Congo-Kinshasa: government struggles with vague Chinese mining contract

More than a decade after the Democratic Republic of the Congo signed and, a year later, renegotiated a mining contract with the Chinese, it still faces the question of what is really in there.

This month, an Extractive Industries Transparency Initiative (EITI) report is expected to be released and hopefully remove the opacity that has punctuated China’s involvement in the Congolese extractive sector. Its preliminary version was hailed by local experts as exposing “prejudices unprecedented in the history of the Congo”.

When it was signed in 2008, the agreement with Sicomines SA, the Chinese firm, amounted to around $ 9 billion. However, after the International Monetary Fund dug holes there, Kinshasa renegotiated the $ 6 billion deal. This still raised questions.

In Kinshasa, people called it the “contract of the century” after details emerged of how it was biased, even in “joint ventures” between the Chinese and the Congolese.

The preliminary report indicated that while the DRC provides most of the joint venture’s assets in the form of mineral deposits, it only owns 32 percent of the shares. In addition, the feasibility study carried out by the Chinese would have undervalued the reserves of these deposits.

Details also showed that, in fact, the contract was changed in 2017 in secret, just a year before the departure of former President Joseph Kabila. It turned out that even the minister in charge of mines was excluded from clandestine renegotiations.

This amendment would have provided for the payment of dividends from the first year of the contract to shareholders. But because the shareholders did not receive the dividend, the mining projects were exempt from taxes.

Yet there were other findings: Chinese investors pledged $ 3 billion to build local infrastructure such as roads, schools and health centers. They only disbursed less than a billion dollars and most of the projects identified were never implemented.

The contract in question concerns Sicomines, the company which, on paper, extracts minerals for Sino-Congolese companies. In July, the Congolese Minister of Mines Antoinette Nsamba had indicated that: “In reality, it was a leonine contract because to this day, Sicomines does not pay any taxes or royalties. However, Sicomines exports minerals and imports equipment and operating products free of charge. the company is exempt from everything, even with regard to driving licenses. “

Chinese authorities have denied this claim. Sicomines officials in Kinshasa issued a statement calling the existence of a secret agreement false “since there was a consensus between the two parties, Chinese and Congolese, and that only a small portion of the profits were to be distributed. , most of which was used to repay loans “.

Sicomines officials say the DRC benefited from the deal, as evidenced by China’s $ 6 billion loan. They also assured that 43 projects have been completed, especially in Kinshasa, contrary to the claims of the EITI.

When the EITI published its preliminary report, it was the result of work carried out by independent consultants.

But the pressure was also fueled by President Félix Tshisekedi’s statement demanding a proper assessment by the Minister of State for Infrastructure and the Minister of Mines. According to the Minister of Infrastructure, Mr. Alexis Gisaro, the technical and financial execution of the selected infrastructure projects is only 27.5%, according to a dispatch from the Council of Ministers of September 24 meeting in Kinshasa.

“On a planned financing of 3 billion US dollars, the amount invested by the Chinese side amounts to 825 million US dollars (interest not included) … This amount has been allocated to the execution of 40 projects including 27 are completed and 13 in progress, ”the dispatch said.

“A program sequenced in six phases has been proposed for the disbursement of the balance of $ 2 billion over the period 2021-2025. Hence the need to release the tranches of $ 150 million planned for 2021 and $ 300 million for 2022 “, he added.

The council indicated that the Minister of Infrastructure and Public Works suggested to the government to convince Sicomines SA, “in view of the cash flows recorded, to review its funding ceiling for infrastructure projects currently amounting to 1.053 billion. of dollars”.

Regarding the technical and financial execution of the mining project of the Sino-Congolese contract, the government noted that “it appears that approximately 2.454 billion dollars have actually been invested to date” out of a planned financing of 3.2 billion dollars. dollars, for an execution rate of 77%. .

The minister suggested that the main legal, technical and financial issues identified in the collaboration agreement be addressed through an in-depth evaluation of the execution of the mining project by an inter-ministerial commission. This is to help determine the expenses incurred in the implementation of the project and to realize the benefits for both parties.

The commission is expected to submit its proposals to the council before the end of October. Meanwhile, stakeholders await the final report from the EITI consultants, even as the government appears to be launching a parallel assessment through the commission.

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