Rush and ruin: The devastating mineral trade in southern Katanga, DRC

Report
from Global Witness
Published on 29 Sep 2004
A Report by Global Witness

Executive Summary

This report exposes the dynamics of the rush to exploit cobalt and copper in Katanga (south-eastern Democratic Republic of Congo (DRC)), and how the illicit trade in these minerals is contributing to the ruin of the DRC's economy, the environment and the livelihoods of thousands of Congolese people. There is currently a "cobalt rush" occurring in Katanga caused by record-high international cobalt prices but there is little indication this dramatic rise in trade has had any benefit to the DRC economy or the Katangan province.

The DRC is now slowly emerging from a devastating conflict, and its fragile transitional government is tasked with bringing the country through to elections in 2005 - as well as implementing desperately needed fiscal and institutional reforms. During a time that the international donor community is providing billions of dollars in aid that partly assists the improvement of revenue collection and public expenditure management in the DRC, the state is losing vast quantities of revenues due to an appalling lack of control over the mining sector. A lack of transparency in mining revenue management coupled with a vast capacity deficit in key government institutions renders determining the precise loss to the DRC economy impossible.

Discrepancies between official figures are illustrative: in March 2004 the Central Bank of Congo reported the DRC produced 783 tonnes of cobalt metal. In the same month, the DRC's customs office reported 13,365 tonnes of cobalt metal was exported - a difference of over 12,000 tonnes. This discrepancy raises serious questions about where mining revenues are going and how trade and production is being recorded. Given that industry experts estimate that the DRC processes a maximum 1,000 to 1,500 tonnes of cobalt metal per year, the figure of 13,365 tonnes is wholly inaccurate.The situation is made even more serious as investigations in Katanga reveal that only a minute fraction of trade in minerals is officially recorded: the vast majority of trade is illicit.

The DRC has in place a new Mining Code designed to attract foreign investment by providing a legal framework that provides clarity and certainty. However, the Code is yet to be applied on the ground in Katanga, leading to the mining sector being virtually uncontrolled and nontransparency to continue. Again, this is caused by a combination of an absence of regulatory capacity and a lack of political will in Kinshasa to bring the trade under control. Current world prices for cobalt stand at US$55,100 per tonne, but the DRC does not have the industrial facilities or capacity to effectively gain from record-high cobalt prices.

However, the real losers in the "cobalt rush" are artisanal miners working under appalling conditions in mines throughout southern Katanga. Deprived of any alternative sources of employment, young men and boys work for as little as US$1 per day gathering mineral soil by hand. They have no protective equipment, and their activities are left completely unregulated by local authorities.

The report also cautions that the current status of mining in Katanga is not simply an economic and social problem. The rush to extract and export valuable minerals from Katangan mines, and the lack of distribution of benefits from this trade could also fuel a resurgence of historical secessionist sentiments.

The DRC has extraordinary natural wealth, but this wealth has never been used for the benefit of the Congolese population. Mining revenues from Katanga could - and should - be used to consolidate peace and promote economic development in the DRC. The international community must coordinate its donor aid policies and work closely with the DRC's transitional government to ensure that the mining sector is controlled effectively and transparently to combat corruption and illegality. This is the only way the DRC will be able to properly harness its own wealth to fund its economic, social and political rehabilitation for the benefit of all Congolese people.

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