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So rich, so poor: paths to prosperity in the Congo

On May 13, President Felix Tshisekedi gave a defiant speech in Kolwezi, one of the country’s mining capitals: “I am tired of what I have seen in this country for years: foreigners come here with empty pockets and when they go home they are billionaires while we remain poor. From now on, it will be a ‘win-win’ situation.” 

The Congo is so rich, and yet so poor. This refrain is as old as the country itself. For decades, its rubber, palm oil, diamonds, copper, and tin have enriched foreign elites and left relatively little for Congolese. And the stakes are currently rising: the Congo is set to become a key actor in a global shift toward renewable energy.t produces 60% of cobalt worldwide, prices of that mineral have gone up by 42% just this year, and a report from McKinsey & Company projects demand for cobalt rising 60% between 2017-2025. Other commodity prices are soaring, as well: copper is up 130%, while gold has risen 45% in the past five years. 

What can be done to ensure that Congolese benefit from this windfall? 

One approach has been to highlight corruption. There is good reason for this––in response to Tshisekedi’s speech, a spokesperson for the Congo n’est pas à vendre (CNPAV) campaign reminded the government that it had already lost $1.95 billion in revenues due to dubious deals with the Israeli businessman Dan Gertler and stood to lose another $1.76 billion. It appears that they touched a nerve, as a social media campaign has since been launched against this civil society coalition. And they are not alone in denouncing malfeasance. Several years ago, the Carter Center estimated that Gécamines, the largest state mining company, cannot account for $750 million in revenues between 2011 and 2014; the Africa Progress Report, led by Kofi Annan, estimated that just between 2012 and 2012, the Congo lost $1.36 billion in five mining deals. 

There is, however, another approach, focusing not on illegal behavior, but on the laws themselves and on the structure of the Congolese economy. Perhaps the problem is not just corrupt elites, but the position of the Congo in global trade and the way the Congolese economy is structured. 

These are debates that harken back to the 60s, when African elites were intent on transforming the continent from a place of extraction on the periphery of the world economy toward a position of greater strength and self-reliance. Tanzanian President Julius Nyerere famously called for his country’s minerals to stay in the ground until they could develop their own mining companies and expertise; Kenneth Kaunda tried––and failed––to create a copper council, similar to OPEC. Meanwhile, many African countries nationalized their mining industry, seeking to better control them and benefit from their resources: Mobutu nationalized the Belgian-owned Union Minière, creating Gécamines, and Zambia, Angola, Nigeria, and Guinea all had powerful national mining or oil companies. 

However, by the late 1980s, most of these mining companies were in serious decline––Gécamines’ copper production, for example, went from around 400,000 to 500,000 tons for most of the 1970s and 80s to a mere 50,000 tons by 1992. 

The problem was seen as a corrupt, inefficient state; the solution–following the “Washington consensus” free-market reforms promoted by institutions such as the International Monetary Fund, World Bank, and US Treasury beginning in the 1980s–was privatization. The liberalization of the mining sector began in the waning years of the Mobutu regime and then accelerated dramatically after the 2002 Mining Code was passed with the backing of the World Bank. It was designed to create a level playing field where investors would follow a clear, transparent process to secure mining permits from the mining registry. The government set taxes low to encourage foreign investment in this risky environment, providing tax holidays and allowing companies to pay off their capital investments before they had to pay tax on profits. 

This was successful in attracting investors––foreign direct investment went from negative numbers during the war to over $4 billion per year by 2017. In the meantime, the Congo became the largest producer of copper in Africa and the largest producer of cobalt in the world. But while national revenues ballooned from $436 million to $3.5 billion last year, most of this budget (77% in 2019) goes to paying salaries, keeping the institutions working, and servicing debts. And even though roughly 120,000 people work in industrial mining in the country, a study of gold mining in South Kivu suggests that most of these jobs do not pay better than a pick-and-shovel artisanal mining job in the informal sector. In addition, the trend towards automation – such as Barrick Gold’s automated Kibali mine in Haut-Uélé province, in the northeast of the DRC – will exert downward pressure on the industry’s future employment potential. 

In other words, it is possible that even if the leakage of public revenues can be staunched, under the current conditions, industrial mining may not be able to propel the Congo to prosperity. 

Just contemplate the fact that few poor and resource rich countries have been able to leverage the wealth in their soil for the benefit of the kind of development that benefits the broad population. Nigeria, for example, has brought in over $30 billion in oil revenues a year for much of the past two decades but still has worse literacy and infant mortality rates than the Congo; similar statistics can be shown for Angola and Equatorial Guinea, the second and third largest oil producers on the continent. 

So, in addition to waging war on corruption––a noble fight––several other battlefields merit attention. 

First and foremost, the state. Economic analysis is relatively clear: it is the combination of strong institutions, human capital, and economic resources that drive development. In fact, some authors argue that the sine qua non of development is a strong and interventionist state, which can have high levels of corruption (as in almost all Southeast and East Asian countries). The antidote to poverty, according to these authors, is a strong state that can protect and stimulate nascent industries; train a new generation of engineers, lawyers, technicians, and businesspeople; and gather enough revenues to fund this transformation. Almost every country––Malaysia, Botswana, the U.A.E., Indonesia, and even Chile––that has been able to use natural resources as a lever for development has done so with bold state intervention. Unfortunately, at times the anti-corruption campaign has pushed in the opposite direction: toward the privatization of the state, in the name of efficiency and transparency, which can end up hollowing out institutions and focusing on the few bad apples rather than structural reforms. 

Secondly, to shift the attention away from industrial mining. And while much of the state’s focus has been on the big, capital-intensive mines––understandably, since it makes up so much of its revenue––it has not done much to promote the artisanal and small-scale mining sector, where over a million people make their livelihood. This sector, alongside the agricultural sector, could arguably do much more to alleviate poverty than industrial mining, whose revenues are largely captured by the state and elites. For example, the government could require investors to develop their mining concessions––there are hundreds of mining concessions in the country that are used for the purpose of speculation and are never developed––or to allow artisanal miners to exploit them. South Africa has a similar clause, and Tanzania has recently tried to redistribute lands and provide technical resources to artisanal miners, as well.

Third, toward a redistribution of resources between the provinces. In 2021 Lualaba, at the center of the mining industry, has a proposed provincial budget 10 times higher in per capita terms than most of the rest of the country, and its neighbor Haut-Katanga is not far behind.These inequalities will only grow as mining revenues rise, leading topolitical tensions and debates over the place of Katanga within the Congo. The drafters of the 2006 constitution foresaw this, creating a caisse de péréquation, an equalization fund that is supposed to redistribute revenues from the wealthier to the poorer provinces (Article 181). However, it took ten years to pass the law to create this body and the caisse is still not operational. 
Coming back to Kolwezi: It appears that President Tshisekedi agrees with many of these suggestions. At least, the program proposed by his government in April includes many similar objectives: the creation of a national training school for industrial workers, processing agricultural products in-country, providing loans to small and medium-size businesses, facilitating artisanal mining. The problem is that this plan includes 343 actions to be undertaken in the next two and a half years, many of which have been on the government’s agenda for years. Will he be able to follow through this time? Unfortunately, national opinion seems to be much more concerned with the recently declared state of siege, Kagame’s disparaging remarks, and Covid-19 restrictions; outside of isolated forums, this issue is rarely debated.

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