With malice aforethought
30 August 2014 05:59 (South Africa)
Business

Ivan Glasenberg, obscure billionaire no more

  • Mandy de Waal
  • Business
mandy on glasenberg.jpg

In Zambia, unemployment hovers at about 80%, and 60% of the population lives on less than a dollar a day. Seven thousand kilometres north, you’ll find a wealthy Swiss hamlet called Rüschlikon, where a powerful South African-born commodity trader lives, close to the mega-multinational he runs. This is the story of Ivan Glasenberg, whose time of relative obscurity may have just ended. By MANDY DE WAAL.

Meet Ivan Glasenberg, the South African lad who made good. Real good. The CEO and biggest shareholder of Glencore, Glasenberg became an instant billionaire when the commodities company listed on the Hong Kong Stock Exchange and the London Stock Exchange during the first half of 2011. The flotation was one of the world’s biggest and earned Glasenberg $8.8 billion, helping the man at its helm become one of the top ten richest men in Switzerland.

It is likely that you’ve never heard of Glasenberg, unless you’re au fait with commodity markets, and we’ll forgive you for that because, as FT puts it, he’s “one of the great enigmas of the corporate world”.

Glasenberg is reportedly so fanatical about his privacy that, when Glencore listed, a top UK law firm Schillings was retained to try to prevent journalists from digging into the billionaire’s private life. Schillings – famous for its gagging orders – directed letters to media companies in England to warn editors to only focus on the business aspects of the listing.

Guardian reports that the letter said the leadership of Glencore consisted of “extremely private individuals” who wouldn’t appreciate scrutiny of their personal lives. The missive went on to say that exposing details of the private lives of these executives – like details about where they lived – could prove a “security risk”.

And yet, it has become harder and harder for Glencore and its CEO to maintain an operation by stealth, however. It is said that Glasenberg agonised over the listing because he knew that he could keep the lid on a private business, but was painfully aware that the public listing would hurtle him from relative obscurity right into open glare of global media.

Perhaps his reluctance was so pronounced because Glasenberg saw how the media had dogged his former business associate, Marc Rich (aka Marcell Reich) – the financier, hedge fund manager and commodities trader who founded the company that would eventually become Glencore.

The New Statesman calls Rich “Glencore’s worst-kept secret.” This is because at one time, the company that made Glasenberg a billionaire carried the name of a fugitive. “When Marc Rich & Co. AG was renamed Glencore after a management buyout in 1993, its founder and namesake was already on the FBI’s Ten Most Wanted List,” the New Statesman reads.

Rich rose to fame in the early seventies while working at a commodities firm. In 1973, just before the oil crisis caused by the Organization of Arab Petroleum Exporting Countries (OAPEC) ban on exports, he somehow knew or anticipated that an embargo was imminent. In a sector where futures trading was the norm, Rich circumvented the embargo with the help of some great contacts in the Middle east, and started buying and selling on the spot, inventing a new form of trading. As prices started spiralling upwards, Rich made a killing and subsequently started Marc Rich & Co.

The international commodities trader didn’t appear to give a damn about trading ethics or political convention, and traded crude with South Africa’s Apartheid government as well as Iran during the 1979 hostage crisis. He wasn’t averse to doing business with despots or dictators, either, and did deals with Cuba, Mossad, Chile's Augusto Pinochet and Romania's Nicolae Ceausescu.

While Rich was secretly sending barrels of oil to South Africa and helping out the Israeli intelligence, Glasenberg was still living in the Johannesburg suburb of Illovo. He went to school in Hyde Park and then studied at Wits. Guardian tells the story of Glasenberg the athlete who became a national athletics champion by his 20s. He dreamed of competing in the Olympics, but because of Apartheid was unable to do so. This is said to still rankle, and apparently he starts each morning at his home in Switzerland with a run.

After Glasenberg did his national service, he headed off to California to study for an MBA. A notoriously media-shy person, he did tell his university magazine how he became involved in the commodities business. “I observed a man sourcing candle wax from South America and selling it to Japan. I thought: ‘That's unbelievable. Talking on the phone in his office, that man made money moving candle wax from one country to another.’ It really interested me,” he said.

Guardian reports that when this interview appeared on his alma mater’s website, he made them take it down. The UK newspaper states that if you phone his former university to ask about Glasenberg, they’ll tell you it is not in their interests to speak about him.

The year 1983 saw the young graduate going to New York to get a job, and as luck would have it, he was employed by Rich’s company. Glasenberg and Rich’s paths collided about the same time that Rich was forced to flee the US when charges of tax evasion, racketeering and illegal trade were brought against him. While Rich was on the run, Guardian reports, Glasenberg ran the Johannesburg office of Marc Rich & Co. where, it is reported, the company made $2 billion selling oil to the Apartheid state.

“Glasenberg, who began work as a junior member of staff in the coal division, was aware of the oil trading but believed there was nothing wrong with it and had no idea whether or not any embargo was being broken. In the event, by the time the UN adopted an international oil embargo on South Africa at the end of 1987, Glasenberg had moved on, working for Rich first in Sydney and then Beijing, selling coal across the far east,” Guardian states.

It wasn’t long before Glasenberg became ‘one of the Rich boys’, the name given to the group of commodity traders that made up the company’s core. “They have profited from being extremely secretive. The sort of people they do business with do not want their deals in the spotlight,” Daniel Ammann told Guardian.

Ammann is an award-winning Swiss business journalist and the author of The King of Oil: The Secret Lives of Marc Rich, which exposes the underbelly of Rich and his operations. He got an unprecedented series of ‘tell-all’ interviews with Rich and in conversations that totalled more than 30 hours, Rich spilled the beans on the oil deals he did with the Ayatollah Khomeini’s regime, Fidel Castro’s Cuba, the Sandinista government in Nicaragua and Apartheid SA under the rule of BJ Vorster.

Rich also told Ammann that while he was a fugitive, he channelled intelligence to the US about the Soviet Union and Iran. It was rumoured that he was also on the payrolls of Mossad, the Russian Mafia and Stasi – the East German secret police. The Mossad connection became evident when Rich (and his network of Israeli lobbyists) brokered the deal of his life – the full presidential pardon, granted on the last day of the Bill Clinton’s presidency.

Rich’s pardon came about ten years after he lost his share in Glencore, the company that once bore his name. After 1993, when a zinc deal went south, Rich was forced by ‘the Rich boys’ to sell his interests and walk away. At the time Glencore was turning about $30 billion a year, operating in 125 territories and had 40 offices worldwide, with 1,200 employees. The management buyout saw Glasenberg become CEO and the biggest shareholder of the company. Glencore website, today does not mention Rich or the company’s early days.

Rich went on to found a smaller boutique trading company located in Switzerland and London, but sold that company in 2003. Today the one-time-fugitive is a philanthropist who oversees a financial trading business and a real estate group with interests in Switzerland, Spain, Portugal, the Czech Republic and Russia.

Despite the highly controversial pardon granted by Clinton, Rich has never set foot back in the US, and says this is because the Americans would invent some or other excuse to arrest him.

Unlike his former boss, Glasenberg doesn’t appear to be ready for any ‘tell all’ exposés yet. For close on two decades after Rich exited Glencore, the business was a closed shop, a private firm that wasn’t letting media anywhere near it.

But the listing changed all that, as did Glasenberg’s next big move - pursuing Xstrata in a $33-billion deal that would see the company run by Mick Davis become a wholly owned subsidiary of Glencore. The deal has seen its fair share of action and nasty turns, which is said to have destroyed the friendship that existed between Davis and Glasenberg. Davis was earmarked to run the merged company, while Glasenberg said he’d do what he loved best – vacate the CEO’s seat to get back to trading. But then followed a flip-flop that proposed Davis be ousted and Glasenberg was firmly positioned for the helm.

Although Xstrata’s website talks about the company’s ‘small beginnings a decade ago’, the diversified mining giant was founded as an infrastructure and electrics company called Südelektra in Switzerland in 1926. In 1990 the company’s business changed dramatically when the man who started Glencore – namely Rich – acquired the majority of the company’s shares, focused the business on mining and got rid of non-core interests.

Rich sold his interests in Südelektra soon after his bad zinc deal and the run-in with his Glencore boys, which saw him exit the company. At one stage Xstrata was an obscure investment vehicle, but a series of aggressive acquisitions changed all that. Today Xstrata, listed on the LSE and Swiss Stock Exchange, operates in over 20 countries and employs over 70,000 people.

Glencore currently owns a 33.65% share in Xstrata, which produces copper, zinc, nickel and vanadium. Xstrata today is a major coal producer and the biggest exporter of thermal coal. Interestingly enough, at the same time that Xstrata listed, it acquired all of Glencore’s coal assets in SA and Australia. “A string of deals saw Glencore become the world’s largest shipper of coal used by power stations,” writes Reuters. “A plan to spin off the coal unit was scrapped after the 9/11 terrorist attacks and Glencore instead sold the coal assets to Davis at Xstrata, in which Glencore at the time had a stake of about 40%.”

The Glencore listing propelled Glasenberg to the top of an elite rich list, but the Glencore-Xstrata monster merger will make him even richer. However, these events have brought with them the floodlights of a certain kind of fame. Gone are the days when Glasenberg was a trading great who was relatively unknown.

Lawyers’ letters be damned, Glasenberg’s future will include nosy reporters burrowing deep into his past, phone calls to his Alma mater, and investigative journalists trying to find out if he had anything to do with those Apartheid oil deals, digging up whatever dirt they can find.

Another very public problem is the debate about the wealth he’s been bringing into the small Swiss municipality of Rüschlikon, which nestles on the shores of Lake Zurich. Even though Switzerland is a tax haven, the Glencore listing saw Rüschlikon's tax repository swell by some 360m Swiss francs, thanks to Glasenberg. Now the village, one of the richest in the country, has a problem. It has more money than it knows what to do with, and is contemplating tax cuts - but locals object because they view the Glasenberg’s money as ‘tainted’.

To add fuel to this fire, the BBC recently aired a documentary on Glasenberg, Glencore and the tax quandary Rüschlikon is dealing with. The film opens with a black screen on which the question is written: “How much profit is fair?” This is followed with footage of the idyllic village with its pristine streets, houses and waterways.

“Rüschlikon, a tiny village on the outskirts of Zurich and one of the richest communities in Switzerland.”

“Real estate prices are booming, unemployment is virtually non-existent, and social problems are few and rare,” the voice continues. The documentary tells the story of how one of Rüschlikon’s five thousand or so inhabitants gave it a massive tax windfall. “However, Glencore's copper mines in Zambia don't generate similar tax windfalls for Zambians,” the makers of the film state. “The country has the third largest copper reserves in the world, but 60% of the population live on less than $1 a day and 80% are unemployed.”

Filmmaker Christoffer Guldbrandsen investigates what is described as “the dark heart of the tax system employed by multi-nationals” and asks very uncomfortable questions about contemporary poverty, those who get extraordinarily rich and those who remain desperately poor. He contrasts the wealthy municipality of Rüschlikon with Zambia, where – as noted – nearly two-thirds of the population lives on less than a dollar a day.
Guldbrandsen shows how Glencore, which controls over half of the world’s copper production, mines copper in Zambia, pays minimal wages in a country where unemployment is rife and then asks why Zambia gets such minor benefit while Glencore, Glasenberg and Rüschlikon grow richer every day.

The fact that Glencore taxes have made Rüschlikon so rich becomes darkly ironic when it is learned that the multinational was accused of evading taxes in Zambia. The charities received a leaked report which alleges Glencore increased costs in a mining operation in the copper-rich country between 2006 and 2008, as a means of tax avoidance. Glasenberg’s company denied the charges, but this didn’t stop the European Investment Bank freezing loans to the company because it had “serious concerns” about Glencore’s corporate governance. Back in Zambia, this case, which involved Glencore’s Mopani copper mines in that country, has become a rallying point for activists who believe the billions should be going to Zambian development.

In April last year, the BBC’s Panorama reported that Glencor stood accused of “paying the associates of paramilitary killers in Colombia” and “profiting from child labour in a mine in the Congo”. Glasenberg denied the allegations.

In 2011, The Namibian quoted secret documents tabled by the country’s cabinet that a fuel supply contract negotiated between the multinational and Namcor masked the giant’s ambition to take over Namibia’s oil industry. The article states that the deal plunged Namibia’s oil parastatal into bankruptcy in less than a year.

But why should you care about Glencore? Glencore is the company that sources, produces, processes, refines, transports, stores, finances and supplies the stuff that makes all the other stuff that comprises our world. Whether its zinc, copper, lead, nickel iron ore, coal, crude oil, oil products, wheat, corn, sugar, cotton, biofuels, edible oils, or rice Glencore buys, sells, finances, grows, mines, makes or processes it. 

The Xstrata merger would make Glencore the world’s fourth biggest mining company and the 11th largest stock on the UK's Footsie. The company’s consolidated turnover for 2011 was $186 billion and it had assets of $86.2 billion.

The problem for South Africa is to fully understand what this merger could mean to local coal prices. The cost of coal directly affects the electricity rate given how dependent Eskom is on coal. Strangely enough, Eskom had significant concerns about the Glencore/Xstrata merger, citing that a giant merged entity would “influence domestic coal prices and take advantage of the utility's supply shortfalls,” Mail & Guardian reported at the end of January 2013.

Curiously, Eskom withdrew its objections and the merger went through the competition authorities.

As Glasenberg stepped into Davos end January for the World Economic Forum (WEF), back home in Rüschlikon his postal box was shattered by an explosion that activists later claimed responsibility for. The anti-WEF agitators also claimed responsibility for a minor blast that shattered a window of the Zurich branch of Credit Suisse. The Glencore CEO is hurtling along a trajectory that appears to merge the apex of his success with proper spotlight, and detractors are starting to get angry. DM

Read more:

  • Ivan Glasenberg's Play For Xstrata Forces Him From His Cone of Secrecy in Forbes  
  • The rise of Glencore, the biggest company you've never heard of in Guardian
  • The rich list - a profile on Marc Rich from The Observer
  • NS business profile: Marc Rich, Glencore's fugitive founder in The New Statesman
  • Watch Why Poverty, the documentary about Glasenberg and Glencore on YouTube

Photo of Ivan Glasenberg by Reuters

  • Mandy de Waal
  • Business


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