It was in fact a “mineral for infrastructure” barter. Overall, the gain for the Chinese side is 76 billion dollars against 3 billion planned for infrastructure in favor of the Congo: 3,600 km of paved roads, rehabilitation of more than 2,000 km of railways and construction of 800 km of new tracks, construction of housing, health infrastructure, schools, universities, two hydroelectric power stations. In a report dated February 15, 2023, the General Inspectorate of Finance (IGF) argues that Congo has gained nothing from these contracts.
On April 22, 2008, the Cooperation Agreement between the Democratic Republic of Congo and a group of Chinese companies (China Railway Group Limited and Sinohydro Corporation) was signed in Beijing. Those who had negotiated these contracts were on the Congolese side: Pierre Lumbi Okongo, Augustin Katumba Mwanke and Zoé Kabila. These contracts were presented as a win-win partnership unlike those signed with Western companies. But in a February 15, 2023 report, the General Inspectorate of Finance (IGF) states that Congo has gained nothing from these contracts. Quite the contrary!
According to IGF Inspector General Jules Alingete, “Chinese companies have already received a gain estimated at nearly 10 billion US dollars, while the Republic has only benefited from 822 million dollars in terms of infrastructure. Will it still be necessary, in the 822 million, that we enter in depth to realize that there is no visibility of this sum… The glaring imbalance which has been observed, the selling off, the squandering of our ores observed in this contract was also the work of misguided sons of our country, who accompanied Chinese companies in this macabre work against our country”. Overall, the gain for the Chinese side is 76 billion dollars against 3 billion planned for infrastructure in favor of the Congo.
The nature of the contracts
When signed, the contracts were worth nine billion dollars. Eventually, these contracts were revised downwards to six billion dollars under pressure from the IMF, the World Bank and Western countries. Officially, the IMF was concerned about debt sustainability. But in fact, Western countries did not accept the rise of China’s economic and political power in the Congo. Of the six billion, three billion dollars were to be devoted to the construction of infrastructure and three billion for the revival of the mining sector.
These contracts include two parts. There is therefore a mining component, ensured by a joint venture, called the Sino-Congolese Mines (Sicomines), associating the group of Chinese companies co-signatories of the Sino-Congolese agreement (China Railways and Sinohydro) to the tune of 68% and Gécamines, 32%. Under the terms of the agreement, Gécamines transferred to the joint venture several mining titles relating to deposits located in Kolwezi, containing up to 10.6 million tonnes of copper, including 6.8 million confirmed, and cobalt . Sicomines’ mining investment is financed by a 3.2 billion loan granted by China Eximbank, two-thirds of which is subject to an interest rate of 6.1%, the last third being granted at an interest rate of zero interest. The second part of the contracts concerns infrastructure, in particular transport, to which 3 billion dollars were to be devoted. This involved the construction of 3,600 km of paved roads, the rehabilitation of more than 2,000 km of railways and the construction of 800 km of new tracks, as well as the construction of housing, health infrastructure, schools, universities, two hydroelectric power stations. It was the China Eximbank which was to grant the loan equivalent to the amount of the required investments. Reimbursement of the loan was the responsibility of Sicomines from profits generated from mining activities. It was in fact a “mineral for infrastructure” barter.
In November 2015, the first copper cathode was produced by Sicomines. But according to the IGF report, “SICOMINES has not yet been able to reach the projected production of at least 200,000 tons of copper in 2016 and 400,000 tons of copper in 2019, despite the size of the investments made or the encroachment of the deposits of the GECAMINES SA ».
To supply the mine with electricity, SICOMINES built and commissioned on July 2, 2022, the Busanga hydroelectric dam with a capacity of 240 MW on the Lualaba River at a cost of $600 million. But this financing took place, according to the IGF, in violation of the collaboration agreement and the joint-venture agreement.
The conclusions of the IGF report
Observers are wondering where the investments planned in the 2008 contracts with the group of Chinese companies have gone, particularly in infrastructure. There is still nothing visible on the ground. The IGF report denounces the lack of visibility and impact of the works carried out and their unjustified selectivity in violation of appendix C of the Agreement of April 22, 2008. The eligible works carried out amount to 534,902,461.66 dollars while the non-eligible work performed was $287,287,598.42. According to the IGF, “The programming of the said works did not comply with specific requirements, such as the connectivity of cities, the opening up, the fluidity of the traffic of people and their goods, the opening of production localities to major consumption centers, the immediate impact on people’s lives, etc. and therefore these works remained, for the most part, without visible impact for the populations. This programming has therefore completely forgotten the railway sector, the airports to be rehabilitated (Goma and Bukavu), the hospitals (31) to be built, the two hydroelectric dams to be built (Kakobola and Katende), the electricity distribution networks to be rehabilitated (Kinshasa and Lubumbashi), training centers for ITP trades to be built and rehabilitated, 5,000 social housing units to be built, 145 health centers to be built and two universities to be built. Some of these projects are now funded by the Republic as part of the PDL-145 Territories project”.
According to the former Office of Coordination and Planning of the Sino-Congolese Program, Sicomines has financed twelve infrastructure projects with an envelope of 800 million dollars disbursed, namely: Hôpital du Cinquantenaire, Esplanade du Palais du Peuple, Boulevard du June 30, Kasomeno Road and minor infrastructure works. These contracts have heavily indebted Gécamines, and therefore the Congolese state. To date, it is the Congolese State which reimburses the loans and not Sicomines as planned. There has been an increase in indebtedness to China as a result of these contracts. The outstanding debt due to this country is close to 20% of the current debt portfolio, mainly due to the Sicomines loan. According to the IGF, there is unjustified indebtedness of Sicomines, instead of a contribution of funds by the Group of Chinese companies (GEC). “Under the terms of the collaboration agreement and the Joint-Venture agreement, it was up to the GEC to mobilize resources for the financing of mining and infrastructure investments (for USD 6.2 billion) resources whose reimbursement had to be ensured by Sicomines. Instead, it was the Sicomines Joint Venture that got into debt, to the tune of USD 3,341,948,821.85 to finance both mining and infrastructure investments. But at the same time, she paid herself, from 2016 to October 2022, USD 5,464,880,564.06 on her main account in Dubai for the benefit of one or more accounts not yet identified”.
It remains to be determined the overall amount that Chinese investors have actually disbursed to finance the Sicomines project. The report only mentions that Gécamines contested the amount of the mining investment which it considers excessive and the reduction in reserves. For infrastructure financing, the money did not pass through the Treasury but through Sicomines, which then disbursed small sums for specific infrastructure projects. According to the Carter Center and the IMF, Sicomines collected, between 2008 and 2014, 1.163 billion dollars to spend on infrastructure. Of this amount, less than $500 million was actually used to fund infrastructure projects.
In the end, it is the Chinese who benefit the most. The project also enjoys total tax and customs exemptions. According to a law voted in Parliament, visas for Chinese workers are free. Ultimately, the contracts must be reviewed and respect the laws of the country in terms of exchange regulations and the incorporation of companies. The Congolese must also produce feasibility studies for infrastructure projects to be financed by the Chinese side.
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Gaston Mutamba Permission
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