This briefing is concerned with the mining industry in the DRC, which spans copper-cobalt, diamonds, gold, uranium and tin.1 It pays particular attention to some recent headlines and controversies in the copper industry, especially in the light of a report from British NGO Global Witness published in October 2007. A commonly-heard perspective on the DRC suggests that, following ostensibly democratic elections in early 2007, a resurgent formal extractive sector represents the country's best chance of emerging from a seemingly continuous cycle of poverty and conflict. Yet as this briefing will show, any material benefits to the Congolese population will be contingent upon two key factors: a successful resolution to the government's commission to review its mining contracts, and the potential impact of increasing Chinese investment in the country.
The Copperbelt – which runs through Zambia and Katanga province in the DRC – is said to contain ‘34% of the world's cobalt and 10% of the world's copper’. Although Zambia is better known as a copper exporter, huge deposits lie in the DRC, and during the 1980s the country's output amounted to as much as ‘7–8% of global production’ (Global Witness, 2006:13). During the 1990s however, the industry was run to ground as state-owned company Gecamines collapsed, along with the economic and social infrastructures constructed around it. And as the country descended into war following the toppling of President Mobutu in 1997, the destiny of several of its mines changed hands according to the complex and appalling machinations of a conflict involving multiple protagonists and interests.
In 2002, negotiations between President Joseph Kabila and rebel forces in the east of the country precipitated a fragile peace of sorts, and brought forth a period of transitional government in the country. Many of the problems the Congolese government now seeks to address stem from this period, wherein several controversial mining contracts were arranged amidst the embers of the conflict and a ‘restructuring’ of Gecamines.
This period of restructuring was overseen by the World Bank, and was centred on ‘rewriting the country's mineral and forestry codes to facilitate private sector participation'2 – the result, according to Global Witness, was that ‘numerous lucrative mining agreements were signed in opaque deals between unaccountable and unelected political leaders, mining companies and other economic operators’ (Global Witness, 2007:3). One such arrangement – which will be explored below – has captured the imagination of the international press, lending somewhat of a ‘soap opera’ element to the contract review begun in April 2007.
Newly elected officials in the Ministry of Mines well understand the importance of their review, both in terms of securing a ‘better deal’ for the treasury on royalties and ownership, and also in terms of impressing on the international community a perception of positive change in the country. This is especially important now that Chinese interest has begun to impact in tangible ways – with mining concessions acting as potential ‘bait’ for luring large-scale investment into industrial infrastructure.
Global Witness & the TGI
The October 2007 report from Global Witness identified four serious weaknesses in the contract review, the Tribunal de Grand Instance (TGI) being carried out in Lubumbashi. In brief, these were:
- 1.
A lack of transparency and clarity;
- 2.
An unrealistic timeframe for completion of the review;
- 3.
Inadequate safeguards to protect its independence; and
- 4.
Limited involvement of civil society.
Potential shortcomings of the TGI are, however, only half of the story, as ‘business as usual’ owes a great deal to the manoeuvrings of private operators in the Congo. In Katanga, this is epitomised by the Central African Mining and Exploration Company (CAMEC) – a British company that has been involved in a high-profile dispute over the validity of three exploration licenses. The tale of CAMEC's assets in the region is a good illustration of the types of issues the Ministry of Mines must deal with if their review is to make any meaningful difference, and is a testament to the complex nature of liberalised mining in Africa.
Spinning Controversy
CAMEC is seen as a relatively newcomer in Katanga, yet has established a rapid visibility (and easy headlines) thanks to association with some well-known personalities. Its chairman is Zambian Phil Edmonds, former England spin bowler and also chairman of White Nile Ltd. which enjoys significant assets in the Sudanese oil industry. Another Rhode-sian3 is Billy Rautenbachwith – wanted for fraud in South Africa, and was declared persona non grata by the DRC government in July 2007.4
The CAMEC controversy centres around three copper-cobalt mining licenses (Mukondo, C19 and C21),5 which were originally owned by Gecamines, but were transferred to a joint-venture between two different companies in November 1998. One of these – Central Mining Group – was controlled by then-Minister of State in the Presidency Pierre-Victor Moyo; the other was Ridgepointe Overseas Development Ltd., controlled by Rautenbach.
It is alleged that the deal was made as part of an agreement between former President Laurent Kabila and Zimbabwean President Robert Mugabe (with whom Rautenbach has enjoyed a favourable relationship), in return for military intervention on behalf of the Congolese government. The licenses were transferred apparently without compensation, and, even more controversially, Rautenbach himself was Chief Executive of Gecamines at the time. In retrospect, this appears to be quite a staggering conflict of interest.6
The fate of these licenses in the following ten years is confusing,7 but what is clear is that they were passed between companies owned by Rautenbach and John Bredenkamp – himself another Zimbabwean tycoon and sometime associate of Ian Smith during the 1970s. Fast forward to 2007, and the three aforementioned licenses were secured by CAMEC as part of an 80% take-over of Boss Mining -once again, a company linked with Rautenbach. To add another twist to the tale, Rautenbach is currently a significant shareholder in CAMEC, with a stake of approximately 17% at the time of writing.
Examining the C19, C21 and Mukondo licenses has been a central plank of the TGI's review of mining contracts. Deputy Minister Kasongo has been outspoken in his criticism of CAMEC and Rautenbach, and the company even alleged that an intended take-over of Canadian company Katanga Mining launched in August 2007 was fatally undermined due to deliberate timing of the aforementioned licenses being revoked. In the event, a TGI hearing of 17 September approved and reinstated the contested licenses -perhaps confirming some of the fears of Global Witness, and certainly providing a boost to CAMEC's share price.8
The story, albeit in truncated form, highlights the real limits to government control over its mining industry, and serves as an abject example of the precipitous effects on extractive industries of civil conflict, shock adjustment and unaccountable government. And whilst Global Witness may be correct as to the need for transparency and strength from the country's new political leaders, this will continue to be undermined without similar sentiments of openness and accountability from the myriad companies and individuals involved in the industry.
China in the D.R. Congo
Of course, proper regulation of the copper industry in the DRC is of even more pressing concern to the west now that China has begun to make its presence felt in the country. In addition to a growing multinational presence, Chinese investment has also been framed in terms of ‘exchange’ – of massive bilateral, multi-sectoral investment ostensibly in return for future concessions in copper, diamond and gold-producing areas. Recent evidence of this is a proposed $5 billlion loan earmarked for transport, health and education infrastructure projects, including a new railway connecting the mining regions in the south to the western port of Matadi. The loan has reportedly concerned the IMF, who had seen their own lending initiative halted in 2006 due to ‘poor implementation’ of its conditions. DRC country representative Xavier Maret has also warned of the potential macr-oeconomic impact of the loan which, he argued, could problematically distort imports, exports and the exchange rate.9
The international community is clearly aware of the need for investment in the country, yet it appears that this move by China has taken some people by surprise. In actual fact, this is not the first instance where Chinese business interest in Africa has been enhanced by the willingness of its government to prop up governments with large-scale finance. In Angola a seemingly ‘done deal’ between Indian oil multinational ONGC, Shell and Angolan state agency Sonangol was overturned at the last minute in favour of Chinese company Sinopec. The clincher was a Chinese $2bn loan, which allowed the Angolan government to bypass the conditionalities upon which IMF support had been predicated (Alden, 2007:44). It is not hard to understand why the Congolese government sees this type of support as an attractive option. As Alden (2007:135) puts it: ‘seen from an African perspective, the most significant dimension on Chinese engagement is that it is a potential source of investment capital and development assistance which western sources are either uninterested or unwilling to provide’. Nevertheless, it seems that, in one important sense, Global Witness is absolutely right about the ‘turning point’ the DRC currently finds itself at. If the country's population are to see any benefit from investment in its resources, the process of mining contract negotiations must continue to be robust and accountable -and so, too, must the behaviour of the investors it seeks to examine. This is true across the board, whether Chinese or otherwise.
This briefing has highlighted two recent controversies that have brought the Congolese mining industry back into the international press in recent months. As stability in the country has improved, the mining industry once again appears to be an attractive place to make money, and the two examples given here reflect a ‘scramble’ for position within the industry as metals and mineral markets boom under Chinese demand. Having come through democratic elections with relative success, the challenge for the DRC's new government is now to build an economic infrastructure that can deliver increasing prosperity and security to its population. Separating controversy from copper is of fundamental importance to this task.