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

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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.

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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

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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