The Looting Machine: Warlords, Tycoons, Smugglers and the Systematic Theft of Africa’s Wealth

It could not last. After Joseph Kabila succeeded his assassinated father in 2001, the monopoly was cancelled under pressure from foreign donors.

Gertler was not deterred. He re-established a commanding position in the Congolese diamond trade by arranging to buy stones from the state-owned diamond miner and began to turn his attention to the far bigger prize: the copper and cobalt of Katanga, where production and prices would rise dramatically as Asian demand for base metals soared. His most important asset – his bond with the new president – was intact. ‘Gertler showed that he could help the family and, in return, they said, “We can do business with you,”’ a diplomat who spent years watching Gertler’s exploits in Congo told me. ‘Kabila can only keep himself in power with the help of people like Gertler: it’s like an insurance mechanism – someone who can get you money and stuff when you need it.’

Over the years that followed, Gertler cultivated Katumba too, even inviting him to a party on a yacht in the Red Sea that included a performance by Uri Geller, the Israeli illusionist and self-proclaimed psychic.

In a reverie of gratitude to Gertler, in the final pages of his posthumously published memoir Katumba wrote that ‘in spite of all our seeming differences, I am proud to be the brother you never had.’

The trio of Kabila, Katumba and Gertler was unassailable. ‘It’s like an exclusive golf club,’ one of Kabila’s former ministers told me. ‘If you go and say, “The founders are cheating,” they’re going to say: “And who the hell are you?”’

Gertler’s role in this exclusive club was manifold. ‘It’s an amalgam – business, political assistance, finance,’ said Olivier Kamitatu, who became an opposition legislator after his five-year stint as Kabila’s planning minister.

Gertler’s particular contribution was to build a tangled corporate web through which companies linked to him have made sensational profits through sell-offs of some of Congo’s most valuable mining assets. ‘The line between the interests of the state and the personal interests of the president is not clear,’ Kamitatu told me. ‘That is the presence of Gertler.’

Since he first rode to Laurent Kabila’s rescue with $20 million to fund the war effort, Gertler has proved himself invaluable to Congo’s rulers. Katumba wrote in his memoir that Gertler’s ‘inexhaustible generosity, and the extreme efficiency of his assistance, have been decisive for us in the most crucial moments.’

Deals in which he was involved are said to have helped finance Joseph Kabila’s 2006 election campaign.

Kamitatu told me that Gertler had helped Kabila win that election and said he had also come up with cash for the military campaign against Laurent Nkunda’s rebels in the East. I asked Gertler’s representatives whether he had assisted Kabila at these moments and during the 2011 elections. They did not respond. Gertler has, however, denied that he has underpaid for Congolese mining assets. ‘The lies are screaming to the heavens,’ he told a reporter from Bloomberg in 2012.

Kamitatu, who is the son of one of Congo’s independence leaders and trained in business before a political career that began as a senior figure a rebel group during the war, sees the shadow state as the root of his nation’s failure to escape poverty. ‘You can’t develop the country through parallel institutions. Every infrastructure project you undertake is not done through a strategic vision but with a view to the personal financial results,’ he told me as we sat at his house in Kinshasa in 2013. Politics and private business have fused, Kamitatu believed. Winning a presidential election costs tens of millions of dollars, and the only people with that kind of money are the foreign mining houses. ‘I am extremely worried about a political system where the voters are starving and the politicians buy votes with money from natural resource companies,’ Kamitatu said. ‘Is that democracy?’

Dan Gertler’s Congolese mining deals have made him a billionaire. Many of the transactions in which he has played a part are fiendishly complicated, involving multiple interlinked sales conducted through offshore vehicles registered in tax havens where all but the most basic company information is secret. Nonetheless, a pattern emerges. A copper or cobalt mine owned by the Congolese state or rights to a virgin deposit are sold, sometimes in complete secrecy, to a company controlled by or linked to Gertler’s offshore network for a price far below what it is worth. Then all or part of that asset is sold at a profit to a big foreign mining company, among them some of the biggest groups on the London Stock Exchange.

Gertler did not invent complexity in mining deals. Webs of subsidiaries and offshore holding companies are common in the resource industries, either to dodge taxation or to shield the beneficiaries from scrutiny. But even by the industry’s bewildering standards, the structure of Gertler’s Congo deals is labyrinthine. The sale of SMKK was typical.

SMKK was founded in 1999 as a joint venture between Gécamines, Congo’s state-owned mining company, and a small mining company from Canada.

SMKK held rights to a tract of land in the heart of the copperbelt. It sits beside some of the planet’s most prodigious copper mines, making it a fair bet that the area the company’s permits cover contains plentiful ore. Indeed, Gécamines had mined the site in the 1980s before Mobutu’s looting drove the company into collapse.

After a string of complicated transactions beginning in November 2007, involving a former England cricketer, a white crony of Robert Mugabe, and assorted offshore vehicles, 50 per cent of SMKK ended up in the hands of Eurasian Natural Resources Corporation (ENRC), whose oligarch owners had raised a few eyebrows in the City of London in 2007 when they obtained a London Stock Exchange listing for a company they had built from privatized mines in Kazakhstan.

The Congolese state, through Gécamines, still owned the remaining 50 per cent of SMKK.

Toward the end of 2009 ENRC bought an option, only made public months later, to purchase the 50 per cent it did not already own. The strange thing was that ENRC did not buy that option from the owner of the stake, state-owned Gécamines, but from a hitherto unknown company called Emerald Star Enterprises Limited.

Emerald Star was incorporated in the British Virgin Islands, one of the most popular secrecy jurisdictions, shortly before it struck this agreement with ENRC, which suggests that it was set up for that specific purpose.

There is nothing in Emerald Star’s registration documents to show who owns it. But other documents related to the deal would later reveal the identity of its principal owner, Dan Gertler’s family trust.

At this stage all Gertler had was a deal to sell to ENRC a stake in SMKK that he did not yet own. That was soon rectified. On 1 February 2010, Gertler’s Emerald Star signed an agreement with Gécamines to buy the Congolese state’s 50 per cent share in SMKK for $15 million.

ENRC duly exercised its option to buy the stake by buying Emerald Star for another $50 million on top of the $25 million it had paid for the option. The interwoven deals were done and dusted by June 2010.

All the corporate chicanery masked a simple fact: the Congolese state had sold rights to a juicy copper prospect for $15 million to a private company, which immediately sold the same rights on for $75 million – a $60 million loss for the state and a $60 million profit for Gertler.

The Congolese people were not the only losers in the SMKK deal. ENRC’s would seem to have suffered too. When it bought the first 50 per cent of SMKK, ENRC had also acquired a right of first refusal should Gécamines decide to sell the other half.

That meant that ENRC could have bought the stake when it was offered to Dan Gertler’s company for $15 million. Instead, it paid $75 million a few months later, once the stake had first passed to Gertler’s offshore vehicle. ENRC has not disclosed the terms of its right of first refusal and did not reply to my questions about it. Perhaps there was some stipulation in it that meant buying the stake directly from Gécamines would have been more expensive for ENRC than buying it via Gertler. But based on the details that have emerged, it is hard to see how the oligarch founders of ENRC thought the SMKK manoeuvre was in the best interests of the rest of the investors who had bought shares in the company when it floated in London.

ENRC was a member of the FTSE 100, the prestigious list of the UK’s biggest listed companies, in which pension funds invest savers’ money. Investors who bought shares when ENRC listed some of its stock in December 2007 paid £5.40 a share, raising £1.4 billion for the company. Over the six years that followed, ENRC’s boardroom was a scene of unceasing turbulence, as the oligarch founders continued to exert their influence over a company that was supposedly subject to British governance rules for listed corporations.

ENRC snapped up assets in Africa, including SMKK, and struck other deals with Gertler in Congo. The Serious Fraud Office was in the middle of an investigation (still active at the time of writing) into ENRC’s activities in Africa and Kazakhstan – and its share price was sliding precipitously downward – when the oligarchs announced that they planned, with the help of the Kazakh government, to buy back the stock they had listed in London, thereby taking the company private again.

The offer was valued at £2.28 a share – less than half of what investors who bought in at the start had paid for them.

If some British pension funds and stock-market dabblers felt burned by their investments in ENRC, their losses were relatively easy to bear compared with those that Gertler’s sweetheart deals have inflicted on Congo. The best estimate, calculated by Kofi Annan’s Africa Progress Panel, puts the losses to the Congolese state from SMKK and four other such deals at $1.36 billion between 2010 and 2012.

Based on that estimate, Congo lost more money from these deals alone than it received in humanitarian aid over the same period.

So porous is Congo’s treasury that there is no guarantee that, had they ended up there, these revenues would have been spent on schools and hospitals and other worthwhile endeavours; indeed, government income from resource rent has a tendency to add to misrule, absolving rulers of the need to convince electorates to pay taxes. But no state can fulfil its basic duties if it is broke. Between 2007 and 2012 just 2.5 per cent of the $41 billion that the mining industry generated in Congo flowed into the country’s meagre budget.

Meanwhile, the shadow state flourishes.

Since at least 1885, when Congo became the personal possession of Belgium’s King Leopold II, outsiders have been complicit in the plunder of Congo’s natural wealth. King Leopold turned the country into a commercial enterprise, producing first ivory then rubber at the cost of millions of Congolese lives. In 1908 Leopold yielded personal ownership of Congo to the Belgian state, which, keen to retain influence over the mineral seams of Katanga following independence in 1960, encouraged the region’s secessionists, helping to bring down the liberation leader Patrice Lumumba in a CIA-sponsored coup that ushered in Mobutu, who became one of the century’s most rapacious kleptocrats.

Richard Nixon, Ronald Reagan and George H. W. Bush welcomed him warmly to Washington. Only once his usefulness expired after the end of the Cold War did the United States abandon Mobutu to flee from Laurent Kabila’s advancing rebels.

In the era of globalization the foreign protagonists in Congo’s looting machine are not monarchs or imperial states but rather tycoons and multinationals. As well as the likes of Dan Gertler, there are the companies that do business with him. ENRC is one. Another is Glencore, the giant commodity trading house based in the Swiss town of Zug, which listed its shares on the London Stock Exchange in 2011, immediately becoming one of the UK’s biggest listed companies. In 2010 and 2011 Glencore was involved in transactions in which, according to calculations by Kofi Annan’s Africa Progress Panel, the Congolese state sold mining assets to companies connected to Gertler for hundreds of millions of dollars less than they were worth.

(Both ENRC and Glencore insist there has been nothing improper in their Congolese dealings.

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From multibillion-dollar copper deals in Katanga to smuggling rackets shifting coltan out of the East, Congo’s looting machine extends from the locals who control access to the mining areas, via middlemen to traders, global markets and consumers. During the war UN investigators described companies trading minerals as ‘the engine of the conflict’.

A senior Congolese army officer remembered Viktor Bout, a notorious KGB agent turned arms dealer who was implicated in the illicit coltan trade – and whose exploits inspired the 2005 film Lord of War – dropping in to do business.

‘He did terrible things here,’ the officer told me.

The trade in minerals from eastern Congo spans the globe. In 2012, according to official records, North Kivu’s declared exports of raw minerals went to Dubai, China, Hong Kong, Switzerland, Panama and Singapore.

When Wall Street nearly imploded in 2008, triggering economic havoc far beyond Manhattan, the world was reminded of the extent of the damage that a complex cross-border network combining financial, economic and political power can do. The reforming legislation in the aftermath of the crisis dealt mostly with the financial quackery that had grown rife in US banks. But toward the end of the 848-page Dodd–Frank Act of 2010 was an item that had nothing to do with subprime mortgages or liquidity ratios. ‘It is the sense of Congress that the exploitation and trade of conflict minerals originating in the Democratic Republic of the Congo is helping to finance conflict characterized by extreme levels of violence in the eastern Democratic Republic of the Congo,’ read a clause in the Act that responded to years of pressure from campaigners. In the future companies using coltan and other resources from Congo in their products would have to submit to US regulators a report on their supply chain, signed off by an independent auditor, demonstrating that they were not funding armed groups. Some six thousand companies would be affected, among them Apple, Ford and Boeing.

Few could fault the sentiment. But the legislation was drafted in Congress, not Congo. It backfired. For one thing, the definition of ‘armed groups’ left out the Congolese army, which has been responsible for looting and wanton violence. Then there was the practical difficulty of tracking supply chains in a war zone. When the Dodd–Frank Act passed, many buyers of Congolese minerals simply took their business elsewhere, reinforcing a temporary ban on mineral exports imposed by Joseph Kabila in response to pressure to curtail the turmoil in the East.

A score of ‘conflict-free’ certification schemes have sprung up, some connected to Dodd–Frank, some to Congolese initiatives, and some to industry efforts to wipe the stigma from their products. In April 2013 an independent German auditor who had spent five days at Edouard Mwangachuchu’s coltan mines concluded that ‘with the evidence presented there was no indication that there are armed groups involved in mining’.

The bigger militias had pulled back from Mwangachuchu’s corner of North Kivu; M23, the most threatening armed group of the day, was camped close to the Ugandan border, away from the main mining areas.

I wanted to see for myself whether the link between eastern Congo’s minerals and its conflict was loosening. I asked to visit Mwangachuchu’s mines. He was out of town, and his company declined to grant me access. But I knew that a cooperative of informal miners was also mining the area, the subject of years of dispute with Mwangachuchu. On the three-hour drive from Goma we passed a settlement nestled in a bend in a valley that had served as the base for Laurent Nkunda’s CNDP rebels. Further along was a camp for refugees displaced by the M23 conflict. At the metal barriers marking the entrance to each village, young men flagged us down and suggested they might be due payment. Children, no older than five, had imitated their elders and crafted a makeshift roadblock of rocks and half a yellow water-canteen. They scampered from the road as approaching vehicles failed to slow.

Another refugee camp marked the start of Rubaya, the mining town at the foot of the hills that Mwangachuchu and the informal miners exploit. Toddlers with bloated bellies, the signature of malnutrition, tottered at the road’s verge. The town itself boasted more robust dwellings than the makeshift tents of the displaced. Mining money had even allowed the construction of a few sturdy wooden houses. Rows of cassava tubers lay whitening in the sun. The whole town sounded as though it were wailing, so numerous were its infants, a chorus pierced by the occasional squawk of a cockerel. A tattered Congolese flag flapped from a skinny tree trunk.

After an hour waiting to pay our respects to the town administrator – during which, a local activist whispered in my ear, the mining bosses were checking that there were not too many children at work for their visitor to see – my Congolese companions and I began our ascent to the summit. Red dust devils swirled around us as we climbed. A local man who worked to get children out of the mines pointed across a valley to the village where he had been one of the few survivors of a revenge massacre of Hutus by Rwandan invaders in 1997.

Porters with white sacks on their heads cascaded down the unpaved paths from the peak, throwing up clouds of red-brown dust. Each sack contained up to 25 kilograms of rock hewn from the mountain. The porters’ haste was a matter of economics: they were paid 1,000 Congolese francs per trip (about $1) and had to wash and sift their cargo in the stream at the bottom before it began the long trip toward the border or the buying houses of Goma.

Most of the incipient certification schemes for Congolese minerals work by tagging sacks of ore as they emerge from the mine to certify their provenance, imitating the Kimberley Process, which was designed to stem the flow of ‘blood diamonds’. The idea is to prevent belligerents getting around embargoes by passing off their minerals as originating from another mine or smuggling them across borders to allow Congolese coltan to be branded as Rwandan or Angolan diamonds as Zambian. But on this hillside there was not a tag in sight. One local, a peace campaigner who had come along for the climb and who kept his distance from the mining bosses leading the ascent, told me that some of the coltan extracted here was crossing the nearby border into Uganda clandestinely. That took it right through the territory of M23 rebels.