The Democratic Republic of Congo’s government watchdog called for a major overhaul of the country’s $6.2 billion minerals-for-infrastructure deal with China after its investigations found significant breaches of the 2008 agreement.
Congo hasn’t been adequately compensated for the copper and cobalt reserves it contributed to the venture, which undertook to finance $3 billion of infrastructure projects using the proceeds of mineral sales from a $3.2 billion mine, the General Inspectorate of Finance said. It called for the value of the investment in infrastructure to be increased “to at least $20 billion in view of the value of the deposits transferred.”
While the mine is pumping out metal, the Chinese partners have only disbursed about $822 million of infrastructure funding over 14 years, the IGF said in a summary of its findings published on its website on Feb. 15. “These works have remained, for the most part, without visible impact for the population,” it said.
The watchdog also accused the Chinese companies of financial malfeasance, including transfer pricing and dumping, and called for them to be fined $100 million for breaching capital controls under the nation’s mining code by not repatriating more than $2 billion in export revenue.
The landmark agreement was signed at a time when Congo was struggling to secure financing after years of war. While the IGF has no legal power to enforce its recommendations, its report could bolster the current government’s ongoing attempt to renegotiate the deal.
Congo has some of the world’s richest deposits of copper and is the biggest source of cobalt, both key components of electric vehicles, batteries and other green-energy technologies. The central African nation has used its position as a strategic supplier of the minerals to push for better terms in many of its mining deals.
China Railway Group and Power Construction Corp. of China, whose subsidiaries control Sicomines, the copper and cobalt project at the heart of the deal, didn’t respond to emails requesting comment.
Sicomines said it wasn’t given the right to respond to the investigation, and the “unjustified criticism” threatened its operations. “The security of private investments, domestic or foreign, is guaranteed in the DRC and commitments made with regard to investors cannot be breached,” it said in a statement posted on Twitter Friday.
In a separate statement posted on Twitter Friday, China’s embassy in Congo defended the partnership and said the IGF report “did not correspond to reality, cannot be considered credible, and has no constructive value.”
“The Chinese government encourages the Chinese companies to work with their Congolese partner to improve cooperation by providing more benefit to the Congolese party and resolve disagreements through friendly and reasonable dialog,” the embassy said. It added that it would “resolutely respond to any violation of the legitimate rights and interests of the Chinese companies.”
The country’s outgoing ambassador, Zhu Jing, stood by China’s record in Congo in a message to Bloomberg last month, saying its companies were involved in more than $11 billion of trade with the country last year and had created over 100,000 jobs.
Chinese companies have become major players in Congo’s mining industry over the past decade, often taking over projects previously owned by Western companies.
Congo is set to hold elections at the end of this year, and President Felix Tshisekedi plans to make nationwide infrastructure projects a cornerstone of his campaign.
The IGF also called for:
(By Michael J. Kavanagh, with assistance from Kathy Chen)