Footprints and paradoxes of Canadian mining in the DRC

Without doubt, public or private discussion about Africa’s socio-economic context rarely revolves around foreign investment. However, at the 2006 Indaba, a senior official from a Canadian mining concern urged his colleagues to take advantage of the ‘unusual conditions’ and venture to invest in the DRC. This in spite of the dire press reportage coming out of that tortured country. Cape Town formed an idyllic backdrop far removed from the mining areas of Africa, for the Indaba, an annual meeting bringing together the different players in the mining industry interested in African adventure. Strange, and yet true, this illustration of the paradoxes that characterise relations between Africa and the West.

Without delving too deeply into this paradox, we will attempt to cast light on the consequences of Canadian mining operations in the DRC. Their numerical superiority makes them stand out. It is clear that every Canadian mining company leaves a footprint. This footprint is not merely ecological, but also socio-economic. Unfortunately, this is not all; alas, these effects are felt even at the level of human rights.

By ‘unusual conditions’, this official was referring to the favourable juridico-legal and fiscal environment offered by the DRC government to those investing in the mining sector. The DRC is considered a fiscal and juridical paradise for mining companies. The reasons for this are both multiple and intricate.

The DRC has been steeped in crisis for the last two decades. The country is abundantly blessed by nature. The climate is ideal, water is plentiful, fauna and flora abound. The ground is replete with vast mineral reserves. However, the commercial exploitation of these resources has not translated into development. In other words, the living standards of the Congolese people have not improved. On the contrary, one may venture that mining has in fact led to the deterioration of the people’s living standards.

Mining has always dominated the DRC’s economic landscape, and served as its main driving force. Mining contributes approximately 70% of the country’s annual budget. Gécamines is the largest mining concessionaire in Katanga. Today, however, Gécamines is defunct as a result of the mismanagement and looting of the Mobutu regime. Given that Gécamines was previously the largest employer in Katanga, one can imagine the effects of its collapse. Following the collapse, the government took the decision to allow artisan and small-scale mining of copper/cobalt. The justification for this was the creation of a Congolese middle-class to serve as a conveyor-belt for harmonious development. When Gécamines closed down, it was necessary to ‘create jobs’ for former employees who had been laid off. Ten years earlier, a decision had been taken to liberalise artisan and small-scale diamond mining in Kasai. Sadly, the artisan and small-scale mining of Copper/cobalt, diamonds and coltan benefits small capitalist expatriates who use Congolese as middlemen and labourers.

Under pressure for the World Bank, the government developed the Mining Code to guide the liberalisation of the mining sector. By and large, the Code concretises the liberalisation of the sector. The playing field may be level, but the players are not of the same calibre, or in the same class for that matter. Consequently, mining companies are making a beeline for the DRC. One would no doubt expect abuses, blunders and pitfalls. However, the Congo has ended up falling victim to its own initiative. Forced to negotiate from a position of weakness, the government has been issuing lop-sided contracts. In some cases, the contracts actually gave the concessionaires the very means to subvert the aims of liberalisation. This sabotage is in turn stifling the growth of the indigenous middle-class. Following pressure from international NGOs and Congolese civil society, the contracts were reviewed in an effort to correct the imbalances. Apparently, the mining companies use loopholes in the mining code, and other means to safeguard their interests.

According to Alain Denault, author of ‘Noir Canada: Pillage, corruption et criminalité en Afrique’, Canadian mining firms operating in Africa are involved in levels of abuse worse than those perpetrated by the former colonial empires. In the early 1990s, just after the World Bank-inspired privatisation wave, Canadian firms were profiting from the Mobutu regime. Shortly after, Laurent Kabila’s rebellion erupted. Within a few weeks, the conflict was full-blown. The mining firms – including the Canadians – went over to the winning side. Mining contracts signed by Kabila were soon distributed. By the same stroke, Kabila received the financial means to support his war effort, and de facto international economic legitimacy, even before the fall of the Mobutu regime. For Canadian companies like Banro Corporation or Barrick Gold, so long as business remained lucrative after as before, the regime did not matter.

Banro, Kinross-Forrest, Barrick Gold, Emaxon, Lundin (Tenke Fungurume Mining), Mindev, and Anvil Mining are among the more prominent Canadian companies involved. Some of these provide us with exemplars of the Canadian firms’ footprints in the DRC. An exhaustive list of these companies involved would be long and assorted. Such would include both private and publicly funded Canadian companies, operating bank accounts and holding addresses in tax havens. While some are privately owned, others are listed on several Canadian stock exchanges. Toronto’s TSX is the more attractive of the stock exchanges because it tends to be less demanding with regard to mining companies and their declared values. Some analysts have even asserted that, unlike the American exchanges, the TSX turns a blind eye to baseline evaluations of exploratory mining. These allow mining companies to speculate on the real value of resources and increase their profits exponentially. This little digression helps to explain the situation with Gécamines.

In Katanga and Kasaï Oriental, the local economies are dependent on mining. Gécamines is a parastatal operating in Katanga and as mentioned, it is in decline, and one of the first consequences of this is that employees are going without salaries. In addition, there are a lot of small to medium companies sub-contracted to Gécamines that are now suffering. To avoid open rebellion Mobutu liberalised the mining sector. Artisan and small-scale mining boomed and with this came ecological disaster and rock falls that claimed lives.

FOOTPRINTS

Mutoshi is a small neighbourhood of Kolwezi in Katanga. Since 2007 Mutoshi has seen a gold-rush, with thousands of artisan and small-scale miners, many of them former Gécamines employees, arriving to pan a rich abandoned mine. This mine is adjacent to the little town. Following a joint-venture with the Canadian firm Anvil Mining, operations resumed here and the artisan and small-scale miners were chased off. Desperately seeking a means of survival, these miners carried on mining, following rich seams located under houses and streets in Mutoshi. One can imagine the net result: homes and roads in the town under assault by artisan and small-scale miners.

Today, Canadian firms own in excess of $300 billion worth of assets in the DRC, most of it acquired through dodgy contracts signed with mining parastatals. Following pressure from civil society, opposition parties and international NGOs, the government has revisited some of these contracts. One particular contract between Gécamines and Tenke Fungurume Mining (TFM) is worth a mention. This Canadian company (a branch of Lundin Mining) controls an area containing 13 identified fields that together hold the planet’s largest reserves of coltan. In 2007 TFM’s capital investments were estimated at $900 million. In 2008, Gécamines suddenly realised that TFM had increased its capital investment to $1.75 billion, and an extra $850 million was ploughed in without informing or consulting its principle partner. TFM underhandedly decreased Gécamines’ share of the joint-venture from 45% to 17.5%, using improvements to infrastructure and rising costs as an excuse. TFM is thus over-invested in the operation, considering that the Mining Code allows investors to recoup their initial outlay on a sliding scale. This means that TFM will be able to recoup its over-investment within the first few years of production, and during this time, Gécamines and the government will get nothing.

Other Canadian companies have also benefited from this scenario. A contract signed in 2005 between Gécamines and Kinross-Forrest granted 75% of the shared value to the latter. According to the contract the capital outlay, including any interest accrued, can be recouped in less than five years after the start of effective production. Kinriss-Forrest is thus helping itself to the lion’s share of production at the expense of the Congolese state and its citizens. Another Canadian company Emmaxon has also delivered a masterstroke by obtaining exclusive rights to diamond mining.

Anvil Mining operates three sites in Katanga, but it is the Dikulushi one that caught the attention of the Commission. A clause in the 1998 contract granted Anvil and its sub-contractors an exemption from taxes and royalties for a period of 20 years. As for the Mutoshi site, the consequences are clear, with residents sacrificing their town and their homes to mine copper/cobalt. Ecological impact is certainly not a key concern for artisan and small-scale miners. For some mining companies, human rights are not a major concern. In 2005, Anvil Mining is said to have provided logistical support for the transportation of army troops during an operation in which civilian lives were lost. Among the dead were scores of women and children.

This year the town of Likasi witnessed violent confrontations between authorities and artisan and small-scale miners, resulting in one death and 32 injured. The cause of the clash was the expulsion of the miners from an old abandoned Gécamines mine in Kamatanda (about seven kilometres from Likasi) that had subsequently been transferred to a Canadian company.
The ecological impact of mining is becoming increasingly evident. A large quantity of chemical effluent from the mines is contaminating the water table. Streams and rivers are littered with chemical waste. A few days ago, the nationwide station Radio Okapi broadcast a worrying report by the Centre for Human Rights and Humanitarian Law condemning the pollution of drinking water in Lubumbashi, a city of four million and the capital of Katanga. The NGO points the finger at mining companies and highlights ‘the occurrence of congenital birth defects at various hospitals in the town. This could be a consequence of drinking polluted water.’

THE PARADOX

Approximately 60% of mining companies operating in Africa are Canadian-owned or funded with Canadian capital. Everywhere that mining takes place in Africa there are serious problems. These challenges are not only socio-economic. They are also ecological, and the impact on human rights. Obviously, Africa does not deserve that which is good for Canada, an attitude which seems to pervade the decisions and actions of companies operating in the continent.

The Peter Munk Cardiac Center and the Peter Munk International Center at the University of Toronto benefit from the generosity of the president of Barrick Gold. Teachers’ pensions, OMERS, Canada Pension Plan, and others all invest in Canadian companies mining in the DRC. Everybody is benefiting! Meanwhile the royalties that these companies pay to the DRC government amount to a mere 5%.

75% of the country’s 60 million inhabitants (around 45 million people) survive on less than a dollar a day. Production costs are very low, there is rampant unemployment, and efforts at organised labour are frequently scuppered. The Banro Corporation controls 13 mining permits in south Kivu, covering concessions that hold approximately 2178 million ounces of gold. Two years ago, Banro claimed to have contributed the welfare of the local population by donating a small kitchen to the local hospital.

CIDA and SNC-Lavalin spent about $2 million on a feasibility study for the construction of the Inga 3 hydroelectric dam. The dam would produce electricity for export, meaning the local residents would have to continue cutting down trees and burning charcoal for cooking, thus further destroying the environment. At the last project meeting held in London, civil society and DRC government representatives were not given a voice. According to Alain Denault, ‘it is worrying to see government agencies like CIDA giving development aid to certain African countries whose resources Canadian companies continue to pillage. CIDA markets Canada while masking the atrocities committed by Canadian companies.’

One wonders why the legal and moral obligations that apply to mining companies in Canada are not applicable in the tropics. It is obvious that the mining companies’ primary objective is profit. But this should not preclude the respect for the engagement conditions of host countries. These companies largely resort to means that would be scarcely acceptable in Canada: rapacious financial practices, human rights violations, violations of ecological standards, stockpiling of undervalued resources. All of these place the future of Africa at risk.

We can echo Alain Denault’s question: ‘What good is served through the shameless extraction of diamonds and gold in Africa, as in Canada, particularly since the profits only accrue to shady companies who continue to threaten the common good?’

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* Mikhael Missakabo is a science teacher at George Brown Community College in Toronto . He came to Canada from the Democratic Republic of Congo some 20 years ago, and follows developments there very closely.