What a curious statement from the European Investment Bank (a placid institution usually) on Wednesday.
It starts off reading like a defence of a $50m loan to Mopani Copper Mines (a Glencore subsidiary based in Zambia) which dates back to 2005, despite strong criticism of the project’s environmental effects.
But there’s a discordant note on concerns about tax evasion:
The Zambian Revenue Authority (ZRA) commissioned a pilot audit report on Mopani prepared by an international tax audit team, consisting of experts from Grant Thornton and Econ Pöyry, and focused on tax matters, A version characterized by the ZRA as “confidential, preliminary and incomplete draft” has been recently leaked.
In accordance with EIB’s Anti-Fraud Policy, the Bank has informed OLAF and has also launched its own investigation. This investigation is conducted by the EIB’s independent Inspectorate General (IG) which can also rely on external expertise from audit companies with a fiscal and forensic background as well as expertise in private investment in ACP countries.
In the event that this investigation were to conclusively demonstrate tax evasion according to the Zambian authorities this would clearly expose MCM to local financial penalties and lead to events that may trigger early repayment of the EIB loan.
For the EIB, the next step is to complete its independent investigation. As is normal for any institution, the EIB is continuously seeking to improve its procedures, including its due diligence mechanisms. Whether there may be a specific need for EIB to improve certain aspects of its due diligence process, will also be reviewed in the light of the outcome of the aforementioned investigation…
Glencore has said it welcomes the probe.
Although clearly the EIB decided not to wait for the investigation before dropping this extraordinary bombshell:
However, due to serious concerns about Glencore’s governance which have been brought to light recently and which go far beyond the Mopani investment, the President of the EIB has instructed the services to decline any further financing request from this company or one of its subsidiaries.
‘Go far beyond the Mopani investment…’
Like we said. Extraordinary for a major global development bank.
Related links:
Zambia defends MCM under declaration of profits and copper production – SteelGuru
Glencore’s Achilles heel - FT Alphaville