Congo’s $6-billion infrastructure-for-minerals deal with Chinese investors is ‘unconscionable’: draft report

- Advertisement -


The Democratic Republic of Congo should renegotiate a mineral deal with Chinese investors for its $6 billion infrastructure, according to a draft report commissioned by a global anti-corruption body of governments, companies and activists.

- Advertisement -

The draft, seen by Reuters, describes the deal that was first signed in 2008 as “unconscionable” and urges the Congolese government to repeal an amendment it secretly signed in 2017 that allowed Chinese mining Speeded up payments to investors and slowed reimbursement of investments in infrastructure.

The final report is expected to be released this month by the Extractive Industries Transparency Initiative (EITI), which tracks revenue flows in the oil and mining sectors and counts more than 50 countries, including Congo, as members.

advertisement

Story continues below ad

The report has no legal force, but if the main findings of the draft remain, it could add to Congo’s pressure to secure more favorable terms from mining contracts with Chinese investors.

- Advertisement -

President Felix Tshisekedi’s government is reviewing the 2008 contract and reserve levels at China Molybdenum’s Tenke Fangurume mine, after saying Congo was not getting a fair deal.

Prime Minister Sama Lukonde Kyenge told a mining conference on Thursday: “Some adjustments have to be made.”

The moves represent a rare pushback by Congo, the world’s leading producer of the battery metal cobalt and Africa’s top copper miner, against Chinese investors, who control most of its mining industry.

Under a 2008 deal with the government of former President Joseph Kabila, Chinese state-owned firm Sinohydro Corp and China Railway Group Ltd agreed to build roads and hospitals, financed from profits from Congo’s Sekomine cobalt and copper joint venture.

Critics say that few of those projects have been realized.

A Congolese government spokesman said he had not read the draft and could not comment. EITI’s office in Congo referred Reuters to the mission’s terms of reference and declined to comment further. A Sicomines representative did not respond to requests for comment.

Story continues below ad

China Railway had no immediate comment. Sinohydro did not respond to a request for comment.

A senior Sikomines official, Fred Zhang, defended the deal in comments to Reuters last week, saying it had spurred growth for the Congolese and that Sikomines would distribute more funds as production increases.

‘Condemnation’

The draft, written by two Congolese consultants, “condemned by the Congolese state of the subliminal character of the Joint Venture Conference of April 22, 2008 and recommended a return to the negotiating table by Sekomine shareholders.”

It says Chinese companies hold a whopping 68 percent stake in Seikomine because Congo contributed 32 percent of all mining assets and initial capital.

It condemns a previously unknown 2017 amendment.

Under the 2008 contract, all profits of Sikomines will initially go to reimbursement of investments in Congo’s most urgent infrastructure projects. On this basis, Parliament agreed to exempt Sikomines from all taxes, the draft said.

Story continues below ad

Under the 2017 amendment, seen by Reuters, only 65 percent of Sikomines’ profits should initially go toward reimbursement of investments, while 35 percent go to shareholders.

The draft said the change could further slow down the pace of infrastructure projects. It says that to date, less than $1-billion of the estimated $3-billion has been invested, which is less than the $1-billion estimated at this stage.

“This amendment is a violation of the protection of the interests of the republic,” the draft said.

The draft report called for a re-evaluation of Seikomines’ reserves, stating that the 2010 feasibility study was flawed, and the cancellation of another contract to build a hydroelectric dam with the same Chinese investors.

Be smart with your money. Get the latest investment insights delivered to your inbox three times a week, with the Granthshala Investor newsletter. .

.

- Advertisement -
Mail Us For  DMCA / Credit  Notice

Recent Articles

Stay on top - Get the daily news in your inbox

Related Stories