Corruption Threaten Congo’s Investment

The Democratic Republic of the Congo (DRC) holds the paradoxical status of possessing a rich mineral wealth at the same time as being one of the world’s least developed countries.

It is among the world’s largest suppliers of copper and cobalt, yet corruption and conflict have left it ranked 176th of 187 countries in the latest United Nations Human Development Index (2015). This disconnection is likely to become starker in light of recent violence and instability.

Even by Congolese standards, militia-led violence has been on the rise in recent months. This is particularly true in the previously peaceful Kasai province in the southern DRC, where an estimated 3,000 people have been killed, including an American and Italian working for the UN, and 1.3 million displaced since late 2016 from attacks by the Kamuina Nsapu militia and a brutal crackdown by the army.

Recurring violence between Congolese troops and the local Mai-Mai Yakutumba self-defense militia in the eastern South Kivu province caused Banro Corp to suspend its Namoya gold mine operations and temporarily evacuate its staff on July 3.

Meanwhile, violence is raging in Tanganyika between rival militias affiliated with the Luba, a Bantu people, and Twa, a pygmy tribe. The UN Office for the Coordination of Humanitarian Affairs estimates that internally displaced persons in the province have swelled from 370,000 in December to 543,000 in March 2017.

In a more recent, and uncommon, development in the capital Kinshasa, two people were killed and six police wounded on July 14 by a dozen armed men, presumed to be members of the Bundu dia Kongo separatist cult, which had previously led an audacious prison break of 4,000 inmates in the city’s Makala prison.

The violence comes after last year’s defiance of the national constitution’s two-term limit by President Joseph Kabila, who has led the DRC since the assassination of his father Laurent in 2001. Despite denunciations by donor countries, UN sanctions imposed on senior officials, and the killing of dozens of opposition protesters primarily in Kinshasa, Kabila appears determined to remain in power and safeguard his family’s financial interests.

While the violence is not necessarily directed at the president’s power grab, Kabila is now presenting himself as the sole guarantor of stability to deflect criticism of his democratic record. He has also sidelined his main presidential challenger, the popular, charismatic, and now-exiled Moise Katumbi, through a politically motivated three-year sentence over a questionable land deal.

Criticism of these affairs from the West is routinely decried as neocolonial interference in African affairs. The recent turn of events has done little for Kabila’s popularity, with an October poll giving him just 7.8% support. But as long as he retains control of the key institutions, the military, and political sphere, he is unlikely to be pushed out, particularly given continued regional support, led by South Africa.

This civil unrest over Kabila’s power grab and militia violence in the south and east raises the risk for foreign entities working in the DRC during a period in which UN commitments are in retreat. With the US Ambassador Nikki Haley leading the charge, the UN’s peacekeeping budget was slashed by $500 million in June.

This includes an 8% reduction to the UN mission in the DRC, months after its peacekeeping contingent was reduced from 19,815 to 16,215 troops by the Security Council in March 2017.

While the European Commission for Humanitarian Aid and Civil Protection recently announced €5 million in aid to the Kasai region, funding cuts forced the International Rescue Committee to close its office in Lubumbashi on July 31. Since the beginning of 2017, aid reductions have also forced Catholic Relief Services and ALIMA to withdraw from Haut-Katanga, Haut-Lomami, and Lualaba provinces in the east.

With little faith in the DRC’s democratic process, Western donors are loath to fund activities around an election scheduled for some time this year, which the government estimates will cost around $1.8 billion.

Foreign governments have until now refrained from using aid cuts as a sanction on the Kabila government, no doubt aware of the scale of the humanitarian crisis that would ensue in the absence of functioning state services.

However, increased security risks, evidence of corruption, and deteriorating diplomatic relations will inevitably lead to pressure for reduced development assistance activities by foreign NGOs and funding from donor countries critical of Kabila.

Aid cuts also come on top of increased scrutiny by US authorities of companies engaging in corrupt practices in the DRC, as evidenced by the $413 million in fines paid by the Och-Ziff hedge fund after it admitted complicity in bribery in the DRC and four other countries.

Swiss mining giant Glencore also recently bought out a DRC copper mining share of controversial Israeli investor Dan Gertler, who is close to Kabila and has made billions off controversial diamond and copper deals.

Mining deals without public procurement processes or government regulations, demands for bribes/royalties made of investors, as well as the absence of a functioning legal system, have made informal power networks key in facilitating foreign mining investments. Most of these opaque dealings have ties to the Kabila clan, consolidating his control over Congolese political and economic life.

Corruption investigations by Bloomberg released on July 17 and December 15 uncovered the family’s complex network of business in nearly all economic areas.

These bring hundreds of millions of dollars to the family, led by Kabila’s brother, and member of parliament, Zoe. An emboldened Kabila has also reintroduced mining code reforms that would increase taxes and royalties on foreign investors and require a greater involvement of the government in new developments, with a decision expected later this year.

All of this points to a volatile short- and medium-term future for Kabila’s Congo, riddled with corruption, militia violence, and civil unrest.

The president may exploit this instability to do away with term limits by way of a referendum, as was previously done in neighboring Rwanda and the Republic of the Congo under questionable conditions. In any event, foreign investors and aid donors will need an even higher appetite for risk to continue work in the increasingly volatile country.

This could ultimately deprive the country of much-needed investment and development assistance. Those most vulnerable to the Kabila-induced instability will continue to be the Congolese people, 77% of which live below the poverty line.

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply