Congo's opaque mining deals may have lost the state $5.5 billion

The British parliament released a statement yesterday suggesting that the Congo had lost up to $5.5 billion in state assets through the undervaluation of mining concessions. Eric Joyce, who is head of his legislature's Great Lakes working group, backed up his allegation with a raft of documents from the Congo, the British Virgin Islands, and the United Kingdom.

Those of you following this blog and the excellent reporting published by Bloomberg (which is quoted here) will not find it surprising that assets have been undervalued. It is the person making the claim, however, that raises eyebrows – as does his direct accusation of Joseph Kabila, the IMF and (somewhat less direct) Israeli businessman Dan Gertler. Plus, for the first time a concrete figure has been put to the fire sale of Congolese mines.

$5.5 billion. That is over 80 percent of the country's entire budget. It is also far more than the $3.1 billion in foreign aid the country receives a year. 

The statement singles out the IMF, which provided a $551 million credit line to the Congolese government in return for reforms and greater transparency, especially in the mining sector. Joyce does not mince his words: "The IMF has not been firm enough with the DRC government and has allowed the presidents and his advisors to run rings around them." He calls on his own government to hold the IMF to account "and to end this scandal."

The modus operandi is by now well known: Congolese mining concessions are sold at prices a fraction of their real value to mysterious shell companies in the British Virgin Islands. In the past four years, at least 45 such companies have been involved in purchases from the Congo. Joyce has documents for nine of these outfits. The sales he is able to document pertain to four major mining concessions (see below) – they were sold for less than 5 percent of their market price. Three of these concessions, worth $3.6 billion, were sold to companies linked to Dan Gertler.

"These transactions were not disclosed by the DRC government. None of these asset sales were put out to public tender. None of the BVI companies have any known track-record of expertise in the mining or resource sectors." 

This is big news that should have a serious impact on budgetary aid to the Congo and in donors' attitudes in general.

– Jason Stearns blogs about the Democratic Republic of Congo and the Great Lakes region at Congo Siasa.