to crimes.

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Glencore’s shares closed 1.23 percent lower at R102.70 on the JSE yesterday. The shares have risen 117.35 percent in the past three years. Glencore’s market capitalisation is worth R1.5 trillion.

The findings come as Glencore, the world’s biggest commodities trader, is benefiting from soaring commodity prices.

In April the miner lowered its 2022 production guidance on copper, zinc and cobalt, but upped its output guidance for nickel and ferrochrome.

It said it expected its full-year trading earnings before interest and taxes to “comfortably” exceed $3.2bn, which was the top of the range of its long-term annual guidance. The bottom end was $2.2bn, Reuters reported.

Glencore, listed on the London Stock Exchange and JSE, is the latest company that has been exposed for wrongdoings.

Shareholders have borne the brunt of executive greed, as corporate misdeeds from the likes of Steinhoff International, Tongaat Hulett and EOH, have gutted these firms and decimated their share prices.

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US Attorney Damian Williams for the Southern District of New York said: “In the foreign bribery case, Glencore International and its subsidiaries bribed corrupt intermediaries and foreign officials in seven countries for over a decade.

“In the commodity price manipulation scheme, Glencore Ltd. undermined public confidence by creating the false appearance of supply and demand to manipulate oil prices.

“The scope of this criminal bribery scheme is staggering.”

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The local banking sector and the Financial Services Board said they were still mulling over the appropriate response to the matter in which financial institutions have to take a stand.

“We have not been given sufficient time to respond to these matters,” an agency of the Banking Association of South Africa said yesterday.

A Nedbank group spokesperson said the group was bound by client confidentiality agreements not to comment on the issues.

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“Nedbank is bound by client confidentiality and in unable to confirm client relationships or provide comment in relation to them,” the spokesperson said yesterday.

The current management of Glencore now has to deal with the mess by its predecessors.

South African-born Ivan Glasenberg was replaced as chief executive at Glencore last year by another South African, Gary Nagle.

Glencore’s current management team is striving to bolster its tattered reputation as it faces the music of a bribery and market manipulation scandal, with its chairperson, Kalidas Madhavpeddi, saying this week: “Glencore today is not the company it was when the unacceptable practices behind this misconduct occurred.”

As Glencore navigates tricky litigation waters, it has sought to reassure the market that it now has its ethics well in-hand.

The mining firm said significant steps had been taken to enhance its ethics and Compliance Programme.

Madhavpeddi said: “Starting before the company knew of the DoJ’s (Department of Justice’s) investigations, Glencore had invested substantial resources towards developing a best-in-class Ethics and Compliance Programme.

Glencore said it had also taken extensive remediation actions, including through the separation or discipline of employees involved in the wrongdoing.

The company had a refreshed board and management team who are dedicated to fostering a culture of integrity, responsibility and transparency.

The DoJ noted certain enhancements to Glencore’s compliance programme and internal controls in the resolutions.

The group said it had bolstered its compliance structures and controls through a comprehensive programme built around risk assessment, policies, procedures, standards and guidelines based on international best practices associated training and awareness initiatives as well as monitoring systems.

This had included strengthening the group’s Code of Conduct and launching a comprehensive global awareness and training campaign designed to embed Glencore’s values throughout its business, set expectations and ensure accountability for all employees.

It had also established a centralised, independent and empowered compliance function and, in 2020, appointed a new dedicated head of compliance, as well as making a significant investment in compliance systems and resources, as well as experienced personnel.

It had significantly enhanced and expanded the group’s ethics and compliance training programmes; instituted a comprehensive business partner management programme, including significantly reducing the company’s use of third-party business generating intermediaries and employing end-to-end controls to oversee their engagement; implemented extensive monitoring and testing mechanisms, including through the use of data analytics, to assess whether its controls were entrenched and effective across the group and ensure continuous improvement.

Glencore had also engaged leading external advisers to review Glencore’s systems and verify that controls were working as intended.

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