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Glencore’s sale of Optimum Coal Mine was meant to prevent load shedding

Published May 25, 2022

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Once again, a major corporation has been thrust into the limelight after being found guilty of corrupt dealings.

This time, units of Glencore plc, an Anglo-Swiss multinational commodity trading and mining company, pleaded guilty to charges including bribery and price manipulation.

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A whopping $1.5 billion (R23.5 billion) settlement will be paid to authorities in the US, UK and Brazil following long-running corruption probes.

US Attorney General Merrick Garland said a $1.1 billion accord with the US would resolve both a decade-long scheme to bribe foreign officials across seven countries and separate criminal and civil charges alleging one of the company's trading arms manipulated fuel oil prices at two of the largest US shipping ports.

"This represents the Justice Department's largest criminal enforcement action to date for a commodity price manipulation conspiracy in oil markets," Garland said at a press conference.

"We will continue to investigate, disrupt and hold accountable corporations that break our laws."

Some of the details on the major corruption revealed by the US Justice Department were:

  • Paying $52 million in bribes to officials in Nigeria from 2007 to 2018, the Swiss commodities firm earned profits of $124 million.
  • Cameroon: $21 million in bribes generated $67 million in profits.
  • Ivory Coast: $4 million investment led to $30 million in profits.

The company also paid off officials in Brazil and Venezuela in order to win favourable contracts with Petrobras and get special treatment from PDVSA, prosecutors said.

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Glencore will pay $29.6 million directly to state-run oil company Petrobras in compensation for defrauding the company and roughly $10 million to authorities in civil penalties.

The UK Serious Fraud Office (SFO), which opened a corruption investigation in 2019 code-named Operation Azoth, said on Tuesday it had exposed "profit-driven bribery and corruption" across oil operations in Cameroon, Equatorial Guinea, Ivory Coast, Nigeria, and South Sudan.

Glencore Energy (UK) Ltd, which said Tuesday it would plead guilty to all the charges at a hearing at London's Westminster Magistrates' Court, will be sentenced on June 21.

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Questions hang over Glencore and Eskom dealings locally

Meanwhile, details of the sale of the Optimum Coal Mine, owned by Glencore in South Africa, have been highlighted in the fourth instalment of the Zondo Commission’s report.

In 2015, the infamous Guptas, through their company Oakbay Investments, began negotiating with Glencore to buy Optimum.

Optimum had been supplying coal to South Africa’s power utility, Eskom, since the 1970s.

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Glencore initially refused Oakbay’s offers.

Negotiations then reopened in September later that year, which led to Ajay Gupta offering R1-billion to buy the mine in November 2015.

The offer was then declined again by Glencore, stating that the amount was not enough to cover the mine’s R2.5-billion debt.

Glencore sells Optimum mine to the Guptas

The Zondo report revealed that the then minister of mineral resources, Mosebenzi Zwane, travelled to Switzerland to urge Glencore’s chief executive Ivan Glasenberg to sell the Optimum coal mine to the Guptas.

Glasenberg agreed to sell the mine to the Guptas for R2.15-billion.

In December 2015, a sales agreement concluded for the Oakbay Investments’ subsidiary, Tegeta, to purchase Optimum.

How Glencore’s sale of Optimum was meant to prevent load shedding

At the time of Tegeta purchasing the mine, the Gupta subsidiary was in a dire financial state. This was when Eskom stepped in with a R1.68-billion guarantee to Tegeta, which was to be repaid with a year’s worth of coal to the power utility.

An entrance to the Optimum Kwagga coal mine owned by Glencore is seen near Hendrina in Mpumalanga province, in this September 8, 2015 file photo. REUTERS/Siphiwe Sibeko/Files

This was how the Gupta’s acquisition of the mine was able to be processed. The submission for the payment from Eskom was signed by Matshela Koko and Anoj Singh under the guise of securing coal for Eskom and prevent load shedding.

In his report, Zondo stated that the prepayment submission (R1.68-billion) by Singh and Koko had nothing to do with addressing the risk of coal supply to Eskom but everything to do with providing financial assistance to Tegeta.

It is safe to say that seven years following the sale, Eskom finds itself in a dire situation with citizens having been left to still contend with load shedding all these years later, despite the sale of Glencore’s mine to the Guptas.

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