Helen Reid and Aaron Ross
DAKAR (Reuters) – Democratic Republic of Congo should renegotiate its $6 billion infrastructure-for-minerals deal with Chinese investors, according to the draft of a report commissioned by a global anti-corruption body of governments, companies and activists.
Reuters has seen the draft and it describes the 2008 deal as “unconscionable”. It urges Congo to repeal a secret amendment that was signed in 2017. This amended accelerated payments to Chinese miners and slowed down reimbursements for infrastructure investment.
Extractive Industries Transparency Initiative, which monitors revenue flows in oil and mining, is set to release its final report by this month. It counts over 50 countries as members.
Although the report does not have legal effect, it can be used to support Congo’s efforts to get more favorable terms for mining contracts with Chinese investors.
President Felix Tshisekedi said that Congo was not receiving a fair deal and his government will be reviewing China Molybdenum’s 2008 contract.
At a mining conference, Sama Lukonde Kyenge the Prime Minister said that there must be adjustments.
These moves are a rare show of resistance by Congo, Africa’s largest producer of cobalt battery metal and top miner in Africa, against Chinese investors, who most control its mining sector.
China Railway Group Limited Limited, a Chinese state-owned firm Sinohydro Corp was awarded a contract in 2008 with Joseph Kabila’s government. They agreed to finance roads and hospitals through profits of Congo’s Sicomines cobalt/copper joint venture.
Many of these projects were not realized by critics.
Congo’s government spokeswoman said that she had not seen the draft and therefore could not comment. EITI’s Congo office referred Reuters the mission terms and declined further comment. Requests for comment were not answered by a representative of Sicomines.
China Railway had no immediate comment. Sinohydro didn’t respond to our request for comment.
Fred Zhang, a Sicomines senior official, defended last week’s deal to Reuters, saying that it had driven the development of Congo’s people, and Sicomines would continue to disburse additional funds as its production increased.
Two Congolese consultants drafted the draft. They recommend “the denunciation, by the Congolese government, of the unconscionable nature of the joint venture convention of April 22nd 2008” and “the return to negotiations by Sicomines shareholders”.
The 68% Chinese stake in Sicomines, according to the report, is excessive since Sicomines was founded by the Congolese who contributed 32% of initial capital and all mining assets.
The 2017 amendment, which was previously not disclosed, is condemned.
All Sicomines profits under the 2008 contract would be used to reimburse investments made in Congo’s most critical infrastructure projects. According to the draft, this is why parliament exempted Sicomines from any taxes.
The 2017 amendment was seen by Reuters. Only 65% of Sicomines profits have to be used for initial reimbursement, and 35% must go to shareholders.
According to the draft, this change may slow down the speed of infrastructure projects. The draft states that $1 billion, or $1 billion, of the $3 billion, has already been invested.
The draft states that “This Amendment constitutes a violation the security of interests of the Republic.”
According to the draft, Sicomines reserves will be reevaluated, 2010 feasibility studies 2010 were flawed, and another contract for construction of a hydroelectric dam with Chinese investors must be cancelled.