Africa, Asia-Pacific, Biodiversity, Civil Society, Economy & Trade, Environment, Eye on the IFIs, Global Governance, Headlines, Natural Resources, Trade & Investment, Trade and poverty: Facts beyond theory

ECONOMY-AFRICA: Pros and Cons to Huge Chinese Investment in DRC

Stephanie Nieuwoudt

CAPE TOWN, Oct 28 2009 (IPS) - Concerns abound about a nine billion dollar Chinese investment in the Democratic Republic of the Congo, especially around environmental consequences and transparency. And, on the Chinese side, investors complain not only about the lack of security in the DRC but about their own government not providing enough support.

As part of the Sicomines deal, China will build a road network stretching for 4,000 km and a railway system spanning 3,200 km. This is a much needed development in a country the size of Western Europe and the second largest in Africa but with only 200 km of tarred road.

The building of a transport network is of strategic importance to the Chinese. It will make it easy to transport the copper (China has a concession to extract 10,6 million tons) and cobalt (626,619 tons) from mines in the Katanga region. Katanga province is part of the so-called Copperbelt and reaches from Angola through the DRC to Zambia.

The Sicomines agreement pulls in three Chinese companies: the China Railway Group, Sinohydro Corporation and the Metallurgical Group Corporation. These companies will have a controlling interest of 68 percent. The Congolese parastatal Gecamines has a 32 percent interest.

"It remains to be seen to what extent the agreement will bear fruit," Johanna Jansson, a researcher at the Centre for Chinese Studies at the University of Stellenbosch near Cape Town, told IPS in an interview. "Very few of the projects agreed upon have as yet been implemented."

The deal has not gone down well amongst critics. Jansson pointed out that one of the major contentious issues was the demand by the Chinese that the Congolese state guarantee the repayment of infrastructure investments, should the profits from the mining project not be sufficient.

Jansson said that this issue was resolved in August this year. This happened only because the International Monetary Fund indicated that it was not willing to continue a three year poverty reduction and growth programme in the DRC if the latter’s government was potentially beholden to China in terms of debt.

There has also been criticism from those who fear that the government has, through this deal, found a way to line the pockets of government officials. In general, "African governments have to be careful of bilateral agreements which are only beneficial to a small number of people in the short term," Dr Rita Cooma, CEO of a New York-based management consulting firm, told IPS at the recent China-Africa Business Summit.

Jansson also raised the issue of Congolese negotiators having the necessary capacity to take on the Chinese negotiators, a perennial problem besetting African countries in all trade and economic talks.

Civil society and other stakeholders in the DRC have expressed concern about the transparency of the deal and have complained that they were not consulted. In a report about Chinese investment in Africa, Jansson argued that the Chinese will logically not engage with civil society as they see the Congolose government as their legal counterpart.

However, it is imperative that the Congolese government and its representatives open up relations with civil society as it could play an important and positive role in assisting with project planning and implementation, she added.

There is fear that the Chinese will not honour environmental protocols. Artisanal mining and small operators have already done huge damage by excavating sites without care for plant or animal life.

"A lot of environmental damage has already been done to the DRC by mining activities," Cooma said. "However, the responsibility to protect the environment should not be that of the investor alone. It is a matter of the DRC government being clear on environmental policies and enforcing them."

Jansson pointed out that there are also a number of private Chinese entrepreneurs involved in mining and agricultural activities in the DRC. They have very little interaction with the Chinese embassy in Kinshasa, capital of the DRC.

"Private entrepreneurs are experiencing great difficulties in the DRC," Ge Kaiyong, a director at the China-Africa Business Council, told IPS at the China-Africa Business Summit that the non-governmental council co-hosted in Cape Town last week.

"The DRC does not offer a secure political environment to investors because of the continuing war in the eastern DRC. There is also a huge language problem as the Congolese do not speak Mandarin and the private investors do not speak the local languages," he added.

There is little contact between the Chinese embassy in Kinshasa and private investors, which adds to the sense of insecurity. "Private investors need to feel that they are getting support. This could also be done through co-operation with the local chambers of commerce," he suggested.

Jansson furthermore recommended that the Chinese ministry of foreign affairs opens up a consulate in Lubumbashi to assist with coordination between Chinese entrepreneurs, Congolese authorities and Congolese civil society.