The dilemma of privatisation of copper mines, smelters and refineries in DRC is that DRC needs economic development ie. growth of production of saleable goods and services that the congolese people can purchase, distribution of purchasing power. For this, a network of enterprises, small average and large has to emerge and grow. This can only be achieved if surplus cash is generated by local companies, operating in DRC, with which they can invest in developing sectors.
The process is fueled by growth of production and of purchasing power and consumption of households, private companies and state expenses in public infrastructure, social services, etc,. In the US this growth process is achieved by "business angels" ie. small enterprises that can readily raise risk money on the stock market. As they achieve financial results, the small companies become bigger or are acquired by bigger companies and so on. The Alternative Investments Market within London Stock exchange, aims at facilitating the raising of risk capital for such companies, and so far, the main beneficiaries have been foreign mining companies seeking to finance projects in developing countries.
When, as in the past for us, riches are produced in the country by locals and with local entrepreneurs, the growth of richness benefits everyone in the long run, even if there are inequalities, but it is the problem of the state to solve these domestic problems internally through regulation. With the exploitation of mineral wealth, the problem is that such minerals like iron copper lead zinc are not of direct use to the countries endowed with such mineral wealth; their use is in industrially developed countries. Technical expertise and capital has to come from these countries to develop the capacity to extract, process and valuate those minerals. There is mutual interest of both parties; for the locals to develop mineral resources with which they are endowed and that are in demand globally at economic prices and with which they expect to increase the well being of their people; for the foreigners, to satisfy their home markets with mineral resources that are needed by their developed economies, and to be paid for their efforts with which they can develop further projects in their home countries or overseas, thereby contributing to world economic growth.
The major problem with African countries - and this has always been so even during colonisation times, but was hidden by the privileged relation with the colonist power - is that, apart from the growing concern about internal civil wars, malgovernment, corruption, which contribute most to underdevelopment, poverty, famine... the locomotives of economic growth are absent. Domestic production and consumption of goods and services are low, transversal trade between African neighbours is low, etc.
Gecamines was a huge conglomerate that proved difficult to manage and it was decided to privatise the "mammoth", piecemeal calling for foreign expertise. Only foreign investors can do this and these are mainly American, Canadian, Australian. When Gecamines enters negotiations with a foreign company, it first creates a private joint venture company to which it can license its mineral rights and the JV then makes an agreement for licensing the mineral rights to the foreign company. Assuming Gecamines does this with many foreign companies, it will be a holding company with shares in many JVs. The proceeds from these shares, in dividends, will then be used by Gecamines for what? To rebuild a state owned network of companies, to build infrastructures, schools, ??? No that is the role of the state and DRC receives a fair share of the project revenues. Gécamines can fuel economic growth by creating small companies for the production of goods and services.
Mis en ligne le 22/02/2007 par Pierre Ratcliffe. Contact: (pratclif@free.fr)