Recent history shows the systematic undervaluation of state-owned mineral assets has been disastrous for the people of the Democratic Republic of the Congo.
The Africa Progress Panel voices its concern over a possible mining deal in the Democratic Republic of the Congo (DRC) and urges the country’s state-owned mining company, Gécamines, to ensure full transparency.
According to Bloomberg media reports, dated October 7th and October 17th, Gécamines, is proposing to sell its 20 percent stake in the Kamoto Copper Company to the Fleurette Group.
The Panel recognises the enormous potential of the DRC’s mineral wealth to drive economic growth and to improve significantly the lives of its 67 million population. But recent history gives good reason to be concerned.
Our 2013 Africa Progress Report, Equity in Extractives – Stewarding Africa’s natural resources for all, analysed five mining deals in the DRC, which involved the systematic undervaluation of state-owned mining assets and sale to offshore companies, all linked to the same company, Fleurette, an offshore-registered holding company owned by Israeli billionaire, Dan Gertler. Together the five deals cost the DRC at least US$1.36 billion, an amount equal to almost twice the DRC’s combined annual budget for health and education in 2012.
Across the five deals, assets were sold on average at one-sixth of their estimated commercial market value. Assets valued at a total US$1.63 billion were sold for US$275 million. The average rate of return across the five deals examined was 512 percent, rising to 980 percent in one deal.
No country better illustrates the high costs associated with opaque concession trading than the DRC, which ranks lowest on the UN’s Human Development Index. It has some of the world’s worst malnutrition, its sixth highest child mortality rate, and over 7 million children out of school.
If this reported sale is going ahead, then the Africa Progress Panel, as stated in our 2013 report, urges Gécamines to show that they have followed an open tender process, essential to transparent concession trading. The Africa Progress Panel would also urge Gécamines to show evidence of an independent and credible valuation for those mineral assets, critical to a fair deal.
Only in this case can the citizens of the DRC know they have received fair value.
Photo credit: Gwenn Dubourthoumieu