Private equity and corruption in Africa

RAID has exposed the role of private equity in financing questionable deals in Africa, calling for an investigation by the authorities in the UK and US.

In 2009, RAID was already asking questions about the Central African Mining & Exploration Company plc (CAMEC),  which was then acquired by the Eurasian Natural Resources Corporation plc (ENRC) – a company listed at that time on the main market of the London Stock Exchange. The acquisition raised issues of compliance with sanctions and disclosure rules.  RAID asked the UK Treasury’s Asset Freezing Unit (AFU) to investigate the purchase and sale of sizeable shareholdings held by entities whose assets were frozen under US and EU sanctions against Zimbabwe. Under the Freedom of Information Act, RAID is currently challenging the AFU’s refusal to release information on its licensing of the deal.

In mid-2013, RAID provided information to the UK Treasury and to the US Office of Foreign Assets Control about CAMEC’s 2008 acquisition of platinum assets in Zimbabwe. Both EU and US sanctions against Zimbabwe were in force at the time. As part of the deal, CAMEC made a $100 million loan to the Zimbabwean government, finance that originated with a US hedge fund, Och-Ziff Capital Management Group LLC. The money was used by Zimbabwe’s President Robert Mugabe to fund a campaign of violence against opposition supporters, enabling him to retain the presidency in the 2008 election.

In April 2014, RAID highlighted unanswered questions not only about Och-Ziffs role in CAMEC’s Zimbabwe transaction, but also about transactions in Guinea (a backdoor loan paving the way to a stake in state mining assets) and the Democratic Republic of the Congo (investment in Dan Gertler’s highly controversial Camrose Resources, later sold to ENRC). Both these transactions involved the investment vehicle Africa Management Limited (AML) – jointly set up by Och-Ziff in 2008 – or Och-Ziff’s partners in AML, Mvelaphanda Holdings (Proprietary) Limited and Palladino Holdings Limited.

In April 2013, the Serious Fraud Office announced an investigation into ENRC. On the eve of publication of RAID’s report, Och-Ziff belatedly disclosed that it was being investigated under the US Foreign Corrupt Practices Act (FPCA). In September 2016, the U.S Deparatment of Justice charged Och-Ziff's Capital Management Group LLC (Och-Ziff) with conspiracy to violate the anti-bribery provisions of the FPCA.   Och-Ziff is publicly listed, and the SEC, which regulates the New York stock exchange, also announced that Och-Ziff had agreed to settle civil charges of violating the FCPA. Overall, Och-Ziff agreed to pay combined civil and criminal penalties of $412 million, the largest ever settlement concerning a Wall Street firm.

RAID has written to several pension funds in the UK and the USA that use Och-Ziff to manage their investments. Funds that have led the way in promoting ethical investment must scrutinise the records not only of the companies in which they hold shares, but also of their fund managers.

 

Read about Och-Ziff and Zimbabwe