DRC's mining industry hobbled by poor infrastructure, tax hike

2018-06-17 18:28


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Feasting on a global demand for cobalt and copper, the mining industry in the Democratic Republic of Congo is flourishing - but two clouds are spoiling its sunlit future.

First is the lack of power, which is holding back the development of the minerals processing sector and crimping the country's ability to reap higher profits from the boom.

DRC is Africa's largest copper producer, and while it is the world's leading source of cobalt, miners can only export concentrate forms of cobalt at 60-70% of the market price because of the energy problem.

"We have an estimated potential of 100 000 MW/year but only produce 3 000 MW/year," said Michael Shengo chief of staff for the provincial mining minister for Haut-Katanga earlier this week as he opened DRC Mining Week, an annual conference in the southeastern town of Lubumbashi.

A massive hydropower project on the River Congo, Inga 3, has the potential to power the entire country and even the continent, but it has been frequently delayed.

Now the project is hopefully back on track thanks to a joint bid by Spanish and Chinese companies: China Three Gorges Corp and Actividades de Construccion y Servicios SA.

Bruno Kapandji, director of the Agency for the Development and Promotion of the Grand Inga Project announced the project's relaunch in front of miners and investors at the conference.

"Our objective is to start the Inga project this year. It could take five to seven years, maybe up to eleven years," said Kapandji.

 Poor global ranking 

Another challenge for the mining industry, which represents 20 to 25%  of the country's GDP, is a new fiscal law that raises taxes.

Seven mining companies, known locally as "the G7", have argued the new code violates terms of the previous version, which provided a 10-year stability clause after any fiscal change, and some of them could be preparing for legal action as a result.

One of its most vocal members, Mark Bristow, CEO of gold mining company Randgold Resources, had a message of warning for other industries operating in the country.

"Attracting investment and developing a mining industry is about trust," said Bristow, "and I see the government is making guarantees to other industries (solar, electricity), and what do they think when they see our guarantees are being taken away?"

Discussing and signing deals is all well and good but implementing and developing them remains an immense challenge.

The World Bank has ranked DRC 182nd country out of 190 for doing business, and the French credit insurer Coface rates it at the same level as Libya, Venezuela, Afghanistan and Syria due in most part to the political uncertainties, corruption and poor governance".

 Gambling and adapting 

There are glimmers of hope in other sectors in the troubled country, currently in the grips of an Ebola epidemic and a bloody internal conflict.

In the capital Kinshasa, French sports retailer Decathlon just opened its first store - a gamble in a city of 10 million where many are struggling to pay for essentials such as food and shelter.

Richard Kalinda, a Franco-Congolese who once said his dream was opening a shop in his home country, said: "I have to reach 0.1% of the population. We are marketing for the middle class, people who have a regular income."

However, Kalinda added they will have to adapt their prices to the country's average salary.

At the 5th edition of the "French week" organised by the Franco-Congolese Chamber of Commerce, the theme set the tone for those looking to invest in the country: "securing business, a challenge and a necessity".

For the chamber of commerce, opening and bringing international capital in DRC requires being very well informed.

"Companies often have to confront administrative and procedural challenges that could be called fiscal harassment," said the French ambassador to DRC, Alain Remy in an interview with Mining and Business magazine.

Debt-ridden Gecamines, the state-mining company, announced this week they struck a recapitalisation deal with their Anglo-Swiss partner Glencore who agreed on a $150m payment.

Gecamines had started legal proceedings to dissolve their Kamoto Copper Mine, but Glencore has reportedly agreed to write off $5.6bn of debt to safeguard their joint venture.

"I am convinced that we are entering a period for the mining industry that will be profitable for all," said Yuma, "but only if the relation between foreign investors and the DRC is more equitable. The new mining code will make that possible, and I call on everyone to conform to it."

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