Any other business

Up the Zambezi: why Rio Tinto’s colossal coal cock-up is going to court

28 October 2017

9:00 AM

28 October 2017

9:00 AM

Another week, another blue-chip in the dock. The US Securities and Exchange Commission has brought fraud charges against London-based mining giant Rio Tinto and two former executives in relation to an ill-starred coal venture in Mozambique. Whatever its legalities, this was a colossal corporate cock-up.

In 2010, Rio paid $3.7 billion for Riversdale, an Australian company that controlled large coal deposits in the Tete region of Mozambique. The plan was to send coal by barge 400 miles down the Zambezi river to the coast, for shipping to Chinese power stations. But the coal reserves proved disappointing, while the Mozambique government refused to permit the barge operation and a rail link proved too expensive. Rio’s chief executive Tom Albanese (already tainted by an earlier takeover disaster, of Alcan) lost his job. Riversdale was sold by his successor for a token $50 million to an Indian consortium which is reported to be thinking of converting the coal to gas, to make it easier to transport.

Now Albanese and former Rio finance director Guy Elliott have been accused by the SEC of burying from investors and others the bad news ‘that a multi-billion-dollar transaction was a failure’. Elliott, who has also sat on the boards of Cadbury, Shell and the brewer SAB Miller, is a hitherto respected FTSE grandee — as were John Varley of Barclays (awaiting trial) and Sir John Rose (facing SFO inquiries after his company, Rolls-Royce, plea-bargained to avoid bribery charges). The spotlight of justice is notoriously capricious in the corporate field, but it’s disconcerting, to say the least, to see these establishment pillars lining up one after another to have their collars felt.

RBS still unrepaired


One company on which — in most folks’ opinion — justice has been notably lenient so far is RBS, whose irresponsibility caused vast economic damage and distress, much of it still unrepaired. No wonder New Zealand-born chief executive Ross McEwan, four years into the Herculean task of steering the bank back to respectability and profit, looked tired and irritable in television interviews this week. He was trying in vain to emphasise the positive aspect of a Financial Conduct Authority report into RBS’s handling of business customers after the 2008 crisis, when it was accused of excessive fee-charging and of forcing some companies into bankruptcy in order to realise the value of their properties for the bank’s benefit. The positive point was that ‘the most serious allegations’ were not upheld by the FCA — though customer action groups called that ‘a whitewash’. The negative was that the regulator is still scrutinising RBS’s treatment of small businesses, for which the bank has set aside £400 million in compensation and which Police Scotland is also investigating. Let’s hope justice may yet have its day.

Meanwhile McEwan is rumoured to be lined up for a new job running the Commonwealth Bank of Australia, but he might enjoy a weekend break in my Yorkshire town of Helmsley before he goes. Here he can contemplate a memorial to the sins of RBS: its NatWest branch, closed in 2015, empty, shuttered and decaying as a blight on our otherwise thriving market square — and one more piece of unfinished repair work he’ll probably leave behind.

To the revolution, comrades!

I’ve just given a talk on the adventures of Captain Leo Steveni, a British agent in Siberia during Russia’s post-revolutionary civil war. In the audience were family members who had known Leo in later life — and a man who once met Alexander Kerensky, leader of the provisional government in St Petersburg that was ousted by Lenin’s Bolsheviks on 7 November 1917. All this was a reminder that the revolution whose centenary no one seems to be celebrating was only one long lifetime ago, and still offers lessons today. If the triumph of the proletariat led to Stalinist oppression, then the post-Soviet triumph of capitalism led only to oligarchs and Putin’s autocracy; neither brought prosperity for ordinary Russians.

Recommended reading on this theme is Why Nations Fail by Acemoglu and Robinson (2012), which divides world history into ‘extractive’ regimes that suppress rights and enrich elites, and ‘inclusive’ ones, characterised by rule of law, open markets and free elections. Memories being short, each generation needs reminding why inclusiveness matters — and those at the top need reminding to resist the extractive urge. The FT this week reported comments by a rollcall of boardroom chiefs to the effect that capitalism has ‘taken wrong turnings’ (Carolyn Fairbairn of the CBI), ‘lost its way’ (Robert Swannell, ex chairman of Marks & Spencer) and ‘been hijacked by the management class’ (Sir Nigel Rudd, ex-chairman of just about everything). ‘Greed and tax dodges leave capitalism ripe for reform,’ was the headline, echoing a theme of this column — and they had better start doing something about it, because one place they can be certain glasses will be raised to revolution on 7 November is the office of Jeremy Corbyn.

The way to bet

There’s no truth in the rumour that whenever my delightful colleague Freddy Gray reveals how he’s betting in his occasional ‘Speculator’ column, I bet the other way — but that’s only because I’m not really a gambling man at all. Since he wrote last month that ‘there’s a lot of money to be made in this digital Wild West’ of bitcoin and other cryptocurrencies, there have been a series of reports that sober pundits might think indicate a sector heading for implosion: that high-volume Wall Street traders who thrive on volatility are wading into it big-time, for example, and that British banks are shunning it for fear that it is riddled with criminals and fraudsters. If you can find good odds on a total wipeout of these monetary phantasms within a couple of years, that’s a bet I might be prepared to take.

 

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