Workshop on The Post-Conflict State in DR Congo, Johannesburg 22/8/2009

1.
Management
of
Mineral
Resources
in
the
DR
Congo
Nicholas
Garre-
Resource
Consul2ng
Services
Limited
Workshop
on
The
Post-­‐Conflict
State
in
DR
Congo,
Johannesburg
22/8/2009

2. Background
• Personal
Background
• Nicholas
Garre-
• Director,
Resource
Consul2ng
Services
Limited
• Research
Associate,
London
School
of
Economics
• PhD
Candidate
(Poli2cal
Sciences),
FU
Berlin
• Regional
/
Sector
Work
Experience
• Extended
regional
field
research
(PhD;
LSE
Posi2on)
• Policy
work
(DFID;
World
Bank;
UNECA;
GTZ;
LSE;
Egmont;
EITI
etc.)
• Numerous
Publica2ons
(i.e.
Trading
Conflict
for
Development
etc)
©
Resource
ConsulJng
Services
Limited,
2009

3. Growth
Prospects
• SubnaJonal
Difference
in
Development
Outcome
• “ContenJous
and
Ambiguous”
– Nega2ve
associa2ons
(e.g.
conflict;
social
and
environmental
issues
etc.)
– Posi2ve
associa2ons
(e.g.
employment;
linkages;
main
income
earner
etc.)
• Growth
Prospects
– 20-­‐25%
of
GDP;
35%
of
fiscal
receipts
by
2018
(World
Bank)
è What
does
the
sector
look
like
today
and
can
we
get
there?
©
Resource
ConsulJng
Services
Limited,
2009

4. DRC
Mining
Sector
Overview
• LSM
– Dominant
Minerals:
Copper,
Cobalt
and
Gold
– Industrial
exploita2on
(mainly
JV’s)
in
(Southern)
Katanga
(FQM;
TFM;
Katanga
Mining
etc.)
and
Ituri
(AGA
is
gecng
there)
– Industrial
exploita2on
has
ceased
in
Kasai
(Mwana
Africa
/
IDC
dilemma
/
De
Beers
has
stopped)
– Parastatals:
Gecamines
at
minimum
capacity
(US$
1.7bn
debt
vs
JV
income);
all
others
have
ceased
produc2on
(restructuring
a
priority)
– Joint
ventures:
Some
in
produc2on
(see
above);
others
in
construc2on
(KMT)
–
contract
review
issue
è Key
External
Constraint:
Impact
of
the
Global
Financial
Crisis.
©
Resource
ConsulJng
Services
Limited,
2009

5. DRC
Mining
Sector
Overview
• ASM
– Dominant
Minerals:
gold,
2n,
tantalum,
tungsten
(3T),
diamonds,
copper,
cobalt
– Hotspots:
Eastern
DRC
(link
to
conflict
–
oien
misunderstood),
Kasai,
Katanga
– Es2mated
18%
of
Congolese
depend
on
ASM
(World
Bank)
– In
rural
Eastern
DRC
oien
only
viable
livelihood
op2on
– Inequitable
produc2on
(prefinancing;
illegal
taxa2on)
and
low
transparency
trade
(some
more
formalised
than
others
i.e.
2n
vs
gold)
– Significant
hard
currency
earner
to
finance
import
dependent
local
economy
è Key
External
Constraint:
General
Apathy
Towards
Long
Term
Engagement
with
ASM
Sector
and
Western
Pressure
Groups
Confla2ng
Security
Issues
with
Development
Issues.
©
Resource
ConsulJng
Services
Limited,
2009

6. Eastern
DRC:
The
Conflict
Issue
• Advocacy
around
“conflict
minerals”
– Localised
taxa2on
of
all
trade
(incl.
minerals
trade)
by
military
groups
(including
FARDC)
– Conflict
today
not
a
“resource
conflict”,
but
mul2-­‐dimensional
(land;
ethnicity;
power
etc.)
– Certain
advocacy
groups
push
the
line
that
Minerals
are
responsible
for
violence,
including
sexual
violence
è This
problema2c
but
sellable
proposi2on
precludes
construc2ve
engagement
with
the
minerals
trade
(i.e.
too
high
risk)
and
conflates
issues
of
security
and
issues
of
development.
©
Resource
ConsulJng
Services
Limited,
2009

7. Eastern
DRC:
The
Conflict
Issue
• Advocacy
around
“conflict
minerals”
(cont’d)
Insecurity
(presence
of
armed
groups)
is
the
problem,
not
trade.
Focus
on
minerals
diverts
a-en2on
away
from
need
for
security
sector
consolida2on
to
tackle
issues
of
insecurity
Focus
on
trade
control
measures
puts
cart
before
horse.
Need
some
level
of
formaliza2on
before
control
measures
can
be
implemented
effec2vely.
Need
for
long-­‐term
engagement
with
ASM
sector
and
investment
in
governance
structures.
©
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Services
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2009

8. Internal
Constraints
to
Growth
• There
are
mulJple
internal
constraints
to
growth
in
the
mining
sector.
This
presentaJon
only
focuses
on:
• Insecurity
• Weak
Governance
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Services
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2009

9. Internal
Constraints
to
Growth:
Insecurity
and
Weak
Governance
• Insecurity
– Congolese
state
unable
to
control
the
monopoly
of
violence
(no
func2oning
army)
– Congolese
state
allows
armed
actors
to
prey
on
the
economy,
incl.
the
mining
sector
in
the
East
– How
much
do
military
groups
depend
on
mineral
trade
taxa2on
in
their
revenue
(see
Trading
Conflict
for
Development):
• CNDP
≈
15
%
• FDLR
≈
75%
(large
majority
from
uncontrollable
gold
trade)
• FARDC
brigades
between
0%
and
≈
95%
(85th
brigade
un2l
2009)
• Other
income:
remi-ances,
drugs,
ca-le,
civilian
extor2on,
general
trade
taxa2on
(see
e.g.
UN
Reports)
è Key
Internal
Constraint:
Insecurity
is
the
main
Challenge
to
all
Reform
in
East
©
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Services
Limited,
2009

10. Internal
Constraints
to
Growth:
Insecurity
and
Weak
Governance
• Weak
Governance
– No
Development
Vision
for
the
Mining
sector
– No
effec2ve
leadership
in
Kinshasa
– Local
nego2a2on
of
security
and
mode
of
extrac2on
(ASM
in
East)
– Parallel
ins2tu2ons
(statutory
and
customary)
– Parallel
decision
making
structures
• Chinese
contract
• State
vs
Katanga
(LSM
sector
stuck
in
between)
– Defunct
administra2on
that
habitually
harasses
economic
operators
(inspec2ons
etc.)
• 15%
of
total
revenue
in
“informal
costs”
è Key
Internal
Constraint:
Governance
Structures
are
Patchy
and
Locally
Nego2ated.
This
Undermines
the
Popula2on
Beneficng
from
Economic
Ac2vity,
Including
Mining.
©
Resource
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Services
Limited,
2009

11. Key
Donor
IniJaJves
• Security
– MONUC
– Some
Elements
of
Security
Sector
Reform
– Economic
s2cks
è Key
External
Constraint:
Pucng
the
cart
before
the
horse
by
trying
to
solve
insecurity
issues
with
economic
s2cks.
This
focus
on
natural
resource
management
(control
mechanisms)
first
and
security
second
translates
into
MASSIVE
implementa2on
problems.
©
Resource
ConsulJng
Services
Limited,
2009

12. Key
Donor
IniJaJves
• Governance
– Mining
Code
(statutory
law
/
liberalisa2on)
– Parastatals
(severance
/
restructuring)
– Mul2-­‐stakeholder
approach
– EITI
– KEIDI
– PROMINES
è Key
External
Constraint:
Funding
Constraints
and
donor-­‐state
rela2onships
©
Resource
ConsulJng
Services
Limited,
2009

13. SuggesJons
• Lessons
for
DRC:
è While
overlaps
exist,
plan
separate
(but
communicaJng)
intervenJon
strategies
to
tackle
armed
conflict
and
develop
the
mining
sector
in
the
East
è Consolidate
Security
Sector
(build
funcJoning
army,
police,
juidiciary)
and
consider
poliJcal,
but
also
military
soluJons
to
obtain
the
monopoly
of
violence
è Engage
with
(formalise
and
reform)
the
ASM
sector
in
order
to
be
able
to
control
it
and
increase
its
development
benefits
è Accelerate
administraJve
reform
and
insJtuJon
building
to
overcome
governance
weakness
and
allow
for
sustainability
of
posiJve
steps
–
this
must
include
the
establishment
of
accountability
mechanisms
è Create
the
necessary
structures
so
that
the
implementaJon
of
statutory
law
is
possible
and
implement
statutory
law
è Restructure
the
former
parastatal
enterprises
and
change
management
©
Resource
ConsulJng
Services
Limited,
2009

14. Outlook
• Despite
donor
efforts
and
some
industrial
mines
producing
chances
are
that
governance
and
insecurity
constraints
to
growth
in
the
mining
sector
cannot
be
overcome
prior
to
the
next
elec2ons.
• Required
change
is
not
only
technical,
but
also
cultural
–
need
to
ins2l
confidence
in
Congolese
to
trust
in
ins2tu2ons.
• This
is
not
a
short-­‐term
process
–
steps
will
be
incremental.
©
Resource
ConsulJng
Services
Limited,
2009

15. Thank
You!
For
further
details
email:
nicholasgarre-@resourceglobal.co.uk
©
Resource
ConsulJng
Services
Limited,
2009