About me.

Andrew M. Mwenda is the founding Managing Editor of The Independent, Uganda’s premier current affairs newsmagazine. One of Foreign Policy magazine 's top 100 Global Thinkers, TED Speaker and Foreign aid Critic

Sunday, January 27, 2013

The myth of Congolese wealth

The arguments that Rwanda is in Congo to exploit that country's mineral wealth are misinformed

Since the current crisis in the Democratic Republic of Congo flared up, most international media coverage has focused on Rwanda’s alleged support for M23, one of over 40 rebel groups fighting Kinshasa. Eastern Congo is mineral rich. So, in almost every story is the claim that Kigali supports the rebellion because it wants to occupy Congo and exploit its mineral wealth. 

There is a mistaken view that because Congo is rich in minerals, anyone who enters the country can make millions of dollars trading in them. This view remains prevalent even in the face of the fact that Congolese citizens under whose feet these minerals lie remain the poorest in income per capita in the world in spite of, and also because of, these natural riches.

It is difficult to tell whether journalists and human rights activists make these allegations out of ignorance or deliberately distort the truths in order to advance a particular narrative. Of course these allegations are not out of the blue. In 1998 to 2002, Rwanda occupied eastern Congo. 

It also sponsored a rebellion against Kinshasa accusing it of supporting Hutu militias who had committed genocide in Rwanda and had organised in eastern Congo to mount an attack against the government in Kigali. During this occupation, Rwanda did get indirectly and sometimes directly involved in Congolese affairs including trade in minerals. Kigali has never told her experience in this and perhaps this is the reason for mistrust of the government.

Rwanda is a poor country whose revenues could not meet the regime’s domestic expenditure needs. So it could not afford its own occupation of eastern Congolese territory 30 times the size of Rwanda and also sponsor a rebel movement. Some people inside the government in Kigali, like many others who criticise them today, thought they could raise money from minerals to finance the war effort. 

They set up a company called Rwanda Metals, which went to trade in Congolese minerals. The records are still there; the experiment was an unmitigated disaster. Rwanda Metals was a total disaster. The Rwandese knew little or nothing about mineral trade and were outmaneuvered and out traded by Congolese middlemen.The company did not turn a profit for all the time it traded in Congolese minerals. By the time it closed shop it was deep in losses and hemorrhaging money.

Most of this part of “Rwandan” exploitation of Congolese minerals was perfectly legal. The Lusaka Accords, signed by Kinshasa, recognised all the belligerents in the war and their external backers. So the accords recognised Uganda and Rwanda’s occupation in the east and their support of rebel groups – RCD-Goma, MLC of Bemba and RCD-Kisangani. 

It also recognised the support to Kinshasa by Zimbabwe, Angola, Namibia and Chad. The accords also mandated the different parties to the agreement to collect taxes and provide public goods and services to the population under their control. It is in this context that Rwanda’s trade in Congolese minerals became legal.

However, because Rwanda Metals was a loss making venture, Rwanda found it could not finance its occupation – including support the RCD-Goma rebels – with Congolese resources but its own. This failure helps us understand why Congo’s citizens live in abject poverty amidst such a diverse array of rich natural resources. 

It also proves the argument the classical Marxist Geoffrey Kay advanced in the 1970s – that poor countries are not poor because they are being exploited but they are poor because they not being exploited enough. It further explains the contrast in the fortunes of South Africa and Congo both of which have rich mineral wealth. Finally it shades light on why Belgian colonial rule relied on forced labor and terror to make money out of Congo’s natural resources.

Currently, Congo’s gold and tantalite in its eastern region are mined by small scale, individual or family based artisans using rudimentary tools such as hoes to dig it out of the soil. Miners spend weeks digging for gold or tantalite in the forest only to come out with negligible amounts that they sell in local markets. 

The proceeds are never enough to feed them. Congolese miners are among the poorest people in the world. The Congolese who make modest returns are the middlemen. They buy small amounts of these minerals from individual miners until they have a critical mass. Then they sell to international dealers coming in from the Middle East, Europe or North America. Others smuggle the minerals through Zambia, Burundi, Tanzania, Rwanda, Uganda and Angola to international markets.

The volume of gold or tantalite that these artisans dig is not enough to pay for a large-scale military occupation of eastern Congo by an army. We can do the mathematics of it: It costs the US $250,000 to sustain one soldier in Afghanistan per year. Let us assume it costs Rwanda one percent of that i.e. $25,500. 

Thus, if Rwanda occupied eastern DRC with 40,000 troops, it would have to spend US$ 1billion on soldiers per year. Every military logistician will tell you that any country will spend five terms more on logistics – arms, ammunition etc than it spends on soldiers. That would take the cost of Rwanda’s military occupation of DRC to US$ 5billion. Kigali has neither the competences nor the know how to make that money from Congolese minerals.

Therefore the only foreign dealer who can turn a profit from Congolese minerals is one without any sunk cost. He/she would have to be a person who charters a plane and lands in Goma to buy minerals and go back home – with no other costs. 

To make money from Congolese minerals by first establishing a military occupation, one would need to organise the mining process on an industrial scale – along the lines of South Africa and Botswana. This calls for investment in infrastructure, technology and people that can cost billions in US dollars. Even then, it would take a minimum of five years to turn a profit and a minimum of 12 years to recover the cost of the initial investment.

To make such an investment, one needs a stable political order in Congo, which only a state, and not warlords, can offer. The investor would also have to be sure that such stability – in political terms as well as in public policies such as the regime of property rights – will last generations before they can invest. So far, there are no credible indicators from the Congolese state that it can offer such guarantees. 

That is why many in Europe, North America and China who have bought mineral concessions from Kinshasa are not investing yet. Many others are not willing to buy mineral concessions because it is difficult to trust Kinshasa to honor its contractual obligations. Without industrial scale investment, a foreign occupier would have to use excessive terror and slave labour to force Congolese villagers to supply sufficient amounts of minerals to return a profit. This is exactly what King Leopold of Belgium did – with deadly consequences.

Congolese citizens are the poorest in the world in spite of the highest natural resource endowment per capita in the world. This is because lack of a stable political order, leading to the absence of political institutions and public policies that can protect property rights, has scared away investors interested in exploiting their natural wealth. 

Therefore, Congolese are poor, not because their mineral wealth is being exploited but because it is not being exploited on an industrial scale. To do this, Congo would need large-scale investment. This would bring foreign capital, technology, skills and investment in infrastructure to set the exploitation ball rolling.

The arguments being advanced on the exploitation of Congolese wealth today are similar to those that informed public policies in Africa in the 1960s, 70s and 80s. For then, leftists argued that foreign investment (imperialism) was exploiting Africans through profit repatriation and transfer pricing. 

So our governments nationalised foreign assets in mining and industry, established state monopolies and put in place elaborate regulatory measures to control the outflow of capital. The result was to dry out capital inflows leading to economic stagnation and decline. Africans became poorer by chasing away those who came to exploit our resources.

Most of Africa has since learnt the essence of Kay’s arguments – that our continent needs those with capital, skills and technology to come and exploit our natural resources. To attract them, we need to give them guarantees that we will register their companies promptly, respect their rights to property, ensure policy consistence and allow them to repatriate their profits. 

Today, our governments have removed capital controls, liberalised foreign exchange, allowed 100 percent profit repatriation, are begging investors to come and help exploit our natural resources. As a result of these initiatives, Africa is the fastest growing region of the world. Its people are getting out of poverty, not because we have stopped foreigners from investing, making profits and repatriating them but precisely because we allowed it.

Congo needs people to help it exploit its minerals. To do this optimally, it has to establish a stable political order first. Because Congo lacks the ability to establish such order, and Rwanda has it, Kinshasa should stop looking at Kigali as an enemy but as a strategic ally. Indeed, Congo can outsource the provision of order in the east from Rwanda. Once investors come and make money, Congo can share the proceeds with Rwanda at an agreed percentage. 

Congo can also take a leaf from Rwanda’s reforms that have made is one of the most business friendly economies in the world and equally, the third most competitive in Africa. This will attract investors in Congolese natural resources who will bring capital, technology and skills into the country, create jobs and rebuild its infrastructure. Only then will Congolese citizens benefit from their natural wealth.

On the other hand, Rwanda lacks the political and diplomatic clout to occupy Congo, so that cannot be an option for Kigali. It also lacks the capital necessary to make its occupation profitable – if international dynamics so allowed. However, Rwanda faces an existential threat from Congo. 

This comes from Hutu extremist rebels who committed the genocide in 1994 and are right at its border with Congo where they recruit, train and rearm to return and finish the job. For Congo’s problem to be resolved, there needs to be security guarantees to Rwanda in form of artificial “depth” inside Congo to give it breathing space. Once Rwanda is guaranteed this depth, it can become a key partner in stabilising Congo.

What do I mean by “artificial depth”? In geopolitics and military science, strategic depth refers to the distance from a nation’s border (or frontline) to its “core”. The core refers to its commercial or industrial center – in biology, this is the heart and nerve center of the organism. The capture of the “core” leads a country to capitulate. 

In Rwanda’s case, its core is its capital, Kigali. It can take an enemy only three hours to drive from any border of Rwanda to Kigali. So Rwanda has little or no strategic depth. Compare this with Congo. If Uganda attacked, there is 1,700km of distance from our border to Kinshasa. 

To traverse this vast jungle territory would take months, thus allowing Kinshasa to trade space for time to reorganise, call upon reserves, mobilise international support etc. Because Rwanda has little or no territory to trade for time to mobilize, the best defense – like Israel – is to strike first and fast to occupy enemy territory and create “artificial depth.”

So far, the debate on Congo, by both Rwanda and her detractors, has ignored this vital element in stabilising Congo. Kigali has a strong and overriding interest in eastern Congo because of the presence of the rebel FDLR that is committed to overthrowing the government in Kigali and also exterminating all Tutsi. 

Any solution that is crafted for DRC that ignores the security concerns of Rwanda will produce little or nothing. Rwanda cannot sit inside its borders and wait for people who committed genocide in which over one million people were massacred only 16 years ago to return and finish the job.

The international press has bought Kinshasa’s and the arguments of ill-informed human rights groups – line, hook and sinker. Kigali itself has been less forceful in presenting its security concerns as an important factor in this debate on Congo and M23. 

Instead, it has focused on an attempt at a point by point rebuttal of the claims against it by UN experts. This Kigali attitude, combined with something akin to a jihad by the international press against Rwanda that is biased, one-sided and vitriolic has made Kigali’s case less convincing.

Rwanda’s ability to ensure security at home depends – partly, if not largely, on it having to keep an eye on the threats emerging from the state of statelessness in the Congo. Those who ignore this may succeed in bulldozing Rwanda into acquiescing to international pressure and therefore adopt a do-nothing policy. However, this will be at the price of undermining its security and thereby leaving it exposed to the risk of joining Congo on the path of state collapse.

1 comment: