Can Tshisekedi clean up DRC’s mining sector?
As President Tshisekedi moves to neutralise the influence of former President Kabila on government, is the DRC’s mining sector about to see an end to the dubious dealing that has marked it for decades? Shoshana Kedem investigates
More than half the world’s deposits of cobalt lie beneath the lush forests that pepper the copperbelt in the southern Democratic Republic of Congo (DRC). The sought-after metal used in laptops, smartphones, and electric cars is expected to power the earth’s tech and climate transition. Yet despite boasting some of the world’s richest cobalt seams, the DRC realises very little value from its exports.
“Of the $300bn value chain associated with cobalt, the country that produces 70% gets 3%,” says development economist Carlos Lopes, former UNECA executive secretary.
In a country that ranks 170 out of 180 on Transparency International’s Global Corruption Perceptions Index, the culture of corruption is so deeply entrenched that street slang for “to eat” implies “to embezzle”.
But the DRC’s mining sector may be on the cusp of a clean-up as President Félix Tshisekedi weeds out allies of former President Joseph Kabila.
Kabila’s dysfunctional rule lasted 18 years, but even after his replacement by Tshisekedi in January 2019, he continued to wield power through his People’s Party for Reconstruction and Democracy (PPRD), which controlled around two-thirds of seats in the national assembly and senate.
However, in recent weeks Kabila’s grip on the government has weakened after a major political shakeup. President Tshisekedi has fought hard to sideline his predecessor and former ally, threatening Kabila’s supporters with corruption proceedings unless they switch their allegiance. The efforts appear to be working – 400 out of 500 legislators in the National Assembly are now thought to be allies of the incumbent.
Having spent much of his life in Belgium, Tshisekedi may be an unlikely architect of a corruption crackdown. The son of revered opposition leader Étienne Tshisekedi, he was controversially deemed to have beaten opposition leader Martin Fayulu and Kabila pick Emmanuel Ramazani Shadary in a 2018 election marred by widespread allegations of fraud. Even after his victory, he was forced to do business with Kabila and his powerful political allies.
Jean Pierre Okenda, a Congolese lawyer and senior analyst at Brussels-based advocacy group Resource Matters, says that Tshisekedi’s victories could give impetus to reform efforts.
“Finally, the new president is going to become the only president,” Okenda says. “We expect progress now as, finally, the political deal between him and the former president is completely cancelled. From this month we are expecting to see some change, some progress.”
Dirty deals
In a sector where sunlight is the best disinfectant for dirty deals, the DRC’s mining sector has long been dogged by a lack of transparency. In 2012, the IMF suspended its $532m, three-year loan after the government failed to publish details of a 2011 mining sale to a British Virgin Islands-based company.
Despite the IMF’s 2019 resumption of lending to the country, which is contingent on transparency, the DRC has fallen from 160th to 170th place in Transparency International’s Global Corruption Perceptions Index since 2012.
The DRC joined the Extractive Industries Transparency Initiative (EITI) in 2007, which insists that member countries publish new and amended contracts, licences and agreements concluded with extractive companies. But while a renewed push by the EITI has seen a wave of contracts published, the most lucrative and important deals remain a mystery, Okenda says.
NGOs have called on the government to launch investigations into allegations of corruption in resource management, but until now not a single case has been opened. With Kabila marginalised and a loyal cabinet now in place, Tshisekedi may launch investigations into allegations of corruption and past deals, Okenda says.
After his inauguration, Tshisekedi promised to publish all mining contracts moving forward, but the question is whether the addenda – where the corruption often lies – will also be made public, says Sasha Lezhnev, deputy director of policy at The Sentry, an anti-corruption group co-founded by George Clooney.
Prospects for change
Despite the promise of change, uncertainty looms. In February, President Tshisekedi appointed the head of the state mining company Gécamines, Sama Lukonde Kyenge, as prime minister. The DRC’s resources have historically been mismanaged by state-owned enterprises, says Okenda.
“In DRC the state-owned enterprises play a critical role in the management of natural resources, especially mining. The governance of these companies is so bad.”
Despite the government’s newfound autonomy, rights groups fear the advent of a new generation of cronyism. “It is a game-changer. But the question is: will the game-change benefit the state or will it benefit the citizens of Congo?” asks Okenda.
He says that good governance is not the responsibility of the new administration alone, but requires buy-in from companies to ensure their dealings with the government are transparent, and their collaborations with other mining companies comply with DRC law.
“The law is clear, that once you sign the contract, 60 days after the signing of the contract it must be published,” he says.
This comes at a time when internatonal investors are paying increased attention to the ethical consequences of their actions. Risk departments increasingly focus on governance, head of sustainable finance at Standard Bank, Nigel Beck said at a recent African mining conference (see also pages 30-31 and 47-48). A new generation of millennials are also forging a future for global finance where sustainable investment reigns supreme, PR mogul Lord Charles Vivian told the Mining Indaba conference in February.
“Doing the right thing is becoming more and more of an important aspect for any investment decision,” he said.
A troubled region
While the DRC is one of Central Africa’s least transparent countries, it is not alone in a region where extraction is intimately linked to political dynamics. Other countries in the region implementing the EITI, such as the Republic of Congo, Zambia, Cameroon and Gabon, have also seen their scores decline in Transparency International’s Global Corruption Perceptions ndex.
As countries scramble to shore up their finances in a post-Covid world, battling corruption and its humanitarian consequences takes on new importance. When the pandemic struck, copper prices tumbled to their lowest in three years and cobalt cost barely a third of its 2018 peak, although both have seen substantial recoveries this year.
“Even before the pandemic, good governance of natural resources and public finances was a challenge that impeded those countries’ ability to improve citizens’ lives,” says Okenda. “The pandemic came to reduce revenues further, so for those countries depending on natural resources, there’s no other way to recover beyond fighting corruption. Let us use the pandemic as an opportunity. It might be the right moment now.”
New risk
But while the DRC looks wistfully to its future, new risk lurks in the legacy of Israeli billionaire Dan Gertler. In December 2017, 14 entities affiliated to him were put under sanctions by the US government, which alleged that he had amassed his fortune through “hundreds of millions of dollars’ worth of opaque and corrupt mining and oil deals” in the DRC. Gertler denies the allegations. The sanctions have recently been lifted, but investigations continue (see box).
Last October a document made public by the DRC government revealed that in 2017 Gertler had purchased 2.5% royalties on the Metalkol copper and cobalt project in south-west DRC for $83m from state-owned Gécamines through one of his companies. According to calculations by news agency Reuters, the combined copper and cobalt royalties accruing to him should total over $25m annually, allowing Gertler to recuperate his investment in just a few years.
Critics condemned the news as evidence of another “sweetheart deal” between Gertler and the former president as well as the fact it had been concealed for so long, but Gertler insisted there had been no impropriety.
In a film screened for journalists in a Kinshasa cinema the following month, Gertler said that he was inviting the Congolese people to share the royalties with him in a scheme that would be operative by the end of 2020. “It is the first time that you, brothers and sisters, will benefit from the wealth of this country,” he said, but gave no details of how the scheme would work.
Rights groups say Gertler’s pledge is a bid to waltz with the new administration and deflect criticism of the deal. “We are a little bit sceptical. The political dynamics are changing, but he may succeed in doing what he did with the former administration,” Okenda warns. ■