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Cablegate: Sadc Mining Ministers Meet in Drc (C-Al9-02272)

VZCZCXRO4236
RR RUEHBZ RUEHDU RUEHGI RUEHJO RUEHMR RUEHRN
DE RUEHKI #1047/01 3351612
ZNR UUUUU ZZH
R 011612Z DEC 09
FM AMEMBASSY KINSHASA
TO RUEHC/SECSTATE WASHDC 0344
INFO RUCNSAD/SADC COLLECTIVE
RUEHXR/RWANDA COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RHMFISS/HQ USEUCOM VAIHINGEN GE
RUZEJAA/JAC MOLESWORTH RAF MOLESWORTH UK
RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 03 KINSHASA 001047

SIPDIS

SENSITIVE

E.O. 12958: N/A
TAGS: ECON EFIN EMIN CG
SUBJECT: SADC MINING MINISTERS MEET IN DRC (C-AL9-02272)

REF: (A) STATE 114484; (B) KINSHASA 399;
(C) 2008 KINSHASA 1101

1. (SBU) Summary: In response to ref A, Econoff attended the opening
and closing ceremonies of the South African Development Community
(SADC) Mining Ministers Meeting on November 12 in Kinshasa. During
the meeting, mining ministers discussed greater harmonization of
mining standards and policies, creation of a trust fund to mitigate
the effects of the global financial crisis on the mining sector,
Zimbabwe's participation in the Kimberly Process, and coordination
of SADC's position on climate change in advance of the Copenhagen
conference. The real challenge for those attending the meeting will
be to implement the decisions they adopted. End summary.

BACKGROUND
----------

2. (U) A meeting of mining experts from member governments of the
Southern African Development Community (SADC) region took place on
November 10-11 in Kinshasa, followed by a Mining Ministers Meeting
on November 12. Participants included members of the Mining
Industry Associations of Southern Africa (MIASA), which is an
association of national mining employer organizations and chambers
based in SADC member states that serves as a forum for information
sharing, formulating common policies on issues of mutual interest,
and acting as the official interface between the mining industry in
the region and the SADC Committee of Mining Ministers. Two
representatives from the Congolese Chamber of Commerce (FEC) also
attended the meeting. Representatives from 16 banks were also
present. DRC Minister of International and Regional Cooperation
Raymond Tshibanda represented DRC President Joseph Kabila, who is
currently the SADC President, at both opening and closing
ceremonies. DRC Minister of Mines Martin Kabwelulu chaired the
Kinshasa meeting. The level of representation at the Mining
Ministers Meeting was as follows: The Ministers of Mines of Malawi
and Mozambique attended, while South Africa, Swaziland, and Tanzania
sent senior officials. A senior official and the Ambassador from
Angola participated, as well as the Zimbabean Vice Minister of
Mines. The following countries' representatives did not show up at
the Mining Ministers meeting: Botswana, Lesotho, Namibia, and
Zambia. In addition, Mauritius and the Seychelles did not send
representatives because they do not perform mining activities.
(Note: The SADC current leadership has suspended Madagascar from
its fora for political reasons. End note.)

3. (U) At the opening ceremony, Kabwelulu noted that at the last
ministerial meeting which took place three years ago in
Antananarivo, Madagascar in March 2006, SADC ministers of mines
discussed mining policies, mining investment rules, the political,
economic and social environment in mining, fiscal and customs
regimes, and the administration of mines. Very few mining ministers
attended the March 2006 meeting and most countries sent senior
officials, instead, according to the DRC Vice Minister of Mines
Victor Kasongo. (Note: The SADC news archives website indicated
that the March 2006 meeting was attended by ministers and senior
officials from 11 member states: Angola, Botswana, Lesotho,
Madagascar, Malawi, Mozambique, South Africa, Swaziland, Tanzania,
Zambia, and Zimbabwe. End note.) In July 2006, a conference of
SADC Ministers of Finance confirmed a harmonization framework. The
SADC ministers of mines with the support of the U.N. Economic
QSADC ministers of mines with the support of the U.N. Economic
Commission subsequently proposed a strategic vision in Addis Ababa,
called the "African Mining Vision." Kabwelulu explained that the
"African Mining Vision" aimed at creating transparency in the mining
sector and promoting the optimal use and equitable distribution of
mineral resource wealth in order to reduce poverty in Africa. He
mentioned that within SADC, the mining sector alone comprises 60
percent of each country's exports, 10 percent of their GDP and 5
percent of their employment.

4. (U) The purpose of the November 2009 SADC Mining Ministers
Meeting was to harmonize mining standards, policies and regulations
within the SADC region; to mitigate the impact of the global
financial crisis on the mining sector and to update the SADC
region's geological maps. In his opening remarks, Tshibanda
emphasized that the African mining sector needed to develop a
rational mineral resource management plan, increase exports and
develop African capacity to process more minerals at home in order
to be competitive in the international marketplace.

5. (U) At the closing ceremony, the SADC Executive Director
announced the decisions which were made at the Mining Ministers
Meeting, which included: (1) harmonizing mining standards and
policies in order to attract investment and avoid problems such as
double taxation; (2) creating a trust fund to mitigate the impact of
the global financial crisis on the mining sector; (3) organizing

KINSHASA 00001047 002 OF 003


artisanal miners into cooperatives and encouraging them to work in
the agricultural sector instead; (4) coordinating SADC's position on
the use of coal so it is compatible with the upcoming Copenhagen
conference on climate change; (5) supporting Zimbabwe's
participation in the Kimberly Process for Diamonds; (6) improving
infrastructure and border control; (7) updating SADC region
geological maps; (8) increasing the level of information sharing in
the mining sector; (9) promoting greater equality in mining in
countries where it was illegal for women to work in the mine; and
(10) holding the next SADC Mining Ministers Meeting in Malawi in
November 2010.


Harmonization of Mining Standards and Policies
--------------------------------------------- -

6. (U) Two decisions taken by the Mining Ministers concern the
greater harmonization of mining standards and policies. The
President of FEC's National Judicial Commission Marcel Malengo
Baeleabe indicated that countries want to attract more investment
and that uniform mining standards and laws across the region would
help achieve this objective. He cited the Organization for the
Harmonization of Business Law in Africa (OHADA) Treaty as an
example. In order to reinforce common standards throughout the SADC
region, mining ministers pushed for greater information sharing
among experts, especially regarding best practices. Malengo warned
that currently not all mining companies have the same standards,
regarding working conditions and corruption. Mining codes must be
fully applied, according to Malengo. He believed that failure to
fully implement the 2002 Mining Code has lead to many
administrative, tax and legal problems in DRC's mining sector.

7. (U) The ministers urged greater harmonization of mining policies
and making them more uniform. For example, at present, each of the
SADC ministers has a different area of responsibility: in South
Africa, the finance minister has more control over the mining sector
than in the DRC. Some mining ministers are also in charge of the
energy sector. Vice Minister of Mines Victor Kasongo recommended
that all Ministers of Finance and Mines should meet regularly and
cooperate with each other more on issues. He also advocated for the
establishment of an information clearinghouse to counter the effect
of high inflation in the region.

8. (U) A second mining policy issue is that of double-taxation.
FEC's Vice President of Mines Simon Tuma-Waku highlighted the fact
that different countries have different fiscal regimes. Even within
the DRC, the specter of double-taxation has arisen. Tuma-Waku
complained that the DRC Tax Authority is currently dysfunctional and
that often it does not know how much revenues it is collecting for
different services. The public finance management system, thus,
needs to be properly automated. Malengo explained that many
provincial governments have created their own tax authority which is
separate from the central government's tax authority and that they
have levied separate taxes on mining companies, which are not
authorized in the 2002 Mining Code. Nevertheless, FEC observed that
if the central government fully respected the retrocession rule, in
which 40 percent of federal taxes are sent back to the provinces,
this problem of double taxation would be alleviated.

Zimbabwe in the Kimberly Process
--------------------------------

9. (SBU) Kasongo told Econoff that during the meeting Zimbabwe
Q9. (SBU) Kasongo told Econoff that during the meeting Zimbabwe
expressed willingness to participate in the Kimberly Process (KP)
for certifying diamonds, but requested assistance from other SADC
countries. He informed Econoff that a monitor will be appointed to
assist Zimbabwe in certifying diamond exports and that Zimbabwe
would submit a progress report during the next KP meeting in June
2010 in Tel Aviv. He announced that the DRC will be deputy chair of
the Kimberly Process in 2010.

Financial Support Networks
--------------------------

10. (U) The mining sector has been devastated by the global
financial crisis. According to FEC Vice President for Mines Simon
Tuma-Waku, the price of copper was USD 8,000-9,000 per ton before
the crisis. The price plummeted below USD 3,000 per ton in March
2009 and is currently around USD 6,000 per ton. Post has reported
that between 200,000 -400,000 people in the Katanga Province alone
have lost their jobs (reftel B), and at least 40 businesses have
halted or closed their operations in the Katanga province alone
(reftel C). The IMF had revised its earlier GDP growth forecast in
2009 from double digits to 2.7 percent.


KINSHASA 00001047 003 OF 003

11. (U) In order to buffer against future shocks, the mining
ministers talked about establishing a "trust fund" to help the
mining sector. However, the trust fund is still in the conception
phase. Kasongo admitted that no decisions have yet been taken about
contributions to the fund, how it would be operated or how
distributions would be made. He stated that the mining ministers
also considered the financing of local entrepreneurs in the mining
sector, but no solutions were found and even South Africa has had
difficulty with this issue. Finally, the mining ministers opined
that artisanal miners should organize themselves into cooperatives
in order to achieve an optimum level of small-scale mining and
greater access to credit. Kasongo believed that artisanal miners
should furthermore be encouraged to enter agriculture in order to
take off pressure from the mining sector.

Climate Change
--------------

12. (U) Kasongo reported that Mozambique took the lead during the
Mining Ministers Meeting in discussions on SADC's position on the
upcoming Copenhagen meeting on the environment. He said that SADC
countries agreed that they should be able to use coal for power
generation. On the other hand, they want to coordinate the use of
coal so that it is compatible with climate change considerations.
he DRC, which has no coking coal, wants to receive carbon credits
for not burning coal from its rainforest.

13. (U) Note: The GDRC will release the official report on the
SADC Mining Ministers Meeting on December 1. Post will provide a
copy of the report by e-mail upon request. End note.

14. (SBU) Comment: Conclusions reached during the SADC Mining
Ministers meeting look great on paper, but the real test will be in
their implementation. More harmonized and transparent mining
standards and policies would help boost investor confidence.
Limiting greenhouse gas emissions from coal-generated power in the
Congo Basin, the second largest rainforest in the world, would go a
long way toward achieving goals set out in the upcoming Copenhagen
environment conference. Zimbabwe's active engagement in the
Kimberly Process would be welcome in the effort to prevent conflict
diamonds from entering global markets. However, establishment of a
trust fund and improvement of infrastructure will require more time
because of financial and logistical constraints. End comment.

GARVELINK

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