Dancing in the Glory of Monsters (57 page)

When the war broke out, no major investor had been actively mining in the Congo in years. At the same time, however, the Belgian and Congolese state had already invested billions over the years in prospecting and conducting feasibility studies. This considerably reduced the risk for private capital. Companies could buy known quantities of copper and cobalt, anticipating roughly how much surface rock needed to be removed, water needed to be dredged, and infrastructure needed to be renovated or installed. In some cases, foreign businessmen colluded with officials from Gécamines, the state-owned mining corporation, to obtain their technical evaluations and feasibility studies. “They rewrote them, put their letterhead on top, and then simply said that they had done a technical study,” a former Gécamines official, who—like most mining officials—refused to be named for this book, told me.
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Boulle had already attempted to get involved in mining under Mobutu, obtaining two mining concessions that contained an estimated $20 billion in copper and cobalt.
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But Mobutu had canceled the contracts, handing one of them to Anglo American, the continent’s largest mining conglomerate. Rankled by the dictator, Boulle, who worked in tandem with several brothers, reached out to Mobutu’s opponents. When Kisangani, the country’s third biggest city, fell in March 1997, Boulle made his move, shutting down his office in Kinshasa and opening a diamond trading house in an area controlled by the AFDL. “Do you wait until everybody gets here and be last or do you get in early?” his brother Max Boulle told the press at the time. “We’ve made a conscious decision to get in early.”
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Since the AFDL had shut down all other diamond dealers in town, Boulle was able to turn a handsome profit. In return, he reportedly paid the rebels $1 million in “advance taxes” on the diamonds.
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Diamond traders were so desperate to sell their diamonds that they literally broke down the door of Boulle’s office. The Mauritian also allowed the rebellion to continue using his corporate Lear jet, although he later claimed that it had been commandeered. In April 1997, after the AFDL had seized control of Lubumbashi, the country’s mining capital, they awarded Boulle with the mining deals that Mobutu had recently called into question. In return, the Mauritian mining magnate was supposed to dole out an $80 million down payment, a quarter of which he reportedly advanced to the AFDL.
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Other mining executives soon followed Boulle’s lead. The Swedish venture capitalist Alfred Lundin, who, like Boulle, had already been in negotiations with Mobutu’s government, began talks with the AFDL over the country’s greatest mining prize, the Tenke Fungurume mine, in March 1997. Tenke was widely acclaimed as the largest copper mine in the world, with an estimated $26 billion in copper reserves. Lundin gave the rebels $50 million up front as a down payment, which was supposed to go to the state mining company.
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“There are moments in the history of mining when you can make deals like this under excellent terms,” Lundin said at the time.
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Indeed, the terms were not bad: In return for $250 million paid to the Congolese state and a $1.5 billion investment in making the mine functional, Lundin would be able to operate tax-free and retain a 55 percent share in the mine.
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Were these deals illegal? Possibly. After World War II various war crime tribunals found German and Japanese companies guilty of crimes of pillage, either through the direct seizing of assets or by buying goods that had been stolen by others. In one case, for example, the U.S. military tribunal at Nuremberg found the manager of a German mining company guilty for having carried out excavation in a coal mine in Poland that he had been granted by the Nazi government.
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In the Congo, Boulle and Lundin also signed deals with rebels, not with the legitimate government. Moreover, the cash down payments—amounting to perhaps $70 million—came at a crucial time for the rebellion, two months before it reached the capital, covering the cost of the final push.

The Congo is often referred to as a geological scandal. This is not an exaggeration. In the late 1980s, it was the world’s largest producer of cobalt, third largest producer of industrial diamonds, and fifth largest producer of copper. It has significant uranium reserves—infamous for having contributed to the Hiroshima bombs—as well as large gold, zinc, tungsten, and tin deposits.

Like so many of the country’s problems, the mismanagement of these assets dates back to colonial times. In 1906 already, the Belgian government gave the Société générale de Belgique, a powerful trust affiliated to the state, a mining tract of 13,000 square miles in Katanga, the size of Belgium.
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Under the exceedingly favorable terms of the deal, the company would get a ninety-nine-year monopoly over any mineral deposits it could identify in the next six years. It was also granted the management of the state railroad line that would help export the copper and cobalt ore, for which the colonial state would provide local labor. Société générale set about creating the three most powerful companies in the Belgian Congo: the Upper Katanga Mining Union, the Bas-Congo to Katanga Railroad Company, and the International Forest and Mining Company. Mineral and agricultural exports from the Congo fueled the creation of some of the biggest Belgian conglomerates and personal fortunes, developing the Antwerp port and creating a copper smelting industry.

Mobutu nationalized the Upper Katanga Mining Union in 1967 and rebranded it Gécamines, while other mining companies in the Kivus and Katanga were also converted into state-owned enterprises. The government proceeded to use the mining company as a cash cow, systematically milking it for money to fund Mobutu’s patronage network instead of reinvesting earnings in infrastructure and development. In order to carry out this scheme, the autocrat forced all mineral exports to be sold through a state mineral board, which would then hand over its revenues to the state treasury. Nonetheless, thanks to rising world copper prices, Gécamines remained the country’s largest source of employment and income, providing over 37,000 jobs at its peak, running thirteen hospitals and clinics, and contributing to between 20 and 30 percent of state revenues.

A confluence of factors brought about Gécamines’ demise in the 1990s. Copper prices plunged as low-cost producers such as Chile stepped up production and world demand dipped. The army pillages of 1991 and 1993, along with the ethnic purging of Kasaians from Katanga in 1993, drove much of the experienced expatriate staff out of Gécamines and contributed to the cutting of foreign development aid that had helped prop up the ailing mining sector. Finally, the years of mismanagement took their toll. In 1990, the huge underground Kamoto mine collapsed, leading to an abrupt drop in production of 23 percent. Exports declined from a high of 465,000 tons in 1988 to 38,000 tons just before the war, while cobalt production slipped from 10,000 to 4,000 tons in the same period. Similar trends affected all other mineral exports, leading to a vertiginous contraction of the country’s GDP by 40 percent between 1990 and 1994.

Pressured by donors to relinquish the state’s grip on the economy and desperate for revenues, Mobutu allowed his prime minister, Kengo wa Dondo, to begin gradually privatizing the mining sector in 1995. Most of the contracts that were later negotiated with the AFDL, including the American Mineral Fields and Lundin agreements, were amendments to and confirmations of deals that had already been struck with Mobutu’s government in 1996. The notion that the war was fueled by international mining capital eager to get its hands on the Congo’s wealth does not hold water; the war slowed down privatization of the sector by a decade, as insecurity and administrative chaos prevented large corporations from investing. It was not until 2005 that major new contracts in Katanga were approved and investors began to invest significant funds.

Kabila’s antipathy toward free-market capitalism shone through in other ways. The rebellion applied its half-Marxist, half-liberal approach to mining, adopting a slipshod policy that imposed harsh conditions on large foreign companies while favoring shadowy investors who often lacked the resources and expertise necessary to develop mining concessions. Kabila was not happy with the huge copper and cobalt deposits that had been doled out—according to the government, the president had never actually put pen to paper on the deal—to American Mineral Fields, and he suspended the negotiations. His minister of mining accused two of the biggest mining companies, De Beers and Anglo American, of “monopolism” and “lack of social responsibility” and stripped them of some of their Congolese assets.
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The government began demanding that any foreign investor provide 15 percent of the planned investments as a nonrefundable cash payment up front and that they keep the involvement of expatriate staff to a strict minimum. It put the largest existing mine, the collapsed Kamoto polygon, up to an open tender but then forced the six companies that applied to work together as a consortium to develop the asset. Not surprisingly, the deal collapsed. “
C’était un désastre
,” a Gécamines official told me, holding his head in his hands. “
Laurent Kabila? Mon Dieu
.”

Soon, however, this approach had exhausted itself. Together with his Rwandan partners, Kabila revived an idea he had from his days as a
maquisard
in the 1970s and created a parastatal company called the Mixed Import-Export Company (COMIEX). Before arriving in Kinshasa in May 1997, Kabila had funneled a total of at least $31 million in private and state capital into COMIEX accounts at two Rwandan banks in Kigali.
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The funds included the $25 million down payment from Lundin, $3.5 million from the state mining company, and several hundred thousand dollars from a state coffee plantation in North Kivu.

The idea of creating a large holding company to manage the ruling elite’s interests in the economy was not a new idea. In Rwanda, the RPF ruling party had a wide-ranging network of investments in banking, real estate, and industry through companies such as Tristar and Prime Holdings. In Ethiopia, the government would pursue a similar model. This allowed the government to dominate and benefit from the private sector without having to subject its activities and financial transactions to the public scrutiny required of state-owned companies. COMIEX initially functioned as the rebels’ bank, but Kabila did not fuse the company with the Central Bank when he came to power in Kinshasa. “COMIEX was never registered as a parastatal and put under the official control of the state,” Mabi Mulumba, the auditor general at the time, remembered. “It was a private trust run by people close to President Kabila, but entirely created with state assets.”
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One of Kabila’s lawyers remembers having warned the president against funding a private company with state resources. The president laughed and told him, “But this law you are talking about, it is man who made it, no?”
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