Democratic Republic of Congo’s mining crisis to catalyse economic diversification

27/11/2015

Faced with collapsing copper prices, the Democratic Republic of Congo’s (DRC) mining economic engine is grinding to a halt.

The province of Katanga, a key global supplier of copper, will suffer greatly but its mining-built infrastructure gives the province a head start in beginning to diversify its economy.
Agriculture, solar energy and technical training have the potential to fuel an economic revolution and transform the region.

Katanga is the historical heartland of Congolese mining and accounts for almost all its mining revenue. The DRC mining sector accounts for around 21% of GDP and a third of government revenue, as well as more than 90% of exports. Its copper once bankrolled the Belgian colonies and its uranium fuelled the first atom bombs.

Since the mid-2000s, Katanga has attracted some of the world’s largest multinational mining companies for billion dollar projects, but international investors are now scaling back operations to ride out the storm.

The largest operator, Swiss-based Glencore, has announced it will shut down production for 18 months to modernise its mines and cut costs. During this time, 20% of the workforce will be dismissed and the mine will cease to pay £143 million in taxes and royalties annually.

If more mines follow suit the already strained central government budget in Kinshasa will find it difficult to cope, especially as a series of national and local elections in 2016 are expected to cost £666 million.
Those most vulnerable in this downturn are the 8.7 million people who live in this mining dependent province. The population in the largest mining concession, Tenke Fungurume, rose from 60,000 in 2006 to 250,000 in 2015, fuelled by the elusive promise of jobs and the arrival of refugees from nearby war zones.

These unplanned and hastily urbanised mining towns offer limited job opportunities, limited public infrastructure and limited services. Despite its mineral wealth, the province is one of the poorest and most conflict-afflicted in the country. The falling mining industry will not only push those communities further into extreme poverty but could also fuel violence against mines and government, deemed responsible for the situation.

There is now an opportunity and a sense of urgency to establish economic alternatives for Katanga, to rethink its growth model and to weather the storm on stronger footing. Katanga needs to diversify its economy. The mines are, perhaps unsurprisingly, extremely supportive of this change.

Firstly, to keep the peace as they lay off workers, but also to limit migration to their overpopulated host communities and to address political pressure to contribute more. Well targeted and coordinated development programmes leveraging the province’s advantages in renewable energy, agriculture and vocational training all show promise.

The use of solar energy and small-scale hydropower in Katanga shows great potential. The rapid urbanisation caused by mining and the infrastructure that connects these new cities increases the feasibility and economic viability of renewable energy mini-grids by creating well connected urban centres. A broader shift towards clean energy could benefit the province in all its sectors.

Agriculture also has a growing potential to reduce the burden of importing food, despite being historically neglected in favour of mining, Katanga’s expansive plains represent a fifth of all arable land in the DRC. Only 10,000 hectares of the 15 million available is currently being exploited commercially, with an estimated 14 million hectares unused.

The DRC spends £991 million a year on food imports and food prices in Katanga has pushed many into extreme poverty. As 72% of land in Katanga is on mining concessions (exploration and exploitation), the mines are an indispensable partner in this potential agricultural revolution. A programme to expand medium-scale commercial farming would lower prices, provide jobs in rural areas and reduce food imports.

Katanga has previously led the country in vocational training, for example training the country’s engineers in its mining schools. However, these schools have been derelict since the 1990s due to a lack of investment. The mines require a new generation of engineers and technicians in the coming decade. Furthermore, the province needs electricians, plumbers, engineers and IT workers if it is to grow. In a province where 61.5% of the population is under 20, coordinated investment in skills could lay the foundations for the sort of skilled revolution it desperately needs.

It remains unclear when and to what extent copper prices will rebound, however waiting for the next boom will do no good for the people of Katanga. The previous mining boom did not provide the inclusive growth that it was expected to provide or a strong economy for people to benefit from. The time to diversify is now.