BRUSSELS - The massive deal that
China signed with the Democratic Republic of Congo
last year is not the "second colonization" that
some Europeans allege it is. The agreement
appears, in fact, a promising way to kick-start an
economy.
The agreement on developing
infrastructure through "resource-backed finance"
certainly gives China a lot of influence in a
country where Europeans are used to dealing the
cards. European countries now look with a certain
envy at what China has achieved.
President
Joseph Kabila's political future depends on this
Sino-Congolese deal, and, with that, at least a
part of the economic
future
of Congo itself.
The Democratic Republic
of Congo has been endowed with tremendous natural
resources, but 40 years of mismanagement have
brought the country down. The DRC is now one of
the poorest countries on earth - even the most
basic of infrastructure has succumbed to four
decades of neglect.
The announcement in
September 2007 that China would take on big
infrastructure projects in the DRC, to be paid for
with Congo's immense copper and cobalt reserves,
inevitably attracted a lot of attention. But it
created also a lot of suspicion: what exactly were
the Chinese up to?
The Chinese companies
will, for one thing, start work on infrastructure
projects in 2008 more or less along the lines of
the five priorities Kabila has set: water,
electricity, education, health, and transport.
These works will cost more than US$9
billion. That is a lot of money, considering that
the 2007 government budget was a mere $1.3
billion, most of which was needed just to pay the
salaries of government staff. So how will the DRC
pay off these Chinese loans?
The basic
idea is that Congolese and Chinese state-owned
enterprises (SOEs) set up a joint venture,
Socomin. This mining company will invest $3
billion in mainly new mining areas. The profits of
Socomin will be used to repay these mining
investments and the investments in the big
infrastructure works.
Broad agreement was
reached in September last year. It was then
fine-tuned through two months of negotiations in
Beijing in November and December.
"It took
a long time, that's for sure," said French-born
Paul Fortin, chief executive of Gécamines, the
Congolese state-owned mining company. "We had to
agree on an economic model that stipulates how the
Chinese investments will be repaid with the
revenue of Socomin. Apart from that, these were
normal business negotiations comparable to those I
did for the many partnerships of Gécamines with
private companies."
One of the agreements
was that over a 15-year period Socomin will raise
about ten million tonnes of copper to pay off
eventually $12 billion in investments in mining
and infrastructure.
The Chinese have
hedged their position quite aggressively. The
first profits will be used to repay the mining
investment, something that is typical of most
private joint ventures with Gécamines. The
agreement also says that "the Congolese government
has to guarantee the safety of the investments,
and the repayment of the infrastructure works".
Any disputes would be settled by the arbitration
tribunal of the International Chamber of Commerce
in Paris, and not through Congolese courts, which
have a reputation of being corrupt.
Under
the agreement, only one in five workers can be
Chinese. In each of the projects half of 1% of the
investment must be spent on transfer of technology
and on training Congolese staff; 1% has to be
spent on social activities in the region, and 3%
to cover environmental costs; 10-12% of the work
has to be sub-contracted to Congolese companies.
How all this will work out for the DRC
remains to be seen. And what will be the quality
of the work? Is the Congolese government capable
of controlling that?
One thing is obvious:
this is not the black and white story some wanted
to make of it. It is neither a colonial horror
story, nor some idealistic investment on the part
of China.
To be sure, China is interested
because it needs the natural resources. But Fortin
thinks the DRC has a lot to gain too. "Congo
doesn't have to wait for its infrastructure until
it has the money. Building starts immediately with
the natural resources as guarantee. Except in
oil-rich states, I know of no other deal quite
like this."
One well-informed European
diplomat admitted that "if carried out well, this
can be positive for Congo".
The deal seems
like a lifeline for Congolese President Joseph
Kabila. After more than a year in power, there's
not a lot he can show to the Congolese people, who
have started to criticize him. Something has to
begin quickly if he wants to get re-elected in
three-and-a-half years.
The Congo-China
deal seems a good way to move forward, also
because the money does not have to be channeled
through a corrupt Congolese bureaucracy. Loans
from China's state-owned Eximbank go directly to
the Chinese state-owned enterprises China Railway
Engineering Company and Sinohydro.
Kabila
alluded very clearly to this in a recent speech.
"The Chinese banks are prepared to finance our
Five Works (water, electricity, education, health,
and transport). For the first time in our history,
the Congolese will really feel what all that
copper, cobalt and nickel is good for."
The exchange agreement with the Chinese
appears to be a satisfactory solution in the short
term. A better-run state is still a must though
and a necessary precondition for making good use
of (and maintaining) all the new roads, railways,
hospitals and schools that are planned.
The Europeans are finding China's role
frustrating. Through their projects, the Chinese
gain access to copper and cobalt. "This at a time
when we ought to be mindful of long-term
provisioning [of commodities to Europe]," a
diplomat told Inter Press Service (IPS). "Would
the European development aid community tolerate us
operating like the Chinese?"
And that is
just one question. There are others. Which other
nation is able to take on such gigantic projects
as cheaply and quickly as the Chinese? And, which
European country still possesses the publicly
owned enterprises to undertake such ventures?
If Kabila is now politically dependent on
the Chinese, that means that Beijing's influence
in this crucial African country has grown very
strong. The Congolese, like many other Africans,
have had it with the often paternalistic Europeans
telling them how they must behave and how they
must improve governance.
To be sure, the
government of the DRC is notoriously weak and
corrupt. Researchers found that typically a
container entering the country in the eastern town
Bukavu is "attacked" by 20 different government
services, each requiring the right papers - or
some kind of payment.
The Congolese state
is dysfunctional, and governance problems are one
reason why Western countries have been slow to
finance the Congolese government after the
elections. "We had no choice but to go to the
Chinese," a well-placed source in Congo told IPS.
With thanks to the Belgian magazine Mo
for making this research possible.
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