Is South Africa Undermining our own Mining Interests in the DRC?

Image: Flickr, Julien Harneis
Image: Flickr, Julien Harneis

DRC President Joseph Kabila’s decree confirming rights to Lake Albert’s oil block 1 and 2 to companies part owned by Khulubuse Zuma embroiled the South African president’s nephew in a legal dispute with a leading oil company operating in Africa, Tullow Oil.

Important questions for South Africans to ponder are, what benefit this kind of investment brings to our shores and whether other SA investments in the DRC, such as gold mining, are undermined by this way of doing business?

Arguably much of the blame for the murky oil deal lies with the Congolese government and not with either the SA or UK private investors. But political connections bring opportunities in places where the locals suffer from absence of the rule of law, of which insecurity of contracts is only a fraction of the problem.

The illicit plunder of natural resources such as gold, timber, coltan and cassiterite has long been the underlying cause of the DRC conflict. In contrast well regulated, formal mining offers one of the only routes to reconstruction and development. South Africa has contributed peacekeeping troops, millions of rands and years of diplomacy to trying to solve the deep insecurity in the eastern DRC, and in particular, the Ituri province, which borders on Uganda with Lake Albert in between. This involvement was predicated not only on a sense of moral duty to share South Africa’s peace dividend in Africa. It was also clearly articulated by President Zuma and others to be in the national economic interest to stabilise the Great Lakes region.

Ituri’s gold and recently discovered ‘black gold’ can only be extracted for profit legitimately, and to the benefit of both the South African and the local economy, if and when peace and security (including of contracts) prevails. This is why investors there have to constantly assess the risks of doing business, while at the same time seeking a ‘social licence’ to operate by contributing to long-term development projects. For example, Anglogold Ashanti has struggled to get formal mining operations started in the area (about 50km from Lake Albert), where the company has held exploration rights in a joint venture with Congolese state-owned company, Okimo, for some time. Anglogold’s subsidiary AGK has said it plans to develop Okimo’s hydro-electrical assets to generate power for the mines and to the benefit of the surrounding communities.

Khulubuse Zuma and family lawyer and business partner, Michael Hulley, have vehemently denied that their’s is a ‘get rich quick’ scheme to sell the Lake Albert oil rights on to the highest bidder soon after obtaining them. Little has been disclosed, however, about the corporate social responsibility (CSR) agreements contained in the contract, or about the contract itself. If the plan is also to develop a hydro-electrical power project for Bunia, they may be undercutting the SA mining company’s plans to develop the same electricity project. More information about the CSR plans and actual benefits rolled out to communities in the DRC is needed, and South Africans should hold all our extractive companies, big and small, established or entrepreneurial, to account for this.

What seems clear is that the Lake Albert oil deal is not of direct benefit to the South African economy, since Khulubuse Zuma’s companies named in the contract, Foxwhelp and Caprikat, are listed in the British Virgin Islands. Even clearer is that South Africa’s economic and security interests in this region would be best served by a commitment from government and business to principles of ensuring transparency and social responsibility in our extractive industries.