Congo poll leaves uncertainty for miners at heart of EV revolution
JOHANNESBURG (Reuters) - The surprise outcome of Congo’s election - a vote meant to bring closure to years of turmoil under President Joseph Kabila - has done little to ease uncertainty for miners and investors in a country crucial to the electric vehicle revolution.
FILE PHOTO: Martin Fayulu, Congolese joint opposition Presidential candidate, casts his vote at a polling station in Kinshasa, Democratic Republic of Congo, December 30, 2018. REUTERS/Baz Ratner/File PhotoDemocratic Republic of Congo is the world’s leading miner of cobalt, a mineral used in electric car batteries which has seen a surge in demand in recent years, with mines run by firms including Glencore (GLEN.L) and China Molybdenum (603993.SS).
Opposition candidate Felix Tshisekedi, an unknown quantity for mining executives, was declared the winner of last month’s chaotic vote on Thursday, defeating Kabila’s chosen successor, Emmanuel Ramazani Shadary.
The stakes for mining firms are high. In a study last year, McKinsey forecast a 60 percent increase in demand for cobalt by 2025, and cited uncertainty in Congolese government policy as one of the major risks to supply.
“It could be that, as a mining sector, we’re worse off than when we were under Kabila,” said one mining operator, who asked not to be identified. “There may be some improvements, but we’re not counting on it.”
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Tshisekedi’s supporters hailed the election result as the end of nearly two decades of corrupt rule under Kabila. But the outcome has quickly come under question, and the extent to which Kabila will continue to wield influence over the economy through sprawling patronage networks remains unclear.
“It’s going to be an extremely volatile period,” said Jason Stearns, director of New York University’s Congo Research Group. “If I were a savvy investor, I’d look at Congo and just step back for six months.”
Tshisekedi has little political track record for investors to judge.
Few companies had expected him to win, one industry source said, and had focused attention on Martin Fayulu, another opposition leader and ally of the former governor of Congo’s mining region, Moise Katumbi. They fear that strategy could now hurt relations with the new president, the source said.
Tshisekedi’s party, the Union for Democracy and Social Progress, has historically favored an important state role in mining and opposed the privatization of state assets. But in what appeared an olive branch to mining firms, Tshisekedi said on the campaign trail that he would take a second look at a new mining code introduced last year.
ADVERTISINGRelations between miners and the government hit a nadir over the code, signed into law in March, which raised royalty rates across the board. But even under Tshisekedi, the prospect of a rethink is slim, said Elisabeth Caesens, director of Resource Matters, which advocates for better natural resource governance.
“Increasing taxes on multinationals was way too popular a move to easily turn back,” she said.
TURF WARS?
Five mining executives contacted by Reuters said they were not yet operating on the assumption that Tshisekedi’s win would be validated by the Kabila-appointed Constitutional Court and expected the outgoing president to fight to keep his stranglehold on the sector. None wanted to speak on the record.
Companies could find themselves caught in the crossfire of turf wars over ministry jobs and positions in the bureaucracy, not knowing who is really in charge.
“There are always people you have to sway if you want a contract or a mining permit,” Stearns said. “At the top, these are Kabila’s people. That’s now going to be in a state of flux that, I think, is going to last months.”
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