August 1, 2017    5 minute read

Western Mining Firms and Corruption in the DRC

Conflicts of Interest    August 1, 2017    5 minute read

Western Mining Firms and Corruption in the DRC

The DRC’s biggest business – mining for gold, diamonds, cobalt, and other precious minerals – is just as dirty as ever, according to new reports. Last week, Canadian regulators announced they were investigating mining giant Glencore over allegations that a subsidiary paid more than $100m to an offshore company owned by an Israeli businessman who’s been accused of bribing Congolese officials.

The payments started in 2013, according to Global Witness, an investigative NGO that recently published a new report showing how mining companies and other businesses continue to plumb one of the world’s least-developed countries for private profit. Their investigation shows how between 2013 and 2015, as much as $1.3bn in mining revenues – twice the amount country spends every year on health and education – never reached the treasury, due to the dysfunctional state-owned mining company, opaque tax agencies, and corrupt government-linked networks.

Corruption

The DRC has long been known for its failure to translate its vast natural resources – not only rare minerals but also timber and oil – into prosperity for its people. But changes in the political context means that this persistent corruption has implications that go far beyond the robbing of ordinary Congolese.

The latest reports lay bare the extent to which Western firms have played a role in stoking systemic and elite corruption in the country, not only harming their own long-term commercial prospects but also propping up an aspiring dictator. It will take much more than simple talk of “supply chain sustainability” on their part if the Congolese people are ever to benefit from a functioning political system and, in turn, their own country’s vast wealth.

The Global Witness report came in the midst others written by Congo Research Group (CRG), Bloomberg, and Le Monde, which connect the dots between President Joseph Kabila’s efforts to continue stalling long-overdue elections, his family’s vast commercial empire, and the global companies that have been operating in the country.

Extractive Policies

Among the most jaw-dropping accounts, the CRG report found that the Kabila family wholly or partially owns more than 80 companies in the country and abroad, invested in nearly every sector of the economy, with addresses as far from Congo as Panama and with revenues tallying in the hundreds of millions of dollars since 2003.

The business interests of the president’s brother, Zoe Kabila, alone comprise stakes in at least 12 Congolese firms, in addition to contracts with major foreign mining companies like Ivanhoe. The new revelations of the family’s business network raise questions of serious conflicts of interest, if not flat-out violations of Congolese law, and show the extent to which foreign firms are compelled to bribe government officials in order to do business in the country.

Congo: From Country to ATM

Given the fact that the president and his family have mastered the art of turning a political office into a personal ATM, it’s little wonder that he is now manoeuvring to stay in place for the long haul. And as long-delayed elections, now slated for the end of the year, raise the prospect of cutting off Kabila’s cash flows, his tactics are becoming increasingly desperate.

He had already managed to sideline his most credible presidential challenger, the widely popular and now-exiled Moise Katumbi, with a politically motivated conviction in June 2016 over an allegedly fraudulent land deal.

Any hopes for justice at the appeal hearing, which started on July 20th, were dashed by an assassination attempt against Judge Mbuyi Likasu. He had been slated to participate in the panel and is viewed as one of the few justices in the country committed to impartiality.

Interfering with Justice

The absence of any chance for Katumbi to receive a fair hearing has prompted the opposition coalition, Le Rassemblement, to demand an end to the sham lawsuit. And it’s not only Katumbi who has been the object of Kabila’s wrath. The president still refuses to allow the repatriation of the body of former opposition leader Etienne Tshisekedi, who died this February.

Not surprisingly, Kabila’s increasingly frantic attempts to stay in power have been met by strong resistance both internally and among members of the international community. This Monday, the civil society group La Lucha called for an unprecedented demonstration against the president, which has received the backing of Katumbi and other opposition officials.

Most recently, the UN Security Council urged the government to swiftly implement a timeline to hold elections. Yet none of this – not even the IMF’s warning that it might cut off assistance – seems to have made any difference in the presidential palace. Meanwhile, ordinary people continue to suffer as the central bank said inflation was expected to rise to 44% this year, and currency exchange services have been banned from displaying rates as a way to cover up the growing economic crisis.

Conclusion

The IMF’s unwillingness to deal with the corrupt regime is a welcome sign. But Western governments and multilateral institutions must enact much broader sanctions that also strike the Kabila family businesses and their affiliates if there is to be any hope of swaying the aspiring president-for-life. The US and EU already blacklisted several top officials earlier this summer, but it only hits one of the ruling family’s business interests, and at this point, it might be too little too late. So too, might be the Canadian regulators’ long-overdue investigation of Glencore.

What would be best is if foreign corporations active in the DRC took Global Witness’ advice to heart and demanded that Gécamines publish audited, yearly accounts, to ensure government officials did not steal their funding and if investors in those companies urged management to ensure they were not channeling cash into Congolese agencies known to be corrupt. Absent such proactive action on the part of corporations, it’s an open question whether Congo’s mining wealth will ever make its way into the hands of the people.

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