The Congolese government establishes a panel to review mining contracts

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The Congolese government establishes a panel to review mining contracts

MONUC - March 28, 2008

During a press conference held on 24 March 2008 in his office, Mining Minister Martin Kabwelulu announced the establishment of a panel to review mining contracts, following the publication of the final report of the Review Commission set up by the Technical Cell for Mining Planning and Coordination (CTPCM). Among others, the tasks of the panel will be to readjust the share of the State in the different partnerships, said the Minister.

The panel, instituted by the government, will be in charge of examining contracts one by one, without intending to rewrite new contracts. Its job will consist in signing amendments in order to correct provisions that are considered out of balance in existing contracts, declared Martin Kabwelulu. The Minister underlined that the panel may eventually keep the main points of existing contracts, and the modifications could be done after eventual discussions with partners.

To that end, Martin Kabwelulu plans to broaden the circle of discussions for foreign investors and committees of state-owned companies that are involved in signing the contracts. Both parties may be heard by the panel in case of difficulties.

According to the Minister, there are two essential reasons that back the government’s decision: the validity of the balance of contracts and the procedural defects in some contracts as well as problems related to the disrespect of engagement by parties.

Because since the establishment of the Contract Review Commission by ministerial order dated January 2007, the two objectives, for which this institution was created for, have not been met. These objectives are the maximization of revenues from different partnerships and cleanup of the mining sector. In fact, in spite of the analysis of some contracts, there are still problems that led to the decision to establish this panel whose task is to solve questions for which final solutions were not yet found.

The Minister announced that, before the publication of the final report, notifications of the conclusions of the Commission along with the requirements of the government will be transmitted to partners. In return, replies from the latter will be sent to the government.

According to the conclusions of the Commission, not a single mining contract was found to be fit for category A. Out of about 60 contracts, 5 were listed in category B (these are contracts to be renegotiated), 6 in the exploratory phase, and the other 49 are doing all sorts of trafficking in the world’s great stock-exchange places by their holders without any exploration at all.

Thus, the Commission suggested the cancellation of about 15 contracts among which 6 are in partnership with Gecamines.

It did not spare mining giants such as the world’s first mining group BHP Billiton, the South African gold giant Anglogold Ashanti, the world’s first diamond producer De Beers (from South Africa) and the American giant Freeport-McMoRan, all of them accused of having signed one-sided contracts.

The Commission also systematically pointed out unjustified tax exemptions, an excessively small share of the State (i.e. 5%) in the capital of joint companies and the partners’ disrespect of their social and environmental obligations though they make profits as high as 600 % from the sale of exploited products.

The report also shows the Congolese State’s lack of rigor in negotiating contracts.

Among the difficulties encountered while working, the Commission mentioned the fact that it was not easy to examine mining contracts; public representatives and some partners refused to provide some useful information that they needed.

Some financial institutions under State control such as the “Direction Générale des Impôts”, the “Direction Générale des Recettes Administrative et domaniales” as well as the “Office des Douanes et Assises,” are among State-owned institutions that were not willing to cooperate with members of the Commission.

The Mining minister and vice-minister, who together conducted the press conference, insisted on the balance to be restored and the adjustments to be made for those problematic contracts, in order to restore the rights of Congolese people and the State.

For Mr. Robert Mwambo, the manager of a mining company in Katanga, the final report of the Review Commission helped disclose the intentions of the State regarding the management of the mining sector.

“Now, we know what the State thinks of us. It is only right to capitalize this perception by the State so as to see how we can work together” he said.

For the NGOs such as the “Ligue Contre la Fraude” (LICOF, the anti-fraud league), unless there is an authoritative decision from the Congolese State, the natural resources will continue to be looted through one-sided contracts. Otherwise, how should the U-turn by the Mining Minister could be understood about this matter?

“At the opening of the States general of mines, he had pleaded for the review of some clauses in the Mining Code which could easily open the door to fraud. It is odd that, during the press conference, he supported the opposite as he declared that not a single contract will be cancelled. This is a concern for the future of our people to whom accounts should be given” underlined a member of the association.

On its side, British NGO Global Witness, in a review of the different mining contracts signed in the last ten years, denounces a lack of transparency in the work of the Commission. According to that NGO, beside the opacity that characterized every aspect of the Commission’s review, those who had to write to the report said that they had received much pressure to finish their conclusions within unrealistic deadlines and that not enough was done to protect their independence while working. Global Witness also denounced the limited participation of the civil society in that Commission.