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sharing in governance of extractive industries

Mining transparency in DRC: all or nothing

‘Transparency’ is not a word one normally associates with Congo’s extractive industries. Yet, the Government has made substantial efforts to disclose information throughout the past year. When these advances, however, fall short of internationally mandated transparency benchmarks, should we throw the baby out with the bathwater?

That is the dilemma transparency activists are now facing with regards to the Extractive Industries Transparency Initiative (EITI): that the DRC, in spite of all its efforts, has failed to comply with international revenue transparency benchmarks, and may get excluded from further participation. In the coming weeks, EITI’s Board will consider whether to validate the DRC as an EITI-compliant country, a good governance distinction the DRC has failed to acquire twice. If it fails to comply with one of the 21 EITI requirements, theoretically it is considered to have failed as a whole. Problematically, the DRC’s exclusion would primarily benefit those who enjoy the dark, while hurting those pushing for transparency.

That the Congolese Government is still falling short of reforms was made evident by the recent International Monetary Fund (IMF) decision to let expire an outstanding $225 loan after it failed to publish the contract of a particularly suspicious deal. But the IMF decision eclipses the fact that the new government has disclosed more than 100 contracts of which we had started to suspect they would never come out.

Similarly, the Government has shown more political will to implement the EITI. The Initiative aims at shedding light on revenues from mining and oil projects. Some African governments consider radiation as a blessing rather than a curse. Exit revenue transparency? Good riddance. But the DRC Government has gone to great lengths to prevent that scenario. Data collection for the most recent EITI report, which covers extractive revenues for 2010, took about 20 days. The same process took more than 20 months for the last report. Minister of Mines Martin Kabwelulu personally rang up major mining companies in Katanga. “Monsieur le Directeur, you haven’t submitted your formulaire yet for the Extractive Industries Transparency Initiative. We need it now.” A particularly dynamic national EITI coordinator, Prof. Mack Dumba, developed the bad habit of ringing up people in the middle of the night to clarify outstanding gaps in the report. His obstinate efforts have even led to threats against him and his family – the strongest and most regrettable sign that the walls protecting confidential revenues are starting to crumble.

The tangible result is a 120-page report full of disaggregated figures – by company, by revenue, by tax agency (for an English version, click here). Civil society actors have started digging into the numbers. They are wondering why, as the report shows, there is no comprehensive law requiring company audits in the DRC. They want to understand why the Ministry of Finance lacks oversight over one of its tax collecting agencies, as the report says. They are starting to appreciate the diverse contractual revenues that benefit Congo’s state-owned companies, revenues no one really seemed to master entirely throughout the EITI data collection.

Given Congo’s complex and traditionally opaque revenue management system, it is no surprise that a lot of payments were missing in earlier drafts of the report. One by one, the EITI Committee has tried to include them, tackling hurdles of insufficient knowledge and political sensitivity. Notably, the Committee overcame its own reluctance to incorporate the transactions under the Chinese minerals-for-infrastructure deal. This key pillar of Kabila’s 5 chantiers program now has its own annex in the 2010 report.

One of the few remaining reporting gaps is a $15 million payment, which state-owned company Gécamines received for selling its stake in one of its joint ventures, SMKK. Gécamines lost a lot of money in the transaction: the buyer, a British Virgin Islands vehicle associated with Dan Gertler, soldthe stake four months later for $75 million to a Kazakh multinational, ENRC. Despite the loss, $15 million is still worth more than 2% of all revenues Congo got from mining in 2010. The EITI DRC Secretariat is now trying to get in touch with the buyer to fill the gap. Mister Gertler, could you please pick up the phone? There is a country trying to get EITI validation here.

The 2010 report cover features the following caption: “les lignes bleues [sur la couverture] sont plus sombres à la naissance et deviennent de plus en plus transparentes, ce qui traduit le processus de mise en œuvre de l’ITIE en RDC.” A 2011 report could build on the lessons learned and help address the structural problems that have come to light in the 2010 edition.

But the question remains whether there will be a next report. EITI rules technically call for a black or white judgment. In comparison, the IMF  is now discussing bottleneck governance issues before writing a new check. The IMF decision to cancel its loan with the DRC might have hurt the country in the short term, but it has already spurred serious conversations about transparency and corruption at the highest levels of Congo’s government. If those conversations result in tangible reforms, the IMF can reengage and everyone wins.

EITI rules don’t provide for constructive re-engagement on how to fix a country’s tax collection system. But if EITI leaves Congo entirely, it’s possible that everyone – EITI, the Government, and Congo’s citizens – will lose out. The EITI would benefit from a wider range of carrots and sticks to encourage countries that make progress and mark those who are stagnant or regress. It has already started thinking in that direction in some cases. It is this long-term engagement rather than a pass/fail system that will help the DRC move upwards along the blue transparency lines.

[This article was posted earlier on Congo Siasa - http://congosiasa.blogspot.com/2013/03/mining-transparency-in-drc-a...]

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Comment by Diarmid O'Sullivan on March 7, 2013 at 14:15

The EITI's approach to deadlines is a good deal more bendy in practice than it might seem on paper. Although there has been a slight stiffening recently (eg the delisting of Gabon) the desire to include countries is much stronger than the desire to exclude them. The DRC got through its past deadlines on the basis of much slimmer evidence of progress than that cited above.

A bigger question is whether there's been a sea-change in attitudes towards natural resource governance within the Congolese government, or whether the interest in the EITI will die away once the money starts flowing from the IMF again.

 

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