Shuimo
02-11-2009, 08:10 AM
Donors press Congo over $9bn China deal
By Barney Jopson in Kinshasa
Published: February 9 2009 19:14 | Last updated: February 9 2009 19:14
China’s biggest investment deal in Africa is faltering as western donors create pressure to renegotiate a minerals-for-infrastructure contract in the Democratic Republic of Congo valued at $9bn (€6.9bn, £6bn).
Under the deal, a consortium of state-owned Chinese companies agreed to build roads, railways, hospitals and universities in return for the right to develop a copper and cobalt mine.
Congo is eager to take advantage of a debt relief scheme for poor countries and to access new forms of western development aid, but it cannot do so until the International Monetary Fund approves a new programme for the country, which it is not ready to do.
In public statements the IMF has “urged the [Congolese] authorities to take all actions to ensure that the final agreement [with China] is consistent with debt sustainability”.
“Changes will come,” said Victor Kasongo, Congo’s deputy minister of mines, adding that the government was awaiting the results of a feasibility study, due by June, on the “robustness” of the project.
Mr Kasongo said Congo wanted to ensure the deal met the criteria for “fair commerce” and was willing to address donors’ concerns. “Congo has chosen to carry on with the IMF and World Bank economic route and at the same time to pursue development with Chinese money,” he said.
Most western donors have said they support the deal “in principle” because it gives Congo access to capital on a scale it could not receive from anywhere else. But, led by the Paris Club of creditors and the IMF, they have raised objections to specific provisions.
The focus of concern, according to western diplomats in Kinshasa, is that the deal would give the Chinese consortium unprecedented state financial guarantees, including some that earmark government revenues and make China a privileged creditor. But Wu Zexian, China’s ambassador to Congo, indicated that it would not be so easy. “They [western institutions] are wrong to ask Congo to remove the state guarantee. That is blackmail,” he said. “This is a poor country that needs to develop. Why force the country to modify the clause?
“We cannot accept that. It’s discriminatory.”
When the deal was struck in 2008 China’s appetite for the metals was insatiable, but if it is scaled back or unravels, it could mark a turning point in China’s quest for resources, which has threatened to marginalise western donors.
Congo has 10 per cent of the world’s copper reserves and the deal promised to enable the cash-strapped government of the country, still recovering from a debilitating civil war, to translate its mineral wealth into tangible development.
Reduced commodity prices are raising questions about how far its mining revenues will cover the infrastructure costs.
The contract was signed after a preliminary report concluded that the mine contained 10m tonnes of copper and 420,000 tonnes of cobalt, and it included the requirement for a fuller study.
The $9bn financing is split into three tranches of $3bn; one for setting up the mining operation and two for nationwide infrastructure investments, including more than 3,500km of roads and nearly 3,000km of railways. The Paris Club represents many of the lenders behind Congo’s existing $11bn external debt, some of which stems from the era of Mobutu Sese Seko, a kleptocratic dictator and cold war ally of the west who ruled for 32 years until 1997.
China was not concerned about “short-term” falls in commodity prices because it was making a long-term investment, Mr Kasongo said. But given the tensions surrounding the deal, one economist in Kinshasa said: “The Congolese government has bet on [both] China and the IMF and now they’re in danger of losing both.”
Asked what lessons the rest of Africa could draw from Congo’s experience with China, Mr Kasongo added: “Nobody should go it alone. We are the first ones to leave the door open to both of them [China and western institutions] because they are both servicing us.”
http://www.ft.com/cms/s/0/f4d34d3a-f...0779fd2ac.html (http://www.ft.com/cms/s/0/f4d34d3a-f6d9-11dd-8a1f-0000779fd2ac.html)
By Barney Jopson in Kinshasa
Published: February 9 2009 19:14 | Last updated: February 9 2009 19:14
China’s biggest investment deal in Africa is faltering as western donors create pressure to renegotiate a minerals-for-infrastructure contract in the Democratic Republic of Congo valued at $9bn (€6.9bn, £6bn).
Under the deal, a consortium of state-owned Chinese companies agreed to build roads, railways, hospitals and universities in return for the right to develop a copper and cobalt mine.
Congo is eager to take advantage of a debt relief scheme for poor countries and to access new forms of western development aid, but it cannot do so until the International Monetary Fund approves a new programme for the country, which it is not ready to do.
In public statements the IMF has “urged the [Congolese] authorities to take all actions to ensure that the final agreement [with China] is consistent with debt sustainability”.
“Changes will come,” said Victor Kasongo, Congo’s deputy minister of mines, adding that the government was awaiting the results of a feasibility study, due by June, on the “robustness” of the project.
Mr Kasongo said Congo wanted to ensure the deal met the criteria for “fair commerce” and was willing to address donors’ concerns. “Congo has chosen to carry on with the IMF and World Bank economic route and at the same time to pursue development with Chinese money,” he said.
Most western donors have said they support the deal “in principle” because it gives Congo access to capital on a scale it could not receive from anywhere else. But, led by the Paris Club of creditors and the IMF, they have raised objections to specific provisions.
The focus of concern, according to western diplomats in Kinshasa, is that the deal would give the Chinese consortium unprecedented state financial guarantees, including some that earmark government revenues and make China a privileged creditor. But Wu Zexian, China’s ambassador to Congo, indicated that it would not be so easy. “They [western institutions] are wrong to ask Congo to remove the state guarantee. That is blackmail,” he said. “This is a poor country that needs to develop. Why force the country to modify the clause?
“We cannot accept that. It’s discriminatory.”
When the deal was struck in 2008 China’s appetite for the metals was insatiable, but if it is scaled back or unravels, it could mark a turning point in China’s quest for resources, which has threatened to marginalise western donors.
Congo has 10 per cent of the world’s copper reserves and the deal promised to enable the cash-strapped government of the country, still recovering from a debilitating civil war, to translate its mineral wealth into tangible development.
Reduced commodity prices are raising questions about how far its mining revenues will cover the infrastructure costs.
The contract was signed after a preliminary report concluded that the mine contained 10m tonnes of copper and 420,000 tonnes of cobalt, and it included the requirement for a fuller study.
The $9bn financing is split into three tranches of $3bn; one for setting up the mining operation and two for nationwide infrastructure investments, including more than 3,500km of roads and nearly 3,000km of railways. The Paris Club represents many of the lenders behind Congo’s existing $11bn external debt, some of which stems from the era of Mobutu Sese Seko, a kleptocratic dictator and cold war ally of the west who ruled for 32 years until 1997.
China was not concerned about “short-term” falls in commodity prices because it was making a long-term investment, Mr Kasongo said. But given the tensions surrounding the deal, one economist in Kinshasa said: “The Congolese government has bet on [both] China and the IMF and now they’re in danger of losing both.”
Asked what lessons the rest of Africa could draw from Congo’s experience with China, Mr Kasongo added: “Nobody should go it alone. We are the first ones to leave the door open to both of them [China and western institutions] because they are both servicing us.”
http://www.ft.com/cms/s/0/f4d34d3a-f...0779fd2ac.html (http://www.ft.com/cms/s/0/f4d34d3a-f6d9-11dd-8a1f-0000779fd2ac.html)