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Report: DRC Mining Deals Highlight Resource Corruption

  • Nick Long

Africa Progress Panel head and former UN secretary General Kofi Annan, Februay 15, 2011.

Africa Progress Panel head and former UN secretary General Kofi Annan, Februay 15, 2011.

The Africa Progress Panel, a research organization chaired by former U.N. Secretary-General Kofi Annan, says most Africans are not getting a fair deal out of their countries’ natural resources. In its annual report, the panel highlights several mining deals in the Democratic Republic of Congo as examples of how, it said, natural resource wealth has been mismanaged.

The 10-member Africa Progress Panel includes Kofi Annan, former Nigerian president Olusegun Obasanjo, a former head of the International Monetary Fund, Michel Camdessus, and the singer and activist Bob Geldof.

The panel's annual report, released Friday, focuses on Africa’s oil, gas and minerals, which it said offer a once-in-a-millennium opportunity to lift people out of poverty.

But not if they are managed the way they have been in the Democratic Republic of Congo, the panel argues.

The report looks in particular at five mining deals since 2010, involving the sale of assets by the DRC state mining company Gecamines. It estimates the Congolese state lost at least $1.35 billion through these transactions - equivalent to twice its annual spending on health and education combined.

And that is just some of the losses, says the pressure group Global Witness, which has campaigned on this issue for decades. Daniel Balint-Kurti is one of Global Witness’s Congo researchers.

"You see that five deals were highlighted, and that is because there were five deals between 2010 and 2012 for which sufficient data exist to do a proper calculation of losses to the Congolese state," said Balint-Kurti.

Last year, British member of parliament Eric Joyce, who was chairing an all-party parliamentary group on Africa's Great Lakes region, claimed the DRC had lost more than $5 billion from mining deals over the previous four years.

Activists within the DRC agree there have been serious problems of governance in the country’s mining sector. Jean Pierre Okenda works for the Extractive Industries Transparency Initiative, an international effort aimed at exposing tax evasion and lost revenue from natural resources.

He said he thought the Africa Progress panel was right to highlight the DRC case, because in his view, it demonstrates not only mismanagement, but also corruption on a grand scale.

DRC government spokesman Lambert Mende told VOA the figures in the panel's report on Congo need to be verified, and put in perspective. He said the government wants to know about losses to the public treasury, but it does not want unproven claims to be made about the country or about its partners.

The government would like to know more about the methodology used in the report, he added.

Okenda suggests the methodology is simple.

Take the case, he said, of SMKK, one of the companies sold by the DRC state mining company. It was sold for $15 million, says Okenda, and a few months later it was resold by the new owner, an offshore company, for $75 million. And that has been the pattern, he says in these five deals that were all conducted in secret without a tender.

Global Witness said it is particularly troubling that all the mining assets sold in these deals appear to have passed through the ownership of the same company. That would not have been known, said Balint-Kurti, if it were not for years of investigation which finally revealed identities that were hidden by certain offshore, secret tax havens.

One of those tax havens used by companies involved in the DRC deals was the British Virgin Islands.

Global Witness argued Britain should pressure its overseas territories like the Virgin Islands to change their laws so that companies registered there are required to declare their owners.

"The system of keeping company ownership secret has a large role to play in ripping off poor African states," said Balint-Kurti.

British Prime Minister David Cameron has said he will try to persuade the G8 group of nations to agree to end this kind of offshore secrecy.