DRC: Tshisekedi wants to renegotiate Kabila’s ‘contract of the century’ with China

For his first official trip to China which began on 24 May, Tshisekedi travelled first to Beijing, where he met Jinping before moving on to Shanghai and Shenzen to visit several industrial sites. The trip will hopefully lead to the signing of several agreements.

It should also be an opportunity for the Congolese head of state to address an ultra-sensitive issue: that of the rebalancing of the agreement concluded in 2008 between the Congolese national mining company Gécamines and the Group of Chinese Enterprises (GEC).

‘Economic colonisation’

The “contract of the century” led to the creation of the Congolese-Chinese company Sicomines. While it provided for the granting of cobalt and copper deposits to this joint venture in exchange for Chinese investment in infrastructure, it is now considered by the DRC to be highly unfavourable to its own interests. In May 2021, Tshisekedi decided to completely re-evaluate the contracts signed under his predecessor, Joseph Kabila.

On 15 February, in his audit report, Jules Alingete Key, the head of the Congolese Inspection générale des finances (IGF), denounced “unacceptable economic colonisation” and drew up a list of demands to make the deal fairer, such as the payment of $20bn in compensation. In response to these demands, Beijing protested that they “do not correspond to reality”.

While in China, Tshisekedi hopes to pave the way for the agreement’s complete overhaul. On 19 May, he informed his ministers that a working group, composed of representatives of the government, the presidential cabinet and civil society, had been tasked with identifying areas for renegotiating the contract. This task force submitted its conclusions late last week, which should serve as a basis for the Congolese side to enter into discussions with the Chinese to reach a compromise.

‘Imbalance’

Among the points identified by the committee in its report, consulted by us, is first and foremost the inclusion of contributions made in kind by Gécamines (in the form of deposits) in the constitution of Sicomines.

The working group estimates that 70% of Sicomines’ shares should go to DRC (60% to Gécamines, 10% to the state) and 30% to GEC. GEC alone currently controls 68% of the capital, leaving DRC in the minority.

In addition to recommending a rebalancing of capital in favour of DRC, the commission also recommends greater involvement of Gécamines in the management of the joint venture. Citing an “imbalance” in the sharing of responsibilities – only the deputy director general and four of the twelve directors are from the Congolese mining company – it suggests that positions on the board of directors be distributed according to the number of shares each holds in Sicomines’ capital.

Independent audit

As for the financial aspect, the Congolese side believes the amount initially provided by GEC in the form of “key money” ($350m was paid to initiate the collaboration) should be revised upwards and should be considered definitively acquired. Therefore, the task force recommends negotiating for reimbursement of the part of that amount that was written off by Sicomines and which, as a result, reduced Kinshasa’s profits.

It also recommends greater transparency over the real cost of Chinese investments, as well as on the volumes of minerals traded. Sicomines is regularly accused of undervaluing what it exploits. And while Gécamines contests the objectivity of the feasibility studies carried out by China Enfi, the commission suggests that an independent expert be used to certify the mineral reserves.

However, if China does not respect these transparency obligations, the committee proposes to introduce two new articles in the contract providing for sanctions that could go as far as the termination of the agreement. In its assessment, the IGF criticised the fact that everything the mine produced was sold exclusively to China Railway Resources Group. The purchase of minerals should therefore be prohibited at a below-market price.

Busanga power plant

Finally, the committee also raised the issue of the “infrastructure” part of the contract, the financing of which, set at $3bn, is considered to be much lower than the value of the deposits ceded by Gécamines. Only $822m have been allocated to this work to date, whereas $1.5bn is said to have been assured by the Congolese side: the report proposes that the balance of the financing be made available unconditionally through a line of credit, at a preferential rate, managed by the Congolese side.

In addition, it is strongly recommended that an assessment be made of the loss of revenue caused by the numerous exemptions granted to Sicomines and Sicohydro, the company responsible for operating the Busanga power plant. In 2016, the DRC’s shares in this major project were substantially reduced (from 49% to 25%, including 15% to a private company, Coman). The commission proposes to revert to the original 2010 agreement and to rebalance the distribution of shares within Sicohydro while ensuring the DRC recovers the shares allocated to Coman.