ROBERT Friedland, the boss of Ivanhoe Mines, a large Canadian firm that digs out copper and zinc in Africa, is not one for pessimism. In his speech to an annual mining industry jamboree, Mining Indaba, in Cape Town, his promises about the potential of the business were as copious as the ore bodies his firm mines. But amid the hyperbole about electric cars, Chinese consumers and the “most disruptive copper discovery in the world” there was a note of panic. Money, he warned, is “a coward”, and may be about to flee.
The cause of fear is a new mining code that was passed by parliament in the Democratic Republic of Congo on January 24th. Congo is Africa’s biggest copper producer; its reserves, mostly in the southern copper belt, are among the world’s richest. As important, it has emerged recently as the world’s leading producer of cobalt, a by-product of copper smelting that is used in batteries for electric cars. It also produces gold, zinc, tin and diamonds.
The new law, which has yet to be signed by Joseph Kabila, the country’s embattled president, drastically raises royalty rates paid to the government on most of the minerals extracted in the country. If signed, it will, unlike most revisions to mining codes, go into effect immediately. Such rates will rise from around 2% to around 3.5% on most metals. But they could go up to as much as 10% on cobalt, under a clause allowing the government to designate certain metals as “strategic”.
Miners are livid. “This is bad for the continent, as well as for the industry,” says Mark Bristow, boss of Randgold, a London-listed firm with a large gold mine in the north-east of the country. He says higher royalties and tax hikes could eat up his firm’s profits and stifle future investment.
Yet Congo has had a new mining law in the works since 2012. The current code was introduced in 2002, when large tracts of the country were still occupied by rebels. Many analysts think it is too generous to miners. Congo “has not done as well from its minerals as it would have liked,” says Amir Shafaie of the Natural Resource Governance Initiative, a London-based NGO. If there is a surprise, it ought to be that the royalty increases came only now.
Miners seem confident that the law could yet change, but that may be wishful thinking. The Congolese government faces a growing crisis of legitimacy. Mr Kabila’s second, and supposedly final, term as president finished in December 2016 and yet he remains in office. Protests since then have led to hundreds of deaths at the hands of police; new armed rebellions have broken out both in the east and south-west of the country. Squeezing miners may be Mr Kabila’s only chance of raising the funds he desperately needs to stay in power.
Perhaps the real worry should be that he might fall. Although Congo’s wealth has been exploited by Westerners since the Victorian era, most of the current industry dates back only as far as 1997, when Mr Kabila’s father, Laurent Desire, came to power. Many of the most profitable mineral rights were bought through Dan Gertler, an Israeli billionaire who is a close friend of the president. In December Mr Gertler was added by America’s Treasury to a sanctions list; it said he had “amassed his fortune through hundreds of millions of dollars’ worth of opaque and corrupt mining and oil deals” in Congo. If Mr Kabila is replaced, everything could be up for grabs.