Mines versus infrastructure: after audit, the IGF exposes how China has fooled the DRC
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February 16, 2023
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The General Inspectorate of Finance (IGF) made public on Wednesday, February 15, 2023 its audit report on the implementation of the Chinese contract. The Supreme Review Body paints a bleak picture of the implementation of the infrastructure-for-minerals contract concluded between the Democratic Republic of the Congo and China in 2008.
This report comes after calls from civil society and Westerners calling for the contract to be revised. Although the Government has repeatedly expressed its intention to renegotiate this major contract, in practice nothing has yet changed.
Below, in 11 points the main conclusions of the General Inspectorate of Finance:
1. The constitution of SICOMINES in 2008 was carried out in violation of Article 1 of the Royal Decree of 22 June 1926. The share capital not proportionate to the purpose of the company and not indicating the mineral deposits as a contribution from the Congolese party. USD 100,000,000.00 set by the GEC (Chinese Group of Enterprises) was very insufficient and therefore disproportionate to the corporate purpose.
2. No evaluation of the mineral deposits contributed by GECAMINES S.A. has been made and therefore, failure to integrate the value into the share capital: while its minimum consistency was known and listed in Annex A of the Agreement of 22 April 2008 and Annex B of the Joint Venture Agreement of the same date: 10,616,070 t/cu and 629,619 t/co worth USD 90,936,120,000, at the rates on the day of conclusion of the agreement.
3. Arbitrary, discriminatory and illegal nature of the fixing and distribution of the share capital at USD 100,000,000.00 at the rate of 68% of the shares for the GEC and 32% for the Gécamines Group. This capital was set at USD 100,000,000.00 (while SICOMINES held assets of USD 90,936,120,000.00) and it was decided that Chinese companies would have 68% of the shares against 32% for the Congolese side. The Chinese contributed USD 68 million and lent GECAMINES S.A USD 32 million, which it repaid with interest of USD 10,979,566.00 through deductions on its dividends.
4. Significant financial imbalance to the detriment of the DRC between the advantages granted to the Chinese side and the commitments to be borne by it as well as the gains expected by the Congolese side: USD 90,936,120,000.00 to the Chinese against commitments borne by them of USD 6.2 billion, i.e. a gain for the Chinese of USD 84,736,120,000.00 to which must be added the tax and customs exemptions provisionally estimated at the lowest rates at USD 2,163,623,850.15. Even determining the net present value (NPV) based on the elements included in the 2021 Feasibility Study, the NPV is USD 76,573,723,516.28 which constitutes the gain in favor of the Chinese side because the NPV involves the deduction of CAPEX and OPEX from turnover. USD 76 billion gain for the Chinese side against 3 billion infrastructure for the DRC
5. In six years, from 2016 to October 2022, SICOMINES disbursed from one of its overseas accounts, in this case Main Account No. 100001700001077 housed in the books of BANK OF CHINA DUBAI BRANCH, a total amount of USD 9,677,613,625.15 to Chinese companies and itself for various unsubstantiated reasons. Illustrative cases of sales return for USD 1,564,280,538.68, contract payment for USD 1,506,989,864.14 and other debit transactions without giving reason for USD 3,827,943,282.32.
6. Lack of visibility and impact of the work carried out and its unjustified selectivity in violation of Annex C of the Convention of 22 April 2008. Eligible work performed: USD 534,902,461.66 Ineligible work performed: USD 287,287,598.42
7.Glaring weakness and modicity of infrastructure investments: SICOMINES has mobilized, in 14 years, financing totaling USD 4,471,588,685.14 and has allocated only USD 822,190,060.14 for the financing of infrastructure works, i.e. 18.38% of the total financing mobilized
8. Under the terms of the collaboration agreement and the joint venture agreement, the GEC was responsible for mobilizing resources for the financing of mining and infrastructure investments (USD 6.2 billion) for which SICOMINES was to be reimbursed. Instead, it was the SICOMINES Joint Venture that took on debt, to the tune of USD 3,341,948,821.85 to finance both mining and infrastructure investments. But at the same time, she paid herself, from 2016 to October 2022, USD 5,464,880,564.06 in her main account in DUBAI for the benefit of one or more other accounts not yet identified;
9. Failure to repatriate export earnings and fines of 5% due by SICOMINES: Following an erroneous interpretation of the contractual stipulations enshrining the freedom of transfer of funds, SICOMINES did not repatriate export earnings totalling USD 2,004,167,489.24 over the period from 2016 to October 2022. As such, it owes fines of 5%, i.e. USD 100,280,374.46
10. Imbroglio maintained in investment repayment periods This imbroglio was used to reduce the amount of infrastructure investment from USD 6.5 billion to USD 3.0 billion. Article 12 of the Convention provided that during the second period the total reimbursement should not exceed USD 3 billion in principal. It is curious. We probably wanted to delay the repayment and therefore the clearance of the DRC's debt vis-à-vis Chinese investors;
11. Irregular and unjustified payment of 4.8% of the amounts of the works under "Amount to be valued": For all works reported by the Congolese Agency for Major Works (ACGT), these costs amount to USD 37,256,434.59. The legality of such a levy and the destination given to the funds thus collected are problematic. It is therefore probably a way to remunerate oneself in a different way.
...state owned Cominiere getting 29%..wow all sorted...win win for the incompetent !
It's a magical (but tiring) time. 
