Resource-for-Infrastructure Agreements as an Alternative Conception of Market Capitalism. The Sicomines Agreement in the Democratic Republic of Congo

Term Paper , 2019 , 30 Pages , Grade: 75%

Politics - Topic: International development

This paper examines the Sicomines Agreement in the Democratic Republic of Congo. It analyses how 'Resource-for-Infrastructure' agreements highlight the limitations of the 'Corporate Social Responsibility' theory in providing an alternative conception of market capitalism. The Democratic Republic of Congo (DRC) has an abundance of natural resources, containing over 80 million hectares of arable land, and access to over 1,100 minerals and metals.

However, in 2013, the United Nations Development Programme’s (UNDP) Human Development Index (HDI) ranked the DRC 187th out of 188 states, with a score of 0.304 HDI. Therefore, due to its abundance of resources, the DRC has the potential to become a prominent driver of African growth, but currently remains one of the world’s poorest states.

Amongst other factors, the DRC’s abundance of natural resources has played a central role in its continued economic and political insecurity. Like many resource-rich developing states, Western and Chinese multinational companies have intervened in the state’s extractive mining sectors. Although resource-based growth has led to a number of successes, their interventions, in some cases, have not led to positive economic trends for developing states.

This is commonly referred to as the resource curse for developing states that are resource-rich. Today, in light of the economic, social and environmental controversies caused from natural resource mining in the developing world, mining companies, and their associated banks, provide Resource-for-Infrastructure (RFI) agreements.

Index

Introduction

Literature Review

The Sicomines Agreement

DRC Economic and Social Impacts

Implications for CSR

Conclusion

References

Through examining the Sicomines Agreement in the Democratic Republic of Congo, how do Resource-for-Infrastructure Agreements highlight the limitations of Corporate Social Responsibility theory in providing an alternative conception of market capitalism?

Introduction

The Democratic Republic of Congo (DRC) has an abundance of natural resources, containing over 80 million hectares of arable land, and access to over 1,100 minerals and metals (WB, 2018, para. 1). However, in 2013, the United Nations Development Programme's (UNDP) Human Development Index (HDI) ranked the DRC 187th out of 188 states, with a score of 0.304 HDI (UNDP, 2013, p. 147). Therefore, due to its abundance of resources, the DRC has the potential to become a prominent driver of African growth, but currently remains one of the world's poorest states.

Amongst other factors, the DRC's abundance of natural resources has played a central role in its continued economic and political insecurity. Like many resource-rich developing states, Western and Chinese multinational companies have intervened in the state's extractive mining sectors. Although resource-based growth has led to a number of successes (Wright & Czelusta, 2007, p. 207), their interventions, in some cases, have not led to positive economic trends for developing states. This is commonly referred to as the resource curse for developing states that are resource-rich. Today, in light of the economic, social and environmental controversies caused from natural resource mining in the developing world, mining companies, and their associated banks, provide Resource-for-Infrastructure (RFI) agreements. In exchange for access to a host state’s natural resources, they supply infrastructure loans to fund public services as a form of Corporate Social Responsibility (CSR). In this study, I focus specifically on China's latest RFI agreement in the DRC, entitled Sicomines. My analysis proposes that, although the agreement provides a promising economic opportunity for the DRC, since its initiation, political and corporate corruption, combined with a lack of transparency and accountability in negotiations, has led to the agreement failing to address the resource curse, whilst continuing to fuel economic and political insecurity.

Due to the DRC's resource wealth and political and economic history, it provides an integral case for discussing the resource curse. By the turn of the 21st century, infrastructure was depleting, whereas revenues from mining were mismanaged by corrupt local elites and multinational companies. In addition, a series of fruitless development projects imposed by Western imperialist powers left the government with a colossal burden of debt. These issues were aggravated following the First Congo War (1996-1997), and the Second Congo War (1998-2003). Both wars left the state struggling from political and economic uncertainty, as the infiltration of rebel groups, ethnic tensions, genocide and resource insecurity, deemed the DRC an unsafe investment to multinational companies (CFR, 2019). Therefore, future investment must conduct responsible actions that begin to resolve both its political and economic instability, whilst using its resource wealth to benefit the wider Congolese population. However, as I will reveal in this essay, development projects conducted by the Chinese Sicomines Consortium, that aimed to promote CSR within its RFI agreement, so far have fallen short in resolving corruption, the mismanagement of resources and political instability.

Additionally, this work presents, through Sicomines, how RFI agreements highlight that CSR is limited in scope and effectiveness when addressing the resource curse and in providing an alternative conception of market capitalism for resource-rich developing states.

I will first provide a literature review discussing the resource curse, transparency and CSR. Next, I will begin my analysis by bringing these literatures together to review the Sicomines agreement. Specifically, in my first section of analysis, I uncover the conditions of the agreement, then whether those conditions are a supposed "win-win" for the DRC, and lastly how corruption in the DRC's political system and its extractive industries has undermined the agreement. In the following section, I examine the economic and social impacts of the agreement. Finally, in the final section of this paper's analysis, I argue that the agreement lacked transparency and accountability in its negotiations, before assessing what the lessons learnt from the Sicomines agreement entail for the future of CSR in RFI agreements.

Literature Review

Resource Curse

Since the Colonial era, Western multinational companies have exercised their imperial power by mismanaging Africa's resource wealth for their own economic gain. Although this has mostly been the case for oil, other extracted resources, such as metals and minerals, have also shown similar destructive trends. The exploration of oil and mineral resources in many resource-rich states in Africa has led to economic underdevelopment, political negligence and conflict (Forstater et al., 2010, p. 9). The problem for these states is that they are heavily dependent on the public revenue generated from resource exports for economic growth. Consequently, these states begin to suffer from Dutch Disease, where growing resource exports cause the state's currency to rise in value against other currencies, leading to other export activities, for example, manufacturing and agriculture, becoming uncompetitive (Gilpin & Downie, 2009, p. 2). Therefore, economic growth in resource-rich developing states is slower than developing states with fewer natural resources. This is commonly referred to in academic literature as the resource curse. In this study, I identify that, in the case of the DRC, Chinese intervention has continued to influence corruption and breed bad governance. I build on resource curse literature by arguing that China has locked the DRC into a system of structural underdevelopment, which scrutinises attempts to strengthen the quality of governance (Renwick, Gu & Hong, 2018, p. 2), whilst limiting the state's attempts in rejuvenating its extractive industries to benefit from its resource wealth.

Transparency Initiatives

Addressing the resource curse requires appropriate uses of resource revenues. Shaxson (2007) identified three interrelated systemic approaches for governments, which include spreading democracy within the political system, providing transparency towards revenues, and holding governments and other private actors accountable when revenues are misused (p. 1133).

As continued foreign investment from the developed world in Africa's extractive industries has intensified the realities of the resource curse, African nations, amongst others continents in the developing world, expressed their concerns in 1992 during the United Nations Conference on Environment and Development (UNCED) in Rio de Janeiro. The conference led to the establishment of the Rio Declaration, which set 27 principles to urge industrialized states to cooperate in promoting sustainable development in the developing world, whilst facilitating public awareness and participation (UNCED, 1992, Principle 12). In 1993, the international community responded by commencing Transparency International to strategically permeate good governance for developed states, especially those struck by civil war, by combating corruption in international commerce (West & Sanders, 2003, p. 1).

Although the Rio Declaration called for further transparency, other global initiatives have highlighted the need for transparency, specifically in extractive industries. In particular, the Extractive Industries Transparency Initiative (EITI) was founded in 2003, with the intention of improving transparency and accountability in extractive sectors, through encouraging governments and companies to disclose information on taxes and revenues (EITI, 2016a, p. 10). Chinese companies have supported the EITI framework, as shown through the government's participation in the UN General Assembly and the G20 summit (Kelley, 2011, p. 40). However, China's non-interference policy views sustainable development as an economic venture (Aidoo & Hess, 2015, p. 108). Chinese multinational companies initiate RFI agreements, where infrastructure loans are provided in exchange for mining rights, but unlike the West, these initiatives avoid interfering in a host state's internal political affairs (Gonzalez-Vicente, 2015, p. 205). Although China's non-interference policy complies within the EITI framework (Kelley, 2011, p. 40), their foreign policy has been subject to scrutiny in the West (Aidoo & Hess, 2015, p. 107). I also critique China's foreign policy in this essay, by arguing that failing to address corruption and political instability has led to the demise of one of its latest and largest RFI agreements in Africa, which for the DRC, has failed to address the resource curse and provide an alternate conception of market capitalism for the resource-rich developing state.

Corporate Social Responsibility

The take-off of CSR began in the 1960s, with companies self-regulating their operations in order to become more ethical and further a social good that went beyond both the companies' economic interests, and the requirements of law. Over time, the implementation of CSR has transitioned from being voluntary to mandatory, and now incorporates a number of both public and private actors at local, regional, national and international levels. However, in practice, major powers diverge in opinion on how to implement CSR. As a result, CSR has failed to address poverty for a number of the more vulnerable populations in the developing world. Thus, CSR theory over time has been subject to reinterpretation following its disciplinary criticism from a number of academics.

Although CSR is implemented as a solution to the controversy caused by market capitalism, evidently its effectiveness in practise falls victim to market mechanisms. Elkington (1998) argues that although the market can be a driver for sustainable development, companies have not been held accountable for their actions (p. 41). As highlighted by Doane (2005b), presuming that companies can compete competitively whilst also "doing good" is wrong (p. 23). CSR requires market-based incentives, which means that it lies within the framework of markets, and therefore becomes victim to its unpredictability (Doane, 2005a, p. 215). The reasons for this stems from the fact that capitalist enterprises have fundamental values, which promote commercial, instead of developmental engagements. These values are the right to make a profit, promote free trade, commoditizing labour, and determining prices and values (Blowfield, 2005, p. 520). As companies enact CSR, capitalist values are treated as universal norms. Therefore, CSR is only initiated if it provides a benefit to the company that implements it. Alternatively, governments are also to blame. Whilst CSR is important in influencing economic development and accounting for stakeholders' basic human rights, governments in resource-rich states require motivation in exercising their role in providing basic services. Therefore, governments tend to also promote that companies provide commercial instead of developmental engagements. As such, the role of government also has to be central in discussions on how to improve the effectiveness of CSR (Genasci & Pray, 2008, p. 1).

The Sicomines Agreement

Outline

Since the Rio Declaration, China has become the DRC's main trading partner. By 2015, Chinese-induced trade accounted for 46% of the DRC's exports worth USD$2.61 billion, and 25% of imports worth USD$1.41 billion (Renwick, Gu & Hong, 2018, p. 6). Under its 2000 'Go Global' strategy, to develop markets for exporting its cheap goods whilst providing new sources of energy and raw materials for domestic consumption (China Policy, 2017, p. 5), China sought towards sourcing oil, copper and cobalt from the DRC due to its natural resource abundance (Lydall & Auchterlonie, 2011 , p. 26).

After the 2006 elections, President Joseph Kabila demanded funding for his Les Cinq Chantiers (the Five Public Works), which aimed to develop infrastructure, health services, education, water and electricity, housing and employment in the DRC (Jansson, 2011, p. 8). The international community already had significant influence in the DRC economy, but the funds supplied were unable to provide funding for his program. Therefore, Kabila's government began discussions with one of China's largest conglomerates, the China Railway Engineering Corporation (CREC), who wanted mining concessions to meet growing demand for copper and cobalt minerals back home. Thus, the Sicomines RFI agreement was initiated as a bilateral investment and joint trade venture conducted between the Congolese Government and CREC who, alongside Sinohydro, with financial support from Eximbank, would supply roughly $6 billion worth of infrastructure financing for Kabila's electoral promises, with an additional $3billion to build their own mines (Jansson, 2013, p. 1). In return, the Chinese consortium were allocated Congolese mining licenses 9861 and 9862 (Landry, 2017, p. 1), expecting to produce 10 million tonnes of copper and 600 000 tonnes of cobalt (Kabemba, 2016, p. 77). The share ownership of Congolese companies in the agreement was 32%, with Gecamines owning a majority of 20%, whereas Chinese companies altogether owned 68% (Landry, 2018, p. 168).

Infrastructure financing was originally targeted towards building roads, railway, clinics, schools and universities. However, Western donors, through the IMF, reduced the loans provided by the Chinese consortium to $6billion amid uncertainties regarding debt repayments (Chan, 2013, p. 32). Under the agreement's new restrictions, only $3 billion worth of infrastructure loans would be granted to the DRC. In the next section, this paper will discuss why these changes occurred and what entailed from their impact. However, it is important to consider that, although the agreement's proposed infrastructure financing had decreased following Western intervention, at face value, the Sicomines agreement still provided a new economic opportunity for the state, as it guaranteed trade with China who require a constant demand of minerals to suffice its domestic demands.

Win-Win

Opinions are divided between academics and policy makers on whether China's involvement in Africa is a so-called "win-win". Corkin and Naidu (2008), summarize that on the one hand, a rather narrow-minded view contends that, due to its need for commodities and demand from foreign market for cheap consumer goods, China is a 'new imperial power', which destructively exploits African extractive industries for its own benefit (p. 115). On the other hand, an alternate viewpoint expresses that China's engagement in Africa will help states achieve their development ambitions (Ibid).

Chinese companies in the DRC differ from Western donors in terms of their economic and political approaches. The China-Africa White Paper (MOFA, 2006) represented that the Chinese government was aiming to provide a mutually beneficial, or "win-win", barter agreement with a number of African economies in exchange for access to mineral resources (Part III). In relation to the DRC, debating whether these exchanges are mutually beneficial, involves determining the prices of services provided by the Chinese and goods exchanged by the DRC. One study calculated that the Chinese consortium would have guaranteed access to mineral resources worth up to US$83.6 billion (Marysse & Geenen, 2009, p. 390). However, other studies suggest that the true value of the DRC's mineral wealth remains unknown (Nguh & Sanyanga, 2013, p. 15), and therefore could be worth a lot more. Whereas, for the DRC, the estimated economic surplus generated from the sale of minerals for public revenue is at least US$20billion, plus the original infrastructure loans provided by the Eximbank, before IMF sanctions, were worth up to $6billion (Ibid). Additionally, the agreement stated that the Chinese would transfer their knowledge of extractive technologies to the DRC, although this has yet to be the case (Kabemba, 2016, p. 82). However, the agreement exempted the Chinese consortium from paying taxes in accordance to the DRC's 2002 Mining Code until profits from mining revenues were able to pay off the infrastructure loans provided by Eximbank (Landry, 2018, p. 168). To receive taxes the DRC government had to act as a guarantor for the loans and guarantee an internal rate of return of 19% (Landry, 2018, p. 10). The bank has thereby protected its loans by guaranteeing a rate of return whilst limiting potential economic and political risks associated to the DRC. Therefore, from its initiation, the agreement proposed an unequal exchange for the DRC government.

Nevertheless, this agreement attracted the attention of Kabila's government for two reasons. The first was that the infrastructure loans would fund his government's electoral promises outlined in the Les Cinq Chantiers. Secondly, due to the previous unsuccessful reforms imposed by Western donors, the government were open to new development initiatives from alternate sources.

Western donors had attempted to promote both liberal and economic reforms in the DRC before, and following, the signing of the Sicomines agreement. In particular, the International Committee in Support of the Transition (CIAT) attempted to provide liberal post-conflict peacebuilding in the DRC, through donor programs, which called for institutional reform in the security, natural resource and justice sectors (Curtis, 2013, p. 554; Paddon & Lacaille, 2011, p. 20). Although many liberal reforms are still on going, most significantly the UN's peacekeeping force, the majority of these reforms were considered as unsuccessful, as conflict continued following the Second Congo War, whilst armed groups connected to foreign parties remained in the state. Following the 2006 elections, the government and Western donors both came to an agreement to promote growth through economic reform. The IMF planned to stabilize the economy under the Heavily Indebted Poor Countries Initiative (IDA & IMF, 2006, p. 6), whilst relieving the government from its debt if it conformed. Additionally, a Growth and Poverty Reduction Strategy Paper (GPRSP) was released to monitor and sustain reforms, whilst ratifying a mining code (IMF, 2010, p. 7). However, in 2006, the PRSP was terminated in the DRC following supposed budget misreporting and the unwillingness of the government to comply with reforms (Curtis, 2013, p. 556). In 2009, following further negotiations, stabilization was considered by both parties as the new end-goal for the DRC economy. In the same year, the government implemented its Stabilization and Reconstruction Plan for Eastern Democratic Republic of the Congo (STAREC), and in 2010, the international community changed the name of the UN's peacekeeping mission to the United Nations Stabilization Mission in the DRC (MONUSO) (Ibid, p. 555).

Although, following the Sicomines agreement, fears began to amount in the West over the DRC's projected increases in debt. Soon after, the IMF hastily announced that, if the agreement were to be renegotiated, the DRC would receive US$10billion worth of debt relief as part of its Poverty Reduction Growth Facility (PRGF). However, in 2009, the commodity prices of copper and cobalt fell, which caused inflation to rise by 100% and the currency to depreciate by 45% against the US dollar (Mining Journal, 2010, p. 4). In response, the DRC turned to the IMF, renegotiated the

agreement with China, and received a relief package of US$551 million from the IMF over a three-year period (IMF, 2009, para. 1). Following renegotiations to the agreement, the infrastructure loans provided by Eximbank were halved, causing speculation over whether the loans would lose their potential effectiveness in a state that is already institutionally weak (Chan, 2013, p. 32). Nevertheless, it would mean that the Chinese Consortium will begin paying taxes on mining profits back to the DRC sooner than what was originally anticipated.

Corruption

To continue why the Sicomines agreement is not an entirely "win-win" situation for the DRC, this section will discuss how corruption is entrenched in both the DRC's political system and its extractive industries, and therefore perpetuated by the agreement.

From a political standpoint, since the Mobutu reign, corruption has remained rooted in the administration and patronage of the DRC's political system. The Kabila government, who commenced the Sicomines agreement, have been criticized for its competitive authoritarianism on the run up to the 2006 elections. The regime infringed media freedoms through force and threats to restrict opposing parties, whilst using intimidation and arrests to avoid criticism (Matti,

2010, p. 49). A study from Kodi (2007), who was once Regional Director of Africa, expressed that the regime had refined the corrupt culture of former president Mobutu, and used the elections to legitimize itself (p. 20). Overtime, political instability, corruption and mineral smuggling have annihilated the DRC's extractive industries. As the copper and cobalt industry accounts for 80% of all of the Congo's exports, the Sicomines agreement is vital in sustaining economic development. However, as the DRC's extractive industries have always depended upon alliances with a number of political elites (Honke, 2009, p. 248), the effectiveness of the Sicomines agreement in providing revenue to combat the wider Congolese population's development challenges remains in the hands of the government. Therefore, political reform is critical in restoring sustainable growth (Garret and Lintzer, 2010, p. 420) and in solving the resource curse in the DRC (Genasci & Pray, 2008, p. 1).

In terms of the State's industries, Gecamines, a once private entity, who hold the majority of the DRC's stake in the Sicomines agreement, have been heavily criticised for the continuous mismanagement of profits that were intended for public revenue. The company previously collapsed in the 1990s after decades of looting during the Mobutu dictatorship (Putzel, Lindemann & Schouten, 2008, p. 6). However, the company resurfaced following the two Congo wars, with the state now owning all its shares. Simultaneously, the Extractive Industries Transparency Initiative (EITI) was introduced in 2007 to revive the DRC's mining sector by ensuring that revenues were managed efficiently, and for the benefit of the wider Congolese population (EITI, 2018, p. 10). However, in 2013, the DRC was suspended from the EITI, as information provided by the Sicomines representatives failed to disclose revenue streams directed to the government (EITI, 2016b, p. 8). It was later revealed, in a report produced by Global Witness that analysed EITI data, between 2013 and 2015, over US$750 million of mining profits designated for the Treasury were retained by various tax agencies and Gecamines (Global Witness, 2017, p. 12). The failure of the Chinese Consortium to address and hold the government accountable for the mismanagement of Gecamines profits, spurs further complexities in the agreement benefitting the wider Congolese population.

DRC Economic and Social Impacts

Economic

From a macroeconomic perspective, the Sicomines agreement has influenced an increase in the production and export of extracted copper and cobalt, which has had a significant impact on GDP. Additionally, the agreement supports the financing of infrastructure projects for the government, health services, transport, housing, communication and energy (Landry, 2018, p. 169). Ensuring growth in the extractive sector is vital to overall economic growth in the DRC as, in 2014, the sector accounted for 95% of exports, 11% of employment and 22% of GDP (Renwick, Gu & Hong, 2018, p. 5).

The construction of the mine cost US$ 1 200 million of investment and was finished in 2015, producing 110 000 tonnes of copper by 2016 (Maiza-Larrarte & Claudio-Quiroga, 2019, p. 430). If copper production can meet its annual target of 250 000 tonnes by year three after construction, it will increase the DRC's aggregate copper production by 25% (Ibid). By 2017, two years after construction, copper and cobalt produced 80 per cent of the state's total export earnings (Global witness, 2017, p.11). In that same year, the DRC exported US$7.23 billion worth of natural resources, with cobalt accounting for 26.2% and copper 24.8% of earnings (OEC, 2019, para. 5). Once the mine is operating at full capacity, production could generate an additional US$2 billion worth of exports, increasing GDP by 3% (Maizia-Larrarte & Claudio-Quiroga, 2019, p. 440). Additionally, the US$3 billion worth of infrastructure loans, to finance public services and improve the accessibility of the mines, would also increase GDP by 0.7% during construction (Ibid), as it provides low-skilled labour for Congolese workers. Although production and GDP have risen since the initiation of Sicomines, future growth depends on the market price of minerals and demand from the Chinese economy (WB, 2008, p. 91), who are the largest importer of the DRC's minerals.

However, there are other economic impacts of the Sicomines agreement that go beyond mining. Despite financing infrastructure projects, the Chinese consortium are exempt from paying taxes on profits in accordance to the mining code until loans are repaid to Eximbank (Landry, 2018, p. 168), which hinders the diversification of infrastructure investment. As corruption has already limited public revenue, the agreement only makes the economic situation worse in the DRC as it does not provide an income to the government for an indefinite period. Combating the resource curse requires state revenues to benefit a diverse set of public services, which should improve the economic capability of the Congolese population and lead to a subsequent increase in GDP per capita. The problem with the agreement so far, is that its infrastructure loans mainly focus on improving the accessibility of the mines through building roads (Maiza-Larrarte & Claudio-Quiroga, 2019, Table 3). The prioritization of these investments limits the opportunity for diversification and modernization in sectors that are vital in supporting development challenges (Kelley, 2011, p. 37). The DRC already has poor infrastructure with weak institutions and lacks adequate public revenue from alternate sources. Therefore, future infrastructure investments for public services are in jeopardy in the long term, as they will require additional funding to manage and improve.

Social

Although the Katanga region, where Sicomines is located, has a relative level of peace when compared to areas on the eastern side of the State that still remain in conflict (Stearns, 2012, p. 6), human rights violations are still committed towards workers in the region. Although artisanal mines have poorer working conditions than industrial mines (Tsurukawa, Prakash & Manhart, 2011, p. 55), this section will discuss the social impact of industrial mines for Congolese workers and local communities using data provided from civil society organisations.

Chinese enterprises in Africa have managerial insufficiencies in supporting Congolese workers. Duanyon & Pei (2019) identify these inefficiencies as mismatching, economic, legal and organizational structures, which are rooted in all of China's overseas investments (p. 15). The study concludes that local Congolese workers suffer from a wage-gap and a lack of local human resource capabilities, which should be supplied by Chinese companies (Ibid). Additionally, the drive to improve labour conditions for Congolese workers originated from the DRC government and NGOs, instead of the Chinese government and its representative companies (Duanyon & Pei, 2019, p. 1). Comparatively, in relation to Chinese workers, concerns have begun to mount over the admittance of Chinese workers from abroad. The Chinese consortium employs illegal informal sector workers and miners from home, which does not comply with international standards (CARI, 2011, para. 7). Chinese workers were coming in on group-visas, which speculated that the Sicomines consortium were bringing more workers than what were permitted at the time, which put local employability opportunities for Congolese workers at risk (Ibid).

The Congolese mining code states that mines are to be at least 90 meters from inhabited areas, and at least 180 meters from inhabited houses (De Haan, Scheele & Kiezebrink, 2017, p. 26). However, a number of mines are in close proximity to inhabited areas, in some cases, only a few meters away. This leaves both workers and communities exposed to metals, dust and smoke that are produced within these mines. Dust particles containing cobalt materials can lead to hard-metal lung disease, causing asthma, lung infection, pneumonia or fatality (Nemery & Abraham, 2007, p. 2; Mizutani et al., 2016, p. 451). However, communities affected by the Sicomines mining activities are not just in close proximity. According to reports, in 2016, following a technical problem leading to an explosion at the Sicomines plant, a spill of chemical substances into the Luilu River poisoned local water supplies whilst producing acid odours and dense smoke in distant regions, Yenge (5km), Sapatelo (7km), Noa (10km) and Sept (45km) (AFREWATCH, 2017, p. 11). Furthermore, as the water in local rivers and wells was poisoned, fish populations were wiped out in Sept, whereas many hectares of vegetables dried out in Noa and Sapatero (p. 17). Shortly after the incident occurred, Sicomines representatives warned the governor of the Lualaba province to advise inhabitants to stop drinking water from rivers and wells, whilst offering to supply drinking water themselves. However, their supplies have been insufficient, resulting in a scarcity of water, leaving local populations having to either rely on rainwater, or walk up to 5 km to collect water from neighbouring areas (Ibid).

Implications for CSR

Accountability & Transparency

To some extent, market capitalism has brought changes to the behaviour of multinational companies, especially in light of the resource curse. Since the DRC's economy was liberated at the beginning of the 21st Century, foreign companies have increasingly taken control of the states' extractive industries, whilst implementing methods of CSR to show their good governance approach. China's takeover in the DRC's extractive sector has been praised, as previous corruption and mismanagement from the government has led to the state failing to benefit from its resource wealth. However, for the state's mining sector to have a positive impact on its development challenges and economic growth, the state requires political reform to improve its productivity growth potential (Garrett & Lintzer, 2010, p. 440), and for future agreements with private actors to incorporate CSR effectively in discussions (Genasci & Pray, 2008, p. 1).

However, the agreement lacked both accountability and transparency which continued corruption and limited attempts to improve governance. In terms of accountability, the agreement favoured the Chinese parties who were exempt from paying taxes to the DRC until Eximbanks' loans were repaid (Landry, 2018, p. 168). Additionally, the DRC were the guarantor for the loans whilst having to guarantee an internal rate of return of 19% to Eximbank (Landry, 2018, p. 10). These arrangements limited the accountability of the Chinese consortium if the agreement failed to provide the infrastructure promised to the Congolese population. Furthermore, the agreement shows that the Chinese consortium were disregarding the political and economic risks posed by the DRC, thereby leaving the state and its people to suffer until its risks were diminished. Concerning transparency, the agreement had not provided a clear account of the real value of the state's resource wealth, whilst infrastructure loans were used to mostly build roads to improve the accessibility of mines (Maiza-Larrarte & Claudio-Quiroga, 2019, Table 3), instead of funding Kabila's electoral promises. Moreover, mining revenues were mismanaged through the agreement and were kept secret by the government until external institutions revealed where revenues were disappearing (EITI, 2016b, p. 8; Global Witness, 2017, p. 12).

As such, the Chinese Sicomines mining companies have branded themselves as responsible players whilst legally fighting for exemptions from tax. Instead of deploying philanthropy in an institutionally weak and politically corrupt state, the Chinese consortium should have paid taxes whilst challenging the DRC's political system from the beginning of the Sicomines agreement. Taxes could have been used to funnel public revenue streams towards sustainable infrastructure and social programs (Marshall, 2015, p. 9) which would then begin to address the state's developmental challenges whilst benefiting from its resource revenue. The state must first disband the political elite who control the mining sector, then begin to tackle local communities' developmental challenges through publicizing full accounts of state revenue, whilst redistributing mining profits to local governments to focus solely on their district's specific problems (Radley, 2016, p. 185).

Conclusion

In conclusion, the Sicomines RFI agreement, which was initiated as a means to revive the DRC's mining sector, has not brought about the political reform required for the appropriate use of taxes and revenues from mining. China's non-interference policy deviated away from restoring good governance in states it would invest in, as it was believed that improving the state's economic capabilities through refurbishing infrastructure would subsequently improve governance. Therefore, the agreement failed to address political corruption in the DRC. In fact, Chinese investment influenced corruption, as the agreement lacked both transparency into its long-term impacts for the DRC and accountability for the misuse of profits and taxes from resource revenues. The infrastructure loans provided by the Chinese consortium to prove their admittance of CSR, have gone to waste due to the DRC's weak institutional capacity and continual corruptive trends. Moreover, profits from mining have gone missing within various tax agencies and Gecamines subsidiaries.

Consequently, I have shown through the analysis that China's foreign policy of non-interference has led to the demise of its Sicomines agreement in the DRC. Although the agreement has presented an economic opportunity for the state to benefit from its resource wealth, the Chinese consortium has limited the risks that the DRC poses, which in turn has led to the detriment of the agreement in benefitting the wider Congolese population. As such, this essay calls for China's non-interference policy to be revised by the international community. Additionally, the DRC must conduct the appropriate governmental reform to combat corruption in both its political and economic spheres. It must distribute public revenues generated from mining to local communities so they can begin to tackle their developmental challenges, but this has yet to be the case. As such, the Sicomines RFI agreement has so far displayed that market driven CSR does not always provide an alternative conception of market capitalism. China's search for resource security, whilst diminishing its own risks, has been at the expense of the Congolese people. Fundamentally, the Sicomines agreement has not tackled the resource curse and the Chinese consortium have not provided effective methods of CSR. The Chinese Consortium have failed to address the DRC's corrupt political system that mismanages public revenue to benefit the elite, which in turn has come at the expense of the Sicomines agreement.

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[...]

• College: University of Sussex
• Course: Environment, Development and Policy (MA)
• Grade: 75%
• Author: Daniel Robinson (Author)
• Publication Year: 2019
• Pages: 30
• Catalog Number: V1012655
• ISBN (eBook): 9783346410016
• ISBN (Book): 9783346410023
• Language: English
• Tags: resource-for-infrastructure, agreements, alternative, conception, market, capitalism, sicomines, agreement, democratic, republic, congo