RPT-Congo's Kabila says wants better deal from miners as output grows

Wed Jan 30, 2013 6:03pm GMT

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* Congo gets only "modest" benefit from rising output-Kabila

* Meeting comes two months after IMF stopped planned loans

* Congo produced almost 600,000 tonnes of copper in 2012

By Jonny Hogg and Clara Ferreira-Marques

LUBUMBASHI, Congo, Jan 30 (Reuters) - Congo must tighten controls on granting mining licences and fight corruption so that the country can benefit fully from rising copper production, President Joseph Kabila said on Wednesday.

The Democratic Republic of Congo has some of the world's largest copper deposits, and is also rich in tin, diamonds, gold and other commodities, but its mining sector has been held back by decades of underinvestment, conflict and corruption.

Just two months ago the International Monetary Fund halted $240 million in planned loans to Congo for failing to disclose details of a mining deal.

"We need to put an end to the paradox which sees huge mining potential, and ever more intense mining activity, but only modest benefits for the state," Kabila told government officials in the southern city of Lubumbashi, Congo's mining hub.

In a rare display of support for a clean-up of the mining industry in what the United Nations deems the least-developed country in the world, he said, "This has negative consequences for the improvement of the population's living conditions."

Kabila came to power after the assassination of his father at the height of a 5-year war over territory and mineral resources, which dragged in at least six neighbouring countries and left millions dead before a peace deal in 2003.

Speaking at the start of a high-profile gathering intended as a gesture to the sector and the international community, Kabila said the state initiative would concentrate on better geological assessment, improved power supply, a major concern for miners, and unspecified efforts to combat corruption.

Companies including Freeport-McMoRan, Glencore and ENRC are increasing production, and Kabila said copper output hit almost 600,000 tonnes in 2012, a leap from under 20,000 a decade ago, at the height of the war, and from 190,000 tonnes of output in 2007.

He said the state would grant licences only to investors with "technical and financial expertise", apparently excluding the middlemen who have been at the heart of Congo's mining industry since the end of the civil war.

The role of shell companies and non-mining investors acting as intermediaries in Congo's mining sector has long contributed to accusations of corruption and a reputation for poor transparency, implicating major producers operating there.

Kabila, whose own ties with intermediaries are under scrutiny, gave no details, but his comments were seized upon by others in government.

"We have to put an end to all of that, they are just adventurers. What we've got to do is invite the big mining and oil companies, then everyone will know who they are," employment minister Modeste Bahati Lukwebo told Reuters.

However, both Glencore and ENRC have been critised by transparency activists over deals in Congo but deny any wrongdoing.

ILLEGAL

Miners regularly complain of demands for illegal payments from officials and say the government must improve its own ability to retain revenue and keep up with a dynamic private sector.

In 2010, according to the latest report by transparency initiative EITI, the government said it received almost $876 million in payments from the mining sector.

But the country's mining code is under review and Congo could demand a larger share. In an early draft, the country demanded a 35 percent stake in any new mining project, up from 5 percent - a move widely criticised by the industry.

"Certainly some investors are worried about how (the mining code revision) will be done, but from the state's point of view, they desperately need the money to pay for social services ... the mining sector is the most obvious source for that," said Neil Wigan, British Ambassador to Congo.

"This meeting is meant to be a demonstration of political will ... but now the question is how that will be implemented," he said.

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