Mining

Mining

Although citizens of the DROC are among the poorest in the world, having the second lowest nominal GDP per capita, the Democratic Republic of Congo is widely considered to be the richest country in the world regarding natural resources; its untapped deposits of raw minerals are estimated to be worth in excess of US$ 24 trillion.

The economy of the Democratic Republic of the Congo, a nation endowed with resources of vast potential wealth, declined drastically since the mid-1980s. Since Congo’s revenue gained up to 70% of export revenue from minerals in the 1970s and 1980s, the Congo was particularly hit when resource prices deteriorated at that time. By 2005 the Congo gained up to 90% of its revenue from minerals (Exenberger and Hartmann 2007:10).

At the time of its independence in 1960, DROC was the second most industrialized country in Africa after South Africa, it boasted a thriving mining sector and its agriculture sector was relatively productive. The two recent conflicts (the First and Second Congo Wars), which began in 1996, have dramatically reduced national output and government revenue, have increased external debt, and have resulted in deaths of more than five million people from war, and associated famine and disease. Malnutrition affects approximately two thirds of the country’s population.

Foreign businesses have curtailed operations due to uncertainty about the outcome of the conflict, lack of infrastructure, and the difficult operating environment. The war has intensified the impact of such basic problems as an uncertain legal framework, corruption, inflation, and lack of openness in government economic policy and financial operations.

Conditions improved in late 2002 with the withdrawal of a large portion of the invading foreign troops. A number of International Monetary Fund and World Bank missions have met with the government to help it develop a coherent economic plan, and President Joseph Kabila has begun implementing reforms. Much economic activity lies outside the GDP data. A United Nations Human Development Index report shows human development to be one of the worst in decades. Through 2011 the Democratic Republic of the Congo had the lowest Human Development Index of the 187 ranked countries, classified lower than Niger despite a higher margin of improvement than the latter country from 2010’s numbers.

The economy of the second largest country in Africa relies heavily on mining. However, the smaller-scale economic activity occurs in the informal sector and is not reflected in GDP data. The largest mines in the Congo are located in the Shaba province, in the South. The Congo is the world’s largest producer of cobalt ore, and a major producer of copper and industrial diamonds, the latter coming from the Kasai province in the West. The Congo has 70% of the world’s coltan, and more than 30% of the world’s diamond reserves. mostly in the form of small, industrial diamonds.

In September 2004 the state-owned G├ęcamines, signed an agreement with Global Enterprises Corporate (GEC), a company formed by the merging of Dan Gertler International in partnership with Beny Steinmetz Global, to rehabilitate and operate the Kananga and Tilwezembe copper mines. The deal was ratified by presidential decree. In 2007 a World Bank report reviewed The Democratic Republic of Congo’s three biggest mining contracts finding that the 2005 deals including one with Global Enterprises Company, a company co-owned by Dan Getler, were approved with “a complete lack of transparency (Mahtani January 3, 2007)”. Gertler and Steinmetz placed Global Enterprises Corporate (GEC)’S 75% share in KOV into Nikanor Plc registered in the Isle of Man, which reached a market capitalization of $1.5 billion by 2007. In February 2007, 22% of the Nikanor Mining company was owned by the Gertner Family Trust and 14% by Dan Gertler. In January 2008 Katanga Mining acquired Nikanor PLC for $452m.

In April 2006 Gertler’s DGI took a major stake in DEM Mining. a cobalt-copper mining and services company based in Katanga. In June 2006 Gertler bought Tremalt, which had a half share in the Mukondo Mine for about $60m from the Zimbabwean businessman John Bredenkamp. In 2007 Tremalt was owned by Prairie International Ltd, of which Dan Gertler’s family trust was a major shareholder. Tremalt owned 80% of Savannah Mining, which held concessions C17 and C18 in Katanga Province and 50% of the Mukondo project. The other 50% of Mukonda was held by Boss Mining, which in turn was 80% owned by Central African Mining & Exploration Company (CAMEC). Boss Mining had rented and operated Bredenkamp’s half of Mukondo. Gertler terminated this arrangement.

Katanga Mining Limited, a Swiss-owned company, owns the Luilu Metallurgical Plant, which has a capacity of 175,000 tonnes of copper and 8,000 tonnes of cobalt per year, making it the largest cobalt refinery in the world. After a major rehabilitation program, the company restarted copper production in December 2007 and cobalt production in May 2008.

In April 2013, anti-corruption NGOs revealed that tax authorities in the country had failed to account for $88 million from the mining sector, despite booming production figures and positive industrial performance. The missing funds date from 2010 and tax bodies should have reportedly paid them into the central bank.