Just in time

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 25^th is for the year 2010. That’s all right then – let’s let bygones be bygones.