Uncertainties Remain With Renegotiated Chinese Mining Deal in DRC

 

KINSHASA, CONGO — 

Democratic Republic of Congo President Felix Tshisekedi has promised to use $7 billion from a renegotiated Chinese mining deal to build roads and infrastructure but his critics say the new agreement lacks transparency and is unfavorable towards Congo.

In a surprise announcement last weekend, Tshisekedi said that talks between his government and a consortium of Chinese investors over rebalancing the so-called Sicomines mining agreement would bring in $7 billion to the Congolese treasury.

The sum represents a huge and possibly transformative opportunity in the impoverished central African country of about 100 million people, where the national budget this year is set to reach $16 billion.

The deal was first made public last Saturday, when Tshisekedi referenced the Sicomines deal during his inauguration speech for a second term in office in front of tens of thousands of people.

"There is the thorny issue of the opening up of our regions, for which a solution in terms of financing has just been made possible," he said.

Negotiations over Sicomines had been underway since last year after Tshisekedi — as well as numerous analysts — described the original 2008 deal as deeply unfair to the Democratic Republic of Congo.

Under the original accord, a group of Chinese investors, including state-owned Chinese firms such as Sinohydro and China Railway Engineering Corporation, entered a $6.2-billion joint venture with Congo's state mining company to run the Sicomines copper and cobalt mine, in Kolwezi in southeastern DRC.

In return, the Chinese investors were supposed to build $3 billion worth of infrastructure across the country, using the proceeds from the mine.

This innovative minerals-for-infrastructure deal was a response to Congo's pressing development needs. The country is roughly the size of continental western Europe, but has a grossly inadequate road system due to endemic poverty, corruption and conflict.

According to many observers, the Chinese consortium failed to uphold its end of the bargain. A lack of transparency over spending also plagued the project and raised suspicions of corruption.

The U.S.-based NGO Carter Center found in a 2017 report, for example, that Sicomines consortium was unable to account for $685 million out of about $1.16 billion that had been allocated for infrastructure spending by that time.

In February 2023, Congo's state auditor, the Inspectorate General of Finances (IGF), also released a report raising numerous problems with the Sicomines deal.

It said that the mine had likely been undervalued, for example, and demanded that the consortium raise its infrastructure investments to $20 billion to reflect the mine's worth.

The IGF also found that only $822 million had been invested in infrastructure since 2008 — a sum it called "glaringly low."

'Unprecedented' renegotiation

Tshisekedi made renegotiating the deal one of his priorities towards the end of his first presidential term, even visiting Beijing in May in an attempt to get better terms.

The push for rebalancing mining deals also targeted another Chinese company, CMOC, which in July last year agreed to pay the Congolese government $2 billion to settle a dispute over declared mineral reserves at its Tenke Fungurume copper-cobalt mine.

At present, no details about the renegotiated Sicomines deal have been released to the public beyond what the president announced recently.

China's embassy in Congo's capital Kinshasa refused to comment. A spokesman for the Congolese presidency said he was unable to comment for the time being.

The Congolese government is nevertheless keen to stress that the renegotiated deal is a boon for its people. Interviewed on French radio on Tuesday, government spokesman Patrick Muyaya hailed the new Sicomines deal as "unprecedented."

'In China's favor'

However, mining sector analysts in the DRC say that a host of questions surround the new $7-billion deal, the details of which remain murky.

Emmanuel Umpula, the executive director of the DRC-based NGO African Natural Resources Watch, said the whole renegotiation took place in secret.

"We asked that this happen in a transparent way, we should know the terms of reference of the renegotiation," he said, explaining that Tshisekedi's announcement had come as a surprise.

Umpula said there were many questions left to answer, such as, critically, how the negotiating parties arrived at the figure of $7 billion.

He also expressed concern that this money would come in the form of interest-bearing loans to the Congolese government, which would ultimately cause headaches for the treasury.

Sicomines has also continued operating and generating profits despite a lack of infrastructure spending, Umpula said, adding that "a simple way" of resolving the issue would have been to halt the mine's operations until the Chinese investors started construction.

Another expert who was briefed on the negotiations between the Congolese government and Chinese investors, said that the final deal was "largely in China's favor."

The expert, who declined to be named so he could speak freely with VOA, explained that few of the original problems had been resolved.

There has been no new study of the mine's reserves, he said, meaning that it was difficult to independently assess the value of the mine. It is also unclear where the money Sicomines had earmarked for investments ended up.

"Where did they go, what did they finance?" he said, referring to Sicomines. "It's on this basis that we should negotiate an agreement."

The expert said his understanding was that the $7 billion would be paid out over 10 to 15 years, in a deal he said appeared highly unfavorable.

"We're losing out on the Sicomines project," he said. "For the Congo, this is catastrophic."

Cover photo: FILE - A copper and cobalt mine run by Sicomines is seen in Kolwezi, Democratic Republic of Congo, May 30, 2015.