From 2012 to 2020, Gécamines’ partners achieved a turnover of 35 billion USD while Gécamines only received 564 million USD in royalties- DRC
The General Inspectorate of Finance (IGF) has just made public an explosive report on the mismanagement of Gécamines over the past decades.
According to this report released at the end of May 2022, Gécamines was the victim of a “disparate treatment of partnerships” in particular with regard to the right to collect royalties.
“From 2012 to 2020, Gécamines’ partners achieved an overall turnover estimated at 35 billion USD, while Gécamines received only 564 million USD in royalties from these partnerships, i.e. 1.6% », argue the IGF inspectors in this report.
The same document reveals that TFM (Tenke Fungurume Mining), which inherited the largest reserves from Gécamines, is not required to pay any royalties.
The loss of earnings in royalties, evaluated at the rate of 2.5%, on the turnover of 14,412,657,464 USD, realized from 2012 to 2020 by TFM, is 360,316,437 USD for Gécamines.
Namely, to limit the effects of the capture of operating income by private partners, the principle of payment of royalties was introduced during the review of mining contracts, on the proceeds of the sale. “However, these royalties were neither generalized nor standardized, in their mode of calculation or their rate, which ranged from 1% to 2.5%”, says the report.
Similarly, while for other partnerships, royalties are calculated on gross turnover, for others, they are calculated on net turnover and the rate of calculation of these royalties is not no longer uniform. “The event generating these royalties being the same, all the concessions or waivers granted to the partners, without equivalent financial compensation, constitute losses for Gécamines and, consequently, for the Public Treasury”, slice the IGF.
In its recommendations, the IGF proposes, with regard to royalties, to explore the possibilities of revising the rate of royalties fixed in the farm-out contracts, taking into account the significant nature of the contribution in kind of the deposits by GECAMINES.
