Tuesday, July 14, 2009

Good Luck with that

From Africa Intelligence:
The vulture fund FG Hemisphere (AMI N°195) is now targeting mining companies. On July 7, the Congolese tax authority, the Direction Générale des Impôts (DGI), announced that the Groupement pour le Traitement du Terril de Lubumbashi (GTL) was not in a position to “honour a tax liability on profits for fiscal 2009 on 2008 revenues”, representing 6.56 billion Congolese francs or about USD 10 million. GTL’s shareholders include OM Group with 55%, Forrest Group with 25% and Gecamines with 20%. The DGI referred to a “garnishment order” taken out with respect to GTL’s accounts as being the cause of the difficulty, without saying who had taken it out.

However, GTL’s financial health is not in question. Contacted by Africa Mining Intelligence, Forrest Group said that the move was in fact an unsuccessful attempt by the American vulture fund FG Hemisphere Associate LLC to gain access to cash that should in normal circumstances be paid to Gecamines and the Congolese government. According to GFI spokesman Henry de Harenne : «There was blocking (of funds) around the month of March but this is not in any way linked to any inability on GTL’s part to pay its taxes.» In addition, GTL was finally able to pay off its tax liability to the Congolese government. GTL generates significant financial income for Gecamines. Indeed, GTL and its subsidiary STL (Société pour le Traitement du Terril de Lubumbashi) represent the state-owned company’s main source of revenue, around USD 100 million/year, which is roughly half its annual income.

FG Hemisphere took on the GTL consortium after its attempt before a Hong Kong court in December 2008 to gain access to entry fees paid by China Railway Group to Kinshasa as part of a deal exchanging infrastructure for commodities. The vulture fund is trying all possible means to lay its hands on Congolese cash since it bought a USD 104 million loan taken out in the 1980s by the Société Nationale d’Electricité Congolaise (SNEL), the Congo’s national electricity company, from the Bosnian company Energoinvest.
I suspect the vultures may have met their match in the Congolese state. Ed Rackley tells a story from Herodotus that may be relevant to this situation. Representatives from an occupying power (Athens?) visit a newly conquered but recalcitrant state that refuses to pay tribute. The messengers say, "We are here with the most powerful of gods, 'power' and 'force', so you must obey and pay us tribute." Receiving officials in the occupied land respond, "Oh that's nice, lucky you. We here are under two other gods, 'poverty' and 'incapacity'."

The moral here being that rule of law and force are impotent before the inertia of destitution, dysfunction and incapacity.

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