The Troubled Heart of African Commodities
Isabel Turner And Erin Hamilton - Wed 19 Mar, 2008
War-torn Congo is rich in minerals but the country has not benefited.
War-torn Congo is rich in minerals says Erin Hamilton and Isabel Turner, joint editors of The Miner Diaries, but the country has not seen the benefits.
If ever there was a time to be jittery about investing it is now. Companies everywhere are tightening their belts. But demand for our ever dwindling resources continues unabated. So for the moment, at least, mergers and acquisitions in the mining sector looks set to continue.
Well that is the view of one of UBS’s top bankers. He reckons that Russia, China and, get this – the Democratic Republic of the Congo (DRC) – could be the target of the next deals.
Needless to say when I mentioned this to Erin, her eyes rolled. She takes this UBS banker’s point about Russia and China, but the DRC? Isn’t this a country brutally ravaged by five years of civil war? A godforsaken place which is in the grip of a humanitarian crisis, with 3m dead? A country that now plans to “fast-track” its review of existing mining contracts to answer massive international criticism of “grave flaws” and “illegalities”?
Most of these mining deals were done at the height of the 1998-2003 fighting. This is what the war was about – mineral wealth. The World Bank reckons that 75% of the remaining resources were signed away then. There is evidence to suggest direct involvement of President Joseph Kabila, his government and closest advisors in negotiating some of the contracts. “Surprise, surprise”, says Erin.
Erin is not the only one worried about this “fast-track” mining review. So are a number of international National Government Organisations (NGOs). As they rightly point out, “in the absence of strong safeguards, transparency and accountability will be the first casualties of Congo’s ‘fast-track’ process.”
One of these NGOs is the US-based Carter Center, which works to advance human rights and alleviate suffering. It reckons that the international community has helped to uplift the mining industries of other countries. But when it comes to the DRC it has failed miserably.
We all know how wealth corrupts? Well, the DRC’s mineral wealth is the stuff of legend.
Records of mining companies in the Congo are far from squeaky clean. Many companies in what used to be a Belgian colony got rich in the civil unrest. Contracts were concluded before there was even a legitimate government in place.
One attorney who analysed five of these Congo contracts for the Carter Center described them as the most one-sided he’d ever seen – in 30 years of practice. Some 60 contracts are under the spotlight and guess what. Not one agreement was properly constituted.
Hardly reassuring. Looks like the DRC government’s fast-track procedure is nothing more than a cover to reassure mining companies and paper over the investment problems.
In the simple terms the problem is this: the existing mining contracts do not in any way benefit the local population. As has become distressingly familiar in Africa, these are contracts that effectively pillage the country of its vast natural resources.
The mining companies have reaped massive rewards. The local population has received zilch. That cannot be acceptable business practice, even in a commodities boom. The mining companies should know better and be falling over themselves to put matters straight.
As the Carter Center rightly points out, the international community, including the likes of the World Bank, should be throwing their weight behind the process. The question, however, remains just how legitimate is this review? We’ve heard that some companies are even moaning that they have been short-changed in the process.
