“It all comes back to cobalt,” he added.
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Artisanal miners work at the Tilwizembe, a former industrial copper-cobalt mine, outside of Kolwezi, the capital city of Lualaba Province in the south of the Democratic Republic of the Congo…Kenny-Katombe Butunka/Reuters
A hard silver metal, created by smelting down blue-speckled blocks of mineral mined from the Earth’s crust, cobalt is vital to the production of lithium-ion batteries, preventing them from overheating or even exploding. This makes it particularly important, along with copper, of which it is often a mining byproduct, for the EV sector.
China is the world’s largest EV market, with more than 1.1 million vehicles sold in the first half of this year alone. Since 2015, when the government launched its “Made In China 2025″ initiative, which calls for the country to become a dominant force in the global EV industry, around RMB 100-billion ($19.4-billion) has been invested in EV manufacturers and related companies, according to business database Qichacha.
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The DRC is home to some 51 per cent of global cobalt reserves, at about 3.6 million tons, more than double those of Australia, which ranks next, according to data from the U.S. Geological Survey.
When it comes to production, the ranking isn’t even close: About 95,000 tons of cobalt were pulled out of the ground in the DRC last year, compared to 6,300 tons in Russia, the next largest producer.
“The road to a clean energy future runs through the Democratic Republic of the Congo,” Jeanine Mabunda Lioko, former head of the DRC’s National Assembly, wrote earlier this year. “The world will need our country’s resources to save itself from the impacts of climate change.”
If the road runs through the DRC, it also runs through China. More than 90 per cent of the DRC’s cobalt exports in recent years have gone to China, which is also the No. 1 destination for Congolese copper.
China is the DRC’s largest trading partner by a factor of five, and is also a major provider of development grants and loans. Between 2007 and 2017, Chinese commitments to the DRC totalled around US$7.5-billion, with almost US$4-billion of that focused on the mining sector, according to a recent report from AidData.
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New Wuling Hongguang Mini EV microcars sit parked at a logistics park in Liuzhou, Guangxi Zhuang Autonomous Region of China on Sept. 6, 2021.VCG/Getty Images
This makes ties with China of utmost importance to Kinshasa. But the relationship is not as one-sided as might be expected. Such is the size of the DRC’s cobalt reserves – and the global appetite for them – that Beijing appears wary of taking its current position for granted, giving the African nation an unusual amount of leverage.
Robert Friedland, executive co-chairman of Canada’s Ivanhoe Mines Ltd., which operates three projects in the DRC, including a partnership with Chinese conglomerate Zijin Mining Group Co. Ltd., has likened Congo’s importance in the new energy sector to Saudi Arabia’s role in the oil boom of the last century.
China has been pursuing the DRC’s mineral wealth for more than a decade. At a signing ceremony in Kinshasa in 2007, Chinese and DRC representatives announced US$9-billion worth of mining investments and loans for infrastructure – including roads, railways, hospitals and schools – in exchange for copper and cobalt concessions. Some commentators touted it as “the deal of the century.”
But the deal, known as Sicomines, was instantly controversial, coming at a time when the IMF and international donors were negotiating with the DRC to cancel previous debts. International pressure forced Beijing and Kinshasa to strike some controversial elements of the deal, such as a sovereign guarantee for mining loans which could have seen the Congolese public paying for a default, and the overall value of the Sicomines project was also scaled down to closer to US$6-billion, including US$3-billion in infrastructure spending (though the ultimate value remains unclear).
Even that smaller figure was worth more than the country’s GDP at the time, and it was followed by a series of other major mining deals involving Chinese state-owned enterprises and private firms.
“The Chinese are huge players,” said Johanna Malm, head of research at Sweden’s Folke Bernadotte Academy and an expert on China-Congo relations. She pointed to figures which show that some 70 per cent of mining projects in the DRC are now controlled by Chinese companies or partnerships.
This helps explain why Beijing has been making conciliatory gestures. “We’ve seen high level Chinese diplomats call out Chinese business owners in the DRC – that’s something we’ve never seen before,” Dr. Malm told The Globe and Mail in an interview.
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A truck carries rocks extracted from a cobalt mine at a copper quarry and cobalt pit in Lubumbashi in 2016.JUNIOR KANNAH/Getty Images
How much of the money sloshing around in the mining sector actually makes it down to the Congolese public remains a key question. While the law requires that all mining contracts be published, the agreements themselves are often highly opaque, and it can be difficult to track whether promised infrastructure investments actually pan out. Corruption is also a major issue: The DRC ranked 170 out of 180 on Transparency International’s most recent corruption perception index.
In May, President Felix Tshisekedi, on a visit to the mining town of Kolwezi in Katanga province, which is dominated by Chinese industry, complained about people coming to the DRC to “enrich” themselves. “They come with empty pockets and leave billionaires,” he said.
Since then, Mr. Tshisekedi has pushed to renegotiate a number of deals. He ordered a full accounting of the Sicomines deal, still the largest by far.
The push comes at a bad time for the arrangement, with an impending report from the Oslo-based Extractive Industries Transparency Initiative (EITI) expected to recommend renegotiating Sicomines and even call for the deal to be dissolved.
Another report, published in June by the independent group African Resources Watch (Afrewatch), concluded the Sicomines deal had been bad for Congo, leaving the country with heavy debts, poor quality infrastructure and less than half of the promised US$6-billion investment.
The report criticized the deal for its secrecy on key questions, including the profitability of mining operations, the implementation of its provisions and the repayment of loans. And the report suggested Sicomines has not produced enough tax revenue to cover the cost of loan repayments to the Chinese side.
In September, the DRC government admitted the Chinese companies have spent just US$825-million of the promised US$3-billion on infrastructure – but it promised the remaining amount of more than US$2-billion would be spent over the next four years. Conveniently, this coincides with a national election in the DRC in 2023, when the boost in spending could be useful to the government.
Emmanuel Umpula, executive director of Afrewatch, told The Globe that the renegotiation of mining contracts is long overdue. But he warned against the DRC government rushing to do so in order to score a public relations victory ahead of the election.
“If they’re looking at this through the framing of an election, they will not negotiate well, that’s why we are calling on them not to politicize the projects but to analyze them technically,” Mr. Umpula told The Globe.
David Kayombo, an independent Congolese researcher and co-founder of an organization called Interface Development, believes there are “imbalances” in the Sicomines agreement that need to be renegotiated. The agreement allowed the Chinese investors to hold 68 per cent of the equity in mines, compared to 32 per cent for the Congolese state, he noted. And it exempted the Chinese mining companies from taxes and royalties until the loans are repaid.
“It’s not clear what Congo is getting in return,” Mr. Kayombo told The Globe. “For a country whose infrastructure is in such a neglected state, that’s much-needed money that could pay for roads and schools.”
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Chinese workers assemble Neta N01 electric vehicles on the assembly line at the auto plant of Hozon New Energy Automobile in Tongxiang city, Jiaxing city, east China’s Zhejiang province, in 2018.Zhejiang Daily/Reuters
China had an advantage in the negotiations because it is more experienced and has longer-term planning horizons, he said. As a result, China was able to ensure that the infrastructure would be built by Chinese companies, without much transfer of skills or training to the Congolese side, he said.
Instead of badly needed roads, some of the Chinese infrastructure projects were football stadiums, useful mainly to politicians in election campaigns. “These are resources for current and future generation that are wasted on projects like football stadiums,” Mr. Kayombo said. “We could have been smarter.”
In defence of the Chinese mining investors, Chinese diplomats and media have hinted that President Tshisekedi has fallen under the influence of the United States, allowing Washington to exploit the mining dispute for its own interests in a superpower conflict.
They pointed to a tweet by Peter Pham, a former U.S. envoy to the African Great Lakes region, who applauded Mr. Tshisekedi’s announcement of the renegotiation of the Chinese mining deals.
On Twitter, Chinese Ambassador Zhu wrote that the DRC “must not be the battleground for the great powers,” adding that “no one has the right to use the country, a sovereign and independent state, to satisfy their own interests.” Global Mining, an online Chinese publication, suggested the DRC’s recent push to scrutinize Chinese deals was encouraged by Washington.
Nelleke van de Walle, Great Lakes director at the International Crisis Group, agreed there could be geopolitical factors in the mining renegotiations. “Tshisekedi is very close to the U.S., and perhaps he is trying to diminish the Chinese influence in hopes of receiving U.S. support,” she said.
The allegation of U.S. interference has been a useful tactic for the Chinese investors, according to Christian-Geraud Neema, a Congolese mining analyst and researcher. “Winning that communication battle is very important to them,” he told The Globe.
But with the DRC election just two years away, and with Congolese minerals crucial to China’s EV strategy, neither side is likely to walk away from the mining deals, Mr. Neema said. “Both sides have plenty of incentives to find common ground,” he said.
In the short term, he said, Mr. Tshisekedi has “huge leverage” over China, which cannot afford to exit from the Congolese mining sector. “There is a strong political incentive for the government to push for more infrastructure from the Chinese agreements. It’s a major political issue. We have a huge problem with the roads in DRC.”
But in the longer term, China could drag out negotiations to boost its bargaining power, knowing that Mr. Tshisekedi will be desperate to strike a new deal before the 2023 election, Mr. Neema said. “Time is not on his side.”