The DRC’s mining sector licences are under review

President Felix Tshisekedi took office in January 2019 and over the last year has sought to reduce his predecessor and erstwhile partner, former president Joseph Kabila’s influence over government policy, as well as his access to associated political and financial benefits. A main arena for this power struggle is the influential mining sector, accounting for almost 100% of export revenues. Following on from our previous note outlining attempts to do this in relation to agreements with Chinese firms (signed under Kabila)[1], there are now efforts to uncover and potentially prosecute supporters and sponsors of Kabila who are said to be beneficiaries of similar agreements.

Significance – Risk of contract frustration

On 19 November, Tshisekedi announced a full audit of all mining licenses in the country. During the period of the audit, there will be a temporary moratorium on the issuance or trading of any mining licenses. Outlining the intervention to his ministers, Tshisekedi said: “this recommended clean-up will increase the contribution of the mining sector to the state's budget and help, as a priority, the people benefit from the mineral wealth of our country[2].” He has targeted certain provisions of mining licenses for investigation, particularly around their social and administrative interventions with a suggestion that focus be placed on whether firms have delivered the required 10% carried interest to the state when moving from explorative to production phases. We also expect an emphasis on beneficial ownership given the aforementioned stakeholder competition. While efforts to elucidate and raise governance standards even the playing field for best-in-class operators, they also increase the likelihood of project delay.

In another sectoral development, a parliamentary commission handed over a report (it is not yet publicly available) on 18 November on the state of mining activities in South Kivu province that highlighted tax evasion, corruption, ecological degradation, contractual breaches, permit violations and other infractions. A particularly damning sentence within the report as reported by RFI said that: "these mining companies are getting richer, behaving like masters in conquered territory and destroying the environment." Most companies referred to in the report are again Chinese. This regional report precedes findings of the government review we mentioned in our previous note into the so-called “Sino-Congolese deal”, that report is still highly anticipated and no significant updates about it have been given.

Outlook – Status quo remains for now

The Tshisekedi administration has experienced an uptick in domestic political pressures in recent weeks – fallout from the appointment of a new electoral commission head and a worsening security situation in the east of the country, for example. This is alongside demands for the immediate release of the government review of the Sino-Congolese agreement, and ongoing competition with the former president’s network.

The announced mininig license audit could be seen as a defence against that pressure as well as transparency demands from local civil society and ESG-minded investors/consumers. For now, Tshisekedi’s goal of decreasing Kabila’s influence is advancing, especially as it coincides with the release of leaked documents alleging Kabila and his associates embezzled hundreds of millions of dollars during his term in office[3]. The process has not hurt official bilateral ties with China – a critical dynamic. DRC-China trade flows were valued at USD7.5 billion in 2020 or 36% of total DRC trade. Our previous baseline assumption that Tshisekedi is seeking to walk a tightrope between reviewing agreements and securing political and national interest remains valid.

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[1] Chinese mining and the DRC balance of power. (2021, October). Songhai Advisory

[2] 19 November cabinet meeting, minutes viewed by Reuters.

[3] Congo Hold-up: Africa's biggest leak reveals massive corruption in DRC and beyond (2021, November). PPLAAF

*Photo credit. Victor_g

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