New DRC-China Mining Amendment Sparks Controversy and Concerns Over Transparency
Signed on March 14, 2024, Amendment No. 5 between the government of the Democratic Republic of Congo (DRC) and the Chinese Enterprise Group (GEC) regarding mining operations by Sino-Congolese Mines (Sicomines) continues to generate significant debate.
The amendment, which trades mining rights for infrastructure development, has faced scrutiny since President Félix Tshisekedi took office in 2019, sparking a trade war between the United States and China over DRC’s mineral resources.
During his visit to Kinshasa in August 2022, U.S. Secretary of State Antony Blinken pushed for the revision of mining contracts favoring Chinese companies in the DRC.
The U.S. praised the DRC government’s decision to review these contracts, citing concerns over transparency, labor rights, and adherence to environmental, social, and governance standards. Global Witness, an NGO, highlighted the opacity and inadequate definitions within these contracts.
In 2023, the General Inspectorate of Finance (IGF) reported an imbalance in the contract signed in 2008, which heavily favored the Chinese side.
Inspector General Jules Alingete revealed that while Chinese companies had gained nearly $10 billion, the Congolese side received only $822 million in infrastructure benefits.
The new amendment has not resolved the perceived imbalance, according to experts. Key challenges remain, particularly concerning the price of raw materials.
The amendment stipulates an annual infrastructure investment of $324 million from 2024 to 2040, contingent on copper prices staying at or above $8,000 per tonne.
Observers argue that the DRC’s absence from global metal pricing forums weakens its position and exacerbates contract imbalances.
The amendment also includes a 30% increase in additional profits for infrastructure if copper prices rise by 50%. If prices fall below $7,000 per tonne, both parties must renegotiate the annual infrastructure investment.
Article 1, Paragraph 10 of Amendment No. 5 grants total tax exemptions to the Sino-Congolese project until 2040. Experts argue this provision disadvantages the DRC, contradicting the Congolese mining code’s principle of non-exemption.
They suggest a reduction principle, significantly lowering taxes while adhering to the mining code. Informally, Jules Alingete claimed that the negotiations were based on the mining code and regulations.
In February 2023, a controversy erupted over a “superprofit” tax, which Sicomines refused to pay, arguing it was not covered by the exemptions. Outgoing Finance Minister Nicolas Kazadi emphasized that Sicomines owes $200 million in superprofit taxes.
Concerns also arise about mineral depletion. Experts warn that Sicomines’ operating techniques could exhaust ores within ten years, potentially requiring additional deposits to fulfill infrastructure financing.
The list of infrastructure projects under Amendment No. 5 has not been officially published, raising public concerns. According to the Congolese Agency for Major Works (ACGT), 80% of the selected road sections lack feasibility studies.
This issue recalls past pre-financed and over-invoiced projects from the 2008 negotiations, as detailed in a 2023 IGF audit report.
The contract, signed in early 2024, includes a $7 billion investment over 17 years, with $1.5 billion already borrowed. In 2024, $624 million will be disbursed, followed by $1 billion in 2025.
Alongside road infrastructure, the amendment adjusts the share distribution within Sicohydro, the entity operating the Busanga hydroelectric power station. The Congolese state’s share increases from 10% to 40%, while the Chinese party’s share decreases from 75%.
As the new amendment faces implementation challenges, questions about transparency, equitable benefits, and effective governance remain central to the debate over the future of mining in the DRC.
