August 11, 2010

Why is Canada Blocking Congo Debt Forgiveness?

Mining companies and Canada's “civilizing mission”

by Macho Philipovich

The Dominion - http://www.dominionpaper.ca

WINNIPEG—In the lead-up to the G20 summit in Toronto, as several major demonstrations and tens of thousands of police and military personnel filled the downtown, a quieter summit took place 200 kilometres to the north, in Huntsville, Ontario. In closed meetings Canadian officials worked to convince the world's major military and industrial powers to criticize the government of the Democratic Republic of Congo (DRC).

They succeeded. The final G8 communique called on the DRC to “enhance governance and accountability in the extractive sector,” and “extend urgently the rule of law.” Just a few days later, on June 29, Canada attempted to block a decision by the World Bank and International Monetary Fund (IMF) to cancel the overwhelming majority of the DRC's roughly $8 billion debt.

In spite of Canada's objections, the World Bank and IMF approved DRC's debt cancellation two days later. But Canadian diplomats delayed the process long enough that the announcement missed celebrations of the 50th anniversary of the country's independence from Belgium which had ruled Congo with legendary violence while extracting its mineral wealth. The DRC's debt, widely considered to be "odious"—consisting of loans to illegitimate rulers—had accumulated through their history as a colony of Belgium, then through the years of the Mobutu dictatorship and on to the present. The loans rarely benefited ordinary people in what is one of the most impoverished countries in the world. Even after one of the IMF's own reports during the Mobutu era showed the loans were being misused and would likely never be repaid, the lending programs were not only kept in place but boosted to higher levels.

Why would Canada want to interfere with relieving a poor country from illegitimate debt?

The Congo has long been the site of bountiful natural resources, which governments and corporations the world over have scrambled to access. The Vancouver-based mining company First Quantum has not been immune to this allure. In 2006, the company's president Clive Newall said of the DRC: "It's the holy grail of the copper industry. Companies are saying: to hell with the political risk, we just have to be here."[1]

The risk did not pay off as well as he would have liked. Over the past year, the government of the DRC canceled three of First Quantum's mining concessions, worth about $1-billion, as part of a review of contracts signed during the tumultuous period of conflict at the end of the 1990s. Canada retaliated on the company's behalf through the G8 and international lending institutions.

Maurice Carney, Executive Director of the Friends of the Congo, a Washington DC-based advocacy group, is asking why Canada was not worried about illegality in the Congo before the recent cancellations; illegality on the part of the companies themselves. He points to a 2002 UN Security Council report called the “Panel of Experts on the Illegal Exploitation of Natural Resources and Other Forms of Wealth of the Democratic Republic of the Congo,” that showed connections between foreign mining companies, including First Quantum, and the ongoing conflict in the DRC, the deadliest conflict the world has seen since the second World War.

“The United Nations clearly stated that these companies that were involved are fueling the conflict, illegally exploiting Congo's wealth, and have violated OECD Guidelines,” says Carney. “Yet neither Canada, nor the G8 have issued any major declarations against these corporations.”

The report pointed to payouts by First Quantum to top Congolese officials.[2] The company's Kolwezi project, the first to be canceled by the DRC, was secured through deals with then-rebel leader Laurent Kabila before he took power in 1997, at a time when mining companies were helping finance his insurgency against the national government. The deal was made with a smaller firm called American Mineral Fields, which First Quantum was planning to buy, and did, securing the contract for themselves. From 1997 to 2001, while accumulating these contracts, their share prices shot “from zero to around $140 USD.”[3]

First Quantum's board has always been politically well-connected. Around this period, former Prime Minister Joe Clark was serving as an adviser and later he became a board member. In 2008, Carney told Democracy Now! that nearly all Canadian Prime Ministers since Trudeau have been involved in a mining company working in the Congo.

The international community's main concern remains re-shaping the DRC government much in the way foreign powers in Congo's colonial period saw themselves to be carrying out a “civilizing mission.” The World Bank and the UK have announced $92-million for their PROMINES project in the DRC “to increase transparency and accountability in the mining sector.”

Although the government of the DRC claims that during the period of mining renegotiation the people in charge of the First Quantum project in Kolwezi were “the only ones who refused to negotiate," and that "[t]hey refused with a lot of arrogance," the cancellation was, in fact, dubious. The holdings were transferred to a company registered in the British Virgin Islands owned by businessman Dan Gertler, among the wealthiest Israelis, who owns other companies financing Israeli settlements in the West Bank.

Carney says in regard to Gertler that “just about every deal he's made in the Congo has benefited him, a select few people in the government, and undermined the people.”

The Canadian Ministry of Finance did not respond to a request for an interview from The Dominion. A Ministry representative previously told Reuters they would “continue to work with our international partners to ensure Canadian investment in the DRC is protected.”

Carney asks us to consider another way the G8 leaders' summit could have played out. “We're not aware of any statements the G8 has issued regarding the millions of Congolese dead or the hundreds of thousands of women raped... Imagine if the call from the G8 was for an end to the conflict and bringing peace and stability to the Congo, as opposed to securing mining deals for First Quantum.”

With files from David Barouski.

Macho Philipovich lives in Winnipeg.

Notes

1.Bloomberg, “BHP, Anglo Shun Congo Risks to Expand as Copper Soars,” 7 February 2006, quoted in Global Witness, “Digging in corruption: Fraud, abuse and exploitation in Katanga's copper and cobalt mines,” July 2006.

2.UN Security Council 16 October 2002 “Report of the Panel of Experts on the Illegal Exploitation of Natural Resources and Other Forms of Wealth of the Democratic Republic of the Congo,” p 9: “In its attempts to buy rights to the Kolwezi Tailings, First Quantum Minerals (FQM) of Canada offered a down payment to the State of $100 million, cash payments and shares held in trust for Government officials. According to documents in the possession of the Panel, the payments list included the National Security Minister, Mwenze Kongolo; the Director of the National Intelligence Agency, Didier Kazadi Nyembwe; the Director General of Gecamines, Yumba Monga; and the former Minister of the Presidency, Pierre-Victor Mpoyo.”

3.Alain Deneault et al., Noir Canada: Pillage, corruption et criminalite en Afrique, Montreal, 2008. p 69.

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