It was 22
January 2012. The posters being put up were truly special: the Rolls Royces of
poster-making. They were printed in full colour on thick plasticised fabric,
with brass rings at each corner to prevent tearing when nailed to walls or
strung up between trees. They were advertising a conference to discuss the
Congo’s latest report on the subject of the Extractive Industries Transparency
Initiative (EITI) to be held just three days later – the 25th.
We all know that the topic
of conflict minerals is a hot one. While blood diamonds used to be at the top
of the list (and remain a hotly debated subject in Zimbabwe) now interest is
very much focussed on the mines in the Congo. It is alleged that the motives of
the various warring factions/countries in the East of the DRC are primarily to
get possession of the mines there, which include diamonds, gold and coltan. The
last one is a little known but highly important mineral in the manufacture of
cell phones. Certainly, there’s massive evidence to show that all neighbouring
countries are benefitting from the smuggling of these minerals, whether by
armed gangs or organised crime, so there must be something fishy going on.
As one of
the world’s leading producers of coltan, the Congo, with its endless wars, has
come under increasing scrutiny. The activist lobbies in the US began to link
coltan with war crimes, exploitation, rape and numerous by products of the
industry. The EITI was intended to reduce the scope for armies and bandits to
gain financially from mined minerals by requiring certification at the source. The
theory was that if you can stop the illegal trade in minerals you’ll stop the
fighting.
The United
States led the fight, when, in an extraordinary piece of logic, it included a
passage making it illegal for US manufacturers to use minerals that were not
certified as part of the Dodd-Frank Act of July 2010 entitled “Wall
Street Reform and Consumer Protection Act”. This is a massive, 849 page piece of
legislation which was intended to regulate the financial industry. The legislation may
have been just what was needed as far as Wall Street was concerned, but its
impact on the Congo was disastrous. Hundreds of tiny mines, consisting of
nothing more than a few men with a wheelbarrow or two and shovels were put out
of work because they had no way of getting their production certified. Some
minerals still get through by smuggling (it’s interesting
that exports from Rwanda and Burundi of these minerals, even though they don’t
have any mines, continue), but the impact of the law has been to wholly negative, not least by reducing prices as the goods can only be sold under the counter. Meanwhile the fighting intensifies.
There’s
another story about mining in the Congo. In 2009 the DRC revoked the
mining licence of First Quantum Minerals, a Canadian company that had invested
$750 million in a new plant to process copper tailings. In effect, not only did
First Quantum lose the licence, but they also lost the investment which was,
effectively, expropriated. (After a lengthy arbitration they were compensated
for some of their loss). Having thus acquired a very lucrative asset, the Congo
government sold it to Dan Gertler, and companies in the British Virgin Islands
linked to him, for a fraction of its real value (the figure of $30 million has
been used). He is a young Israeli entrepreneur with a flair for making friends
in high places and keeping his money in tax havens. Dan Gertler then sold the
mining rights to another mining company for hundreds of millions of dollars.
The proceeds were then, allegedly, shared between him and his protector,
President Kabila.
In September 2011 the IMF, as part
of their due diligence procedures, asked for explanations from Sodimico and
Gecamines, both state owned mining companies, concerning sales of assets at below
market value and without publicity to Gertler. This was in connection with
the IMF's proposed loans to the DRC worth $561 million to strengthen the economy.
These
dealings are public knowledge. However what is less well known is that payment
of the latest tranche of the IMF loan, about $85 million, has now been
suspended because the government has refused to disclose details of the Gertler
deals. It (the Government) even had the cheek (I was told by the IMF
representative) to demand a renegotiation of the loan agreement, while refusing
to allow the last three IMF inspection teams entry into the country.
Gertler’s shady dealings have not
gone unnoticed in the stock exchanges of the world, and in December 2012, it
was reported that Eurasian Natural Resources Corporation (ENRC) had spent $550m
buying itself out of a DRC copper-mining partnership with Gertler, in order to
protect their good name. They accused him of making the majority of his
$2.5bn fortune from "looting Congo at the expense of its people". So
when we talk about transparency in mining, it’s clear that the Congo might
squirm a little.
But no, as
the poster shows, they are trumpeting their adherence to the principles of
transparency, and their wholehearted support for the EITI, even though it looks
like a bit of a sham.
But wait:
the report to be discussed at the conference on the 25th is for the
year 2010. That’s all right then – let’s let bygones be bygones.
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