The State vs. the people

28

Since Mobutu nationalized the economy in 1967, the Congo’s main mineral deposits have

been held by parastatal companies. The privatisation of those parastatals already started

before the advent of Kabila’s AFDL to power in 1997. In 1995, in an attempt to curb the

downward spiral of the DRC’s economy, premier Kengo wa Dondo’s government

hesitatingly embarked on a privatisation programme that also targeted the mining sector,

endeavour was to relaunch the formal mining sector that, due to exogenous factors (such as

economic recession, price fluctuations on the commodity market, etc.) and bad governance,

had nearly come to a stand-still. Negotiations under Kengo resulted in a series of joint venture

agreements with junior mining companies. In Katanga, the mining rights on the huge deposits

of Tenké and Fungurumé were transferred from Gécamines to a partnership with a Canadian

company that was part of the Lundin Group, which was led by the Swedish financier Adolf

national George Forrest and his group (which now holds the most important mining portfolio

in the DRC), who entered in the mining business through an agreement with Gécamines and

Kengo’s attempt to relaunch the mining sector was thwarted by the war that started in

September 1996. During the war, all belligerent parties throughout the country negotiated

alterations to the existing contracts and new joint venture agreements. The above mentioned

UN reports on the illegal exploitation of the DRC’s natural resources describe in detail how

the business of awarding mining contracts, or access to mining sites and resource trade routs,

indeed did serve war purposes and private interests of domestic and foreign belligerents, and

of businessmen and politicians who were interlinked in so-called elite networks.

belge « GRANDS LACS »Volet : La GECAMINES et Monsieur Georges Arthur FORREST, p. 15. (see :

http://www.kongo-kinshasa.de/dokumente/divers/gecamines.pdf)

29

coal ; Sodimico : copper, cobalt ; Entreprise Minière de Kisenge

« Manganèse » : manganese

a surface of more than 11.000 km2): gold, cassiterite, coltan

company Sibeka): diamonds

Since 2001, the World Bank has supervised the DRC government’s mining policy, and this

has largely consisted in further privatizing the country’s mining parastatals. In the same year,

Bank’s overall strategy in the DRC has been to spur economic growth through private sector

papers called ‘Transitional Support Strategy’ (TSS), the first of which was developed in

2001. A second TSS paper, which is to be the “road map” for the Bank’s support to the DRC

2004, the Bank has supervised the following reforms in the mining sector, which it identified

as a driving force for a quick economic recovery: the launch of restructuring key companies

such as Gécamines, the promulgation of a new Mining Code in July 2002, and the preparation

improvement of natural resource management, by aiming at a country-wide implementation

The World Bank’s resource management policy in the DRC has raised serious concerns

among several NGOs and other observers. The Bank has been criticised for several reasons,

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20 March 2005.

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30

among which are its is top-down approach that lacks true participation, and its neglect of the

role of natural resources in fuelling conflict, despite the guidelines of its own Conflict

the DRC’s lack of institutional capacity to regulate the free market system which the mining

Another reproach concerns the Bank’s downplaying of current bad governance and corrupt

practices that stand in the way of an equitable redistribution of benefits from the mining

To date the World Bank’s most visible “achievement” on the ground has been a 43 million

USD “voluntary departure programme” which was carried out as part of its reform strategy

context these may sound as considerable sums, but existing contracts and social conventions

in fact entitled the departing employees to a total sum of 125 million USD, instead of 43

found themselves penniless after having paid their debts, while their departure had deprived

of these former employees are now immersed in the socio-economic swamp the collapse of

the formal mining sector in Katanga has caused.

The following chapters provide more details on how the Bank’s mining reform strategy has

been implemented in practice.

12/28/000090341_20051228104558/Rendered/INDEX/34558.txt

http://www.reliefweb.int/rw/rwb.nsf/db900SID/ACOS-64CLZY?OpenDocument

31

32

Kabila’s home province Katanga covers one fifth of the national territory and inhabits about

5,5 million civilians. In the south of the province vast reserves of copper (Cu) and cobalt (Co)

are found in sedimentary deposits along the Central African copperbelt, which stretches along

the borders with Zambia and Angola. The copperbelt contains 34 % of the world’s cobalt

copperbelt also contains minerals such as zinc, germanium, uranium and silver. Mine

exploitation started under Belgian rule by the Union Minière du Katanga (UMHK) and was

taken over by the giant parastatal Gécamines (and a smaller parastatal called Sodimico) when

Mobutu nationalized the Congolese economy in 1967.

Gécamines’ concessions stretch out over a surface of 30.000 square kilometres and are

clustered round the towns of Kolwezi (West Group), Likasi (Central Group) and Lubumbashi

(East Group). They contain estimated reserves of 30 million tons of copper and 3 million tons

and cobalt producers, with an annual production of 480.000 tons of Cu (TCu) and 16.000

TCo, yielding a turnover of about 1 billion USD and providing jobs and social services –

Witness, June 2004, p. 24.

Studies – Vrije Universiteit Brussel, 23-24 November 2005.

33

Gécamines accounted for up to 20 to 30 % of the national treasury and for up to 70 to 85 % of

Much has been written elsewhere about the reasons for Gécamines’ decline and we will not

undue political interference have led to the parastatal’s current situation, deemed

“catastrophic” by a team of international consultants that audited the company in 2003 (see

Chapter: Mining Reforms in practice: the cases of KOV and Kamoto). Throughout most of

the Mobutu era, Gécamines occupied a central position in the economy of the DRC – and

consequently Gécamines was the main pillar of his regime that was based on predatory

patrimonialism. Between 1967 and 1984, for example, Mobutu siphoned off an estimated sum

of 4 to 5 billion USD to the detriment of Gécamines, while the Belgian Société Générale,

As mentioned above, the privatisation programme of the Kengo wa Dondo government in

junior mining companies resulted in a number of joint venture contracts that marked the start

DRC’s natural resources describe how during the war a military-commercial network was

established in Kabila’s stronghold Katanga, in which Zimbabwean interests were closely

interlinked with those of the AFDL. The UN reports also list numerous other private actors

that appeared on the Katangan mining scene during the war, striking deals with the AFDL

that were equally detrimental to the province’s industrial patrimony.

A quick glance at some recent statistics points out that, despite the assistance of the World

Bank, the continued privatisation of Gécamines under the transition has not curbed its

decline. On the contrary, by 2005 Gécamines officially produced less than 15.000 TCu and

1.000 TCo, and today it still staggers under an ever-increasing debt – already 1,7 billion USD

workers and has in 2004 only contributed 0,45 million USD in taxes to the national

The relaunch of the DRC’s most important mining parastatal, which is now reportedly bound

transition, and the following chapter discusses the reasons why this is so. The findings of the

Lutundula Commission’s mission to Katanga provide a sound basis for such an analysis.

2005, p. 53, 55; http://www.lepotentiel.com/afficher_article.php?id_edition=&id_article=12707

34

The Lutundula Commission’s findings in Katanga corroborate the view that the main reason

for the failed reforms of the mining sector in Katanga are bad governance on behalf of the

of the main public services related to the Katangan mining industry: Office des Droits et

Accises (OFIDA: customs), Office de Gestion du Fret Maritime (OGEFREM: maritime

transport), Direction Générale des Redevances Administratives et Domaniales/Direction

générale des impôts (DGRAD/DGI: fiscal services), Office Congolais de Contrôle (OCC:

import/export quality and quantity control), the Provincial Direction of Mines, of

Environment and Nature Conservation, of Energy, Urbanism and Habitat, of Land Affairs and

management contracts, 40 of which concern Gécamines and 7 of which were entered into on

studies of Gécamines and Sodimico partnerships and an analysis of bad governance practices

As noted above, the Commission has limited its investigations to contracts signed before 30

June 2003, but there was a follow-up on whether and how the contracts were executed after

that date. Since the Commission’s report was deposed at the Bureau of Parliament in June

2005, its conclusions remain valid until at least that date. Furthermore, our chapter on the

concessions of KOV and Kamoto (see Chapter: Gécamines’ reform in practice: cases of KOV

and Kamoto) shows that the report has not contributed to a change of mining policy on behalf

of the government.

As a preliminary note it is necessary to describe the role the Congolese government plays in

parastatals, as all of the country’s public enterprises, are regulated by law n° 78/002 (see

below). This law was drafted under Mobutu and deprives the parastatal’s directors of any real

venture agreements – in areas under State control, lies with the President and the Minister of

agreements, but they receive directives from Kinshasa officials, often the President himself or

advisors in his entourage, which contributes to a perception of these negotiations as a lengthy

and pain-staking process (resulting in Pre-Accords, Memorandums of Agreement, Mining

Congolese officials’ demands for kickbacks, which, if granted, evidently lead to conditions

the opaque and random procedures that lead up to joint venture agreements contribute to the

companies, which are established under Congolese law.

Unpublished doc., November 2003, p. 7.

35

indeed currently ranked as the world’s worst country to do business in, according to the

World Bank’s Doing Business classification, which is a bench-mark for measuring countries’

The general picture of the mining sector in Katanga drawn by Congolese and international

NGO’s, journalists and observers, is that it is stuck in a vicious circle caused by corruption,

mismanagement and predatory patrimonialism recalling Mobutu times: mining operations

hardly generate revenue needed to fund a properly functioning institutional apparatus and,

corroborates this view. It states, for example, that the Congolese State has arbitrarily granted

which according to the Mining Code should have a 5 % stake in the joint venture companies,

result the State derives no benefit from these partnerships. The Commission also confirms

that top officials frequently interfere in joint venture negotiations and joint venture

joint venture companies without having any controlling mechanism in place, and in addition

to this, most of the minerals leave the country unrefined, as a result of which the DRC is

The public services in Katanga lack the necessary power to stand up against decisions from

Also, the provincial services that are related to the mining sector lack synergy, and their staff

is under-equipped and under-paid.

One of the consequences is that there is no reliable procuration of mineral export statistics.

Joint venture companies with private partners Anvil Mining and First Quantum, for example,

communicate their production statistics to the relevant services only after having exported

their minerals abroad. And since the government fails to allocate enough funds to the

provincial services, the officials who are supposed to control the mining companies are in

both cases paid by the companies themselves.

Lack of coordination between public services also leads to conflicting measures. An example

is the case of Somika. Somika is an Indian run company that installed a hydrometallurgical

plant on top of an underground water basin that provides water to 70 % of the population of

of mining companies in the DRC.

36

environmental division gave a negative advice on the grant of the concession, but this was

neglected by the cadastral affairs division. Reportedly Vice-President Abdoulaye Yerodia

(PPRD), upon receiving complaints from the provincial governor Kisula Ngoy (PPRD),

Another case is that of the weighbridge (‘pont-bascule’) of Kasumbalesa, the main exit point

from Katanga to Zambia. The OCC (the public service involved in controlling import and

export) and a private firm Zatalt, which works in partnership with the Mines Ministry, fight

over the competence over the weighbridge. All incoming and outgoing vehicles are obliged to

be weighed and are charged 120 USD for this service. A First Quantum staff member who

Almost all joint ventures Gécamines (and Sodimico) are engaged in, have failed to contribute

of case studies, it is mentioned that there is only one joint venture company that brings fresh

cash to Gécamines, namely the Compagnie Minière du Sud-Katanga (40% Gécamines, 60 %

the copper/cobalt sector, which are mostly joint ventures with Gécamines, have in 2004 paid

The lack of strategic vision and the government authorities’ search for immediate cash, have,

according to the Commission, caused the failure of Gécamines’ relaunch. Joint venture

negotiations have not been based on any kind of strategic model pre-established by the

directors or the tutelage. A consequence is that almost all partnerships have been concluded

without a preliminary study to determine the value of the assets that Gécamines has

transferred, and in most cases these assets have been largely undervalued. Even then, the

contractual counterpart of the private partner, which is essentially a commitment to an

investment plan (with money borrowed from financial institutions and/or raised on the stock

market) and to the transfer of technology, has in many cases not been respected. The

Commission further mentions the existence of several conflicting contracts or contracts with

partners who lack the financial capacity to engage in industrial mining exploitation.

In this context, it is worth noting that, despite Gécamines’ huge copper potential, most of its

running joint venture projects are based on the extraction of cobalt, which was formerly

2005, p. 55.

in the metallurgical industry (superalloys, corrosion resistant alloys,…), the chemical industry (adhesives,

37

preference for short-term cash yielding projects over a durable development of Katanga’s

world-class reserves: at current market prices cobalt pays off about ten times more than does

not attuned to the reality of the global market. In June 2005 the Belgian economic weekly

Trends drew up a fairly exhaustive list of Gécamines’ main running and planned joint venture

off by June 2005, one arrives at a planned production of about 30.000 TCo. Current global

demand is about 50.000 tons per year and though the expected trend is a further rise over the

next years, it is quite obvious that if all Gécamines’ joint venture contracts are duly carried

Mining experts therefore agree that a rational and sustainable development of Katanga’s

reserves should, as was the case until the nineties, be based on copper and not on cobalt

the market offers a lot more opportunities for new copper projects than for projects solely

based on cobalt.

In the eighties and nineties the copper price averaged over 1 USD/lb, but due to increased

demand from China and other Asian countries the price has risen to over 1,40 USD/lb today

Katanga, the country is now the leading copper producer, accounting for 40 % of the world’s

Global demand for refined cobalt has over the past decade grown strongly, which is mainly

due to China’s economic boom. Estimates suggest that in 2005 Co-demand amounted to more

Since hardly any cobalt is fully refined in Katanga, Gécamines in 2004 only accounted for

grading only 8-35 %, most of the added value is made outside of the DRC, which deprives the

_______________________________
catalysts,…) and the ceramics industry (pottery and china). Copper is used for electrical cables, pipes and

valves, and has a wide range of applications in the automotive and electronics industry.

(http://www.trends.be/attachments/2005%5C25%5CKatanga.pdf)

representatives of mining companies in the DRC.

http://www.mbendi.co.za/indy/ming/cppr/sa/cl/p0005.htm

38

Most of China’s cobalt production, which accounted for 23 % of global output in 2005, and

estimated that in 2005 75 % to 90 % of China’s import of cobalt ores and concentrates came

The failure to relaunch the formal mining sector in Katanga is the main cause for socioeconomic

illustrations of this is the phenomenon of artisanal mining which an estimated 50.000 to

70.000 people reverted to as a strategy for survival, after the biggest employer of Katanga

exceptionally high grade of cobalt. An estimated 70 % of artisanal digging occurs on the

Heterogenite occurs as deep as about 15-30 meters below the surface and is extracted under

appalling working conditions: “creuseurs” frequently die due to primitive mining methods;

some of the ore bodies, like the one of Shinkolobwe, are naturally radioactive and constitute a

great health hazard to the miners, and also to the entire region through dust pollution; the

artisanal activities imply child labour and cause serious descolarisation; and the miners

http://www.mbendi.co.za/indy/ming/cppr/sa/cl/p0005.htm

39

The heterogenite is sold to intermediaries (“négociants”), who subsequently sell it to local

trading houses (“maisons d’achat”), the biggest of which are Bazano (Lebanese), Chemaf

ore is first exported by truck or train to Zambia, then goes further on to South-Africa, from

since, as noted above, the relevant authorities are unable to provide reliable statistics, the

based consultancy firm International Mining Consultants (IMC) cites an amount of ore that

turnover of over 120 million USD. Production and other costs need of course be taken into

Moreover, scraping away the upper layers of mineral deposits heightens the production costs

The Lutundula Commission has shown that several attempts on behalf of the Congolese

authorities to structure heterogenite mining and trading have failed due to bad governance and

Compagnie: NOUCO) to defend the interests of the artisanal miners. This organisation was

supposed to co-operate with the non-profit organisation Association des Exploitants Miniers

et Artisanaux du Katanga (EMAK). NOUCO ceased its activities and left the “creuseurs” it

represented with a 1 million USD debt payable to EMAK. NOUCO’s successor Congolaise

des Mines et de Développement (COMIDE) now engages in artisanal exploitation for the

profit of its directors. Gécamines further engaged in “hand-picking contracts” with the main

trading houses (Bazano, Chemaf and Somika), which organize artisanal exploitation on

Gécamines’ concessions. These private partners are supposed to cede to Gécamines half of

their production, but Gécamines has not installed a controlling mechanism to verify whether

this really happens.

The collapse of Gécamines and the failure to relaunch it may well prove to be a threat to

widespread poverty and unemployment, a general feeling of lawlessness and futurelessness,

underinvestment in education and health care, and environmental issues serve as a breeding

ground for violent conflict. Drawing attention to current fighting by Mai Mai militias in the

north of Katanga, a recent analysis by International Crisis Group points out that the province

which is potentially the richest of the country harbours several underlying tensions that may

40

power, an elite of mainly “northerners” has ruled the province, much to the resentment of the

also re-ignited conflict between native Katangans and the Luba who originate from the Kasaï

and who have in the beginning of the nineties endured operations of “ethnical cleansing” that

The political responsibility for Katanga’s grim socio-economic conditions lies primarily with

Kabila’s Katanga clan and its power brokers, who have upheld their near-hegemonic position

in the province for almost a decade. As previously noted, in both international and Congolese

NGO and press reports, numerous accusations have been made about the ruling elite’s

corruption practices. It is very hard though to provide solid evidence for allegations of

corruption or for private stakes of government officials in the mining sector. A recent official

document, however, does indicate that Kabila’s PPRD uses Gécamines as a vehicle for

Conseil Provincial of the PPRD in Katanga on 20 September 2005 wrote a letter to the PPRD

general secretary Vital Kamerhe, expressing his thanks for the financial support PPRD

Katanga receives from the hierarchy of the party. He further stresses the capacity of the

PPRD/Katanga to raise funds and lists a number of Congolese contributors. These

contributors are divided into two categories: (i) mandatories of Gécamines and ‘la Société

Nationale des Chemins de Fer du Congo’ (SNCC), all making regular payments

Without therefore necessarily being exhaustive, the list of names contained in the letter

(see below) he was promoted to the post of deputy general manager.

transition. Discarded from his position in December 2005.

transition. Discarded from his position in December 2005.

the transition. Now promoted chairman of the board.

Was appointed Minister of Press and Information on 30 June 2003, but in July

Provincial) and Richard Muyej Mangeze Mans (Président du Bureau du Conseil Provincial), dated 20/09/2005.

See Appendix II to this report; Reportedly PPRD/Katanga itself receives 15.000 to 30.000 USD a month from

PPRD national headquarters. See : http://www.globalsecurity.org/military/library/news/2006/02/mil-060217-

irin04.htm

41

2004 he stepped down from office to become the Secretary General of the

PPRD.

PPRD and is a key power broker in the DRC mining sector. Mwanke is a

former employee of South-African engineering firm Bateman, that belongs to

the Global Resources Group of Beny Steinmetz (see below). Steinmetz’s

Group together with Dan Gertler’s DGI Group formed the company GEC Ltd.

which acquired rights over Gécamines’ KOV mine (see Chapter: Gécamines’

reform in practice: cases of KOV and Kamoto). Mwanke introduced Gertler’s

of MIBA’s output. Between 2001 and 2004 Mwanke sat on the board of Anvil

several mining projects in Katanga (Dikulushi, Mutoshi, and Kinsevere). In

1998 Mwanke put his signature to a joint venture contract that handed out the

Central Group of Gécamines to Ridgepointe Overseas, a firm of Zimbabwean

April 1998 to April 2001, after which he was in charge of the State Portfolio in

Laurent Kabila’s government. The UN Panel of Experts named him as a key

player in the plunder of the DRC’s resources and he was subsequently

removed from government (November 2002). However, in July 2003 he was

appointed secretary general of the transitional government, and in January

2004 Joseph Kabila gave him a position as roving ambassador. Today he is

still one of Kabila’s closest advisors.

advisor, until he was appointed Minister of Industry and Small Enterprises in

October 2003.

PPRD. He was appointed Secretary General of the government in 2001 and

Chief of the President’s cabinet in 2002. He resigned from office in November

2004 after his alleged involvement in a financial scandal. The allegation was

that he had pocketed 1,6 million USD brokering a debt reduction of the

Minister of Interior by Joseph Kabila and later Secretary General of the PPRD.

Currently he is Vice-Governor of Katanga, in charge of economic affairs.

PPRD. On 30 June 2003 he was appointed “Chef de la Maison Civile du Chef

above mentioned UN reports as a key private actor in the plunder of Gécamines during the war. He was

appointed as CEO of Gécamines from November 1998 to March 2000. Rautenbach had in October 1997

obtained a contract for his firm Ridgepointe Overseas, that operated the Kababankola mine near Likasi in a

partnership with Gécamines. In November 1998 all assets of the Central Group were transferred to Rautenbach’s

Central Mining Group. When Rautenbach was discarded from Gécamines’ management in March 2000, he was

stripped of his mining assets, but part of them were granted to his country-fellow and arms dealer Arnold

Bredenkamp. Later Rautenbach re-appeared on the Katanga mining scene through stakes in mining operations

owned by his holding company Shaford Capital.

30/11/2004.

42

de l’Etat”. This institute takes care of the personal matters of the President and

his family. Its head administers the public funds allocated to the President.

Governor of the « Banque Centrale du Congo » in the same year. He holds this

position up to today.

former employee of Gécamines and became Governor of Katanga in

November 2001. In May 2004 Kisula Ngoy replaced him.

Katanga since May 2004.

PPRD. Appointed ambassador to Zimbabwe in 1998 and Minister of Press in

April 2001. He left the government on 30 June 2003 and was named special

Secretary of the President of the Republic in January 2004.

the Centre d’Expertise d’Evaluation et de Certification (CEEC), a key institute

in the diamond sector, until he was appointed general director of mining

parastatal Okimo in August 2005. President of FC Lupopo, a soccer team in

Katanga, that received a sponsoring cheque of 10.000 USD from heterogenite

Katanga. President of soccer club TP Mazembe. He reportedly has links with

Further research into mining sector related assets and benefits of the above listed individuals

is strongly recommended.

The said letter further lists a number of foreign businessmen that are active in Katanga and

Simon (Société East China), Mr. Gonzalo (Marc Rich RSA), Mr. Chetan and Mr. Hitech

203

http://www.omct.org/base.cfm?page=article&num=5568&consol=close&kwrd=OMCT&rows=13&cfid=954776&cftoken=283209&SWITCHLNG=FR

43

Kabila about the plan of Kinross-Forrest (K-F) to establish a joint venture company with

Gécamines to exploit the Kamoto mine and related assets. The report concludes that in

comparison with the estimated 200 million USD the private partner plans to contribute,

the equity stake of 30 % proposed to Gécamines in the joint venture is unacceptable.

against the planned joint venture.

Tuma-Waku in November 2002, and sends a seven page Memorandum of Agreement

related to the joint venture to Twite Kabamba and Nzenga Kongolo, respectively

Chairman and CEO of Gécamines. The Memorandum concerns the same assets as

mentioned in the Tuma-Waku report. The estimated contribution of K-F is still 200

million USD, but the proposed equity stake of Gécamines is diluted to 25 %.

Gécamines, sends a letter to Kabamba and Kongolo with the October 2001 report of

Tuma-Waku attached to it. Bwanga proposes to prepare a draft agreement that contains a

detailed description of Gécamines’ contribution to the project. He also remarks that the

44

Kamoto mine is already subject to an agreement with South-African mining company

Iscor.

Arthur Ditto (chairman of K-F) sign a nine page Preliminary Agreement containing no

significant alterations of the 3 June 2003 Memorandum of Agreement.

Kabamba.

Ndongala, who hails from the opposition.

action plan to reform Gécamines to the interministerial Economic and Financial

Commission (ECOFIN) in Kinshasa. The plan is based on an audit of Gécamines,

commissioned by the World Bank, that IMC carried out in the course of 2003. IMC

strongly advises against the K-F deal related to Kamoto, and classifies the agreement with

Iscor regarding Kamoto as an exemplary model for future negotiations. IMC further

recommends that all Gécamines’ directors be dismissed immediately and that a team

assisted by international experts renegotiate all of Gécamines’ partnerships, starting with

the major ones (Kamoto, Tenké Fungurumé, etc.). At the ECOFIN meeting IMC also

presents a detailed rapid restart strategy for Gécamines. This strategy aims to valorize the

assets of Gécamines that have not yet been subjected to joint venture agreements. The

most important of these assets are the mine of KOV and related concentrators and refining

facilities.

Kongolo instructing him to suspend all ongoing negotiations between private partners and

Gécamines. A copy of the letter is transmitted to President Kabila and the main members

of ECOFIN.

sign a joint venture agreement entitled « Convention de joint venture entre la Générale

des Carrières et des Mines et Kinross-Forrest Ltd. relative à l’exploitation de la filière

Kamoto (mine)-Dima-Kamoto concentrateur-usines hydrometallurgiques de Luilu ».

signed. The parties to the joint venture contract are Global Enterprises Corporate (GEC)

of diamond tycoon Dan Gertler and Gécamines.

are awarded to Ernst & Young (financial audit) and Duncan & Allen (legal audit). The

legal audit is again supposed to scrutinize Gécamines’ partnerships. The French

consultancy firm Sofreco wins a contract to co-manage Gécamines. This project is also

funded by the Bank.

45

entitled « Convention de joint venture entre la Générale des Carrières et des Mines et

Global Enterprise Corporate Ltd. relative à l’exploitation de la mine à ciel ouvert de KOV

et des gisements de Kananga et de Tilwezembe ».

Assembly. The IMC recommendation concerning KOV and Kamoto is echoed in the

report: ongoing negotiations on Kamoto, KOV and related assets should be stopped. For

an unknown reason the report of the Commission does not mention the Preliminary

Agreement on Kamoto, although this contract was signed before the transition.

approves the joint venture agreements of Gécamines with GEC, K-F, and Lundin/Phelps

Dodge (involving the Tenké Fungurumé deposits). The agreements, together with that on

KOV, concern 70 % of Gécamines’ reserves and all strategic industrial assets in the West

Group around Kolwezi.

in the first week of August another presidential decree ratifies the appointment of new

directors in 30 parastatals.

decree necessary to change Gécamines’ board of directors. Kongolo and Kabamba are

dismissed, but three other directors are promoted. Through this decree Sofreco is finally

allowed to co-manage Gécamines, which by now has been stripped of all its assets.

the Comité Internationale d’Accompagnement de la Transition en RDC (CIAT) and to

Paul Wolfowitz, the President of the World Bank. Annexed to it is an analysis by

Canadian law firm Fasken Martineau Dumoulin of the GEC and K-F joint venture

agreements with Gécamines. The memorandum contains the following summary of the

competitors (First Quantum) is a client of the Canadian law firm. Forrest Group further

states that the agreement is satisfactory to all stakeholders.

46

In 2002 the Bureau Central de Coordination (BCECO), a Congolese public service that

manages projects funded by international donors, issued an invitation to tender for a study of

USD, was financed by the World Bank in the framework of an International Development

Mining Consultants (IMC) and it was signed in September 2002. IMC produced a twofold

study, consisting of an audit of the then current state of affairs of Gécamines (phase I of the

study, concluded in March 2003 and approved by the Congolese government in June 2003)

and of a strategic proposal for a rapid restart of the company’s production (phase II, finalized

Following usual procedure with audits commissioned by the World Bank, the IMC report was

never disclosed to the public, though apparently it does circulate among several journalists

of the audit (phase I) and a detailed description of the strategic plan IMC envisaged to restart

Gécamines’ production (phase II). The diagnostic part of the IMC study (phase I) was, to say

the least, highly critical. Its key points of criticism are a prelude to the conclusions of the

Lutundula Commission, which indicates that the IMC audit did not lead to a better

management performance of Gécamines. Some key points of criticism can be summarized as

follows:

“catastrophic” situation of Gécamines’ are made impossible by the juridical

78/002, as noted above, deliberately voids Gécamines’ (and in fact all public

enterprises’) management of executive power. The real director general therefore is

the Minister of Mines, who has the final say in every managerial decision. This

President Kabila decreed the creation of a Permanent Committee for the

opposition would, in accordance with the Global and Inclusive Agreement, replace

Kabila stalwart Jean-Louis Nkulu as the Minister of Mines (see Chapter: Mining

reforms in practice: case of the Mining Registry). The decree formally transferred the

“administrative” tutelage of Gécamines to the President. According to the specialized

funded by foreign donors, including the DRC’s mining parastatals. This body is called Comité de Pilotage de la

Réforme des Entreprises Publiques (Copirep).

http://64.233.179.104/search?q=cache:62T6ivhMQboJ:www.recim.org/rec/rec0603.htm+%22comite+permanent%22%2Brestructuration%2Bgecamines&hl=
nl&gl=be&ct=clnk&cd=2&client=firefox-a

47

newsletter Africa Mining Intelligence this demarche was meant to avoid that the

application of the Global and Inclusive Agreement would deprive the Kabila clan of

These agreements form the legal basis of operational companies in which Gécamines

and the private partners hold an equity stake. The agreements contain numerous

anomalies, all to the detriment of Gécamines, which are the result of negotiations led

by members of the management and of the government who were primarily aimed at

generating quick cash instead of a sustained and rational development of Gécamines’

patrimony. Gécamines has transferred most of its mining rights and industrial assets to

joint venture companies. The counterparts the private partners commit to are

production and investment schemes that usually aim far below the exploitation

potential of the mineral deposits concerned. As a result, many of Gécamines’ assets

are frozen. Moreover, the private partners all invest with borrowed capital that must

be reimbursed by the joint venture company, before Gécamines touches any dividend.

To obtain the necessary loans from financial institutions, the private partners give

Gécamines’ assets in pledge. Since they usually have their social seat in off shore

fiscal paradises, the private companies can easily be dissolved in case any legal

problem, e.g. related to the eventual bankruptcy of the joint venture, should arise.

In September 2003 the auditors presented their plan for a rapid and sustained restart of

Gécamines’ production to the Congolese interministerial Committee on Economy and

place in the presence of Bemba, the member ministers of ECOFIN, a number of other highranking

1. All current members of the board of directors and trustees need to be immediately

replaced. To the new board of trustees must be added three internationally reputed

managers familiar with the mining industry. The new management must no longer be

harassed by the constant interference of political authorities.

2. Joint venture agreements must be extensively analysed before (re-) negotiation. The

principal objective is to optimise State revenue by (re-) establishing an equitable

relationship between the State and private investors. Future negotiations will be

carried out by a technical structure composed of Congolese and international experts

and will be supervised by ECOFIN and a political structure. All partnerships need to

be re-examined, in priority the ones related to the most important projects (Tenke

Fungurumé, Kolwezi tailings, Kamoto, Luiswishi, Kipushi,…).

3. A new 100 % subsidiary of Gécamines must be established. This new company called

Gécamines A (GCMA) will be debt-free and will receive all mining assets of

Gécamines. Its primary objective is to implement the rapid restart strategy laid out by

IMC. Three internationally reputed managers must be added to the board.

48

4. The rapid restart strategy consists in the development by GCMA of three industrial

entities, the only ones not yet subjected to existing joint venture agreements: (i) the

mine of KOV and/or Kamoto, the DIMA concentrator and the Luilu

hydrometallurgical refinery in Gécamines’ West Group; (ii) smaller mines such as

Tilwizembe and Kananga, the KZC concentrator and part of Luilu in the West Group;

and (iii) smaller mines (Kambove, Kamoya,…), the Kambove concentrator and part of

the Shituru refinery in the Central Group. A business plan worked out by IMC

determined that with an initial investment of 60 million USD, and a working capital of

40 million USD, GCMA could, within about three years, produce 100.000-150.000

tons of copper and 4.000-6.000 tons of cobalt. This production level represents a

conservatively estimated yearly turnover of 150-200 million USD.

5. Gécamines has up to 30 June 2003 accumulated a debt of 1.630 million USD. This

debt should be restructured along a plan worked out by IMC.

6. The artisanal extraction of heterogenite has an important socio-economic function

since it provides an income to ten thousands of diggers. The ore should be treated in

the ovens of Katanga to maximize the value added in the country. Artisanal activities

should be restructured for environmental and security reasons.

As a way of assisting Gécamines in the implementation of the proposed strategy, the World

Bank funded another series of studies through the Comité de Pilotage de la Réforme des

Entreprises Publiques (Copirep), that sent out invitations to tender for new audits. More than

a year after the official meeting between ECOFIN and IMC, Africa Mining Intelligence

announced which consultancies had won the contracts: the accounting firm Ernst & Young

would carry out a financial audit of Gécamines, law firm Duncan & Allen a legal audit, and

Sofreco had won a contract to take part in Gécamines’ management for a period of 18 months

involvement however kept being deferred: as late as 19 July 2005 the Congolese Council of

December 2005 before the President issued the decree necessary to install the parastatal’s

In other words, the Kinshasa authorities waited more than two years to implement IMC’s

recommendation to “immediately replace all members of Gécamines management”. In the

mean time the two highest-ranking officials, chairman of the board Twite Kabamba and

managing director Nzenga Kongolo, had remained in office. Three former board members

remain in place in the “new” board: Assumani Sekimonyo who is the former deputy general

manager of Gécamines replaces Kabamba; Mukasa Kalembwe becomes deputy general

three make regular financial contributions to the PPRD. It also remains to be seen if and when

Sofreco’s involvement will bring about any real changes. In a January 2006 interview Paul

Fortin, the new CEO of Gécamines delegated by Sofreco, declared that, despite the existence

49

of all the above mentioned audits, his team will re-analyse all joint venture agreements during

If this new phase of partnership scrutiny is duly carried out, it will also include the joint

ventures through which Gécamines lost it rights over the only assets still available at the time

when IMC devised its rapid restart strategy. Our analysis of what happened to Gécamines’

major assets in the West Group – those of KOV and Kamoto – after the September 2003

meeting of IMC and ECOFIN shows how the reform of Gécamines works in practice.

Before we analyze how the KOV and Kamoto deals came about, it is necessary to point out

that not only the World bank, but also the President’s cabinet seemed to be well aware of the

gravity of Gécamines « catastrophic » situation. On 13 November 2003 the Deputy Chief of

Cabinet, Samba Kaputo, sent an official letter to Gécamines CEO Nzenga Kongolo

mine of KOV, and of Kinross-Forrest and Kamoto, show that Kaputo’s request was to no

avail.

On 9 September 2004 an agreement was signed between Gécamines and a company called

Global Enterprises Corporate Ltd. (GEC), transferring all key assets related to the open mine

of KOV plus the Kananga and Tilwezembe deposits to a joint venture called ‘DRC Copper

venture negotiations are usually a lengthy process, it is very likely that talks between

Gécamines and GEC had been going on for quite some time before that date. Even if this is

not the case, it remains a fact that eight months after the IMC/ECOFIN meeting and Kaputo’s

ensuing letter, the “Accord Préliminaire” buried IMC’s rapid restart strategy.

The signatory to the joint venture contract on behalf of GEC was the Israeli diamond tycoon

Dan Gertler. Gertler’s activities in the DRC go back to 1998, when he set out to cultivate

transmitted to: the President, the chairman of ECOFIN (Bemba), the Ministers of Mines (Diomi Ndongala) and

Portfolio (Vunabandi), the chairman of the Gécamines board (Kabamba). Samba Kaputo is now security advisor

to the president and is, as part of the “Katangan clan”, widely recognized as one of the major power brokers in

the DRC. This document was available to the authors of this report for perusal only.

Global Enterprise Corporate Ltd. relative à l’exploitation de la mine à ciel ouvert de KOV et des gisements de

Kananga et de Tilwezembe. Signed by Nzenga Kongolo, Twite Kabamba, and Dan Gertler on 09/09/2004. This

document was available to the authors of this report for perusal only.

50

Gertler’s dealings in the DRC during the war led an advisor to the Ministry of National

Infrastructure of Israel, a person named Yossi Kamisa, to file a suit against him in February

Defence Export Organisation connived with Gertler to train the Congolese army in exchange

to dismiss Kamisa’s claim and ruled that Kamisa had signed a final waiver of all demands

After the death of his father, Joseph Kabila revoked the IDI deal in April 2001, reportedly

the transition, another Gertler company, viz. Canada based Emaxon, acquired sales rights

the report of the Lutundula Commission states that it was Katumba Mwanke, one of Kabila’s

closest advisors, who introduced Emaxon to MIBA to strike a deal that the Commission

behalf of the government (see above) and is a former employee of Bateman, a South-African

reportedly is a joint venture of Dan Gertler International (DGI) with Steinmetz’ s Global

do not, however, have any records of Mwanke’s possible involvement in the GEC deal. But

Israeli defence industries in their export activities.

Shekel, rate on 9 February 2006: 1 USD = 4.69 NIS.

51

another political figure also appears to be involved. Reportedly, former Mines Minister

2006 Tuma-Waku was named President of the GEC/Gécamines joint venture (DRC Copper

In February 2006 three NGOs, namely 11.11.11, Broederlijk Delen and RAID, and the

Belgian monthly Mo*, asked the Canadian law firm Fasken Martineau DuMoulin (Pty) Ltd.

to analyse the Joint Venture Agreement (JV Agreement) of 9 September 2004 between

Gécamines and GEC. On instructions of the NGOs, the firm has centred its analysis on how

the JV Agreement’s provisions generally resemble the provisions normally found in joint

Fasken Martineau DuMoulin (Pty) Ltd. concludes its analysis as follows:

52

Also the Kamoto file illustrates how resource management in Katanga works in practice. In

its November 2003 report IMC analysed the existing agreements concerning Kamoto and

stated that it would have preferred to include the mine of Kamoto and related industrial assets

The parties involved in this dispute were a South African steel producer called Iscor (later

renamed Kumba Resources), and a company registered in the British Virgin Islands, namely

Kinross-Forrest (K-F). K-F was established in 2001 by the Canadian company Kinross (60

Having looked into the agreements Gécamines/Iscor and Gécamines/K-F, IMC strongly

exemplary model for future negotiations.

53

Iscor’s project consisted in exploiting 30 % of the known reserves of Kamoto and in

rehabilitating a concentrator (KTO2) and part of the metallurgical plant of Luilu, a key

that Gécamines would not transfer its assets but would let Iscor work with the assets and

rehabilitate them for a period of ten years, after which Gécamines could again fully dispose of

charge extra interests on the funds it would borrow for investments (150 million USD), nor

According to IMC, the K-F project concerned the “exclusive disposal” of most of the West

Group deposits, the concentrators of KTO and DIMA and the entire metallurgical plant of

Some of the IMC auditors’ concerns had already been raised in October 2001 by the then

Minister of Mines Simon Tuma-Waku Bawangamio. On 5 October 2001, Tuma-Waku

received a visit of George Forrest, two former administrators of Gécamines (René Noleveaux

and Urbain Brabants), and Arthur Ditto of Kinross, all of who just before had had an audience

Kabila, Tuma-Waku brought to notice the importance of Gécamines’ patrimony involved in

the planned joint venture:

Objet: création joint venture Gécamines-Kinross/Forrest, signed 09/10/2001 by Simon Tuma-Waku, p. 1, This

document was available to the authors of this report for perusal only.

54

Tuma-Waku in his report concluded that, compared to the 200 million USD the private

partner planned to contribute, the equity stake of 30 % proposed to Gécamines in the joint

Gécamines, Jean-Louis Tasinda, reportedly also warned Joseph Kabila about the plan to strip

Gécamines of its most profitable units. Tasinda reportedly pleaded that the deal would leave

Gécamines with 24.000 workers on its hands, as the joint venture would only employ

On 3 June 2003 K-F wrote a letter to Twite Kabamba and Nzenga Kongolo, respectively

chairman of the board and CEO of Gécamines, with its joint venture proposal, moulded in a

with the Mines Minister at that time, Jean-Louis Nkulu, thus apparently resulted in one day in

a seven page detailed document – the said Memorandum – on the joint venture KF/

Gécamines called Kamoto Copper Company (KCC). The Memorandum concerned the

same assets as mentioned in the Tuma-Waku report, and the required (estimated) K-F input

was still 200 million USD, but the proposed equity stake for Gécamines was now diluted to

The above mentioned report of Tuma-Waku was later attached to a letter written on 23 June

2003 by Kitolo Bwanga, the director of Gécamines’ “Division de Gestion des Contrats” to

Agreement and recommended that a first draft of such a Memorandum should contain a

on 03/06/2003. Attached: Protocole d’accord entre K-F Limited et Gécamines, 03/06/2003. Unsigned but

mentioning the intended signatories: Arthur Ditto and Malta Forrest for K-F, and Nzenga Kongolo and Jean

Assumani (deputy director general) for Gécamines. This document was available to the authors of this report for

perusal only.

available to the authors of this report for perusal only.

55

Bwanga’s call for caution was, however, overtaken by events. Two days after he wrote his

letter, on 25 June 2003, the then Mines Minister Jean-Louis Nkulu wrote a letter to Twite

“Protocole d’Accord” of 3 June 2003 had thus apparently changed into a fully fledged ninepage

Bwanga, the Gécamines’ director who was in charge of managing such contracts, had thus

clearly been bypassed. The reason for all this hurry could be that five days later, with the start

of the transition on 30 June 2003, a member of the opposition would become Minister of

Mines.

It was most probably this “Accord Préliminaire”, containing no substantial alterations to the

“Protocole d’Accord”, that was so fiercely criticized by IMC. And despite the above

mentioned call of Samba Kaputo in November 2003 to stop all joint venture negotiations,

three months later further negotiations led to a Joint Venture Agreement between Gécamines

Before it acquired its stake in the Kamoto project, the Group of Gécamines’ ex-chairman

George Forrest (November 1999 – August 2001) already possessed the most important

mining portfolio in the DRC: after exploiting the Kasomba mine, the Group aquired stakes in

the Luiswishi (East Group) and the “Big Hill” project in Lubumbashi, and in May 2003, a

Forrest’s business practices and relations with the Kabila clan have been commented at length

written, the DRC had no laws regulating issues related to party financing.

Boshab), the Director General of Gécamines (Nzenga Kongolo), and the President of K-F (Arthur Ditto). Signed

by the Minister of Mines on 25 June 2003. This document was available to the authors of this report for perusal

only.

Forrest/Limited relatif à l’exploitation minière au Groupe Ouest de la Gécamines. Signed on 24 June 2003 by

Nzenga Kongolo, Twite Kabamba, Malta David Forrest and Arthur Ditto on 24 June 2003. This document was

available to the authors of this report for perusal only.

Kinross-Forrest Ltd relative à l’exploitation de la filière Kamoto (mine)-Dima-Kamoto concentrateur-usines

hydrometallurgiques de Luilu, signed by Nzenga Kongolo, Twite Kabamba, Malta David Forrest and Arthur

Ditto on 9 February 2004. This document was available to the authors of this report for perusal only.

http://www.copperresources.com/news/documents/CRC%20Release%20301105.pdf.; ‘Forrest returns’, in:

134.

de/dokumente/divers/gecamines.pdf, p. 6, 14.

56

Besides an analysis of the GEC contract, the above mentioned coalition of NGOs also

commissioned the Canadian law firm Fasken Martineau DuMoulin (Pty) Ltd. to make an

analysis of the February 2004 Joint Venture Agreement between Gecamines and K-F with

respect to the Kamoto project. As in the case of GEC, Fasken Martineau DuMoulin (Pty) Ltd.

centered its analysis on a comparison of the JV Agreement’s provisions with those found in

Fasken Martineau DuMoulin states that, under the JV Agreement, Gécamines agreed to grant

the joint venture company KCC the exclusive rights to occupy, have full benefit, use,

maintain, upgrade, develop, and process the tailings, and also the surface rights, the

concessions, the properties of the KAMOTO project and all other mining rights and other

The JV Agreement also provides that, should the Concessions contain insufficient ore to meet

the production targets defined in the feasibility study or to feed the processing plant for the

period of the JV Agreement, then Gécamines must also make supplementary exploitable

Fasken Martineau DuMoulin (Pty) Ltd. concluded that:

1. In instances such as Kamoto, common practice is to have an audit and an evaluation of “in

kind” contributions so that both partners can be satisfied that such contribution has been

given a fair value. The share capital is thereafter attributed proportionately to the

contributions of each partner. In the case of the Kamoto Project, the Parties’ contributions

2. The JV Agreement relates to extensive assets, part of the national wealth of the

Democratic Republic of the Congo, which are being transferred to be used by the private

sector without an evaluation and assurance that the country will be appropriately

3. It is reasonable to assume that K-F will have been totally reimbursed in capital and in

interests of all loans and advances and will have derived substantial benefits from the

control exercised on the operations, prior to Gécamines receiving any remuneration on its

4. It is reasonable to assume that the remuneration for the rented equipment and installation

5. It is reasonable to assume that available cash for dividends will be minimized as it will be

more advantageous for K-F Limited to be fully remunerated through contracts with

between La Générale des Carrières et des Mines and Kinross Forrest Limited with respect to the Kamoto Mine,

the Dima-Kamoto concentrator and the Luilu hydrometallurgical plant, 19 février 2006, 10 p.

57

statement continues as follows:

In another statement on its website Forrest Group has put a link to the report of the Lutundula

It should however be noted that the Lutundula Commission, though it was supposed to

examine all economic contracts concluded before 30 June 2003, for an unknown reason has

not included in its analysis the “Accord Préliminaire” signed on 24 June 2003, concerning KF

and Kamoto. The Commission only mentions the Kamoto mine and related assets in one of

its recommendations:

http://www.forrestgroup.com/fr/infos37.html

acquire 75 % of the Kamoto Copper Company.

58

After the Lutundula report was deposed at the Bureau of the National Assembly in June 2005,

this recommendation, echoing that of the IMC auditors, was again neglected by the Kinshasa

authorities. As noted above, the Council of Ministers decided in July 2005 to transfer the

rights over the KOV and Kamoto concessions and assets to the Gécamines joint ventures with

GEC and K-F. Both agreements were ratified by Presidential decree, respectively on 4 August

government, despite the Lutundula Commission’s recommendation to stop concluding

contracts related to the national patrimony until after the elections, approved of a partnership

The joint venture company acquired mining rights over a surface area of 15.000 square

concessions of Tenké Fungurumé. During the first week of August another decree appointed new directors to 30

parastatals (see Chapter: Governmentality).

government approved of two other joint venture agreements with MIBA. The private partners involved are De

Beers and Nizhne-Lenskoye (see Chapter: The Lutundula Commission).

59

instigation and with funding of the World Bank. The Code constitutes the legal framework

for the mining sector. The new law’s directives are contained in the Mining Regulation,

which is ratified in May 2003. Both documents outline the operational procedures of the

Mining Registry.

the Mining Registry, to which the World Bank has committed 1 million USD.

Registry.

it is unable to handle files in a fair manner as was outlined.

is replaced by Diomi Ndongala, who hails from the opposition.

about Mbaka’s poor management methods. Mbaka is replaced by the deputy director and the

Registry is closed down to repair the damage.

suspended upon allegations by the Bakandeja Commission of bad governance in the public

enterprises under his authority. In January 2005 he is replaced by Ingele Ifoto, the fourth

Mines Minister in three years time.

60

fourth general director of the Registry in less than three years time.

In 2001 the World Bank approved an Institutional Development Fund (IDF) to finance the

Transitional Support Strategy report of July 2001 the World Bank expressed the intent of the

In a letter of intent to the IMF Congolese senior executives describe the Mining Registry as

“the key administrative institution responsible for managing the sector's new legal and

Regulation, decreed respectively in July 2002 and May 2003. The major innovations of the

The new Mining Code and Mining Regulation give a detailed description of what the nondiscretionary

procedures mentioned above entail. Without going into all details, one can

summarize as follows:

1. The applicant for mining rights hands over all documents pertaining to his demand to

the Registry.

2. The Registry treats the demand according to the principle ‘first-come-first-served’.

3. The Registry verifies if the three main criteria are met:

a. Eligibility of the applicant: articles of association of the company, certified

copies of identity cards, …

July 9, 2001, p.17.

24, 2004. See: http://www.imf.org/external/np/loi/2004/cod/01/

http://www.imf.org/External/NP/LOI/2002/cod/01/

61

b. The applicant needs to prove that he has the required financial capacity. The

Mining Code prescribes the formula used to calculate the minimum sum.

c. For cadastral purposes the national territory of the DRC is divided into

quadrangles (of approximately 85 hectare or 0,85 square kilometres). The

4. The Registry sends its advice – favourable or non-favourable – to the Ministry of

Mines. The advice is accompanied by a technical evaluation from the Directorate of

Mines, another public entity involved in administering the mining sector.

5. The Minister of Mines signs the decree of patent (“arrêté d’octroi”).

6. If the mining title is granted, the Registry issues a certificate to the applicant signed by

the general director of the Registry.

For every stage of the procedure a maximum delay is stipulated in the Mining Code. The

decision of the Minister, for instance, must be imparted to the applicant within a period of

thirty days upon receipt of the file sent by the Registry. Another stipulation of the Mining

Code is that the holder of a permit must pay annual surface area fees to the Mining Registry.

For an exploration permit the fee amounts to 2,5 USD per quadrangle during the first two

years. The maximum number of quadrangles granted to a company for exploration is 23.500

years the fee is multiplied by ten. Surface area fees for exploitation permits amount to 425

per exploration permit is 470, and if we assume that all exploration permits issued in 2004

covered 470 quadrangles, these allotments represent a sum of nearly 2,8 million USD.

If all duties are duly collected, the Registry thus disposes of a considerable amount of fluid

assets. These should enable it to maintain the financial and functional autonomy with which it

endeavours to minimize the role of Congolese politics in the distribution of mining rights.

Another proclaimed intent, the enhancing of transparency in the business of granting permits,

The project of the modernization of the Registry was granted to GAF, a German consultancy

firm that had previously set up computerized mining titling systems in Namibia and

Madagascar. The contract value was 1 million USD, and was funded by the World Bank. The

account (feasibility study, social development plan,…).

may hold a maximum of 50 exploration permits (23.500 quadrangles = 20.000 km2).

http://www.geocities.com/fsddc/potentiel280205.html

62

project duration was 18 months with an additional phase of 12 months for support and

firm, International Institutional Consulting (Spain), supervised the implementation of the new

The new Mining Registry was to open its doors in June 2003 and was to be governed by a

five-headed board of directors. In May 2003 the outgoing government appointed Ambroise

Mbaka Kawaya to the post of general director and he was confirmed in this position soon

after by the newly formed transitional government. Mbaka hails from Katanga and is a former

chairman of Gécamines. In that capacity he was a signatory to the much contested contract

Through this contract Ridgepointe, a company of Zimbabwean businessman Billy

Rautenbach, acquired a 80 % stake in the Central Mining Group (CMG), which was a joint

November 1998, a few days after the deal was finalized, Rautenbach replaced Mbaka at the

head of Gécamines, a position he would hold until March 2000. The management switch at

Gécamines degraded Mbaka to the position of counsellor, but shortly after he acquired the

post of Deputy Mines Minister in the government of the late Laurent Kabila.

politically neutral move, and thus contravening the idea of depoliticising the business of

granting mining licenses, the appointment of a Kabila stalwart as director of the Registry was

part of a PPRD stratagem to consolidate its powerful position in the mining sector before the

start of the transition. The Global and Inclusive Agreement, signed in December 2002,

stipulated that a member of the unarmed political opposition would acquire the post of Mines

Minister under the transition. But due to the Mining Code stipulations on the Registry, much

of the competence over the granting of mining rights was transferred from the Mines Minister

to the head of the Registry, and the scope of the transitional Mines Minister’s mandate was

further depleted by a series of Presidential decrees issued in the last months before the

transition. The decrees deprived him of his competence over the oil sector, transferred the

authority over a “Permanent Restructuring Committee” for Gécamines to the President

himself and obliged the Mines Minister to share his power over the Centre d’Expertise

interview to the authors of this paper, stating that GAF’s contract with the World Bank contained a clause of

confidentiality.

to the questions of this paper’s authors about the Mining Registry.

Senaat, Gewone Zitting 2001-2002, Parlementaire onderzoekscommissie «Grote Meren», Hoorzittingen Vrijdag

8 februari 2002. See footnote 187.

key institute in the diamond trade since it is the public service that evaluates and certifies precious and semiprecious

stones, and issues Kimberley certificates for diamonds. Until August 2005 it was led by Victor

Kasongo, another confidant of President Kabila. Kasongo is now head of mining parastatal Okimo and was

replaced at the CEEC by Jean-Pierre Tshimanga Buana (MLC). In the period considered, the Portfolio Minister

was Joseph Mudumbi. Mudumbi was suspended in November 2004 upon charges of corruption by the

63

the transitional Mines Minister would be seconded by the outgoing Mines Minister and

The new Mines Minister in question was Diomi Ndongala, the head of the Christian

Democratic Party. His short-lived career as Mines Minister is emblematic for the constant

political struggle in Kinshasa over resource control during the transition. On numerous

occasions Ndongala did indeed come into conflict not only with the entourage of Kabila but

also with Vice-President Bemba. An example is the already mentioned Emaxon dossier. In

April 2003, diamond mining parastatal MIBA signed a contract with the Canadian firm

Emaxon Finance International, granting the sales rights for 88 % of its output to the latter

group of the Israeli diamond tycoon Dan Gertler, who with his company GEC also acquired

rights over the KOV concessions and assets in Katanga (see Chapter: Gécamines’ reform in

practice: cases KOV and Kamoto). Ndongala always publicly opposed the Emaxon deal and

advocated the process of selling MIBA’s diamonds by tender. In August 2003, he openly

clashed with his Deputy Minister after Nkulu had signed a sales order for a 10 million USD

Pierre Bemba revoked a deal that Ndongala had struck with the Indian run company

the after-effect of a feud between Ndongala and Bemba: Ndongala during his legislature

reportedly took several measures to fight export fraud in the diamond sector, thus

On 3 May 2004, a month after the Chemaf dispute, Ndongala removed Mbaka Kawaya from

result of the above mentioned “Bakandeja Commission” audit, that charged him of bad

Ifoto who also hails from the opposition. Ifoto, the fourth Mines Minister in three years time,

is in office up to the present day and keeps a rather low profile, which is probably the best

guarantee for his political survival.

The suspension of Mbaka followed complaints of several foreign companies about poor

management methods. The ministerial decree ordaining his suspension describes the motives

Mines Minister, a function that he kept for 8 months.

64

Bank representative in charge of the mining sector. De Sa replied with an e-mail to the head

of the Mining Ministry’s office demanding the Minister should cease signing documents

interference in Congolese matters is: in a public reaction Mbaka denounced De Sa’s

demarche as a “scandal worthy of Watergate” and stated that the Registry was not to be

The authors of this paper in October and November 2005 conducted an enquiry among

industry sources, international legal advisors and sources within the Registry, all of who

typically requested anonymity. The following paragraphs are based on these interviews.

Apparently major governance problems already arose on the very first day the new Registry

opened its doors to the public. It must be noted that all sources confirm that none of these

problems were due to a lack of technical capacity, as staff had received proper training, and

as board members had ample experience in the mining sector and possessed all the necessary

managerial skills.

Due to the preceding preparatory work, it had almost been a year since new mining titles had

been granted. The opening day was hectic because of the large number of demands that were

deposited. In the flurry, the correct application of the first-come-first-served principle was

threatened because the Registry’s staff experienced great difficulties piling up all files in the

correct order of receipt, and the principle was further violated by files disappearing from the

stacks. Sources within the Registry alleged that members of the board had picked out several

files and made contact with the applying companies, private initiatives that clearly

contravened the whole idea of impartial procedures. As a consequence, some companies were

from the start favoured above others, which was a pattern that persisted until the decision in

March 2004 to suspend work at the Registry for a year.

Other problems reported by industry sources were:

payment of kickbacks

process

surface areas for speculative reasons

surface fees

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On the institutional side, staff could not get used to the idea that the Registry was an

autonomously functioning entity. Because it was located in the same building as the Mines

Ministry, the Registry kept being perceived as its administrative continuation. In the original

outline of procedures, the Mines Minister’s only task was to issue decrees based strictly on

the advise of the Registry and the Directorate of Mines. However, at some stage, the cabinet

of the Mines Ministry reportedly installed a commission to re-analyse the analysis of the

Registry and the Directorate. Another consequence of infringing on the intended institutional

division was the politicisation of the Registry’s working. The Registry became part of the

institutional chain leading upwards from the Mines and Finance Ministry to Vice-President

Bemba’s Economic and Financial Commission (ECOFIN), and from there on to the “espace

présidentiel”, where advisors to Joseph Kabila such as Kikaya Bin Karubi and Augustin

One instance was reported to the authors of this paper of a permit granted by the Registry,

that was afterwards withdrawn in favour of another company, by order of an unidentified

government entity outranking the Mines Ministry. The tenor of the story recalls a

bureaucratic structures it results in a situation in which civil servants exert absolute authority

over their inferiors. If an order is not or improperly executed, the inferior functionary is

simply discarded and replaced by another one. The said syndrome can of course have a

salutary effect on the working of institutions, yielding discipline and effectiveness, but the

drawback is that a spoilt element in the structure of command affects all elements down the

chain.

The case of the Registry again shows that there is an enormous amount of political

obstruction to get impartial and transparent procedures adopted in the mining sector.

Although the modernization of the Registry seemed to be a project that could easily be

implemented, it turned into chaos within less than a year of operation. The damage done

apparently was of such scale that it took a year to be repaired. After the dismissal of Mbaka

the Registry was indeed only re-opened in March 2005. Currently, it is headed by its fourth

general director in three years time. The person in question, Jean-Felix Mupande, again is a

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320 ,‘Eugène Diomi Ndongala’ in: Africa Mining Intelligence n° 65, 09/07/2003.

321 For some interesting remarks on “Big Manism” and corruption, see: Paul Nchoji Nkwi, Democratic

Governance in Africa: a decade of misconceptions, University of Yaoundé, Cameroon, s.d.

322 ‘Jean-Felix Mupande’, in: Africa Mining Intelligence n° 121, 30/11/2005.

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Three decades of Mobutism and seven years of war have plunged the DRC in a deep

economic, social, political and humanitarian crisis. Under pressure of the international

community, the former belligerents, together with representatives of the unarmed political

opposition and civil society organisations, joined a transitional government that has ruled the

country since July 2003. The principal objectives of the transition were to re-unify and

reconstruct the country, to establish peace, to create an integrated national army and to

organise democratic elections. If one makes up the balance sheet of nearly three years of

transition, one cannot but conclude that for the most part it has failed. The east of the DRC is

still not under government control and is immersed in conflict, the integration of the army is

far from achieved and parallel command structures reflect the persistent loyalty of troops to

the rebel movements they belonged to during the war. Elections, finally, were postponed with

a year and have over the last months been rescheduled numerous times to an always later

date.

Much of the transition’s failure can be ascribed to bad governance and corruption on behalf of

the DRC’s current political class. The DRC’s history has burdened it with a certain kind of

“governmentality” that is the main obstruction in the way of reconstructing the country and

adequately addressing the humanitarian crisis it is facing. At all levels of the state apparatus,

public office is seen as a means to acquire personal wealth and privileges. For low rank

officials, who are underpaid or not paid at all, petty corruption is a strategy for survival. This

excuse however is not valid for corrupt practices on behalf of the country’s leaders, who bear

a grave responsibility for the situation the next government will inherit. Large-scale

embezzlement of funds earmarked for military purposes has made the national army

inefficient and barely operational. Its inadequately paid soldiers often revert to their guns as a

means to scrape a living and pose a security threat to the population that they are meant to

protect. The ongoing conflict in the east has a strong economic and resource component to it,

and is largely brought about by high-ranking politicians within the transitional government.

Finally, one of the major causes for the postponement of the elections is the ruling politicians’

reluctance to step down from their comfortable position in the transitional institutions, and to

lose their access to the wealth yielded by the nation.

Throughout the transition the leaders of the DRC have paid ample lip service to international

donors on the issue of bad governance and corruption. In practice, however, the key

principles of good governance – participation, accountability, transparency – have constantly

been disregarded. As a result, the Congolese public opinion perceives anti-corruption

measures more as a tool to rule out political adversaries, than as a genuine effort to serve the

interests of the population. An example of this is the Parliamentary enquiry into governance

practices at public enterprises by the Bakandeja Commission. The investigation led to the

dismissal of many high rank officials and six ministers, but was not further scrutinized in

court, which could have held the accused officials accountable. Our discussion of the political

imbroglio concerning another Parliamentary enquiry, that of the so-called Lutundula

Commission, clearly shows that the main political parties have thwarted initiatives aimed at

enhancing transparency in the politico-economic management of the country, when such

initiatives tended to interfere with their own affairs.

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The Lutundula Commission’s report provided us with a good basis for an analysis of

governance practices in the mining sector, where, because of the DRC’s vast mineral

reserves, economic stakes are exceptionally high. In this analysis we focused on mining

sector management in Katanga, the province that harbours by far the greatest potential for

resource based economic growth. The mining area of Katanga has in recent history not been a

war zone and during the war and the transition the central government has retained a solid

grip on the province. Over the last decade Katanga’s - and the country’s - main mining

parastatal Gécamines has been most intensively targeted by reform efforts, for which it has

received ample assistance of the World Bank since 2001. The interaction between the

Congolese government and the World Bank has resulted in an anarchistic and opaque

privatisation process that has stripped Gécamines of all its assets. The parastatal company is

now bound by countless contracts with, often dubious, private partners that contribute little or

nothing to Gécamines or to the national treasury.

As a consequence of the failure to relaunch the most vital part of Katanga’s economy,

widespread poverty and unemployment have struck the province. These grim socio-economic

conditions might very well exacerbate underlying political and ethnic tensions that threaten to

lead up to violent conflict in the future. Another consequence of the mismanagement of

Gécamines is the phenomenon of artisanal mining. Every day an estimated number of fifty to

seventy thousand “creuseurs” invade numerous mining sites in Katanga to dig for

heterogenite, an ore that is exceptionally rich in cobalt. These people work in appalling

conditions for little more than 1 USD a day. Most of the ore, which they sell through

intermediaries to big trading houses, leaves the country unrefined, and this again deprives the

DRC of much needed revenue. Several attempts on behalf of the Congolese authorities to

structure the informal sector have failed due to corruption: an organ (NOUCO) set up by the

provincial governor to defend the interests of artisanal miners, left them with a debt of 1

million USD; and the directors of NOUCO’s successor COMIDE organize artisanal mining

activities for their own profit.

The NOUCO and COMIDE example points to the main reasons for the dilapidated state of

the Katanga mining sector, namely bad governance, corruption and institutional failure. The

countless joint venture agreements that Gécamines has entered into, contain numerous

anomalies that are all detrimental to the State and to Gécamines. These agreements are

usually negotiated by Gécamines’ directors, but President Kabila and members of his

entourage frequently interfere. The terms of these contracts, deemed by experts to be in most

cases stupendously unfavourable for Gécamines, give serious reasons to believe that the

officials involved in the negotiations have received kickbacks as a way of “compensation”.

Our interviews with several international legal advisors who have partaken in joint venture

negotiations, confirm that demands for kickbacks on behalf of high ranking Congolese

officials are a recurrent element in such negotiations. Corruption might also explain why the

Congolese authorities allow that joint venture contracts are in most cases not properly

executed. At the provincial and local level then, institutional controlling mechanisms are

absent or inefficient. Public services which are supposed to regulate the mining sector and

mineral trade are under-equipped and underpaid, if not unpaid. They take conflicting

measures and they are unable to procure reliable export statistics. Their representatives are in

some cases paid by Gécamines’ private partners themselves, an aberrance of course which

gives way to massive tax and export fraud.

The general picture of the mining sector in Katanga drawn by Congolese and international

NGO’s, journalists and observers, is that it is stuck in a vicious circle caused by corruption,

mismanagement and predatory patrimonialism recalling Mobutu times: mining operations

hardly generate revenue needed to fund a properly functioning institutional apparatus and,

situation lies primarily with Kabila’s Katanga clan and its power brokers, who have upheld

their near-hegemonic position in the province for almost a decade. Hard evidence of

corruption is difficult to find, but there is documented proof that Kabila’s PPRD uses

Gécamines as a vehicle for party financing. The company’s directors make regular financial

contributions and also businessmen or companies engaged in joint venture mining operations

provide support to the party.

Regarding this situation also the World Bank has a lot to answer for. For five years now the

Bank has been supervising and funding the restructuring of Gécamines, but our analysis of

the way Gécamines’ giant mining assets of KOV and Kamoto were transferred to private

companies, clearly shows that the Bank cannot be unaware of how the mining reforms that it

outlines are implemented in practice. The World Bank funded an independent audit carried

out in 2003 by consultancy firm IMC. IMC strongly advised against the existing agreements

involving Kamoto, worked out a detailed business plan for the exploitation of KOV within

the framework of a rapid restart strategy for Gécamines, and recommended to dismiss all of

Gécamines’ directors. Some of the directors were indeed dismissed but this happened only

two years after the audit, namely in December 2005. In the mean time the Congolese

authorities, neglecting both the IMC recommendations and those of the Lutundula

Commission (also funded by the World Bank), had officialized the KOV and Kamoto deals,

thereby burying the IMC rapid restart strategy and stripping Gécamines of its last assets of

any importance. After the IMC audit, the World Bank for its part funded a legal audit of

Gécamines, which was carried out by law firm Duncan & Allen and is said to be finished by

now, but which will, in accordance with common practice, not be disclosed to the public. At

the time of writing a foreign consultant (a French firm called Sofreco) is co-managing

Gécamines, again with funding from the World Bank. Due to political obstruction Sofreco’s

involvement was deferred for more than a year, and it has found Gécamines as an empty

shell. The consultancy firm is currently engaged in the fourth round of partnership auditing in

three years time. Its project leader has publicly stated that his team will not bring up the joint

ventures contracts for discussion and will limit itself to see to it that the partnerships respect

their engagements.

Our analysis of mining sector management in the DRC ends with a case study that reflects the

quintessence of our paper’s conclusions: throughout the transition, efforts to implement good

governance practices related to mining sector management have largely failed due to a lack of

political will on behalf of the DRC’s ruling elite. In addition to this, the World Bank has not

been able or willing to cope with the enormous amount of political obstruction such efforts

have met with. The case study in question is that of the Mining Registry, which was a project

aimed at introducing non-discretionary criteria procedures for the granting of mining rights.

The idea behind this project aligned with one of the key objectives of the new Mining Code,

namely to change the government’s role from mining operator to mining regulator. The

Mining Registry project was jeopardized from its start in May 2003 by the appointment of a

Kabila stalwart, Ambroise Mbaka, at the head of the Registry. In clear contrast with the aim

of depoliticising the business of awarding mining rights, the appointment of Mbaka was part

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of a political stratagem of the PPRD to consolidate its powerful position in the mining sector

before the transition started. From the first day the Registry opened, exactly the opposite

happened of what the World Bank had outlined for the project. Licenses were awarded on an

were equally not respected, conflicting permits were handed out, kickbacks were paid, highrank

authorities unduly interfered, etc. Less than a year after the Registry opened its doors to

the public, Mbaka was dismissed and the Registry was closed down. It took a year to repair

the damage and since November 2005 the Registry is headed by its third general director in

less than three years time.

In short, repeated efforts to improve the situation of the DRC’s population after the war by

trying to pave the way for sustained development and shared economic growth, have been

undermined completely by bad governance practices under the transitional government.

Elections are at hand, but cannot be expected to make any miracles happen. Either – and this

is a very likely scenario – the ruling elite (or most of it) will be voted back into power and

will thus be endowed with more legitimacy than it has enjoyed before, or either a new

political class will arise, which will have a difficult time trying to eradicate deeply-rooted

patterns of corruption and patrimonialism. Moreover, any newly elected government will be

burdened by the inheritance of the war and the transition, and will be facing enormous

challenges. Conflict in North Katanga, the Kivus and Ituri is likely to persist and may even

spread to other areas. Major security sector reform efforts will need to be undertaken to create

a functional and disciplined army. Also, the Congolese population, of which the greater part

is immersed in a grim humanitarian crisis, might lose its patience if elections do not quickly

lead up to a tangible improvement of socio-economic conditions. As we have seen, the

mining sector could have played an important role in improving those conditions during the

transition, but mainly due to mismanagement it has, however, failed to do so. Any new

government will need to bring about a radical change of resource management practices, but

even under the best conditions, it will still take several years before the mining sector is able

to generate substantial revenue and employment. In the mean time, the international

community should make good governance of the DRC mining sector one of its prime

concerns, so that eventually – finally – the population of the DRC will be able to reap the

riches of its soil.

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