Ethical Corporation, 15 May 2008 - Western mining companies fear that ethical standards will count for little as they renegotiate contracts in the Democratic Republic of Congo.
subdued. A cloud hung over the miners' dreams of exploiting the fabulous minerals and gem wealth of the Democratic Republic of Congo.
As delegates gathered, the Congolese deputy minister of mines, Victor Kasongo, claimed that the government commission set up to review the 60 biggest contracts signed with mining companies since 2000 had been �surprised by the number of flawed contracts�.
All 60 contracts are to be renegotiated, according to local media reports. The Congolese government has not made clear how many deals it would like to see changed, but so far 16 mining companies say they have been invited to discuss their contracts.
All the major mining firms that spoke to Ethical Corporation preferred to avoid talking of the merits or detail of the ongoing negotiations. They fear antagonising a government whose sole aim appears to be to grab a greater share of projected cash flows from mining projects.
Of serious concern to western mining companies that must renegotiate their deals in the DRC is the government's reported interest in courting Chinese investors for the mining sector. Some claim that government officials leaked news of the review's findings to local press in November 2007 as a way of advancing a $5 billion loan from China's Exim bank, for which China would be allocated mineral resources from concessions freed up by the review.
On 29 January, Katanga Mining Company, a South African copper miner, announced that it was handing over the Dikuluwe and Mashamba West concessions to its Congolese joint venture partner, state-owned G�camines. The two concessions had been scheduled to last for a further 12 and 15 years respectively, but were transferred instead to China's Sinohydro Corporation and the China Railway Engineering Corporation as part of the Exim deal.
In the dark
Virtually all the major mining groups have projects or concessions in the DRC and have sought to maintain their standards of ethics and corporate governance while doing business there, partly because of the extensive presence of global human rights non-governmental organisations that are quick to publicise failures on the part of the regulators or the miners.
Those NGOs, which include Mining Watch Canada and Global Witness, welcomed March's belated publication of the review. But in a joint statement they expressed concern �about the lack of clarity surrounding the critical next stage � the process of renegotiating contracts with companies�. The groups called on the Congolese government to outline the process and criteria for renegotiating contracts to ensure �a level playing field� for all companies.
The Congolese government's letters to affected mining companies, some details of which have been made public, make clear that the Ministry of Mines wants international firms to allow G�camines or fellow state-owned vehicle Okimo to have a greater share of the project finances of virtually every major mining venture in the country.
The letters almost without exception contain recommendations for G�camines and Okimo to take a �larger equity stake� or �more active role in the day-to-day management� in the running of joint ventures, but not necessarily the mines. This, despite neither entity actually operating a profitable mine.
BHP Billiton and AngloGold Ashanti would only confirm that they had received communication from the government and were in the process of formulating a response or engaging in ongoing discussions. Freeport McMoran says it was told it must negotiate the �quantum of transfer payments� (a form of royalties) and �percentage share of G�camines in the Tenke Fungurume project�. Meanwhile, Toronto and Johannesburg-listed Teal was advised that the ministry was looking for �realisation of social actions with a visible impact�.
Social capital
Many of the miners are offering, for starters, to rehabilitate parts of the local roads system or healthcare infrastructure as a way of improving the lot of the community. They argue that investment in the quality of communications serves both the company and the community, since improved transport links will make a more lasting contribution even if the project never happens.
But government officials have made it clear to miners that primarily they seek greater access to project cash flows. Companies such as BHP Billiton and AngloGold Ashanti that may wish to set aside funds generated by specific projects for local community development could potentially clash with the negotiating agenda of Okimo or G�camines.
Since the Congolese government has not opened up the contract renegotiations to public scrutiny, the mining companies face a serious dilemma. Without some form of partnership with G�camines or Okimo they cannot prospect or mine. But if they concede to demands from either entity for greater involvement, they could endanger the viability of projects by failing to contribute to local communities that must live with them.
Okimo and G�camines are accountable only to the Congolese government; they do not run their own social programmes, or contribute significantly to the tax base. In fact they specialise primarily in being �partners�.
Although no company can say so openly, all know that the rules of the game in the Congolese mining sector are changing in a way that will eventually bring the multinationals with higher ethical standards to a point where they must compromise or choose. If they stick to their standards, China seems more than willing to step in to accommodate the government's demands.
Political turmoil
Regionalism, rural insurgency and corruption have plagued the Congo since its independence from Belgium in June 1960.
Following a separatist war, UN military intervention and political instability, military strongman Mobuto Sese Seko seized power in 1965. His mismanagement of the Congo's economy and his enriching himself from its financial and natural resources made his name synonymous with kleptocracy � a government that steals from its people � in Africa until the violent end of his rule in 1997.
Following the civil war of 1998-2003 the first multi-party elections in 46 years were held between July and November 2006. These confirmed Joseph Kabila, who came to power in a coup that ousted his father, as president. The international community funded the elections and deployed the world's largest UN peacekeeping operation, Monuc, to manage and legitimate the process.
Despite continued regionalism, the Congo has enjoyed a comparatively less violent period since the election, although militias continue to control parts of the country in defiance of a partly dysfunctional state apparatus.
