DR Congo to audit and review 'unfair' Chinese mining contracts

Officials, in trying to end years of mistrust with Chinese investors involved, say they want to reach an amicable solution to ensure improved revenue for DRC while protecting Beijing's businesses. It hasn't panned out well.

The Democratic Republic of Congo (DRC) has embarked on a review of mining contracts awarded to a Chinese firm it co-owns with Beijing, but whose work and profits have given rise to concerns about fairness, according to The East African. Officials, in trying to end years of mistrust with Chinese investors involved, say they want to reach an amicable solution to ensure improved revenue for DRC while protecting Beijing's businesses. It hasn't panned out well.

DRC's Finance Minister Nicolas Kazadi said the contracts in question are tilted towards the Chinese on all fronts promising Kinshasa will right all wrongs on tax obligations, which it argues were too lenient on the Chinese. "Sicomines SA does not want to pay the USD 200 million it is being asked to pay, after making super-profit," he said after a government audit report was published at the end of February.

They have to pay because it is so clear that this tax is not one of the taxes exempted in the contract," he said referring to a company created to execute the contract signed in 2008. The East African said it has been a tricky balancing act so far as talks between Kinshasa and Beijing over the matter often raised further public quarrels with Beijing vowing to protect the rights of its corporate citizens.

According to the East African, the mining sector in DRC represents the might of Chinese economic interests: 80 per cent of the country's exports in the mining sector are destined for China, with Chinese firms now dominating the scene as the destination for up to 80 per cent of all the copper and cobalt mined in the DRC. The country's ministry of mining also says 90 per cent of the DRC's mining production actually is exported to China. Overall, Chinese companies have already cashed in earning at least USD 10 billion from contracts in the last decade while Kinshasa has benefited from only USD 822 million in terms of infrastructure, according to the report of the Inspectorate General of Finance released in February, according to the East African.

This contract, in particular, provided for exemption or a limited set of provisions on all taxes, duties, fees, customs, direct or indirect, domestic or import and export payable in the DRC. Within the framework of the investment reform, advantages are granted to investors, President Tshisekedi has consistently argued since he was elected, the East African reported.

All this was legal as both parties consented and didn't violate the Mining Code, which gives a free hand on determining levies. But DRC see it as immoral and accuse the Chinese of reneging on their obligations. "DRC's National Assembly is backing the review, calling for strict control of the contracts signed between the country and certain partners such as the Chinese contract and many others," Speaker of the DRC National Assembly Speaker Christophe Mboso said.

This decision to review was arrived at after controversial talks between the DRC government of President Felix Tshisekedi and the China Embassy in Kinshasa, according to the East African. The parties agreed to revisit the contract signed in 2008 between the DRC and Chinese companies for the development of mining sector and construction of infrastructure, hospitals and bridges.

The contract locally referred to as the "contract of the century" was initially worth USD 9 billion and the DRC as well as China met at the time IMF was opposed to the deal over possible debt. After strong pressure from the IMF, the contract was reduced to USD 6.5 billion, the East African said. The East African said DRC needed infrastructure but had no money. China had the money but needed minerals. Today, China has not even built one metre of rail in the DRC. Part of the deal had said China was to build 3,500km of roads, 3,500 km of railway infrastructure, 31 hospitals with 150 beds and 145 health centres.

All this for an estimated value of USD 6.5 billion for which they would be repaid in cobalt and copper deposits to be mined by the firm established after the contract, which was Sicomines. It is owned by China Airways Corporation and Sinohydro on one side and the DRC government on the other as a minority shareholder in the ratio of 68:32.

The East African said a first meeting to agree on review was held between the stakeholders at the end of March after President Felix Tshisekedi denounced cases of the imbalance in the contracts, especially on commitments by signatories. The DRC denounced the slow pace of infrastructure construction the country needs to develop its human and economic potential, accusing the Chinese of not acting on their obligations, according to the East African.

The DRC head of state based his comments on a February 2023 report of the General Inspectorate of Finances. Tshisekedi told a gathering there was a need to urgently re-balance commitments including timelines to guarantee the interests of the country, according to the East African. According to the East African, the report of the Inspectorate General of Finance found a significant financial imbalance to the detriment of the DRC between advantages granted the Chinese party and commitments it has to meet, as well as the gains expected by the DRC. The Inspectorate General of Finance accused Chinese investors of evading the obligation to finance the works.

According to the Inspectorate General of Finance's report, Chinese firms since 2008 have earned USD 90.9 billion against their commitments of USD 6.2 billion. The report criticises "an imbroglio maintained in the repayment periods of the investments", according to the East African. (ANI)

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)