International companies and local elites in the Democratic Republic of Congo (DRC) are pocketing revenues from copper and cobalt production instead of sharing it with local communities or spending it to reduce poverty, a watchdog group charged Wednesday.
A new report by the London-based Global Witness says that despite being one of the richest copper- and cobalt-producing areas in the world, the province of Katanga in southeastern DRC remains severely poor and the population has little or no infrastructure or public services.
"The profits are serving to line the pockets of a small but powerful elite -- politicians and businessmen who are exploiting the local population and subverting natural riches for their own private ends," says the report, whose authors based their findings on field research in November and December last year.
The 56-page report also scrutinises the role of local regulators, international donors and multinational firms. It says that government officials are actively colluding with mining companies to skirt regulations and the payment of taxes.
The report, "Digging in Corruption", explains that a significant share of the copper and cobalt is mined informally and exported illicitly from the African nation, representing a major revenue loss for the Congolese economy and a lost chance to reduce poverty.
A local source quoted in the report estimated that at the end of 2005, at least three-quarters of the minerals exported from Katanga were leaving illicitly. Since the DRC's recorded copper and cobalt exports were estimated at 390 million dollars last year, that means the illicit trade could amount to as much as 1.1 billion dollars.
And since most of the products mined by hand are exported in raw form, even when these exports are declared, the DRC is losing out on the higher prices it could obtain if it processed the minerals before export.
Global Witness urged the international community to seize the opportunity of the Jul. 30 elections to press for real reform.
"In the run-up to elections, politicians and companies have been scrambling to get their hands on ever-greater shares of the lucrative mineral trade, with little or no regard for the welfare of the Congolese population," said Patrick Alley, director of Global Witness.
"The plunder of the DRC's natural resources continues to undermine the country's opportunities for peace, stability and development," he said.
The world's appetite for minerals is rapidly growing. Copper is sought after for use in power transmission and generation, building wiring, telecommunications, and electrical and electronic products. Cobalt is used in super-alloys to make parts for gas turbine aircraft engines and demand is continuing to soar as it is used for rechargeable batteries in globally popular mobile phones and devices.
It is also used to make magnets, tire adhesives and catalysts for the petroleum and chemical industries.
The price of copper has quadrupled since 2001, standing at 7,603 dollars per tonne in May this year.
Resource-hungry Western nations have viewed the interest in copper and cobalt from rising industrial powers like India and China with worry. The two Asian giants suffer from scarce domestic resources.
World production of copper is expected to increase by six percent and total use by five percent in 2006, with the areas on the border between DRC and Zambia playing a major role.
The so-called copperbelt running through Katanga and Zambia contains 34 percent of the world's cobalt and 10 percent of the world's copper. Since 2004, there has been a massive influx of foreign companies pouring into Katanga on the DRC-Zambia border.
The study says operations have been marred by price fixing in contract negotiations in the capital Kinshasa, where politicians have quickly approved several large contracts with multinational companies, leaving only a small share for the state mining company, GÃ©camines.
The Kamoto copper mine, the Dima-Kamoto Concentrator and the Luilu hydro-metallurgical plant are one example, with Kinross-Forrest inking a deal with GÃ©camines that gave the former a 75 percent share and GÃ©camines 25 percent. The main shareholders of Kinross-Forrest are George Forrest International in Britain and the Canadian company, Kinross Gold Corporation.
International companies have been returning to the country prompted by high copper and cobalt prices, and by the gradual decrease in conflict in DRC over the last two years. The establishment of a transitional government in 2003 and the advent of elections in 2006 have all contributed to creating a more attractive climate for international investment.
Those companies and banks include the Canadian mining firm First Quantum Minerals Ltd, the Rand Merchant Bank in Johannesburg, and Adastra, a Canadian company with its head office in Britain.
The report also examines the ties between international mining firms and global public lenders such as the World Bank. It says the World Bank is involved in copper and cobalt mining in DRC and in promoting foreign investment despite classifying the country in one of its publications as the worst country in the world in which to do business.
The International Finance Corporation (IFC), the World Bank's private investment arm, has provided financing for a feasibility study carried out by Adastra, which is hoping to establish a copper and cobalt project in Kolwezi.
The IFC now has a 7.5 percent stake in Adastra's project that was taken over by First Quantum, another Canadian mining company.
The report called on private companies to help reform the sector and declare all mineral exports, pay the appropriate taxes and ensure that the working conditions of the estimated 150,000 miners who supply them meet minimum health and safety standards -- or refuse to buy products originating from those mines.
The average miner in Katanga earns about two or three dollars a day. Most work without protective clothing, equipment or training, and scores die every year in preventable accidents, the report says.
"We know that the Congo is rich. But despite this, we don't even have enough to eat. Only one category of people profits," one miner told Global Witness.
- 116 Human Rights