Ruschlikon is a sleepy village in Switzerland, where even with a very low tax rate, the residents are so wealthy that it receives more tax revenue than it knows what to do with. This is largely thanks to one resident – Ivan Glasenberg, CEO of Glencore, whose copper mines in Zambia are not generating quite as large a bounty of domestic tax revenue. Zambia has the 3rd largest copper reserves in the world, but 60% of the population live on less than $1 a day and 80% are unemployed. Its genial Vice President Guy Scott wants to challenge the tax avoidance of multinationals like Glencore, whose trading practices have long aroused suspicion. But the country is still bound to IMF loan conditions that forced it to hurriedly privatise its mines and enabled its President to negotiate mystifying deals that mainly benefited him. Zambia’s copper mines frequently lead to air and water pollution levels far beyond legal standards. An investigative story of global trade and political corruption where money and natural resources only flow one way, and in the meantime, poverty becomes harder to escape.
Tax avoidance by Glencore dwarfs aid received in Zambia, or indeed any investment offered to try and stimulate local business. Zambia’s citizens are dependent on the mines for jobs, but the economy as a whole sees little benefit. The country’s tax office receives $50m/year revenue from its mines, but an excess of that amount is required to keep electricity flowing to them, so the country’s abundant mines actually create a net loss. By contrast, Glencore executives recently received an estimated $100m from the company’s public listing on the London Stock Exchange. Guy Scott preaches that reforming this “takes time” but his strategy is primarily reliant on attracting alternative investment from Chinese businessmen – will this really be a lot better for Zambians struggling to feed themselves?
Glencore’s former CEO, Mark Rich, was the subject of a notorious court case in the 1980s, involving massive tax evasion and treasonable deals with the Iranian Government. The company pleads perfect corporate practices now, but has continued to be associated with bribery of bureaucrats, including those in the European Parliament, who are simultaneously attempting to review the legality of the contracts issued during Zambia’s mine privatisations. The only spokesman available for comment in the local Zambian representative for Glencore, clearly set up as the fall guy, trained to deny any negative implications of mining in Zambia.
The Zambian government faces an impossible dilemma – it needs to provide health, education and other key services to its poor population, so it’s not in a position to talk tough with companies like Glencore. Having some guaranteed investment feels better than the total inability to feed its people, which was the case in 2000 when, as the former finance minister says, “I felt less like a minister and more like a beggar”. Thick-skinned opportunists, companies like Glencore know how to swoop in on countries falling into total poverty, relying on poor Governments to take any improvement over complete collapse, and knowing that they’ll almost certainly be unable to combat attack on all fronts – from sulphuric acid in the air, from global tax avoidance, from pollutants drifting into the water supply. Multinationals know they can escape any global policing, and can rely on poverty making a country choose employment over any downside of murderous emissions. Meanwhile, production in the mines doubles, and the tax that would have doubled Zambia’s GDP in one year leaves the country undetected and unchallenged.