Guest blog: Taking stock of the China deal

This is a guest blog by Johanna Jansson, a PhD candidate in International Development Studies at the Department of Society and Globalisation, Roskilde University, Denmark. Her PhD project explores the DRC’s relations with its emerging and traditional development partners. 

The ‘China deal’, the minerals-for-infrastructure agreement struck in 2007 between the DRC and China, is one of the most well-known embodiments of the increasing Chinese presence on the African continent. 

Most of you are familiar with the story. By means of a barter-type agreeement, the Sino-Congolese mining joint venture (JV), Sino–Congolais des Mines (Sicomines), was created and allocated mining titles in Katanga. In exchange for access to mining titles, Sicomines will construct transport and social infrastructure in the DRC, financed by loans from the Chinese state-owned bank China Export–Import (Exim) Bank. The loans are to be reimbursed by means of the profits from the mining venture. The mining titles allocated are the Mashamba West and Dikuluwe copper- and cobalt concessions.  

The agreement was contested during 2008 and 2009 by a range of domestic and international actors. Among the concerns raised, the most salient pertained to a lack of transparency in the negotiation process, concerns for debt sustainability and a claim that the agreement was skewed in favour of the Chinese party. The Sicomines episode became known worldwide since it provoked the perhaps most conspicuous (geo) political controversy seen to date between an African country’s traditional (IMF) and emerging (China) external partners. The 2009 settlement was in favour of the IMF’s preferences: the loan towards infrastructure was capped at US$ 3 billion and the guarantee provided by the Congolese state for the reimbursement of the China Exim Bank loan to the commercial mining venture was removed. 

The agreement is now under implementation (refer to the table below for an overview of the infrastructure projects implemented). The mining venture is slated to come into production in 2012-2013 and reach full capacity in 2016.

In a recent paper for the South African Institute of International Affairs, I take a close look at the agreement from its inception in 2007 to the state of implementation as of May 2011. The paper draws on field work in Kinshasa and Lubumbashi in September-October 2008, February-March and October 2009 and February-May 2011. I have conducted interviews with Congolese respondents from government departments, civil society and the private sector; Chinese respondents from state-owned and private enterprises and the Chinese Embassy; and representatives from international governmental and non-governmental organisations, the diplomatic community and observers. Around 50 of my 130 interviews concerned the Sicomines agreement specifically.

In the paper, I argue that the Sicomines episode reflects the contemporary changes in China’s role globally. The power configurations of the global political economy shifted significantly from 2007 when the agreement was first signed to 2009 when it was renegotiated. China’s ascension as a global leader was fast-tracked by the global economic downturn. Its position as an external actor to reckon with in the DRC is now consolidated, a development which in itself signifies change in the DRC’s international relations. Yet, the Sicomines agreement also represents continuity in that regard, since it was amended to the benefit of the policy preferences of the IMF. The revision came about for several reasons which I outline in the paper. The most important is that China, with its strong strategic interest in taking up an active role in the IMF, had to balance its goals in the DRC and in the IMF. The lobbying efforts of the traditional donors, also members of the IMF’s board, therefore had the desired effect of making China agree to a downsizing of the agreement.

Since the Sicomines agreement was revised in 2009, it has slipped down the agenda and is no longer subject of a great deal of Kinshasa’s attention. “It’s under implementation, and it’s going slower than the Congolese government would have wanted”, seems to be the assessment of most people, Congolese and expatriates, I’ve talked to this year. Yet, many questions around what the agreement actually meant and means for the DRC remain both undebated and unanswered.

A matter that I find deserves to be opened up is the perception that the downsizing of the agreement was primarily made for debt sustainability reasons. It was part of the considerations, rightly so, but there is more to that story. I show in the paper that despite the fact that the quantity of minerals contained by the mining concessions is uncertain, even IMF and World Bank staff has observed that the repayment margin for the loan to be contracted under the 2009 version of the agreement is important. A second tranche of lending towards infrastructure may thus have been within the reimbursement capacity of the Sicomines JV. In other words, a loan larger than US$ 3 billion could have been justified. The halving of the credit line to be extended by China Exim Bank towards infrastructure refurbishment therefore needs to be read as more than a result of debt sustainability concerns. It is also an expression of the IMF’s and the traditional donor community’s preferences in terms of how investments in the mining sector should be structured: that investments should be channelled through the Mining Code, the companies should pay taxes and public goods should be provided by the state. By means of the renegotiation of the Sicomines agreement, this model partly trumped the original developmental-state approach: a credit line extended by a state-owned bank providing up-front financing of turnkey infrastructure projects, and reimbursements on that loan replacing payment of profit taxes. Both approaches have their pros and cons in the Congolese context, and I discuss this further in the paper.

Lastly and importantly, I find that there is a strange discrepancy between the enormous attention devoted by the international community to the issue prior to October 2009 and today’s relative silence. After all, the amendments made in 2009 only encompassed a cap on the infrastructure loans. US$ 3 billion of loans are still to be contracted by the DRC, and the real story in terms of the DRC getting value for ‘money’ (mining titles) will in this case be determined by the implementation of the infrastructure projects. As my paper shows, and as indicated by the table below, one project is completed, eight are under implementation and six projects are under negotiation. For the remainder of projects, the disbursement pace will be determined by the profitability of the mine. The selection of specific projects and the terms of these (most notably the price) are determined in negotiations between the Chinese parties in Kinshasa and Beijing on the one hand, and the Bureau for Coordination and Monitoring of the Sino-Congolese Programme (Bureau de Coordination et de Suivi du Programme Sino-Congolais) and the Congolese Agency for Public Works (Agence Congolaise des Grands Travaux) on the other. Anyone interested in whether or not the Sicomines agreement is a ‘good deal’ for the DRC – this is where to take a closer look over the years to come.

State of implementation of the infrastructure projects financed through the Sicomines agreement

This table is reproduced from Jansson, J. (2011). “The Sicomines agreement: change and continuity in the DRC’s international relations”. Occasional paper, October. Johannesburg: South African Institute for International Affairs.

Project	Measure	Contractor	Status as of June 2011	Cost ($ million)
The road between Beni and Niania, North Kivu	Refurbishment	Sinohydro	Completed and evaluated	57
Boulevard Triomphale, Kinshasa		CREC	Underway, about to be completed	N/A
Boulevard Sendwe, Kinshasa
Central hospital (Hôpital du Cinquantenaire), Kinshasa	Construction	Sinohydro	Underway, estimated inauguration October 2011	200
Part 1 of the Boulevard du 30 juin, Kinshasa	Refurbishment	CREC	Underway, about to be completed	N/A
Part 2 of the Boulevard du 30 juin, Kinshasa			Underway	N/A
Tourism Avenue, Kinshasa				24.4
Lutendele Road, Kinshasa				21
The road between Lubumbashi and Kasomeno, Katanga province				138
15 km of road in Butembo, North Kivu province		Sinohydro	Not yet started	30
Part 1 of the esplanade in front of the People’s Palace, Kinshasa				19
Part 2 of the esplanade in front of the People’s Palace, Kinshasa				Not negotiated at the time of the 2011 field research
Avenue de la Paix, Kinshasa
Avenue Ndjoku, Kinshasa
The road between Bukavu and Kamaniola

Source: Johanna Jansson’s personal interviews in Kinshasa with ACGT representatives, 15 February 2011 and 3 February 2009; a representative for one of the Chinese companies within Sicomines, 3 May 2011; and with BCPSC representatives, 23 February 2009 and 3 March 2009.