Company linked to Israeli billionaire to partner with construction giant on DRC infrastructure
Gibraltar-based conglomerate Fleurette Group and construction giant Andrade Gutierrez announced the formation of a joint venture to develop infrastructure in the Democratic Republic of Congo (DRC) on 23 April.
The DRC possesses a wealth of natural resources, but years of conflict and underdevelopment have yielded a country two-thirds the size of the European Union with only 2,250km of paved roads.
However, Fleurette Group deals in the DRC and the close relationship its head, Israeli billionaire Dan Gertler, maintains with Joseph, the president, have also come under scrutiny from transparency and governance watchdogs, including Global Witness and the Africa Progress Panel, chaired by Kofi Annan.
Fleurette Group has a history of investing in DRC that stretches back two decades, largely in the mining sector. Infrastructure is a new area for Mr Gertler, but one that is closely linked to the needs of the mining industry.
“These types of investments require commitment, knowledge and expertise and I am confident that, in working with a proven developer of infrastructure assets in emerging markets such as Andrade Gutierrez, we have found the right partner,” Mr Gertler said of the JV in a statement.
Although specific projects have yet to be announced, they will be focused on the mineral-rich southern province of Katanga, where Mr Gertler’s companies already hold a number of mining interests. Improving power grids and rail transit will be among the priorities.
“We have identified a power gap; the country is crying out loud for improved power grids,” Pedro Neves, Andrade Gutierrez’s managing director for structured business for Africa, Europe and Asia, tells This Is Africa. “We are also looking at trains and rail travel. Power and trains are a big part of the solution to DRC’s infrastructure gap, and while they are very good for mining they are also very good for agricultural industries.”
Five days after the joint venture was announced, it emerged that Fleurette had extended a $196m loan to Congolese state miner Gécamines in January 2013, so it could take over a copper mining venture. The short-term loan, made through Fleurette affiliate African Dawn Finance Ltd., has interest fixed at 6 percent. Fleurette Group spokespeople dispute any notion of secrecy with regards to the loan.
“A healthy, competitive Gécamines attracts additional investment and interest in the DRC resources sector. To that end, it requires investment and support and Fleurette is pleased to have been able to contribute to Gécamines being able to fulfil its financing needs,” a Fleurette spokesperson stated in response to This Is Africa’s questions about the loan.
Mr Gertler’s last few deals with Gécamines through companies connected with Fleurette Group were among those singled out for their unusually favorable terms by the Africa Progress Panel in its 2013 Africa Progress Report.
In one 2011 transaction, a company jointly owned by Fleurette and Glencore International PLC, Bermuda-registered Kansuki Holdings, exercised its right of first refusal in order to purchase Gécamines’ shares in the Kansuki copper mining project. The purchase was made through a third Fleurette-owned offshore company, British Virgin Island-registered Biko Invest Corp, at prices that were 682 percent below market value, according to the APP.
In a similar deal in the same year, Fleurette Group’s wholly owned subsidiary Rowny Assets Limited, also registered in the BVIs, purchased Gécamines 20 percent stake in Mutanda copper and cobalt mine for $120m. This allowed Rowny Assets to profit 428 percent on the sale, according to the average of five independent valuations.
Mr Gertler claims his company paid fair value for the shares, according to Bloomberg.
“It is disappointing that the Africa Progress Panel Report 2013 has published basic errors, selective information and repeated the same old, disproved allegations against the Fleurette Group and Mr Dan Gertler,” company representatives told the Financial Times last year, when the report was first published. “The Fleurette Group is the biggest taxpayer in the DRC and has generated substantial inward investment, created tens of thousands of jobs and is the country’s largest long-term investor.”
In July 2013, the Kansuki and Mutanda concessions were merged by Fleurette and Glencore. Both Mutanda and Kansuki mines are located in Katanga province, where the JV projects with Andrade Gutierrez will take place.
According to the APP report, between 2010 and 2012 the DRC lost at least $1.36bn due to underpricing mining assets in deals with offshore companies.
Mr Gertler’s long-standing relationship with the DRC was part of the attraction of the partnership for Andrade Gutierrez
“We partnered with Fleurette precisely for this complementarity. They have been in the DRC for the past 17 years, mostly in the mining sector. They know the country,” Mr Neves explains.
However, it is precisely the closeness of Mr Gertler’s ties with Congo’s elite that have led some to question the transparency of his business dealings in the country.
“Gertler is very close with the Congolese president, and he is getting an awful lot of favourable deals in Congo. He doesn’t have experience in building massive infrastructure projects, its not clear why he should be the joint venture partner of Andrade Gutierrez,” claims Daniel Balint-Kunti of transparency watchdog Global Witness. “It seems that people partner with Gertler because of his links to power structures in Congo, and one could query whether that’s legitimate.”
Most of Mr Gertler’s companies are registered in offshore tax havens, and few details on the beneficial ownership structures of his business interests are available. He has not been forthcoming when his dealings in Congo have been queried in the past.
“We’re a private company. Why should we announce?” Mr Gertler argued in a 2012 interview with Bloomberg. “I should get a Nobel Prize. They need people like us, who come and put billions in the ground. Without this, the resources are worth nothing.”
Mr Gertler is estimated to have amassed a personal fortune of $2.6bn, according to Forbes. According to UNICEF statistics, 54.1 percent of Congo’s 65.71 million population live below the poverty line of $1.25 per day.
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