DRC finance minister looks at mines, oil and beer for cash
Nicolas Kazadi sets his sights on raising additional revenue domestically partly by revising deals
The Democratic Republic of the Congo (DRC) aims to revisit mining contracts, rescinding and reselling unused oil permits and boosting taxes on beer to fund its development plans, says Nicolas Kazadi, the country’s finance minister.
A country the size of Western Europe with 80-million inhabitants, the DRC had a budget of just $4bn last year and poverty is rampant, despite its vast riches of copper, cobalt and other natural resources. The government needs more money to meet President Felix Tshisekedi’s pledges to provide free education and expand access to healthcare and the task of raising it has fallen to Kazadi, 55, an economist who previously served in the central bank and finance ministry.
While the IMF has agreed to give the central African nation $3bn in financing since Kazadi took up his post in April, and the African Development Bank and the World Bank will provide hundreds of millions of dollars more, that will not be enough to fund the country’s proposed $10.5bn budget for 2022.
The finance chief has his sights set on raising additional revenue domestically — a condition of the IMF loan — in part by revising deals made by the previous administration. He also sees potential for an international bond sale, possibly by 2023.
“We are fully aware that governance wasn’t good, and there are a lot of things that need to be revisited,” Kazadi said. That will include scrutinising mining contracts and making sure companies are paying taxes.
The terms of two of the DRC’s biggest mining deals — a $6.2bn minerals-for-infrastructure agreement with China, and China Molybdenum’s contract to run the Tenke copper and cobalt mine — are already under investigation, according to Kazadi. The government has also begun an audit of state-owned copper mining company Gecamines “to know what kind of contracts they signed and who’s behind them”, he said.
The government is trying to improve operating conditions for the mining industry, including reforming its VAT system to make it more transparent and efficient, the finance chief said. It is working on a payment plan to reimburse what may be more than a billion dollars owed to companies, Kazadi said.
Tshisekedi’s administration has backed a deal between state-owned mining company Sakima and closely held Dither to process Congolese minerals including gold and coltan at new refineries in Rwanda, despite a long history of violence between the two countries.
“The idea today is to turn the page and to co-operate,” Kazadi said. “We can’t stop ourselves from profiting from opportunities offered to us.”
The government is also intent on raising more money from its crude reserves and is still set on reclaiming the rights to two undeveloped oil blocks on the Uganda border that were awarded to Israeli billionaire Dan Gertler, who is under sanctions by the US for alleged corruption in the DRC.
It is in the country’s interests that the government “facilitate the sale of these blocks, which have incredible value”, Kazadi said.
Gertler declined to comment, according to a spokesperson.
An initiative to raise more money from the beverage industry that is being undertaken with Swiss company Sicpa will cause bottles to be stamped to ensure taxes are paid and could raise hundreds of millions of dollars, Kazadi said.
The DRC’s business association, the Federation des Entreprises du Congo (FEC), said the taxes would be illegal and warned that the system’s implementation could result in damage to factories and halt production.
“The sales of our members will fall, which will have the consequence of a drastic drop in the industry’s contributions in terms of tax payments,” the FEC’s Leny Ilondo said. The government should protect its domestic companies by doing more to stop illegal imports, he said.
Better border controls and a more favourable tax regime would help reduce trafficking of all products, including minerals from eastern DRC into neighbouring Rwanda and Uganda, Kazadi said. “But to control our borders, we need the means,” he said.
Bloomberg News. More stories like this are available on bloomberg.com
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