The newly re-elected Democratic Republic of Congo President Felix Tshisekedi announced that the renegotiation of the Chinese mining deal had secured an additional $7 billion for the Congolese treasury to be used for infrastructure projects. However, analysts believe that the $7 billion may not materialize as expected, and China’s dominance in cobalt mining in the country is still in doubt.
Minerals-for-Infrastructure Deal
Located in central Africa with a population of 100 million people, the Democratic Republic of Congo, also known as the DRC or Congo, is very rich in mineral resources and is the world’s largest producer of cobalt. Seventy percent of the world’s cobalt comes from there. Cobalt is a key component in lithium batteries for electric cars and cell phones, and 80 percent of the cobalt mines in Congo are currently owned and operated by Chinese companies. Note that the Democratic Republic of Congo must not be confused with the Republic of Congo, which is a different neighboring country.In 2008, the Chinese regime and the Congolese government reached a deal that exchanged Congo’s mineral resources for infrastructure projects built by China. As a joint venture, Chinese state-owned enterprises and Congo state mining company ran the Sicomines copper and cobalt mines at Kolwezi in the south-eastern Congo.
The Chinese side committed to investing $3 billion in infrastructure, building more than 3,500 kilometers of roads, railways, 31 hospitals with 150 beds, 145 medical centers, and two modern universities. In addition, more than 5,000 low-cost housing units were to be built, including no fewer than 2,000 in the capital and no fewer than 3,000 in the provinces. In return, Congo’s state-controlled mining company Gecamines transferred 68 percent of its shares to the Chinese partner company, allowing it to mine 10 million tons of copper and more than 600,000 tons of cobalt in exchange for all this.
Since 2015, Sicomines has been producing a stable supply of copper and cobalt for China, while the Chinese side has only completed a fraction of the promised infrastructure projects. According to a 2023 report by Congo’s Inspectorate General of Finance (IGF), only $822 million has been spent out of the $3 billion investment promised by China. The IGF believed that the copper and cobalt mine was likely to be grossly undervalued, so in February 2023, it asked the Chinese side to increase infrastructure investment to $20 billion to reflect the real value of the property.
Many observers believe that the Chinese side has been unable to fulfill its commitments under the original agreement and that the lack of transparency on various expenditures has raised suspicions of corruption within the Chinese regime.
Mike Sun, a veteran U.S. investment strategist and China expert told The Epoch Times: “The investment promised by the Chinese side has not been realized, and the Chinese side is trying to cheat wherever they can. Now I’m afraid the $7 billion [investment] is just as likely to drag on forever.”
“If Congo insists on negotiating for $20 billion, I suppose the CCP will have to agree to it in the end. This is because the ‘Belt and Road Initiative’ has not only economic goals but also diplomatic and political implications in the ongoing competition with the West,” he also said referring to the Chinese Communist Party.
Maximizing Profits
Before renegotiating the Sicomines deal, Congo negotiated a previous agreement with China Molybdenum Company Limited (CMOC). In July last year, CMOC settled by agreeing to pay $2 billion in royalties to Gecamines, Congo’s state-controlled mining company.Previously, CMOC was accused of under-declaring its reserves to avoid paying millions of dollars in royalties to Congo, and the Congolese courts stripped it of control of the Tenke Fungrume Mining (TFM).
The TFM is one of the world’s largest copper and cobalt reserves. In 2016, CMOC acquired all of its shares from U.S.-based Freeport McMoRan Inc. for $2.65 billion, and now indirectly owns 80 percent of TFM. The acquisition was financed by the Chinese regime.
President Tshisekedi of Congo visited CMOC during his May 2023 visit to Beijing. Two months later, Congo dropped its original multi-million dollar fraud allegations against CMOC, and CMOC took back a controlling stake in the company and resumed mining the TFM copper and cobalt mine for just $2 billion.
According to the information released by the Chambers of Mines of the DRC, Chinese investors currently control about 70 percent of the country’s mining resources. Copper mines in Congo have also been dominated by Chinese companies. Among them, China’s leading mining company Zijin Mining Group holds about 45 percent of the world’s second-largest Kamola-Kakula copper mine and 72 percent of the Kolwezi copper and cobalt mine in Congo.
‘Belt and Road Initiative’ Putting Countries in Debt
The CCP’s “Belt and Road Initiative” is a part of its agenda for global expansion, using infrastructure investment as bait to plunder the resources of poorer countries. To achieve its goal, the CCP has asked state-owned banks to lend sufficient preferential loans to companies to expand mining investment in countries that are a part of the initiative.Congo is one of the strategic locations of the “Belt and Road” in Africa, and its rich mineral resources are the target of the CCP’s ambition to dominate the world’s new energy industry. Under the goal of “Made in China 2025,” the CCP has made electric vehicle batteries one of the 10 critical fields for technological development.
However, the infrastructure projects promised by the CCP have only partially materialized, or hardly ever materialized.
According to a U.S. think tank, the massive infrastructure programs promised by the CCP in the “Belt and Road” countries have trapped low- and middle-income countries with hidden debts totaling $385 billion, and 42 low- and middle-income countries now have debt exposure to China of more than 10 percent of their GDP. Thirty-five percent of these infrastructure projects involve corruption scandals, labor violations, environmental hazards, and public protests.
For example, after TFM was acquired by a Chinese company, it no longer followed the same routine as before. Instead, it operates 24 hours a day, with deep mining pits being dug. Workers were asked to climb into acid tanks for repairs without even passing air-quality tests, and safety accidents occurred from time to time.
British journalist Peter Hitchens wrote an article in 2008 titled “How China has created a new slave empire in Africa,” based on his experiences in Congo and Zambia. The article says that the Chinese regime’s focus on mineral resources and treating African laborers like slaves makes it hard to believe that China is coming to Africa in good faith.
Mr. Sun also said: “When Western companies invest in Congo, they follow the legal requirements on environmental protection and workplace safety, which means that the cost will be higher. Chinese companies do not care about labor rights and environmental impact, and therefore they can mine very cheaply. When something goes wrong, they use the same tactics they use in China to suppress it. This is why the CCP is increasing the number of armed security at its mining sites.”
At the same time, Mr. Sun does not think that the CCP will be able to dominate the cobalt mines in the long run. He explains that Africa is politically unstable. There are a lot of variables when there is a change of government, and when a new president comes in, he may do things very differently from what the country did in the past. He may not recognize the previous agreement with China. This has happened many times before, and he believes it will continue to happen in the future.
