Text:
http://www.mg.co.za/mg/news/98jan2/30jan-congo.html
Congo's
investment
blues
LAURENT
KABILA'S
honeymoon with the
investment community
is going though a rough
patch.
Hard on the heels of
the cancellation of the
America Mineral Fields (AMF) Kolwezi copper reclamation project, the government
of the new
Democratic Republic of the Congo has announced the scrapping of another 12
mining research deals signed five months ago.
Kabila's Ministry of Mines says the 12 foreign companies involved are dragging their heels instead of starting the work. Other firms have been given until February 10 to start research work or have their preliminary agreements scrapped too.
That, say insiders, is very bad for investor confidence.
"Big international mining companies will not commit large sums of money upfront
for greenfield exploration in the rainforest," says one. "The government is
going about things in the wrong way. First, there have to be reassurances that
due process will be followed. You don't encourage investment with ad hoc
agreements that can be cancelled at any time."
Investing in the Congo is not for the faint-hearted, but with high risks come huge rewards. And for that reason alone, believes BoE NatWest analyst Barry Sergeant, the money will keep on coming.
But only as long as security of tenure is in place. "At the moment there is no mining code, no tax system. So even if a company did win a tender, it wouldn't know what taxes it would be paying. Such issues have to be addressed as quickly as possible, otherwise the rebuilding of the country will never get under way."
Only six months ago, politicians and businesspeople alike were talking about the Congo as the driving force for the region, with mining the engine. And as the biggest economy on the continent, South Africa was best placed to capitalise on that potential.
But already that vision seems compromised and the new government's credibility is being called into question. AMF, which is suing Anglo American for $3-billion over alleged interference in the Kolwezi contract, believes it held the exclusive rights to the project. Gecamines, the state-owned mining company, disputes this, even going so far as to accuse AMF of fraud.
Robert Stewart, the new chair of AMF, is in the Congo this week, attempting to clear up the issue. Says AMF representative Earl Young: "We believe the tender was handled in a transparent way. The government said we'd won it and that we had been awarded the property. We are now trying to determine why they changed their minds. There is a lot of confusion, but we are very optimistic that the talks will be fruitful."
The AMF delegation is hoping to go straight to the top in its attempts to reopen negotiations; a meeting with Kabila is on the cards. But analysts believe they are in for a rough time, having failed to satisfy the financial conditions laid down by the Gecamines authorities first time around.
Meanwhile, the Kolwezi project is in limbo. Anglo has said it is no longer interested in tendering. Instead, Anglo will concentrate on the Kolwezi Group West project, which is much bigger, but also requires larger capital investment to get off the ground. Industry sources estimate that more than $1-billion is needed.
Anglo is co-leader, with 15%, in an eight-company
consortium, a move that has raised eyebrows in the
mining industry. Not only because it marks a significant turnaround in Anglo's
popularity stakes in the country
(it was forced to abandon the Tenke Fungurume
copper cobalt investment in the 1970s because of
political pressure), but because such groupings are
difficult to manage.
Anglo, however, is optimistic. Says representative
Glen Finnegan: "It has enormous potential -- more than
400 000 tons of copper per annum. The task team
working on the feasibility study is up and running."
But Anglo's involvement raises other questions about the government's policy. On the one hand, the new order has lambasted the mining companies for profiting for years from the former regime; on the other, Kabila has hailed the consortium as one that will spearhead the revival of the country's mining industry.
As a result, some observers believe the industry is still in a massive state of flux, with the government all too frequently moving the goalposts, with new rules and new visions. In the short term, the fear is that such volatility puts any deal done either with Gecamines or the government in jeopardy.
The new Minister of Mines, Kambale Mututulo, will no doubt use next week's African mining conference in Cape Town to set the record straight. Much of the problem, according to people operating in the Congo, is lack of experience.
"They're beginning to realise that they haven't been too hot on the public relations side. They've created certain misperceptions that they are now keen to correct. And no doubt the minister will set out to do just that next week, making it clear that the government will indeed honour all agreements," says one observer.
But with the legal battle between AMF and Anglo hanging over any further developments, the minister may be in for some tough questions.
Mining is a rough game so a bit of jostling for position is par for the course. The concern now must be that the industry will be tied up in litigation for years to come, with dire consequences for the economy as a whole. -- Mail& Guardian, January 27, 1998.