Country in focus
Copper and cobalt mining is expected
to be the mainstay in the DRC’s foreign
earning in the next few years.
Current policy is likely to remain in
place despite a new president in the
Democratic Republic of the Congo
(DRC), writes Leon Louw.
result sheets indicated that Fayulu secured an overwhelming
victory in the elections.
“According to election results obtained by CRG, Fayulu gained
59.42% of votes in comparison to Tshisekedi’s 18.97%. CRG also
released a second set of data from the DRC’s Catholic bishops
conference (CENCO), which had deployed 40 000 observers
for the ballot and conducted a parallel vote-tallying process. Per
CENCO’s count, Tshisekedi garnered only 15% of the vote in
comparison to Fayulu’s 62%.
A notable aspect of CENCO’s tally is that Tshisekedi finished in
third place, with the ruling FCC candidate, Shadary, listed as the
runner-up by securing 17.99%. Nonetheless, at least Tshisekedi is a
new face, and although drastic change is not likely, the Kabila hold
has been broken.
No fireworks
But what does all this mean for mining? Well, not much. The
most likely scenario is that Kabila and his network will continue
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pulling the strings. It is doubtful whether Tshisekedi, unlike João
Lourenco, will dismantle Kabila’s stranglehold with as much
vigour and as boldly as Lourenco did with the Dos Santos empire
in neighbouring Angola. So, don’t expect fireworks during the first
few years of Tshisekedi’s rule. According to Signal Room’s report,
the new administration is expected to continue the policy agenda
of the Kabila government.
“Likely collusion between Tshisekedi and the FCC — as well
as the FCC’s parliamentary majority and its potentially strong
representation in the new cabinet — points to policy consistency
under the president-elect. This includes matters pertaining to the
mining code. Ongoing speculation regarding the legitimacy of
Tshisekedi’s incumbency means that the new president will not
inspire the investor and donor confidence that often accompanies
‘democratic’ transitions. However, the absence of a large-scale
civilian outcry to political developments suggests that both donor
contributions and investment inflows will not deviate from trend
in the coming months,” says the report.
The unstable political environment has caused investors to think
twice before making long-term commitments, while the recent
promulgation of the new mining code contributed to an uncertain
climate. The major investors in the DRC, including Glencore,
Ivanhoe, and Randgold (now Barrick), opposed the mining code
fervently last year, but despite their opposition, Kabila pushed
through new policies that increased taxation, and reduced the
stability period in which changes to taxes and customs cannot be
modified from 10 to five years.
According to the new mining code, mining royalties on non-
ferrous metals have increased from 2% to 3.5%, for precious metals
from 2.5% to 3.5%, for precious stones from 4% to 6%, and a new
‘strategic substance’ designation could require companies to pay a
royalty as high as 10% on metals such as cobalt, one of the DRC’s
prime products. The corporate income tax for miners remained at
a reduced rate of 30%, and the introduction of a new ‘super profits’
tax could mean a rate as high as 50% on profits that exceed 25% of
the expectations outlined in a mining feasibility study.
Opportunities abound
Despite these new rules and regulations, exploration,
expansions, and new developments in the DRC continue
unabated. Cobalt, copper, and lithium deposits are drawing the
most exploration attention, and gold, tin, and tungsten remain
a big drawcard. While Chinese and Indian companies are
developing several new projects, existing mines are expanding
or consolidating their assets. A number of mines are venturing
underground, production at Alphamin’s Bisie tin project in the
eastern DRC is imminent, while Ivanhoe and Rio Tinto have
big plans in the DRC. All this activity has created a range of
opportunities for South African suppliers and service providers,
but the DRC remains a complex country in which to do
business. Infrastructure is almost non-existent and electricity
supply continues to hamper development.
According to Duncan Bonnett, partner and director at Africa
House, suppliers need to understand several issues before entering
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