DRC overview

Introduction

The DRC continues to cope with the after-effects of widespread war. There has been a large number of casualties as a result of lacking infrastructure and limited health care.

Consequently, CSR efforts in the DRC are consistently stretched beyond the standard mandate of sustainable and ethical development. The opportunities to invest in the community surrounding a proposed extraction site are virtually limitless

A 2009 survey of mining companies operating in the DRC reflects industry sentiment that CSR expectations are too high and unrealistic. Financial pressures from the recent global economic downturn have likely increased reluctance to invest in CSR activities.

There is a vast range of CSR issues of which a new business entrant to the DRC must be aware. These range from issues that a company has very limited to no control over to those which a company has the full potential to manage.

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Wealth Redistribution

The issue of wealth redistribution from extractive sector is an international social issue regarding the terms to which companies have received access to DRC's resources and how much of that revenue ought to be maintained by the DRC to reinvest in the nation.

While this is not an issue that can be addressed in an individual company's policies, the issue's social impact is one to be aware of: it receives much attention in the NGO communities, affects the reception of foreign business and its perception by the Congolese people, and, as evidenced by recent decisions, can have material impacts on terms under which extractive sector contracts are struck.

DRC government reviews all foreign company contracts

This issue is apparent in the 2007 decision by the Congolese government to review all contracts negotiated with foreign companies over the past 10 years. This was to involve renegotiating the terms of contracts created between 1998-2003, a time marked by war and governmental corruption, with an aim to establish new contractual terms more fair and favourable to the DRC.

This review was undertaken with the support of the International CSO community, but there has been debate over the government processes and methods used in the undertaking. The review is almost complete; however, there are cases of unresolved impacts on extractive operations.

Tenke Fungurume in contract negotiations with DRC government in 2010

One unresolved case involves the Tenke Fungurume copper-cobalt mine, among the richest copper deposits in the world. Tenke's ownership is split between the Canadian firm Lundin Mining, 24.75%, partnered with the operator of the project, the American firm Freeport-McMoRan Gold and Copper Company ("Freeport"), holding 57.75%, and the Congolese state mining company, Gécamines, holding the balance with 17.5% as a free carried interest.

The firms are still in negotiations regarding the new terms of their contract as laid out by the DRC government. A new proposed contract has since been proposed (May 2010) and is pending government approval)

DRC government cancels First Quantum's $500 million contract

Canadian company First Quantum is also experiencing the effects of a contract review. In August 2009, the Congolese government essentially canceled a $500 million contract for a copper-cobalt mine in Katanga, overseen by its Kingamyambo Musonoi Tailings (KMT) unit.

The government declared that the contract had been signed under unfair terms. The company challenged the government with three separate lawsuits but was unsuccessful and has a $6 million pending debt charge. The suit may end up going to international arbitration.

Issue of wealth distribution in DRC

The issue of wealth redistribution may also become apparent in the oil and gas sector, according to a recent report published by the Pole Institute. The report looks at the issues emerging as a result of the development and expansion of the oil and gas sector in the DRC.

The report further examines how the issue of conflict will need to be managed by stakeholders from the local level upward to avoid the corruption and military involvement as witnessed already in the extractive sector.

The report calls for local involvement in development of the sector to ensure issues of wealth redistribution are addressed, acknowledging the high capital expenditures required of investors and the following likelihood that such investments should be organized correctly from the offset as the relationships amongst stakeholders will be cemented by large amounts of capital. Read the Pole Institute's report on the issue of wealth distribution in DRC (broken link) here.

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Military Activity

Militarization of areas in and around extractive sector projects is a CSR issue that falls well outside the locus of corporate control.

In a 2002 UN report, "Report on the Illegal Exploitation of Natural Resources and Other Forms of Wealth in the Congo," 8 Canadian companies - Banro, First Quantum, American Mineral Fields, Hrambee Mining, International Panorama Resources, Kinross Gold, Melkior Resources, and Tenke - were found to be in violation of Organisation for Economic Cooperation and Development (OECD) guidelines while undertaking mining activities in the DRC.

Concerns were raised about the nature of contracts signed with military leaders and the president of the DRC. Also brought into question were stipulations of these contracts concerning taxation, benefits and reporting requirements as well as the implication of foreign political involvement in the negotiations.

UN updates report on illegal exploitation in DRC

An update on the UN's Report on the Illegal Exploitation of Natural Resources and Other Forms of Wealth in the Congo, released in 2003, stated that allegations for 7 out of the 8 Canadian companies had been "resolved", a term used broadly in reference to "an acknowledgement of improper practices and a timeline to seek correction."

Further, the 2004 report, "Unanswered Questions - Companies, conflict and the Democratic Republic of Congo," put out by Rights and Accountability in Development, continued to study the central issue of compliance with DRC law that is not OECD compliant.

The report sought to tease out additional details of questions being raised in civil society groups regarding accountability and potential future actions for companies seeking transparent and ethical business transactions in the DRC.

The Anvil Mining operation and the Kilwa Incident

The economic activity and investment generated within a community with a new extractive sector project attracts outside attention. It lures militias into an area that may provide new revenues to fund operations. In addition to the general threat and complications provided by this heightened insecurity comes the potential to be involved in an incident between warring factions.

This scenario became the backdrop for a well-known incident that occurred at the site of an Anvil Mining operation. Though eventually cleared of wrong-doing, the incident created a complex situation for the company.

In July 2005, the media and NGOs reported Anvil's involvement in the death of over 100 villagers in what the company refers to as "The Kilwa Incident."

A small group of rebels were reported to have started an uprising in the area of Kilwa near an Anvil mining operation. The Congolese Armed Forces (FARDC) responded in a takedown resulting in the death of over 100 villagers, including women and children.

In the process, Anvil was reportedly instructed by the FARDC to supply vehicles for their troops; Anvil complied with the order. (Read a news report on theKilwa Incident.)

Anvil reiterates $18 million CSR investment in DRC

Anvil chief executive Bill Turner acknowledged the incident but downplayed any culpability. His response included the position that Anvil "[was] not part of this. This was a military action conducted by the legitimate army of the legitimate government of the country."

The company contends it was forced to act under orders of government and that it has been cleared by local, national and Australian courts of any wrongdoing. Anvil reiterates its $18 million CSR position (http://www.anvilmining.com/index2.html redirecting to another site) as one that continues to bring "programs of social investment which have brought meaningful jobs, clinics, schools, water wells and other infrastructure to some of the poorest communities in Africa

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CSR Initiatives & Issues

Many CSR issues are fully manageable from within a corporate policy perspective. One should be forewarned that a CSR program is a necessity to do business in the DRC, given the myriad social and economic issues faced by the country and the modern legacy of international firms to provide support for these issues.

Create a sound CSR strategy for mining in the DRC

Before reviewing the CSR issues particular to the DRC, it is a good idea to review the underlying methodology behind the creation of a sound CSR strategy.

Typical CSR efforts undertaken by extractive sector companies currently doing business in the Democratic Republic of the Congo include, but are not limited to:

  • The construction and maintenance of schools, hospitals and health care clinics;
  • Specialized remedial health programs for those suffering from HIV/AIDS;
  • Specialized treatment programs for female victims of rape and violence;
  • The development of infrastructure, such as water systems, roads, shelter, and energy.

HIV/AIDS

HIV/AIDS is a major issue in the DRC, with 3.2% of the population aged 15-49 testing as HIV+, over 1.3 million adults carry the disease. Approximately 12% of the population is stricken with malaria each year and TB rates are high as well, with 392 cases per 100,000 people.

Congolese are especially susceptible to water-born diseases such as diarrhea, Hepatitis A, and typhoid fever.

Case study for an HIV/AIDS program

In South Africa, a case study was done around the methodology for an HIV/AIDS program developed by Anglovaal Mining Limited (Avmin), a South-Africa-based mining company. The program was developed in response to the high level of HIV/AIDS among employees - 14% in 2002.

The report, co-produced by the World Economic Forum, reveals the complex range of issues that need to be addressed in the process of program development, from providing anonymous employee testing to the economic case for the employer’s provision of HIV prevention. Read the case study for an HIV/AIDS program.

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Poverty

According to the World Bank’s most recent Poverty Reduction Strategy paper for the Democratic Republic of the Congo, the percentage of the nation’s population living below the poverty line is between 70% and 80%. For further insights into regional challenges and specific feedback from Congolese citizens refer to the 2006 United Nations Poverty Reduction Strategy Paper.

DRC needs solution for poor housing conditions

Poor housing conditions, the result of poverty, have been identified as one of the main causes for the transmission of preventable diseases in developing nations. In the DRC this is heightened by the number of citizens forced to flee their homes due to the threat of violence.

Though studied in a different context, the 2009 report on Housing and Living Conditions Standards, released by the Department of Minerals and Energy, Republic of South Africa, sheds light on the elements involved in providing solutions to the problem of sub-par living conditions for employees and locals to the community in which one operates.

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Environment

Deforestation and soil erosion are concerns common to areas where extraction takes place.

Environmental impact assessment is a major CSR initiative

An important component of a CSR program is an Environmental Impact Assessment that goes beyond minimal requirements and into the many elements of environmental impact that must be studied to ensure new operations are constructed in a sustainable manner with minimal damage to the surroundings.

The undertaking of such an assessment is lengthy, costly, and requires the work of an independent third party to properly report on the findings.

First Quantum is recognized as one of the most successful Western companies operating in the DRC, and operates an extensive CSR program that addresses environmental issues.

This environmental impact assessment (broken link) was created on behalf of First Quantum by African Mining Consultants limited for the Bwana Mkubwa mine in Zambia. The document is 273 pages in length and provides an example of the granularity required in such a study.

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Health Care

The Democratic Republic of Congo suffers from a decaying and under-funded health care service. The central government has not adequately funded infrastructure, such as hospitals and clinics. This is particularly the case in the war-torn areas of the eastern provinces.

It is estimated that 10% of the hospitals are funded by foreign companies, 30% by churches and the rest by the state. The United States Aid for International Development (USAID) and the Department for International Development (DFID) are both large contributors to the health sector, with the majority of funding going to HIV/AIDS-related services.

UN develops health indicators for DRC

Congolese visiting clinics must pay for their own care and operate in an essentially private fashion.(D. Dijkzeul & C. A. Lynch, Health Care Financing in E. DRC, Global Public Health, Vol. 1, 2 June 2006).

In 2008, the United Nations Development Program reported some baseline indicators for health in the DRC. Life expectancy rates are low: there is a 47% chance that a Congolese will die before his or her 40th birthday. More than half of the population is without access to health care or drinking water (57%) and at least 3 out of every 10 children are poorly nourished.

Corporations invest in DRC hospital facilities

To combat the lack of health care available to workers and local residents, many corporations invest in the development of hospital facilities and their staff and administration. An extensive study of the local perception of two large Humanitarian NGOs in the DRC was recently completed. It was reported in the article, Doing Good, But Looking Bad? Two Humanitarian NGOs in the Eastern DRC.

While a corporation is not expected to act exactly as an NGO would, making an effort to match this level of performance could only benefit a company seeking to meet success in the development of a health care solution for a local community.

Results from survey respondents show a mix of gratitude at private efforts coupled with an anger that structural resolution to the lack of health care provision is not occurring.

NGOs should focus efforts on quality health care

An interesting result of the study is the suggestion for NGOs to not get overly focused on the traditional CSR tenets of fairness, impartiality, and independence as they go unnoticed at the local level.

Instead, it suggests a greater emphasis be put on quality of care. Working within the constraints of the recommendation suggest a private approach to the provision of the service created the best perception at a local level, an impact perhaps even more important to a corporate entity than an NGO.

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