Glencore, the world’s biggest commodities trader, handed out a large portion of its share in a Kazakh private school to a trusted lieutenant of the country’s ruling dictator, in an under the radar deal that uncovers the companies close ties with the repressive regime.
Kazzinc, a Kazakh based subsidiary of Glencore invested $23 million in Haileybury Astana in 2012, a branch of the Hertfordshire public school that counts for Clement Attlee and Sir Stirling Moss among its alumni. Although Haileybury holds no ownership to the Astana school, it is thought to receive £500,000 for the use of its name and service offered at the school.
The Recent Investigation
According to an investigation by Source Material, a non-for-profit instigative journalism organization, in collaborative with The Times, discovered that Glencore wrote off its investment and passed it free of charge to the charitable foundation of Bulat Utemuratov, a close associate of President Nazarbayev, 78. Utemuratov is Kazakhstan’s richest man and it is though that he will take over Nazarbayev presidency in 2020.
Glencore have gained a reputation for paying off powerful individuals to gain access to frontier markets with untapped reserves. In the past, the company has been accused of feeding cash to Dan Gertler, a diamond tycoon and close confidant of Joseph Kabila, who was Congo’s president for 18 years. Kazakhstan, with Nazarbayev at the helm have also gained notoriety for accepting bribery. It is thought that Nazarbayev could hold as much as $9 billion hidden in Swiss bank accounts.
Utemuratov’s Verny Capital group has been a long been Glencore business partner in Kazakhstan, and benefited heavily from the group’s 2011 London IPO.
Glencore & Haileybury
With Glencore’s unusual transactions, it raises questions about how the company does business in jurisdictions that are known for posing corruption risks. Its recent unreported foray into the elite British education is now being exposed through corporate records in Kazakhstan.
Kazzinc, a subsidiary to Glencore in Kazakhstan held the majority of shares of the Haileybury private school based in Astana, the new Capital. They held these shares between 2012 and 2016 with president Nazarbayev’s charitable foundation the second largest shareholder with a 26 per cent stake.
When the Astana school opened in 2011, it became Haileybury’s second franchise in Kazakhstan alongside to the one in Almaty. Kazzinc funded the venture in 2011 by lending out $17.3 million. It was only until the next year that Kazzinc was repaid, but also in that year Kazzinc’s accounts show that it purchased a 56 per cent stake in the Haileybury Astana LLP for $23 million. The accounts note that “the management of the group do not expect to recoup the costs of the acquisitions from the profits derived from the investments. Therefore, the company provided for the loss from the investments… in the company’s reserves.”
Rather suspiciously in 2016, Mr Utemuratov’s charitable foundation received all of Kazzinc’s share of Haileybury free of charge.
Glencore’s response to the accusations
When Glencore was asked about the transaction, they said: “Glencore, through Kazzinc, has been an investor in Kazakhstan since 1997. Kazzinc has supported the country’s development over the past 20 years, including through occasional strategic investment in Haileybury school, which is a not-for-profit organization, was made in 2009.”
“The investments were disclosed in Kazzinc’s financial statements. The investments were not material for Glencore and therefore were not separately disclosed by Glencore in its financial statements.”
During the 2011 flotation, Glencore’s relationship with dictator Nazarbayev caused anxiety. The opposing parties wrote to the London Stock Exchange stating that “Bulat Utemuratov, the former head of administration for the president of Kazakhstan, is a co-owner of Kazzinc. Utemuratov is widely believed to be holding these assets for the benefit of Nazarbayev.”
In 2009 an American diplomatic stated that Mr. Utemuratov had “long been rumored to be Nazarbayev’s ‘personal financial manager’”.
In response, a spokeswoman for Mr. Utemuratov states that he “is neither a middleman, nor proxy for President Nazarbayev” and he did not profit from his relationship with the president.
All we know for sure is that if these shady deals continue to be made, Glencore will end up with a lot more questions that need answering.