Mineral reserves help swell Congo coffers

Africa / African Business
by Peter Jones, mars 20 2014, 05:28

KINSHASA — A sharp increase in mining production will drive economic growth in Democratic Republic of Congo to aboutt 9.5% this year, one of the highest rates in Africa, Prime Minister Augustin Matata Ponyo said in an interview.

Congo — a country the size of western Europe in the heart of Africa — has rich reserves of gold, diamonds, copper, cassiterite and coltan but development of its resources has been hampered by poor infrastructure, corruption and decades of conflict.

Mr Ponyo, a technocrat who took over as prime minister in April 2012, is credited with taming inflation, curbing government debt and boosting economic growth on the back of a mining bonanza.

Congo’s roughly $20bn economy grew 8.5% last year, according to the International Monetary Fund (IMF), as copper production hit a record 942,000 tonnes — making it the largest producer in Africa.

"Mining production is practically exploding and it’s forecast that in 2014 we’ll see much higher production than in 2013," Mr Ponyo said.

"For 2014, we predict economic growth of around 9.5%, among the highest on the continent," he said.

His forecast topped the IMF’s estimate that Congo’s economy would grow 8.7% this year. Despite robust growth in recent years, most of the country’s 65-million people live in poverty.

Mr Ponyo said Congo’s growth and low inflation — 1.1% last year according to the IMF — made it a special case in Africa. Mining makes up around 30% of Congo’s economy, the government says.

Production boomed last year as a number of expansion projects came on line — including at Glencore Xstrata’s Kamoto Copper Company.

Freeport McMoRan is also ramping up output at its giant Tenke Fungurume Mine in the southeastern copper-rich province of Katanga.

The prime minister sought to allay investors’ concerns over proposed new mining and oil codes, due to be approved during a new parliamentary session that began last Saturday.

The government has held talks with investors over a mining code that would raise the state’s stake in new projects to 10%-15% and triple royalties to 6%. Mr Ponyo said he would take onboard the opinions of major international firms.

"We are obliged to take their observations into account, while preserving the interests of Congo," he said in the interview last Saturday.

Mr Ponyo has said the government’s recent success in pacifying some armed groups in eastern Congo — where millions have died from violence, hunger and disease in the past two decades — has helped attract mining investors.

Congo’s soil is estimated to hold trillions of dollars in minerals but a lack of infrastructure has bedeviled its development. The country has just 2,000 km of paved roads and miners complain production has been limited by a lack of electricity.

In a January letter to President Joseph Kabila, seen by Reuters, Mr Ponyo set out plans to ration energy to mining companies and called for a suspension of expansion plans.

"The energy deficit is putting a brake on the development of the mining sector and consequently of the country," Mr Ponyo said. "The government is working to find durable solutions."

The most important of these is a long-delayed expansion of the hydroelectric power station at Inga, 250km southwest of Kinshasa on the Congo River.

Three consortiums are bidding for the contract to build Inga III and sell the power it generates. The project was made more attractive last year when SA signed a deal to buy half of the 4,800 MW produced by the power station.

Mr Ponyo said the government was keen for construction to begin before the World Bank’s estimated start date of 2016: "It’s up to us to work with the World Bank and other partners to explore possibilities to shorten the timeframe."

The World Bank is expected to approve $73m of financing for the project today but progress has been slow in deciding on a private partner to contribute the majority of the estimated $12bn construction costs.