World Bank implicated in controversial DR Congo mining contracts
22 November 2006
An internal memo warns that the Bank may be complicit in the non-transparent awarding of mining contracts that are unfavorable to the country
A Friday November 17 Financial Times article "World Bank faces questions over Congo mining contracts" reveals the contents of a leaked internal World Bank memo concerning the Bank’s involvement in the Democratic Republic of Congo’s mining sector. The memo warns that the Bank may be perceived as complicit in the non-transparent awarding of mining contracts between the DRC’s transitional government and three international mining companies last year.
The three joint-venture contracts, worth billions of dollars in concessions from former state-owned mining company Gecamines, were signed against the recommendations of a DRC parliamentary commission and World Bank-financed audits of Gecamines. The Bank’s audit called for a halt to the awarding of contracts until the company’s assets could be assessed and a restructuring plan elaborated.
Analysis of the three deals, which reportedly signed away over 80% of Gecamines’ remaining productive assets to private mining companies, revealed their terms to be of little benefit to the country.
The World Bank had been involved in mining sector reforms since it re-engaged in the DRC in 2001. The deals in question were apparently signed before the Bank-financed restructuring of Gecamines got underway, leaving little more than the shell of a company in the hands of the Bank-financed management team responsible for restructuring and revitalizing the former copper giant.
Critics charge that the Bank should have done more to prevent or encourage renegotiatation of such unfavorable contracts, in order to help ensure greater transparency and benefits for the Congolese people. The Bank has met additional criticism for its failure to support increased oversight and effective management of the Congo’s mining industry, after having played an instrumental role in enacting mining sector reforms in 2002 to attract foreign investment in the country.
Beyond its role in the mining sector, many observers are concerned about the sheer size of the Bank’s general lending portfolio in the DR Congo, where over $2 billion have been earmarked for loans and grants since the Bank reengaged in the country 5 years ago. They argue that the Bank’s infusion of funds runs contrary to the findings and recommendations of the Bank’s own conflict unit regarding financing for post-conflict countries. Those findings emphasize the need to focus aid on community-driven development and provision of services over private sector investment in longer-term productive contracts, and caution that conflict is likely to reemerge if root causes (such as struggle over natural resource control) are not addressed.
World Bank involvement in the Congo has instead focused on rewriting the country’s mineral and forestry codes to facilitate private sector participation in the exploitation of the country’s natural resources.
Earlier this year, the World Bank began an investigation into allegations that the transitional government mismanaged millions of dollars of Bank funds earmarked for disarmament and emergency reconstruction projects. The findings have not yet been released.
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