By Johanna Jansson

Relations between the People’s Republic of China and the Democratic Republic of Congo (DRC) came under the global spotlight in April 2008, when a China Export Import (EXIM) Bank-funded barter deal of unprecedented size between a consortium of Chinese companies and the Congolese mining parastatal, Gécamines, was announced.

In terms of the agreement, the DRC would receive transport and mining infrastructure to a total value of $9-billion. In exchange, the rights to mine 10,6-million tons of copper and 626 619 t of cobalt would be ceded to the Sino-Congolese joint venture, Sicomines.

The deal was concluded at a time when the global economy was booming and copper prices were running at over $8 000/t. Since then, falling raw material prices have resulted in the near-complete halt of operations in the DRC’s mining sector – larger mining operations have been put on hold and the majority of smaller smelting facilities have ceased operations.

The steep decline in export demand for the DRC’s minerals has resulted in the country’s foreign exchange reserves plummeting from an estimated $209-million in August 2008 to an estimated $36-million in January this year – the equivalent of about one day of imports.

Further, the Congolese economy currently suffers from endogenous pressure as the dire security situation in the country’s eastern parts requires costly military operations.

Meanwhile, efforts have been made by international financial institutions to offset the effects of the crisis. On the February 27, the World Bank granted the DRC a $100-million emergency grant for teachers' salaries and to payessential expenses for government institutions.

Two weeks later, on March 12, the International Monetary Fund (IMF) approved a loan disbursement of $195,5-million to the country from its Exogenous Shocks Facility. The Congolese government have also been in talks with the African Development Bank and the European Union regarding economic assistance.

Whither the Sino-Congolese contract in this context? The Congolese government and the Chinese parties to the agreement maintain that the deal will go ahead unchanged and that the investments are not to be considered traditional debt since they will be repaid in minerals.

However, the IMF continues to argue that whereas the Sicomines deal is positive, in principle, if it went ahead as it stands, it would result in an unsustainable de facto increase in the DRC’s external debt and make it impossible for the IMF to go ahead with much-needed debt relief for the country.

As a result of the crisis and the predicament in which the Congolese government finds itself, it is estimated that the IMF may now have increased leverage for its argument that the Sino-Congolese contract has to be renegotiated and reduced.

During the week of March 23 to 27, a delegation from the IMF visited Kinshasa and it was expected that the Sicomines contract would form an important part of the discussions with Congolese stakeholders. It has been argued that the most likely amendment to the contract is that the China EXIM Bank-financed infrastructure investment may be capped at $6-billion.

In the meantime, the initial stages of the infrastructure investments are already in implementation. In August 2008, two agencies under the DRC’s Ministry of Infrastructure were set up specifically to manage the Sino-Congolese infrastructure programme.

The Congolese Agency for Major Construction Works is the contracting authority for the infrastructure projects and the Bureau for Coordination and Monitoring of the Sino-Congolese Programme is the agency that will coordinate all infrastructure and mining activities pertaining to the deal.

Under the supervision of these two agencies, initial infrastructure projects to the value of $340,4-million are currently being implemented by Chinese companies China Railway Engineering Corporation and Sinohydro.

A hospital will be constructed in Kinshasa and refurbishment work will be carried out on the road between Lubumbashi and Kasomeno, in the south-eastern Katanga province; on the road between Beni and Niania, in the north-eastern Oriental province; and on Tourism avenue and Lutendele road, in Kinshasa.

The total value of infrastructure projects to be undertaken in 2009 is $750-million, according to representatives of the Congolese Agency for Major Construction Works.

Over the next four years, infrastructure investments to the value of $3-billion are planned ($1-billion in 2010, $750-million in 2011 and $500-million in 2012.

The DRC is definitely in need of both immediate crisis relief and long-term, large-scale infrastructure investment. It remains to be seen how successful the Congolese government’s current efforts to maintain support from all sides will be. It is, however, likely that any renegotiation of the Sino-Congolese contract will take place only once the feasibility study for Sicomines’ mining concessions has been finalised, which, at the earliest, will be in June this year, according to a representative of the Bureau for Coordination and Monitoring of the Sino-Congolese Programme.

Jansson is a senior analyst at the Centre for Chinese Studies, Stellenbosch University – jjansson@sun.ac.za