Operators fail to meet DRC local ownership deadline

The Democratic Republic of the Congo (DRC) has pressed ahead with a contentious local ownership requirement for mining companies, despite ongoing concern about its potential impact on investment in one of the world’s most important copper- and cobalt-producing regions. Under provisions introduced into the Mining Code in 2018, mining companies must ensure that at least 10% of their equity is held by Congolese nationals. This includes 5% allocated to Congolese shareholders and a further 5% reserved for employees. The government set July 31 as the deadline for companies to demonstrate compliance, warning that those failing to meet the requirement could face sanctions. Major operators, including the likes of Glencore and Ivanhoe Mines, have called for additional time and clarity. Industry concerns have centred around how the shares will be transferred and financed, whether the requirement will apply retrospectively and which employees will qualify. At the time of going to press, no mining company had complied after the government reaffirmed the deadline in July. Africa House partner Duncan Bonnett said while uncertainty surrounding local ownership levels and mining regulations remained a concern, such disputes were not unique to the DRC. During periods of economic difficulty, governments frequently offered generous terms to attract investment, he said. When commodity prices rose, however, they often concluded that the country was not receiving a fair share of the resulting value. This created a recurring tension between governments seeking greater benefits from their natural resources and mining companies warning that more onerous regulations could undermine profitability and future investment. “The challenge is to find the balance between allowing companies to mine profitably while ensuring that government and the country receive their fair share,” said Bonnett. Despite the regulatory concerns, he remains positive about the level of activity in the DRC. “There are a lot of new mines being developed and existing mines being expanded,” he said. Investment was also flowing into power and water infrastructure required by mining operations, with some of this infrastructure benefiting surrounding communities. Renewable energy projects, particularly solar installations with battery storage and hydropower developments, are gaining momentum as mines seek more reliable electricity supplies. Bonnett said the continued investment indicated that the DRC’s mineral potential remained compelling, despite the more complex regulatory environment. He said beyond regulatory uncertainty, the continuing conflict in the eastern DRC remained a serious obstacle to the country’s long-term stability and development. Fighting involving the Rwanda-backed M23 rebel group and Congolese forces has destabilised large parts in the east of the country. While the copper and cobalt operations are situated farther south, the persistent conflict and tension do impact investor confidence and complicate efforts to build an integrated national economy, said Bonnett. He said the country’s size and lack of internal connectivity made these challenges particularly difficult to address. Resolving the conflict was critical not only from a security perspective but also to continue attracting sustained investment and developing transport corridors, he added. LV