The Mining Review in the Democratic Republic of the Congo: Missed Opportunities, Failed Expectations, Hopes for the Future

Contact: Deborah Hakes, 404-420-5124

Few benefits resulted for the people of the Democratic Republic of the Congo (DRC) from the government's two-year review of contracts with companies mining billions of dollars of gold, copper, cobalt, diamonds, and other minerals.   
 
"The mining review offered an opportunity for the Government to distinguish itself from the past and to prove its commitment to turn mineral wealth into development for the country," said John Stremlau, vice president for Peace Programs of The Carter Center.  "Unfortunately, this does not appear to have happened.  Although the full results have not been disclosed, the known outcomes confirm the most skeptical opinions.
 
"At critical moments, the government chose to forgo international cooperation and transparent procedures. This undermined both the legitimacy of the process and any confidence in the outcome," Stremlau said.  
 
From the limited documents that The Carter Center has been able to review, it appears that the government sought short-term benefits at the expense of long-term improvements.  
 
"A number of companies agreed to increased upfront payments," said Professor Peter Rosenblum of Columbia Law School, which assisted The Carter Center in the review.  "But in the face of the economic slow down even the short term benefits are likely to prove illusory."  
 
The Carter Center has drawn the following preliminary conclusions about the outcome of the process:

•  Unwieldy:  A major problem with the contracts was the vast array of divergent obligations that would be difficult to oversee and enforce even with a sophisticated regulatory apparatus, which the DRC lacks.  That situation remains unchanged.
• Illusory:  Most investors agreed to increased one-time, upfront payments; however, informed observers report that the payments are contingent and unlikely to be required under current economic conditions.
• Ephemeral: With the possible exception of conditions on debt financing for mining joint-ventures, there are no clear long-term benefits from the review.  In the meantime, companies may still take advantage of weak provisions in many agreements to divert profits away from the investor company or to avoid paying taxes on real profits. 

The Carter Center concludes its work on this initiative with the following recommendations.
 
To the Government:

• Publish the results of the renegotiation, including the renegotiated contracts concluded with companies;
• Commit to contract transparency for the future;
• Design and implement a program for contract oversight and compliance review;
• Instruct the parastatal companies to design and implement a clear plan for the exercise of their minority share interests in the renegotiated contracts;
• Develop a national mineral policy that provides guidance and leadership to all ministries, parastatals, the parliament, and citizens about how national assets will be developed, managed, and spent;
   

To the Parliament:

• Institute a process for vetting and approving investment contracts;
• Obtain a full accounting from the parastatal companies of the renegotiation process and their plans for exercising their minority share interests in the mining companies;
• Obtain from the government (ministry of mines/ministry of finance) their plans for overseeing the implementation of the renegotiated contracts.
• Establish mechanisms for direct oversight and monitoring of the mining deals through requiring updated financial statements and disclosures and investigating compliance with DRC tax regimes and regulations.
   

To Civil Society:

• Design and implement a plan for monitoring contract implementation and compliance;
• Advocate for systematic transparency in disposition of natural resources, on the part of government, the parastatal companies, and the private investors.

The Center urges the international community, foreign governments, and international financial institutions to actively assist the government of the DRC developing productive arrangements with responsible investors, and to establish a regulatory framework that will offer short- and long-term benefits to the people of the DRC.  
 
The Carter Center's Role

During the past two years, The Carter Center has advocated for reform of the mining sector in the DRC to ensure that mining investments contribute to development and reinforce democratic institutions in the country.  We have called for an inclusive and transparent process with regard to mining contracts and one that treats all investors according to a single set of objective standards. During this time, The Center has mobilized international experts to review mining contracts, met extensively on multiple occasions with Congolese government officials, collaborated closely with NGOs in the DRC and elsewhere, and sought to build international support for the mining review process.  Despite its failings, the mining review has shed considerable light on the operations of mining sector and has galvanized civil society interest.  We believe that it is now important to build a sustainable means for Congolese and international civil society to access and supplement this information. 


For this, it is necessary to strengthen civil society's capacity and engagement in monitoring the implementation of contracts – including financial, social, and environmental aspects of investment – as well as tracking revenues and advocating through parliament and the executive branch for progressive changes that will bring more fairness to the sector. 
There are some projects underway in the DRC that support this work, particularly the Publish What You Pay coalition and the efforts to strengthen the Extractive Industry Transparency Initiative.  In addition, there are efforts to develop mineral tracing in the country and efforts to pressure investors outside the country to behave more responsibly. To bolster the existing efforts, The Carter Center will organize activities in conjunction with civil society and, potentially, members of parliament and the executive to extend the understanding of contracts and monitoring their implementation.

Despite the Carter Center's past criticism, the government has shown willingness to reach out to the Center and acknowledge areas where the government could improve its performance.  The Carter Center will be available to offer this analysis as requested. 
 
Background

In 2007, following the first democratic elections in decades, the government of the Democratic Republic of the Congo announced an important initiative to review billions of dollars of mining agreements.  The agreements were concluded as part of a massive privatization of the mining sector undertaken during the preceding years of war and a difficult political transition period.  Shrouded in secrecy and dogged by allegations of corruption, the cloud over the agreements left the population with a fear that national riches had been exchanged for war spoils and political favors. 
 
The initiative got off to a promising start when the government agreed to establish an Inter-ministerial Review Commission and to publish all of the agreements under review.  "In the beginning, it was the international community that failed the Congo," said Stremlau.  "The government of Belgium, which supported the Carter Center's work, stood out for its effort to promote a responsible review.  But although they recognized the problems with the contracts, the major investor states, including the United States, Canada, and the United Kingdom refused to publicly support any review.  Mining companies resisted the government's efforts and the World Bank, which had criticized the contracts and supported a review in principle, remained effectively silent. 
 
Over the next months, however, the government demonstrated an erratic approach to addressing problems in the contracts.  Forthcoming communications and government efforts to obtain advice and assistance were followed by months of silence.  The government passed up many opportunities to take advantage of international support, including professional lawyers experienced in contract negotiations.  Meetings of donor countries were canceled without explanation, and proposals for pro-bono assistance were left unanswered.  
 
"We are convinced that individuals inside the government made serious efforts to put into place a credible process for a systematic review of the contracts," Stremlau continued.  "Unfortunately, they did not have the necessary political support to do the right thing." 
 
In July 2008, after months of silence, the government turned precipitously to renegotiations without independent financial or legal expertise.  Over the next five months, the parastatal mining companies reached agreements with the vast majority of the companies involved in the review.  A number of the most significant economic actors, including Tenke Fugurume (Freeport McMoRan) and First Quantum did not reach agreements with the government.  When Minister Kabwelulu declared the end of the review, he indicated that contracts with those companies would remain largely unchanged.

 
####

 
The Carter Center:  A not-for-profit, nongovernmental organization, The Carter Center has helped to improve life for people in more than 70 countries by resolving conflicts; advancing democracy, human rights, and economic opportunity; preventing diseases; improving mental health care; and teaching farmers in developing nations to increase crop production. The Carter Center was founded in 1982 by former U.S. President Jimmy Carter and his wife, Rosalynn, in partnership with Emory University, to advance peace and health worldwide. Please visit www.cartercenter.org to learn more about The Carter Center.

Read more about the Carter Center's work in the DRC

Nov. 2007: First Report:  The Carter Center Review of DRC Mining Contracts - Update and Recommendations (PDF)