MAC/20: Mines and Communities

Congo update

Published by MAC on 2007-10-01


Congo update

1st October 2007

Congo mining contracts marred by lack of transparency

Gloal Witness, Press Release

1st October 2007

The integrity of a governmental review of mining contracts in the Democratic Republic of Congo (DRC) is being undermined by a lack of transparency and pressure to rush through the process as fast as possible, Global Witness said in a new briefing published today. Global Witness is calling on the government to publish the contracts, as well as the criteria for their evaluation, and to extend the period available for the review.

The Global Witness briefing, entitled "The Congolese mining sector in the balance", provides a critique of the process of the review since its inception. It highlights several main concerns:

* a lack of transparency, clarity and public information, affecting almost every aspect of the review.

* intense pressure to complete the review within an unrealistic time-frame, calling into question its methodology.

* inadequate safeguards to protect the independence of the review.

*limited involvement of civil society and lack of public consultation.

Global Witness initially welcomed the DRC government's decision to launch a review of mining contracts in April 2007.[1] For decades, the DRC's vast mineral wealth, which includes diamonds, gold, copper and cobalt, has been exploited illegally or has been tied up in opaque deals which have provided huge profits for multinational companies and individual politicians, but contributed little or nothing to the country's development.

"This initiative could have marked a turning point by restoring transparency, fairness and trust in the mining sector," said Patrick Alley, Director of Global Witness. "It could also provide an effective tool with which to rebuild confidence among civil society, economic operators, investors and donors.

Instead, the government is rushing the whole process through so fast that one has to question the thoroughness and objectivity of the exercise."

The Commission set up to carry out the review was given just three months to analyse more than 60 contracts. Although the period has been slightly extended, the government is still exerting pressure on the Commission, which is expected to submit its report to the Minister of Mines in October.

"This apparent disregard for the care and attention to detail required for a thorough review of contracts will affect both the quality and the outcome of the process," said Patrick Alley. "Huge sums of money are tied up in these contracts which could represent a valuable opportunity to develop the country's economy and reduce poverty. Yet the government does not appear to be treating the matter with the seriousness it deserves."

Global Witness warned that if the process is perceived as biased, it will be labelled as "business as usual" in the context of extensive corruption in the mining sector. Not only will the Commission's efforts then have been wasted, but popular disillusionment could lead to increased tension and instability in mining areas.

The government has not published the contracts under review (although it has made them available to certain organisations), nor has it published the criteria against which the contracts are to be evaluated. There is also a lack of information about how the contracts are being prioritised, since not all of them can be analysed in detail in the time available.

Global Witness also expressed concern about the limited involvement of Congolese civil society and the lack of consultation with the general public. The Congolese population have been the main victims of the grave mismanagement of natural resources in the DRC. Yet the government has not sought out their views as part of the process, even though mining operations have a direct impact on the lives of millions of Congolese men and women.

Global Witness's recommendations to the DRC government include:

* the publication of the terms of reference and criteria for the review, a full and definitive list of the contracts under review and the contracts themselves.

* a further extension of the period available for the review, if necessary by several months, and the publication of a revised timetable which allows sufficient time to solicit a broad range of views.

* the creation of an independent monitoring mechanism which would oversee the Commission's work and ensure that its final report is based on a fair, independent and thorough assessment of the contracts. The monitoring body, which could include members of civil society, parliamentarians and international legal experts, could also oversee the implementation of the Commission's recommendations.

The full Global Witness briefing, "The Congolese mining sector in the balance", is available at

http://www.globalwitness.org/media_library_detail.php/576/en/the_congolese_mining_sector_in_the_balance

For further information, please contact Carina Tertsakian on +44 207 561 6372.

Note to editors:

Global Witness is an independent British-based non-governmental organisation which researches and campaigns on the links between natural resource exploitation, conflict and corruption.

All Global Witness publications can be found at www.globalwitness.org

[1] See Global Witness press release "Congolese government should ensure transparency and independent oversight in mining contract review", 17 May 2007.


Chinese deal with Congo prompts concern

By William Wallis and Rebecca Bream in London

Financial Times

20th September 2007

Mining companies, the International Monetary Fund and other donors were scrambling yesterday for clarification of a planned deal between China and the Democratic Republic of Congo.

This would tie up mineral resources in exchange for $5bn (€3.6bn, £2.5bn) in infrastructure projects and loans. A preliminary agreement was signed this week just as an IMF mission landed in Kinshasa to review progress towards the resumption of budget support for Congo.

IMF, World Bank and African Development Bank officials seem to have been caught off-guard by the scale and timing of China's plans.

These come at a delicate stage in Congo's negotiations towards forgiveness of debt accumulated under the late dictator Mobutu Sese Seko, totalling about $8bn, or equal to 800 per cent of current national exports.

Western mining groups, awaiting the results of a government review of about 60 contracts signed during the recent civil war, were also seeking more details from the Kinshasa government.

The Katanga region of Congo has some of the world's best deposits of copper and cobalt. Other areas host rich sources of minerals including diamonds, gold, iron and uranium.

After years of war, dictatorship and turmoil, however, the country's infrastructure is either non-existent or in ruins, and extraction operations are pro-ducing at a fraction of their potential.

IMF and World Bank officials have acknowledged the scale of Congo's infrastructure needs. But they are seeking to ascertain whether the Chinese loans are in line with Kinshasa's commitment under the financial institutions' heavily indebt-ed poor countries' debt-reduction initiative not to contract new debt on anything but concessional terms.

In a best-case scenario, the IMF would restart a lending programme - the last one stalled in 2006 because of poor implementation - and Congo would stand to benefit from an 80 per cent write-off of its external debt in mid-2008 at the earliest.

"If the terms of the deal do not meet the concessionality issue, that would be a concern," said an IMF official.

Most of the mining activity in the country is currently being carried out by smaller, more entrepreneurial companies. Large western mining groups are keen to get access to these resources to replace their dwindling deposits, but have largely held back - put off by continuing unrest, widespread corruption and the lack of infrastructure.

Alex Gorbansky, the managing director at Frontier Strategy Group, a political risk consultancy, said China's $5bn draft agreement with Kinshasa would put pressure on both the large mining companies looking to get in and the small miners already there.

"It will give China a distinct advantage in the Congolese copper belt," he pointed out.

He said large western mining groups, such as Anglo American and Rio Tinto, were spending increasing amounts of time and money weighing opportunities in Congo. But China's move might mean they had left it too late to secure assets.

Copyright The Financial Times Limited 2007

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