Africa Confidential (London)
20 October 2009
analysis
Several inconvenient facts are undermining President Joseph Kabila's ambitious 'zero tolerance' anti-corruption campaign. Recent reports highlight the failure of efforts to reform Congo's state and the continuing pillage of its mining industry by local and foreign interests. On 26 September, the Senate published a 122-page report on mismanagement in the mining business. Congo made just US$92 million from this key industry in 2008 but lost some $450 mn. through under-invoicing, tax evasion, smuggling, fraudulent contracts and poor accounting.
The Chairman of the Senate Commission, David Mutamba Dibwe, said most of the mineral exports are not declared and the poorly equipped taxation authorities are unable to track the trade or the revenues. In North Kivu and South Kivu Provinces, some 80% of exported metals, which include Africa's largest tin shipments, are not registered. Only 1.09% of the tax due was paid on the $74.73 mn. claimed by the tax authorities, the Direction Générale des Impôts. DGI officials prefer to let debts accumulate, with arrears subject to heavy penalties whose amount they can then 'negotiate'. Statistics bear little relation to reality and are compiled using 'only one computer, which is old and has a very weak capacity'.
Then on 30 September, the 70-year-old Canadian mining lawyer Paul Fortin resigned as Managing Director of the state-owned copper mining company Gécamines after four difficult years. 'Frankly, I'm tired,' Fortin explained. He had tried to resuscitate the company's finances and administration: his declared aim was to revive Gécamines' production of copper, cobalt, zinc and lead in tandem with foreign partners while ensuring that employees were paid and that its debt was manageable. Fortin's critics accuse him of failing to tackle the rampantly corrupt political elite which pushed through mining deals for private benefit, further underminingGécamines' position.
Sources in Kolwezi said Fortin saw the limits of his own efforts when he visited Kamoto in western Katanga and discovered the factory had been producing 50 tonnes of copper a month without his knowledge for a year. The ownership papers were appropriately opaque, and the metal was transported to Lubumbashi and sold privately. Another report suggests that company directors were selling the state's capital equipment privately, including machinery that Fortin needed to rebuild Gécamines' dilapidated factories.
Uncle Calixte at Gécamines
The new man to watch at Gécamines is Calixte Mukasa, Fortin's former deputy and now Managing Director. Mukasa is the uncle of Augustin Katumba Mwanke , a powerful advisor to President Kabila who was named as corrupt by the 2002 United Nations Expert Panel on the Illegal Exploitation of Natural Resources of Congo, after which he was briefly sidelined by Kabila. Mukasa is not thought to be enthusiastic about reform and accountability in the mining business.
Like previous Gécamines managing directors such as Billy Rautenbach and George Forrest, Fortin is likely to return to Katanga in a private capacity, but he is legally obliged to stay away for a year. We hear he gets on well with former banker Rebecca Gaskin, who now heads United Resources and its joint venture operation with Gécamines at Kipushi. The troubles in Congo's mining business are matched by concerns about political developments. It was recently revealed that Kabila is planning to change the constitution (adopted in December 2005) to abolish presidential term limits. For many Congolese this suggests a return to the pattern set by Mobutu Sese Seko.
In mid-September, Kabila set up a commission to 'evaluate' the constitution, with a dozen representatives from the Senate, House of Representatives and Supreme Court. Under a senior lawyer, Néhémie Mwilanya Wilondja, the Commission held its first meeting on 18 September and jettisoned a proposal to create 15 extra provinces, in addition to the present eleven. Radically, it will consider extending the presidential term from five to seven years, with the possibility of further terms.
The President would also chair the body in charge of judicial matters, the Conseil Supérieur de la Magistrature, thus breaching the separation of powers. The constitution prohibits alterations to the presidential term and guarantees the independence of the judiciary. Parliament is to consider the Commission's report next March.
On 21 September, Communications Minister Lambert Mende Omalanga denied that the Commission existed; the following day, the Senate President, Léon Kengo wa Dondo, said it did exist and a week later, Mende said it was just a 'cogitation of experts'. None of this has prompted criticism from the European Union which, with the United States, provided much of the $500 mn. to pay for the national elections in 2006. 'I am not about to pay for a dictatorship here,' said Louis Michel, the Belgian minister who was then European Union Development Commissioner, before the elections; now he believes in 'quiet diplomacy'.
At the end of June, Kabila declared that he intended to remodel the justice system. Soon after, 90 judges were told to retire or be fired. Next in line was the Ministry of Property Affairs; more than 80% of legal cases in Congo are about property rights and a piece of land may have several registered owners. Yet so far, reform has touched only the lowest rungs of the ladder. The much-criticised Finance Minister Athanase Matenda and advisor Katumba Mwanke hold on to their jobs despite repeated accusations by parliament and civil society. Katumba Mwanke faces criminal charges in South Africa.
Beyond reform
The apparent perpetuation of the Mobutu-style system of political patronage, pillage of state assets and impoverishment of the citizenry provides the backdrop to a new study by academics in three continents, who argue that the Congolese state is beyond reform(1). Edited byTheodore Trefon, the American who directs the Belgian Reference Centre for Expertise for Central Africa in Tervuren, Belgium, the study concludes that foreign-backed reforms have not produced any sustained improvement - rather tens of billions of dollars have left the country through capital flight and fraudulent sales of state assets. Foreign lending - amounting to more than $15 bn. in political loans for the pro-West Mobutu regime - further impoverished Congo.
The United Nations peacekeeping force, the Mission des Nations Unies en République Démocratique du Congo, costs over $1 bn. a year, yet ordinary people do not live in safety, especially in the east where there is fighting against the Lord's Resistance Army from Ugandaand the Forces Démocratiques de Libération du Rwanda (AC Vol 50 No 15). Unrest persists in Goma and Lubero, involving soldiers of the national army. Hundreds of thousands of people have been chased from their homes.
Grand macroeconomic reforms meant to reduce poverty have done nothing for Congolese, says Trefon. The UN Food and Agriculture Organisation reckons that at least 17% of the population is malnourished, even in Kinshasa, where there is no systematic conflict. The FAO reckons that a crisis exists when malnutrition is at 10%. Trefon argues that aid givers have exacerbated the calamity. As different agencies pursue different agendas, he says, 'the international community has no master plan'. Some want to pool their contributions, others to supervise the spending of their funds, allowing their Congolese partners to drive wedges between them, a strategy inherited from Mobutu.
One example is the 2002 forestry code - a carbon copy of an agreement developed by Canada for Cameroon in 1994, which did not work there. The aim was to involve local communities in improving welfare; the result was more rivalry between communities. Forest concessions were to be reallocated but the same players ended up controlling the same resources. The process, intended to be transparent, was not. A review of mining contracts began in 2007 and is still not complete (AC Vol 48 No 20). Louis Michel says it launched 'a new dynamic of corruption'.
Trefon's team reports that corruption, at every level, has become a 'way of life' - and, in its way, a source of development, since public servants must be paid for private services. Civil servants are often not paid their small official salaries. The public domain has been privatised into the hands of anyone with an official stamp. The budget of $4.9 bn. is absurdly small. Nobody knows what happens to receipts from forestry concessions, farm production or electricity from the Inga Dam. Anyone with a small slice of power is reluctant to swap it for donors' peace kits and templates, which endanger the matabiches (tips) that flow his way.
The academics retell an old fable. The scorpion asks the crocodile for a ride across the river, promising not to use its sting during the journey. Halfway across, the scorpion strikes. As they both get ready to drown, the crocodile asks why and the scorpion replies: 'Because I am a scorpion. Don't try to understand, we are in Congo.' The parable applies to the commercial and state corruption of the 1990s, which destroyed Congo's economic fabric and brought no investment.
The book says the problems are known and the remedies acknowledged but things get worse while aid continues. External finance provided more than half of the 4,182 bn. Congolese francs ($4.9 bn.) of the draft 2010 budget. Trefon calls the reforms a 'masquerade'. He says Congo needs external finance only because it fails to make proper use of its own vast riches, including its hydroelectric potential (see Box). Democratisation, also financed from outside, is another masquerade, exemplified by Kabila's recent attempt to hold on to power and do away with judicial independence.
Presented on 17 September to the Belgian Parliament in the presence of the Foreign Minister,Yves Leterme, the study drew a startled reaction from Kinshasa, whose Ambassador in Brussels, Henri Mova Sakanyi, produced a booklet in refutation, also published byL'Harmattan(2). Sakanyi said his own figures showed improvements in security, development and the re-establishment of the state. He accused Trefon of claiming that Congolese were incapable of economic rationality and called on intellectuals to produce a volume showing how well things were going in their homeland.
Many mining companies share Trefon's conclusions in private but prefer to keep quiet. There are exceptions. Israeli magnate Dan Gertler is a vociferous supporter of Kabila's regime and has prospered. He reaped further dividends when he switched from his already lucrative diamond marketing contract for the state-run Société Minière de Bakwanga in Eastern Kasai to operating Katanga's copper mines. He moved into the Central African Mining & Exploration Company and sold his stake for some $340 mn. when Kazakhstan's Eurasian Natural Resources Corporation bought the company.
Other companies find it harder to work with the government. In August, the government cancelled the contract of Canada's First Quantum Minerals flagship Kingamyambo Musonoi Tailings in Kolwezi and gave Freeport McMoRan 60 days to budge or face the same prospect. The government wantsa greater share in - and higher royalties from - the ventures.
First Quantum realised the government's seriousness when judicial authorities ordered its Kolwezi office to be shut. So it declared force majeure and stopped building its factory. The two parties are continuing negotiations. The government is wary of international arbitration, whereas First Quantum is certain it will win. The company also believes that the World Bank's Investment arm, the International Financial Corporation, which has a stake in the project, will press its case internationally.
The decision of whether the cancellation is final rests with Kabila, who may want a more compliant business partner. Some favour awarding the concession to Shiraz Virji, the Lubumbashi-based owner of Chemaf. Since adding mining to his pharmacy and clinics bow, Virji has considered floating his company to raise funds.
(1)'Réforme au Congo (RDC): Attentes et Désillusions, Musée Royal de l'Afrique Centrale, Brussels et Editions L'Harmattan, Paris, 2009.
(2)Réformes au Congo (RDC): Pour un regard alternatif, L'Harmattan, Paris 2009.
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