Democratic
Republic of Congo should be one of the richest countries in the world, thanks
to the trillions[i] of dollars’ worth of gold,
diamonds, copper, cobalt and other natural resources in its soil. The demand for those minerals – used to make
smartphones, computers, batteries and countless other popular consumer goods –
is incredibly high, yet rampant corruption and mismanagement has kept Congo’s
citizens in poverty while the illicit trade in minerals has funded violence and
armed conflict for decades. Congo consistently ranks at or near the bottom of
the United Nations Human Development Index.[ii] One in seven children is dead
before the age of five[iii] and nine per cent of the
population is considered in need of humanitarian assistance.[iv]
While the vast
majority of Congo’s
population suffers from a lack of basic services, the state has sold off
valuable mining assets at suspiciously low prices, losing the Congolese
treasury hundreds of millions of dollars in crucial revenue in the process.
This money has instead gone to a handful of anonymous companies, whose real
owners are hidden under layers of paper companies, located in an offshore tax
haven in the British Overseas Territories. The secrecy of the offshore business
world which facilitated these deals allows corrupt politicians and businessmen
and women to launder money, dodge taxes and strike suspect deals while keeping
their identities secret.
This exploitation of Congo’s natural resources
reached a peak around Congo’s presidential elections five years ago; it is
particularly relevant today as Congo is due to go to the polls again in
November 2016. Journalists and Global Witness researchers have previously
revealed how, in the period around the disputed 2011 elections, a series of
suspicious mining deals was struck with anonymous offshore companies that cost
Congo $1.36 billion in potential revenues. Reports at the time suggested that
proceeds from at least one of these questionable sales were used to contribute
to an election fund.
Each deal took advantage of the secrecy regime in the
British Virgin Islands – a UK Overseas Territory and tax haven – to help disguise
the real people involved; major mining companies and Israeli businessman Dan
Gertler were also central to the transactions. Gertler, a billionaire, is a
close friend of Congo’s President Joseph Kabila, who eventually won the
contested polls amid claims of ballot stuffing and intimidation. [v]
The astonishing
revelations in the ‘Panama Papers’ data leak – a slew of 11.5m files from the
world’s fourth biggest offshore law firm, Mossack Fonseca – gave the public an
unprecedented glimpse into the murky world of anonymous offshore tax havens
used by politicians, wealthy businessmen and criminals.[vi]
It was this offshore world that was exploited to facilitate these huge natural
resources deals that drained so much money out of Congo. According to reports,
Gertler is mentioned more than 200 times in the Mossack Fonseca documents.[vii] The law firm also set up two of
Gertler’s companies that obtained oil blocks in eastern Congo under
controversial circumstances.[viii] Mossack Fonseca’s dealings
with the companies ceased soon after they were set up in 2010.
Now in 2016, Kabila is reported to be seeking a
way to stay in power despite being obliged by the constitution to step down at
the end of his second mandate in December 2016. As elections loom, Global
Witness has seen evidence of mining deals being struck without public
announcement, with no clarity on where the cash is going. History appears to be
repeating itself, with Congo’s valuable natural resources at risk of being
stolen to fund an election campaign instead of the basic services that the
country’s population needs so urgently.
2016 is not only a watershed moment in Congolese
electoral politics; it is also a critical year in the global fight to end the
offshore secrecy that facilitated these deals. UK Prime Minister David Cameron
is hosting an anti-corruption summit in May where company ownership
transparency will be on the table. It is
difficult to see how the summit can be a success unless Cameron clears up the
financial secrecy for sale in the UK’s own constitutional backyard. In the wake
of the Panama Papers, Cameron has said that UK law enforcement will have fast
access to beneficial ownership information of companies incorporated in UK tax
havens,[ix] but this is not enough. A
central registry of ownership information must be made publicly available if it
is to be effective. It is essential for the people of Congo that these secrecy
laws change, so that the identities of all of the owners of the companies who
benefitted from these deals can be revealed and if any were involved in any
wrongdoing, brought to justice.
Above all, it is essential that Congo’s mineral
wealth starts to benefit the Congolese population. Congo has recently suffered
from the temporary downturn in world metals prices but has enjoyed a mining
boom over recent years, producing a record one million tonnes of copper in
2014.[x] However this has failed to
translate into improvements for the vast majority of Congolese. Conflict and
instability persist: in late 2012 an armed rebellion erupted in Congo’s
war-torn North Kivu province and lasted for 20 months.[xi] Basic services like roads,
hospitals and schools are still largely absent. The $1.36 billion lost to the
suspicious mining deals around the elections translates into twice the
country’s annual spending on health and education[xii] – a spectacular loss to
the public purse.
Congo’s government announced in March 2016 that a revision of its mining
law would be suspended until metal prices improve.[xiii] This suspension is
particularly worrying as the revision would have offered a chance to introduce
robust transparency and accountability measures in Congo’s mining sector.
Global Witness is warning that unless Congo strengthens and enforces its mining
law, the country could once again see its natural resource wealth siphoned away
from the Treasury and used to help fund an election that will likely be
brutally contested and possibly even unconstitutional.
Fighting an election campaign is not cheap. If
dodgy deals like these secret sales helped in part to finance contested polls
marred by violence in the past, then now is the time for change. In particular
Global Witness is calling for:
Congo’s
government and state-owned mining companies to be pressured – from within the
country as well externally – to adhere to domestic laws and international
obligations by publishing the details of new mining, oil and gas contracts,
especially in the lead up to the 2016 elections.
Congo’s new
mining law to ensure that there is an open and public tendering process for new
mining rights, that new contracts are published promptly and are freely
accessible, that the identities of the ultimate beneficial owners of companies
are made public, and that state-owned mining companies are monitored, audited,
well-governed and held to account.
Congo’s
government to introduce a public register of the beneficial owners of all the
companies who bid, invest and operate in extractive industries.
The UK and other
developed economies to insist on public registers of beneficial owners and put
an end to tax haven secrecy jurisdictions. The companies and
individuals involved in the secret sales scandal to be fully investigated by
the relevant Congolese and foreign authorities and, where wrongdoing is
revealed, prosecuted.
What follows is the story of these secret mining
sales, from Congo via Caribbean tax havens to the heart of London’s financial
district. It will look at the fallout from the exposé of the deals, show
how the loopholes that allowed them to happen remain in place, and examine what
needs to be done to prevent Congo’s 2016 elections being beset by the same
turmoil as in 2011.
[i] UNEP News
Centre, ‘UNEP Study Confirms DR Congo’s Potential as Environmental Powerhouse
but Warns of Critical Threats’, 10 October 2011: http://www.unep.org/newscentre/Default.aspx?DocumentID=2656&ArticleID=8890
[ii] UNDP, Human
Development Index 2015: http://hdr.undp.org/en/composite/HDI
[iii] UNICEF,
Democratic Republic of Congo: http://www.unicef.org/wcaro/Countries_1749.html
[iv] News24, ‘7.5
million need humanitarian aid in DRC’, 12 January 2016: http://www.news24.com/Africa/News/75-million-need-humanitarian-aid-in-drc-20160112
[v] MONUSCO press
release, ‘MONUSCO calls on INEC to address electoral observer missions’
concerns’, 12 December 2011: http://monusco.unmissions.org/Default.aspx?tabid=10847&ctl=Details&mid=13648&ItemID=13602&language=en-US also New York
Times, ‘Congo President Kabila Denies Reports of Election Fraud’, 13 December
2011: http://www.nytimes.com/2011/12/13/world/africa/congo-president-kabila-denies-reports-of-election-fraud.html?_r=1&ref=world
[vi]
The International Consortium of Investigative Journalists, ‘The Panama Papers’,
3 April 2016: https://panamapapers.icij.org/
[vii]
Haaretz, ‘Israeli Diamond Tycoons Listed in Leaked Panama Papers’, 7 April
2016: http://www.haaretz.com/israel-news/.premium-1.713130?date=1460029627319
[viii]
Global Witness, ‘News Over Ownership Of Congolese Oil Blocks Raises Further
Corruption Concerns’, 29 June 2012:
https://www.globalwitness.org/en-gb/archive/news-over-ownership-congolese-oil-blocks-raises-further-corruption-concerns/
[ix]
David Cameron delivered a statement on the Panama Papers on 11 April 2016, in
which he said “today I can tell the House that we have now agreed that they
will provide UK law enforcement and tax agencies with full access to
information on the beneficial ownership of companies. We have finalised
arrangements with all of them except for Anguilla and Guernsey, both of which
we believe will follow in the coming days and months. For the first time, UK
police and law enforcement agencies will be able to see exactly who really owns
and controls every company incorporated in those territories: the Cayman
Islands, British Virgin Islands, Bermuda, the Isle of Man, Jersey—the lot.”:
https://www.gov.uk/government/speeches/pm-commons-statement-on-panama-papers-11-april-2016
[x] Reuters, ‘UPDATE
1-Congo copper production to hold steady in 2015 – mines ministry’, 15 October
2015: http://uk.reuters.com/article/congodemocratic-mining-copper-idUKL8N12F2PK20151015
[xi] BBC, ‘DR Congo
claims defeat of M23 rebels’, 5 November 2013: http://www.bbc.co.uk/news/world-africa-24815241
[xii] The Africa
Progress Panel report, p. 57, reports that 2012 health and education spending
in Congo came to a combined $698 million: http://app-cdn.acwupload.co.uk/wp-content/uploads/2013/08/2013_APR_Equity_in_Extractives_25062013_ENG_HR.pdf
[xiii] Reuters, ‘UPDATE
1-Congo mining code revision suspended until metal prices recover -minister’,
10 March 2016: http://af.reuters.com/article/drcNews/idAFL5N16I5EV
Source link : https://www.globalwitness.org/en/campaigns/democratic-republic-congo/out-of-africa/
Author :
Publish date : 2016-05-04 03:00:00
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