Sino-DRC contracts to thwart the return of Western patronage

Is the Democratic Republic of Congo (DRC) on the verge of bankruptcy? Reuters reports that the DRC’s foreign reserves, which stood at over US$225 million last April 2008, fell to just US$36 million in early February 2009. The World Bank reacted quickly and Marie-Francoise Marie-Nelly, the DRC’s World Bank country director, announced that the bank has proposed lending the country US$100 million in emergency funds from early March to help offset the effects of dwindling mineral export revenues.

The World Bank proposal comes as the DRC’s government accelerates efforts to secure another US$200 million from the IMF’s ‘exogenous shocks facility’ as the country awaits a rebound in demand for its mineral exports.

How viable are these amounts compared with the US$20 billion that China is proposing to the DRC, a post-conflict country? Who can explain to us how the World Bank’s US$100 million loan and the IMF’s US$200 million loan to the DRC is not going to increase its debt burden? Why should we be worried about Chinese loans and not Western ones?

In September 2007 the DRC signed a historic mining agreement with China. The agreement was conducted between La Générale des Carrières des Mines (Gécamines), the DRC’s state-owned mining company, and a group of Chinese state-owned enterprises (a kind of public–private agreement). These include China’s Eximbank, the China Railway Engineering Company (CREC) and Sinohydro.

The agreement creates a mining joint-venture between Gécamines, CREC and Sinohydro in the form of a Beijing-based company called Socomin (a joint-venture), in which the Chinese hold 68 per cent of the shares and Gécamines 32 per cent. Eximbank entered with an investment of US$9 billion in Socomin, of which US$3.25 billion will be mining investment and the remaining US$6 billion earmarked for infrastructural development.

The loan is only the first instalment of a US$20 billion package of loans to be made available over the next three years. Of the US$9 billion, a third will be pumped into the DRC’s war-ravaged mines. The other US$6 billion will take the form of a soft loan (backed by some of the country’s best mineral deposits) to finance new infrastructure (roads, railways, hospitals, hydro-electric dams, airports and vocational training centres) to be built by Chinese construction companies. Changes to infrastructure will be made primarily with Chinese labour, though Congolese local companies will be sub-contracted.[1]

The Financial Times reported on 9 February 2009 that China’s biggest investment deal in Africa is faltering as Western donors create pressure to renegotiate a minerals-for-infrastructure contract in the DRC.[2] In public statements the IMF has ‘urged the [Congolese] authorities to take all actions to ensure that the final agreement [with China] is consistent with debt sustainability’, according to the report. In Kinshasa, the report said, the government is keen to listen to the concerns of Western donors but is, at the same time, eager to pursue the deal with the Chinese.

‘Changes will come’, Victor Kasongo, the DRC’s deputy minister of mines told the Financial Times, adding that the government was awaiting the results of a feasibility study, due by June, on the ‘robustness’ of the project. ‘Congo has chosen to carry on with the IMF and World Bank economic route and at the same time to pursue development with Chinese money’, he said.

Most Western donors have said they support the deal ‘in principle’ because it gives the DRC access to capital on a scale it could not receive from anywhere else. But, led by the Paris Club of creditors and the IMF, they have raised objections to specific provisions.

The focus of concern, according to Western diplomats in Kinshasa, is that the deal would give the Chinese consortium unprecedented state financial guarantees, including some that earmark government revenues and make China a privileged creditor.

But Wu Zexian, China’s ambassador to the DRC, indicated that it would not be so easy. ‘They [Western institutions] are wrong to ask Congo to remove the state guarantee. That is blackmail’, he said. ‘This is a poor country that needs to develop. Why force the country to modify the clause? We cannot accept that. It’s discriminatory.’

On this occasion I think the Chinese ambassador has a point. The DRC was not frogmarched into a deal with China. It signed the deal in complete independence as a sovereign country. If there are clauses that need to be revised, they must be done so in that same spirit. The Western world, the IMF and the World Bank bankrolled Mobutu’s kleptocratic regime for 32 years. They lent him a lot of money which he put in Swiss banks.

The DRC has inherited US$14 billion worth of debt incurred by the Mobutu regime and various transitional governments after President Laurent Kabila was gunned down. During his short 44 month-long tenure of office, Kabila left the country with no debt, not even a penny!

One of the reasons Kabila was killed is because he refused to reimburse all the debts that Mobutu had incurred, arguing that he did not see any works that that money had done in his country. ‘If you lend money to a thief, expect not to be repaid one day’, Kabila told the IMF and the World Bank.

Now the same IMF and World Bank are putting pressure on the DRC government to ditch the deal with China as a condition to get its debt forgiven. That is clearly blackmail. The US$100 million the World Bank has proposed is just a drop in the ocean given the huge challenges the DRC faces. Any suggestion that such a drop in the ocean is actually a foretaste of a US$1 billion loan, provided the DRC ditches the deal with China, is unacceptable.

At this age of globalisation, if the DRC has no freedom to diversify its trading partners, it is still a Belgian colony, a ‘free trade zone’ as it was defined at the Berlin Conference under the trusteeship of King Leopold II.

If the DRC government tries to flex its muscles, it invites trouble. After asking, in vain, the IMF and the World Bank to forgive Congo’s US$14 billion debt inherited from Mobutu and various transitional governments, the DRC turned to China because Kinshasa was told it must abide by ‘the principle of the continuity of the state’ and pay its due. As a consequence, the government of Joseph Kabila is paying US$800 million a year just to service the debt. At the same time, the interim American government set up in Baghdad trampled the same principle and refused to respect the oil contracts Saddam Hussein had signed with France, China and Russia, let alone recognise the debts of the former Iraqi dictator!

The DRC’s deal with China must go ahead. The DRC should be allowed to exercise freedom of choice in the globalised market economy. China will help the DRC break free from the stranglehold of neocolonialism.

How does one explain Rwanda’s cyclic wars in the eastern DRC? Simple. The Tutsi insurgents are encouraged by the ‘return of the white patronage’ over the mineral-rich central African country. We have Albrecht Conze, the former political chief of MONUC (Mission des Nations Unies en République Démocratique du Congo – the UN peacekeeping mission in the DRC), and now the German ambassador to Zimbabwe’s words for it. In an interview given to the Spiegel Online on 17 August 2006, Conze predicted the return of the white patronage in a country that was a Belgian colony until 1960 in the following terms: ‘It is like the West being Congo’s foster parents’ he said, ‘but it won’t be easy.’ According to Conze’s theory, support will come from a black ‘council of advisors’, another idea hatched by Western governments. ‘The plan is for well-known African politicians such as Joaquim Chissano, Mozambique’s former president, [and] Nicephore Soglo, his colleague from Benin, to make policies crafted overseas more palatable to Congo’s citizens’, he said.[3]

The project’s success ultimately depends on ‘Western states and institutions acting in a unified way’. But that is a somewhat shaky foundation. The US government’s interest in rebuilding the DRC is limited, for example. After all, the deeply Catholic country ‘contains neither oil nor terrorists’, Conze pointed out.

Conze concluded by saying, ‘By contrast, Congo’s former colonial ruler Belgium fears losing lucrative business opportunities to European competitors the moment the situation in the country becomes more transparent. The rising world power China could cause trouble too – by providing billions of dollars in loans without imposing conditions or controls in return for access to the country’s valuable natural resources. Beijing has already used this method in neighbouring Angola, where it now controls much of the oil production.’

Good heralding Mr Conze! This is one the reasons why, all of a sudden, we have another cycle of war in eastern Congo. In fact, the Financial Times reported on 31 October 2008 that the evangelical Christian Tutsi warlord Laurent Nkunda, alias Nkundabatware, who has grabbed all the headlines in credit-crunch hit Western countries, is very much against the agreement the DRC signed with China to provide US$9 billion worth of investment in rebuilding infrastructure in exchange for the country’s natural resources. This is a clear sign that Nkundabatware is being used. But who gives him the mandate to veto an agreement signed by a sovereign, legitimate and democratically-elected government with a partner of its free choice?

Nkundabatware is a proxy for Rwandan interests in the DRC, and the West is using the presidency of Paul Kagame of Rwanda to weaken the DRC completely.

At a recent meeting convened by the Royal Commonwealth Society to discuss whether Rwanda should be admitted or not as a member of the Commonwealth, one of the speakers, Andrew Mitchell, a Conservative MP and former shadow minister for international development, said that ‘he likes Kagame because he is a man of actions who has shown exceptional leadership and who is working with India to thwart China’s breakthrough in Africa.’ He meant to say the DRC, because Kagame has so far only invaded the DRC, which has signed the biggest minerals-for-infrastructure contract with China valued at US$9 billion (€6.9 billion, UK£6 billion).

The Chinese deal is an ‘infrastructure development resources-backed finance (IDRF)’ deal, a kind of barter trade which will not leave the DRC saddled with debts. It will have an impact on the infrastructure sector as well as on the agriculture sector. It will benefit Western investors, especially in the mining sector. How can you kick-start the development of the DRC after 15 years of a war of aggression without basic infrastructures? Clearly, this is where you start. China is ready to put a larger amount of money into the DRC than any other.

The mining contracts the DRC signed with Western partners were founded on the West keeping 75 per cent of the stakes. There is no single contract where the DRC gets more than 25 per cent. Is that acceptable? Take Freeport MacMoran, which wants to exploit the biggest reserve of copper and cobalt in the world situated in Tenke Fungurume, Katanga. It insists that the Congolese state should be content with a 5 per cent stake, as originally agreed, and should not revise it. Companies such as Banro hold private gold concessions – wholly owned – in South Kivu and Maniema,[4] and First Quantum wholly owns copper concessions in Lonshi and Frontier Project, formerly known as Lufua, Katanga.[5] ‘Où est le sérieux?’ as the French say.

The DRC has, more or less, adopted the liberal market economy, the fundamental principle of which is ‘you go where you get a better deal’. If it gets a better deal from China, why not put China first? Similarly, if it gets a better deal from America, Belgium, France or Britain, why not privilege such partnerships first?

* Antoine Roger Lokongo is a London-based Congolese journalist.
* Please send comments to [email protected] or comment online at http://www.pambazuka.org/.

[1] ‘DRC Unveils Its $9 billion minerals-for-infrastructures with China, Government Press Release, Ministry of Public Works, 9 May 2008.
[2] ‘Donors Press Congo Over $9 Bln China Minerals Deal’, Financial Times, London, 9 February 2009.
[3] See, Keith Harmon Snow, ‘Over Five Million Dead in Congo? Fifteen Hundred People Daily? Behind the Numbers Redux: How Truth is Hidden, Even When it Seems to Be Told’, Global Research, 30 January 2008.
[4] ‘Banro closes US$14 million financing’, PRNewswire-FirstCall, Toronto, 19 February 2009.
[5] First Quantum Minerals Receives Court Approval for Plan of Arrangement With Scandinavian Minerals’, Market Wires, Vancouver, British Colombia, 17 June 2008; See also: ‘First Quantum Minerals Announces Resource At Lufua Project; One Million Tonnes of Contained Copper’, CCNMatthews via COMTEX, Vancouver, British Colombia, 1 June 2004.