Painting by Cheri Samba

Lokuta eyaka na ascenseur, kasi vérité eyei na escalier mpe ekomi. Lies come up in the elevator; the truth takes the stairs but gets here eventually. - Koffi Olomide

Ésthetique eboma vélo. Aesthetics will kill a bicycle. - Felix Wazekwa

Friday, April 15, 2011

Congo's Mining Contracts Still Shrouded in Secrecy

This is a guest blog by Elisabeth Caesens, DRC Mining Governance Project Coordinator for the Carter Center. The views expressed here are her own and do not represent those of the Carter Center. 

A few days ago, the World Bank reviewed Congo’s improvements in natural resource governance and expressed its satisfaction on mining contract disclosure, something the Congo promised to do after it signed a few disquieting contracts in 2010.

The optimism stands in sharp contrast with the current state of contract transparency, as the overwhelming majority of agreements are carefully kept confidential. For copper rich Katanga, only two contracts are in the public domain. Two out of 30, or 40, or 50 – who knows.

Let’s start with what is public: : the controversial Metalkol and Sodifor contracts which replaced First Quantum’s cancelled KMT project (in which the World Bank’s IFC had a 7.5% stake) and its revoked Frontier license. The deposits were awarded to unknown companies. This ‘asset flipping’ did not only affect legal security, it also implied several billions of dollars of potential new debt. “If Congo wants debt relief, don’t recognize the Metalkol contract”, the IMF reportedly told President Kabila on the eve of the 50th anniversary of independence celebrations. The President promised, debt relief got through, but so did the Metalkol contract a month later. Barely had the presidential endorsed the deal when the junior sold a majority stake to London-listed ENRC.

The president’s betrayal understandably depressed diplomats in Kinshasa who have been working for years on DRC mining governance to improve the business climate and attract major players who find Congo to risky to invest in. After the Metalkol debacle, Promines, a $90 million World Bank-DfID sponsored mining governance project, was put on hold; other donors reconsidered projects they had in store.

Anti-depressants quickly came in the form of the “Economic Governance Matrix”, a list of steps aimed at improving extractive industries governance. Congolese authorities promised to publish contracts, concessions, revenues. Ironically, the transparency guidelines themselves were kept secret for several months. Before the Matrix was even finalized, the Government published the Metalkol (KMT) and Sodifor (Frontier) contracts to alleviate political pressure. Technically, not doing so could trigger a repeal of debt relief. But what is nice about the Matrix is that the Government pledges transparency across the board: not just for Metalkol but for all contracts, not just for contracts but for tax payments, concession maps, policies.

Now let’s see what the Matrix did for contract transparency across Katanga’s copper belt. Unfortunately, nothing much. All the copper-cobalt contracts other than the above are secret. There’s probably about 40 of them, including investments just as important as Metalkol. There is Freeport’s two billion investment in Tenke Fungurume Mining (TFM), China’s six billion Sicomines contract, Glencore’s involvement in Katanga Mining (with deposits richer than TFM’s), ENRC’s control over the world’s richest cobalt deposit at Boss Mining well before it added Metalkol to its growing portfolio, OM Group-Forrest exploiting the lucrative Lubumbashi tailings. These are the copper-cobalt lungs that should make Congo breathe, but at this point we don't know whether it will produce any oxygen, let alone how much, as we ignore the rules the lungs obey to.

Mind you – the Government considers these agreements already public.  The Matrix asserts that mining contract disclosure… «Has been carried out. The Ministries of Finance and Mining had published the joint venture contracts between public and privates companies in June 2007 (...)  The Metalkol one was published in the Journal Officiel [the journal of state record]. Since January 2011, six (6) new contracts have been published on the website of the Ministry of Mining." 

Indeed, a lot happened since June 2007, when the Government published 63 contracts it wanted to revisit. The Revisitation Commission listed all contracts as either ‘to be renegotiated’ or ‘to be cancelled’. Renegotiations ensued in 2008. In 2009 and 2010, the Ministry of Mines announced the end of the renegotiation process several times, sharing some sector-wide results. But the new terms for individual contracts have never been published. We  know barely anything about their content, other than the little information some companies published on the stock-exchange to reassure their shareholders in Toronto or Johannesburg.

We don’t even know for sure whether renegotiated contracts exist. I have asked diplomats, activists, investors and government officials alike for copies. A lot of promises (‘je peux te les avoir facilement’), a few summaries of renegotiated terms (‘they’re not final, they need updating’), 3-4 draft supplemental agreements full of track changes (‘bon, vous gardez ça pour vous’). The one signed amendment I could glance at is that of TFM (‘vous voyez que ça existe’). The amendment was dated December 10, 2011, meaning negotiations went on for at least two more months after the official announcement that the deal was sealed. Four months after signature, the new TFM contract is still awaiting presidential approval. In other words, the terms governing the single biggest private investment in Congo’s mining sector could still be changed. The same may be true for many of the other revisited mining contracts.

Other, non-revisited contracts are equally kept secret. Take China’s 9 billion infrastructure-for-minerals deal signed in 2008 and renegotiated down to 6 billion in 2009 after strong IMF criticism of the new massive debt it implied. The 2008 contract was leaked efficiently, but hunting down the 2009 amendment is a real pain. There are also the infamous Caprikat and Foxwhelp contracts for oil blocks in Lake Albert which, with three contracts for the same oil blocks in a five year period, were as much of a torn in the eye of the IMF and the World Bank as the First Quantum saga. It didn’t help the new investors were better known for their political connections than their geological expertise. Here again, copies circulate from inbox to inbox: we’ve been waiting for an official publication in vain.

So what is needed now is not anti-depressants, it’s vitamins, coffee and other stimulants for people to demand contract transparency for as long as it takes to get the job completely done. Now that Metalkol is published, the Bretton Woods institutions should press for disclosure of all the rest. Global Witness should extend its advocacy for transparency beyond the China contract. One cannot accuse China of opacity while tolerating it for all the other mining investors. The same goes for local civil society, now absorbed by the new advocacy in vogue – tax transparency. A crucial endeavor, but you cannot track whether companies have paid their dues if you don’t know what they owe in the first place. For that, you need contracts. We need them all up there, along with Metalkol and Sodifor and a few gold and tin contracts. Site en cours de maintenance (website under construction)? Transparency is like an optical illusion – they say it’s there, but it isn’t, really.

10 comments:

Erin said...

Incredibly detailed update and analysis, Lies. Cheers!

Adam said...

The World Resources Institute has come up with a tool for visualising DRC's natural resources...it defaults to show forest zoning but can be set to show mining licences:

http://www.wri.org/tools/atlas/map.php?maptheme=drcforest

Great post by the way.

Jason Stearns said...

@Adam - this is extremely helpful, but it seems that some of the concessions are off - SHAMIKA's concessions are in Kalehe, for example, not in Lake Kivu. Any ideas about how precise the map is?

Peter said...

One element of the scandal is that nobody has been pushing hard for disclosure of the revised contracts -- not civil society, not government, not the World Bank. And we know that there are all kinds of new payments to Gecamines, Pas-de-porte, and other constraints that may not benefit the central government.

Anonymous said...

@ Adam - thanks for sharing, it's a beautiful project. Do you know what date the concession shapefile goes back to?

jason belcher said...

I like your book Dancing in the Glory of Monsters, it addresses a question I am looking at in my PhD research on killing as a habit, or really as a normal part of life. For some, it is. I saw it in Iraq in 2006. Same for Afghanistan in 2008. Institutions, regimes, culture etc of course have a role to play, but in the end many individuals choose killing as a way of life. Your death squad interviewee who stated that "For us soldiers killing is easy. It is part of life" reminded me of a similar sentiment by a paratrooper in WWII. The man, who drove a milk truck before the war, shot a Nazi officer in Italy in 1945 because the captured German refused to surrender his pistol. The paratrooper wrote: "He refused to surrender his pistol, so I killed him. Its so easy; it solves your problems, theres no questions asked. I think I'm getting the habit." We like to believe there is some force (a dictatorship/etc) which compels people to kill again and again; but in many cases there isn't. They kill because its easy, and it solves their immediate problem. They don't have any guilt, or remorse, or worries. There was a trigger man in Iraq who right after blowing up a marketplace full of civilians went to his kabob stand and complained that his usual lunch wasn't spicy enough. Thats what was on his mind after committing mass murder. You can't fix that mentality with foreign aid, or a more democratic government. The problem isn't structural, its in human nature. There is no policy cure for that. No government can change it. You don't have to be talented, smart, athletic, or rich to kill effectively. So we think killing as a way of life is terrible, but not too terrible as long as it happens in far away (to us) places like Rawanda. What we need to know is how does the habit of killing spread, and can the spread be stopped? In the twentieth century mass killing required the apparatus and resources of the state combined with individual willingness; in the twenty first century a state apparatus is no longer necesary. Even worse, that mechanism may no longer be able to stop the killing habit once it passes a certain threshold. Its no longer far away from us; just look at Juarez.

LNFAW said...

http://lnfaw.blogspot.com/2011/04/blog-post_1998.html

Rich said...

@ jason belcher -

Thanks for the interesting insight.

I can say that any killing habit is a crime and war is a situation whereby individuals’ drift towards criminal activities becomes more alive, where they find breeding ground and favourable conditions to bloat.

What you have described for WWII, Iraq Rwanda and many other conflicts is not very far from the kind of crimes we experience in our societies on a daily basis; the only difference is that the quality and quantity of these appalling behaviours are aggravated in an armed conflict situation.

Communities in the Great Kivu region have lived for years with relative levels of ethnic tensions but never as much as to the point of engaging in mass killings as those experienced during the recent conflicts. Anthropologically, I am yet to see any ethnographic evidence supporting the existence of wide spread killing habit among indigenous cultures in those places now so reputed for killing and extreme violence habits.

Ref # “What we need to know is how does the habit of killing spread, and can the spread be stopped?”

I do not think there is a simple answer to your question. However, there may be a complex procedure where one would need to control for aspects related to the individuals/groups’ psychology, the historical/political context and many other socio-demographic profiles – for both individuals and groups of individuals – to assess the extent to which one can say the ‘killing habit’ prospers in situations characterised by extreme violence and conflict.

One of the answers could be further explored around the fact that, for instance, a war situation can provide thousands of ‘reliable’ cover/excuse for individual’s responsibility when committing criminal behaviour.

Here we do not even talk about the different types of violence (killings) state violence, individual violence etc…

Rich

Anonymous said...

The mining website is back up since today. The four contracts (2 copper, 1 tin, 1 gold) are available here: http://mines-rdc.cd/fr/index.php?option=com_content&view=article&id=92

Elisabeth Caesens said...

Update

Lundin Mining said in a press statement yesterday evening that the president finally approved the TFM contract. Lundin has a 24% stake in TFM, Freeport has 56%, Gecamines 20%.

http://cnrp.marketwire.com/client/lundin_mining/release.jsp?year=2011&actionFor=1429284&releaseSeq=0

An official at the Ministry of Mines told me in December the TFM amendment would be published as soon as the presidential decree is issued. If effectively published, we'll get to 3 disclosed contracts for the copper belt instead of 2. Even so, the bulk of agreements remains confidential, unless the Government decides to take advantage and publish them all at once.

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