Do the Congo: the DRC is at last trying to clean up its economic act

The Democratic Republic of the Congo is intent on revisiting mining contracts, rescinding and reselling unused oil permits and boosting taxes on beer to fund its development plans, according to Nicolas Kazadi, the country’s finance minister.  

A country the size of Western Europe with 80-million inhabitants, the DRC had a budget of just $4bn (R60bn) last year and poverty is rampant, despite its vast riches of copper, cobalt and other natural resources. The government needs more money to meet President Felix Tshisekedi’s pledges to provide free education and expand access to healthcare. The task of raising it has fallen to Kazadi, 55, an economist who previously served in the central bank and finance ministry.  

While the International Monetary Fund has agreed to give the central African nation $3bn (R45bn) in financing since Kazadi took up his post in April, and the African Development Bank and World Bank will provide hundreds of millions of dollars more, that won’t be enough to fund the country’s proposed $10.5bn (R157.4bn) budget for 2022. 

The finance chief has his sights set on raising additional revenue domestically — a condition of the IMF loan — in part by revising deals made by the previous administration. He also sees potential for an international bond sale, possibly by 2023.

“We are fully aware that governance wasn’t good, and a lot of things need to be revisited,” Kazadi said in an interview in the capital, Kinshasa, last month. That will include scrutinising mining contracts and making sure companies are paying their taxes.

We are aware that governance wasn’t good, and a lot of things need to be revisited.

—  DRC finance minister Nicolas Kazadi

The terms of two of the DRC’s biggest mining deals — a $6.2bn (R93bn) minerals-for-infrastructure agreement with China and China Molybdenum’s contract to run the Tenke copper and cobalt mine — are already under investigation, according to Kazadi. The government has also begun an audit of state-owned copper mining company Gecamines “to know what sort of contracts they signed and who’s behind them”, he said.

The government is trying to improve operating conditions for the mining industry, including reforming its VAT system with a view to making it more transparent and efficient, the finance chief said. It is furthermore working on a payment plan to reimburse what may be more than $1bn owed to companies, Kazadi said.

Tshisekedi’s administration has backed a deal between state-owned mining company Sakima and closely held Dither to process DRC minerals including gold and coltan at new refineries in Rwanda, despite a long history of violence between the two countries.

“The idea today is to turn the page and to cooperate,” Kazadi said. “We can’t stop ourselves from profiting from opportunities offered to us.”

The government is also intent on raising more money from its crude reserves and is set on reclaiming the rights to two undeveloped oil blocks on the Uganda border that were awarded to Israeli billionaire Dan Gertler, who is under sanctions by the US for alleged corruption in the DRC.

It is in the country’s interests that the government “facilitate the sale of these blocks, which have incredible value”, Kazadi said.

Gertler declined to comment.

An initiative to raise more money from the beverage industry that is being undertaken with Swiss company SICPA will see bottles stamped to ensure taxes are paid and could raise hundreds of millions of dollars, though companies oppose the plan, Kazadi said.

A more favourable tax regime and better border controls will also reduce trafficking of natural resources from eastern DRC into neighbouring Rwanda and Uganda, he said.

— Bloomberg News. More stories like this are available on bloomberg.com