There Are Other Places in Corporate Bullseyes

In December, the writer John Le Carré along with Jason Stearns, analyst with the International Crisis Group think tank, wrote about the current situation in the Democratic Republic of Congo. They noted that the recent swearing in of Joseph Kabila as president of the Democratic Republic ended a peace process that had followed seven years of war. Close to 4 million people have died and even now, on average, 1,200 people a day are dying from disease and malnutrition that are the result of the war and logistical collapse.*

“But,” they write, “dubious mining deals between the Congolese government and international corporations may be threatening the nation’s chances of rising from the ashes.” They point out that 10 years ago the Congo ranked high among the world’s producers of cobalt, copper, coltan and industrial diamonds. However, now three quarters of the population live on less than a dollar a day. One quarter—15 million people—must survive on a single meal a day.

As part of the peace process, the World Bank has organised the privatisation of the Congo’s state-owned mining company, Gecamines. It paid out $45 million to retire 10,000 mining workers. While the bank was overseeing this transition, the Kabila-led government negotiated mining contracts in 2005 with three corporations: Phelps Dodge (recently bought by Freeport McMoran to form the world’s largest publicly traded copper company), Global Enterprises Company and Kinross-Forrest. The deals are said to amount to 75 percent of Gecamines’ mineral assets.

According to Le Carré and Stearns, two of these deals have been examined by the Canadian law firm, Fasken, Martineau and DuMoulin. They concluded that the share of the profits going to the Congolese government would be “minimal, if any.” They found that no competitive bidding process took place and that the price of the mining property sold was “guesswork.” Le Carré notes that for “a minimal return” the Congo regime has “signed away millions—if not billions—of dollars’ worth of copper and cobalt for 35 years.”

An internal memo dated September 2005, written by the World Bank’s mining expert Craig Andrews and sent to Pedro Alba, the bank’s director for the Congo, is quoted by both the Financial Times and Africa Confidential. It states that the deals had not been through a “thorough analysis, appraisal and evaluation” before being approved and that the assets transferred to the companies exceeded the “norms for rational and highest use of the mineral assets.” Andrews wrote that the World Bank could be seen as risking “perceived complicity and/or tacit approval” of the deals.

One of the NGOs that have followed the deals is Rights and Accountability in Development. Its director told the Financial Times that “those now in control of the process are the very same people who nodded through some of the most controversial deals of the last three years.”

Africa Confidential points out that a similar process to the sale of Gecamines has taken place with regard to the state diamond company, Société Minière de Bakwanga (MIBA). Several deals, they note, “have given politicians and managers kickbacks or stakes in private firms.” They state that many of the natural resource projects of the Congo are financed through the London Alternative Investments Market, where “inexperienced” companies “have reaped huge rewards.”

According to the Financial Times, the Congo government is set to review the contracts, but “in spite of the reviews, no substantial changes are expected.” The deal was in fact part of the peace process as warring factions of the Congo elite helped themselves to handouts derived from the sales. The Financial Times explains that the government “was seen by western diplomats as deeply corrupt, but necessary to put an end to war in a country central to the region’s stability.”