November 23, 2017

Unstable DRC’s mineral wealth no longer investors’ magnet

The commodities price slump has resulted in a drastic reduction in foreign direct investment inflows into the Democratic Republic of Congo.

When prices were high the benefits outweighed the risks attached to investing in the DRC. Defiantly, the war-torn country had been attracting the interest of mining and exploration companies from all four corners of the earth.

Now for majority of investors, the investing in the country is not worth the risk.

Big players like Glencore, Australia’s Mawson West Ltd and Kazakhstan’s Eurasian Resources Group have put their mines on care and maintenance to reduce high levels of debt, according to Reuters.

On the contrary, with a long-term view, Chinese companies are bucking the trend, filling the void left by foreign investors. One of them is China Molybdenum, which acquired Freeport-McMoRan’s majority stake in the Tenke copper project in Congo for $2.7 billion in May. Sicomines, the mining side of a $6 billion infrastructure-for-minerals deal between Chinese firms and Congo, came on tap in November and may soon become the country’s largest copper producer. China Molybendum and Zijin Mining, another Chinese investor, have invested heavily in copper-cobalt projects in the last year.

However, there is a feeling that Chinese investment might not be enough to stem the tide of divestment in DRC’s mining sector in the short-term, as Serge Bilambo, head of mining and metals at Standard Bank Group in DRC, says: “There will be more job losses over the next six months.” At least 3,000 direct and 10,000 subcontractor jobs have already been axed in Congo’s mining sector since last year.

Even in the medium to the long-term prospects do not look bright for the local economy and the Chinese investment might not provide sufficient redemption. According to observers, from recent history, Chinese companies prefer imported Chinese labour and supplies. This means they might contribute less to the local economy than previous big mining projects.

Information credits: information adapted for African Mining Brief from a report filed by Reuters

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