Friday, October 30, 2009

Many critics of the China-Congo deal

China and Congo recently inked a deal that will allow China to mine copper out of the country. In exchange, China agrees to pay for and build 4,000 kilometers of roadway and 2,000 kilometers of railway.

The agreement has many critics, most of all the World Bank and International Monetary Fund, also many anti-corruption advocates are opposed to the deal.

To hear more of the critics side, we go to this analysis from reporter Stephanie Nieuwoudt of the IPS.

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.

1 comment:

I.L. Kalala said...

Infrastructure reform is certainly important when it comes to alleviating many of the problems the Congo faces. Access to medicine and food, in theory, will be improved.

Like many of the investment agreements that have been executed in the Congo, this deal lacks transparency.