Daily Archives: 19 June 2011

Congo’s War for Mining or Peace for Mining?

From Dancing in the Glory of Monsters: The Collapse of the Congo and the Great War of Africa, by Jason Stearns (Public Affairs, 2011), Kindle Loc. 5014-5042 (pp. 288-289):

The Congo is often referred to as a geological scandal. This is not an exaggeration. In the late 1980s, it was the world’s largest producer of cobalt, third largest producer of industrial diamonds, and fifth largest producer of copper. It has significant uranium reserves—infamous for having contributed to the Hiroshima bombs—as well as large gold, zinc, tungsten, and tin deposits.

Like so many of the country’s problems, the mismanagement of these assets dates back to colonial times. In 1906 already, the Belgian government gave the Société générale de Belgique, a powerful trust affiliated to the state, a mining tract of 13,000 square miles in Katanga, the size of Belgium. Under the exceedingly favorable terms of the deal, the company would get a ninety-nine-year monopoly over any mineral deposits it could identify in the next six years. It was also granted the management of the state railroad line that would help export the copper and cobalt ore, for which the colonial state would provide local labor. Société générale set about creating the three most powerful companies in the Belgian Congo: the Upper Katanga Mining Union, the Bas-Congo to Katanga Railroad Company, and the International Forest and Mining Company. Mineral and agricultural exports from the Congo fueled the creation of some of the biggest Belgian conglomerates and personal fortunes, developing the Antwerp port and creating a copper smelting industry.

Mobutu nationalized the Upper Katanga Mining Union in 1967 and rebranded it Gécamines, while other mining companies in the Kivus and Katanga were also converted into state-owned enterprises. The government proceeded to use the mining company as a cash cow, systematically milking it for money to fund Mobutu’s patronage network instead of reinvesting earnings in infrastructure and development. In order to carry out this scheme, the autocrat forced all mineral exports to be sold through a state mineral board, which would then hand over its revenues to the state treasury. Nonetheless, thanks to rising world copper prices, Gécamines remained the country’s largest source of employment and income, providing over 37,000 jobs at its peak, running thirteen hospitals and clinics, and contributing to between 20 and 30 percent of state revenues.

A confluence of factors brought about Gécamines’ demise in the 1990s. Copper prices plunged as low-cost producers such as Chile stepped up production and world demand dipped. The army pillages of 1991 and 1993, along with the ethnic purging of Kasaians from Katanga in 1993, drove much of the experienced expatriate staff out of Gécamines and contributed to the cutting of foreign development aid that had helped prop up the ailing mining sector. Finally, the years of mismanagement took their toll. In 1990, the huge underground Kamoto mine collapsed, leading to an abrupt drop in production of 23 percent. Exports declined from a high of 465,000 tons in 1988 to 38,000 tons just before the war, while cobalt production slipped from 10,000 to 4,000 tons in the same period. Similar trends affected all other mineral exports, leading to a vertiginous contraction of the country’s GDP by 40 percent between 1990 and 1994.

Pressured by donors to relinquish the state’s grip on the economy and desperate for revenues, Mobutu allowed his prime minister, Kengo wa Dondo, to begin gradually privatizing the mining sector in 1995. Most of the contracts that were later negotiated with the AFDL, including the American Mineral Fields and Lundin agreements, were amendments to and confirmations of deals that had already been struck with Mobutu’s government in 1996. The notion that the war was fueled by international mining capital eager to get its hands on the Congo’s wealth does not hold water; the war slowed down privatization of the sector by a decade, as insecurity and administrative chaos prevented large corporations from investing. It was not until 2005 that major new contracts in Katanga were approved and investors began to invest significant funds.

I hadn’t realized the extent to which Canadian companies have dominated mining in the Congo.

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Filed under Belgium, Canada, Congo, economics, industry, nationalism, war