How China Learnt Corruption From the West

To single out Chinese companies for entering into shady business in the DRC is to miss a fundamental point: Western firms have been at it for centuries, and still are.

Last January I was in the Democratic Republic of Congo (DRC) to research Sicomines, China’s controversial $6.5 billion megadeal in which Chinese companies will construct roads, schools and hospitals in exchange for mining and untold billions of dollars worth of copper and cobalt with Congo’s state mining agency.

On a sunny morning in the south-eastern mining city of Lubumbashi, I called a Congolese official to pose some hard questions about the deal – particularly, what happened to the $350 million ‘signing bonus’ that was handed over by the Chinese. But I hardly got a word in before his response betrayed his fear as to the more sensitive concern on his mind: “Is this about COMIDE?”

It wasn’t, of course. But perhaps it should have been, because the corruption scandal that burns hottest among Congolese officials today has nothing to do with the Chinese. In 2009, the International Monetary Fund started a $551 million loan to improve the DRC’s business climate through a series of projects. As a condition of the loan, Congo’s government would have to make all its mining contracts and transactions public.

So it must have come as a surprise to the IMF when Bloomberg revealed the DRC had sold its 25% stake in a copper mining venture called COMIDE SPRL – a trade the Congolese government hadn’t disclosed. The IMF responded to the news by refusing to renew the loan, meaning the DRC will essentially forfeit an incredible $225 million because a few Congolese officials didn’t want the world to know what they were up to.

When Westerners try to explain China’s rapid rise in Africa, they often assume that it comes through corruption, secret deals and manipulation. But there is nothing Chinese about COMIDE. Its parent company, Straker International Corp., is based offshore in the British Virgin Islands, and it is primarily owned by the multinational Eurasian Natural Resource Company, headquartered in London and traded on the Kazakhstan stock exchange.

Certainly the circumstances surrounding the Chinese Sicomines deal merit concern too. The DRC’s government doesn’t seem to have conducted any study that estimates the potential value of the minerals buried at the Sicomines site, meaning no-one can predict the eventual profits and what’s truly at stake for the Chinese companies, the Congolese mining company and the Congolese government.

What’s more, a 2011 study by the accountability NGO Global Witness reported that $24 million of that signing bonus was mysteriously diverted into an offshore account in the British Virgin Islands by Sicomines’ Congolese partners. Even in the DRC’s multibillion-dollar mining sector, $24 million is a lot of money to go unaccounted.

But does this then set China’s Congolese ambitions apart from the West’s? Is the $6.5 billion Sicomines deal in fact unprecedented in its lack of transparency and its potential to make its CEOs rich while the Congolese people remain poor?

To single out the Chinese companies as uniquely responsible for entering into shady business in the DRC is to miss a fundamental point: If the Chinese have learned how to leverage power over the Congolese government, they owe the lesson to the rogue businessmen from Western countries that preceded them.

Two centuries ago it was the Belgians who colonised the Congo, first for its ivory, a trade which would eventually die out along with most of the wild elephants that supplied it. After ivory, it was rubber, transported by Belgian-constructed railroads whose tracks remain embedded in the ground, relics of Congo’s resource-driven history. Then, to build the atomic bombs it would drop on Hiroshima and Nagasaki, the United States sourced its uranium from a mine just 100 km southeast of Kolwezi in south-eastern DRC.

Companies from Canada, the UK, South Africa and elsewhere began operating industrial mines. They extracted billions of dollars worth of copper, cobalt, and other minerals. Today, Congo’s mining sector generates 28% of the country’s GDP and is the primary source of income for 16% of the population, according to the World Bank.

In theory, the country should be rich from its vast mineral wealth. But you wouldn’t know it by looking at how most Congolese live. Rural families sleep in huts that flood when it rains. Only 4% have electricity.

Western nations such as the United States tend to claim they have tried to solve the DRC’s problems. But the record shows that for at least the first 30 years following the Congo’s independence they did the opposite, entrenching one of Africa’s most corrupt and violent dictators by supplying him with billons of dollars in aid, weapons and bribes. Mobutu Sese Seko killed his adversaries with impunity and commandeered as much as 40% of Congo’s wealth (between 4 and 8 billion dollars) during his 31-year rule.

In the years since Mobutu’s rein, foreign mining companies have garnered blame for manipulating Congo out of its natural wealth. On at least five occasions in 2009 and 2010, Congo’s state-owned mining companies sold their stakes in mines to offshore companies that immediately re-sold the same stakes for up to five times the price. “Between 2010 and 2012, the DRC lost at least US$1.36 billion in revenues from the underpricing of mining assets that were sold to offshore companies”, claimed a report released earlier this year by an international panel chaired by Kofi Annan.

All the while, Congolese eyes are turning toward China in the hopes that the Chinese may usher in prosperity where patrons before it have not. The fact that China succeeded in moving 600 million people out of poverty over the past 35 years is a source of admiration for some Congolese who remain entrenched in it themselves. Many see China as much more welcoming than the US. Twice a week, a line forms outside the Chinese embassy in Kinshasa as Congolese students and businessmen arrive to apply for visas to work or study in China. They say it’s far easier to get a visa there than to the US.

China’s government has consistently reinforced the sentiment that it is eager to help the Congolese people flourish. In his very first trip abroad as China’s leader, Xi Jinping travelled in March 2013 to Tanzania, South Africa and Congo-Brazzaville, where he promised $20 billion in loans for aid to Africa over the next three years. In June, US President Barack Obama followed in the Chinese leader’s footsteps in what was only Obama’s first extended trip to Africa since taking office some four and a half years ago.

The metaphor of America’s lagging commitment to the continent is not lost upon Africans themselves. In a 2009 survey of 250 people in nine African countries, three-quarters said the Chinese way was a ‘very positive’ or ‘somewhat positive’ model of development. When asked which model offers more promise for Africa’s future, the Western or the Chinese one, they overwhelmingly chose the latter.
Chinese investment may not, in fact, radically alter the future of one of the world’s most underdeveloped nations.

Unless the DRC’s government collects its fair share from the Sicomines deal and somehow uses that wealth to benefit Congolese society in a way it never has before, China may simply become the latest benefactor in Congo’s long history as a country rich in resources whose neediest citizens will never benefit from them.

But it’s hard to blame the Congolese for hoping China will succeed where the West has failed.

In an office overlooking Kinshasa’s grand Boulevard 30 Jeune, newly repaved and widened by the Chinese under Sicomines, stands Mack Dumba, Congo director of the Extractive Industries Transparency Initiative, which works to improve accountability in the global mining sector.

“Why don’t Americans build roads like this anymore?” Dumba asks. “Why don’t the Belgians, that colonised, build roads like this? The Chinese are doing things that no one else will.”

This article was adapted from Jacob Kushner’s new eBook, China’s Congo Plan, now available on iPad, iPhone and Kindle. Kushner’s research was advised by faculty at the Columbia University Graduate School of Journalism and supported by the Pulitzer Center on Crisis Reporting.

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