Wednesday, May 19, 2010

Interview with Paul Fortin on the Chinese Agreement in the Congo

An interesting, if a bit dated, (thanks, Dan) interview in the Belgian newspaper Le Soir. Journalist Collette Braeckman interviews Paul Fortin, the Canadian lawyer and former head of Gecamines, and the man who negotiated the DRC's China deal. Although the interview is in French, and happened in 2008, here are the main points:
  • Fortin stoutly defends the agreement, explaining that it was not negotiated in secret with high level leaders, but in Beijing over two months, with a team of 15 experts from the Congo.
  • He explains that the infrastructure agreement came first, in September, negotiated with Pierre Lumbi, the Minister of Infrastructure. But the infrastructure loan needed to be secured, as in Angola. Unlike Angola, Congo didn't have readily available resources to secure the loan. It was necessary to develop new resources. As Fortin says, "To finance this, I needed to find 10 million tons of copper as security. Its a form of barter." [DB: at $3000 per ton, 10 million tons comes to $30 billion. That's quite a security. Of course there are costs involved in producing that copper.] 
  • "Congo was inspired by the Angola example, except that in Angola, the oil was available immediately, whereas in the Congo, the copper will only be available after three years."
  • Calling it "the contract of the century", Fortin said: "it's a new idea. To have thought  it up, and then worked it out over four months, this is an incredible coup."
  • "Everything is happening very quickly, and the Congolese are going to be able to see the results of these agreements very soon. With others, it's slow, there are conditionalities, they give you something, they take it back, they hesitate. The Chinese asked no questions, it was a business deal, and that's all. The team that discussed all this with us was not condescending. Their negotiators were very simple, and very direct."
As we've seen in video clips on this blog, the work did begin soon after the agreement was signed, despite the reservations of the international community. In The Dragon's Gift, I point out how important the construction business is for Chinese companies in Africa. It seems that this deal was indeed negotiated with Chinese construction companies, no mining company was involved. (A mining company was recruited to join later, but I'm not sure it remained a partner to the deal. Does anyone know?). This reinforces an important point. In seeing China's activity in Africa as all about a desperate search for resources, we are missing the complexity of the business engagement. In 2008 alone, after all, official statistics from MOFCOM tell us that Chinese companies signed infrastructure contracts worth $40 billion in Africa.

1 comment:

  1. The article in Le Soir is not recent but dates back to February 28, 2008.
    Since then everything has changed: Paul Fortin’s is gone, Victor Kasongo is gone, the Chinese shareholders have changed…
    By falling copper prices, the contract is reduced from 9 to 6 bilion USD and under pressure from the IMF, the Chinese reduced the interest rate to those which they had previously granted to Angola.
    Colette Braeckman makes it clear that the deal was done by Pierre Lumbi, which belongs to the inner circle of Kabila.
    Fortin further cites that Congo needed a supplementary 2.5 million tons of copper ore to meet the Chinese requirements.
    This ore was found in 2 mines of Katanga Mining (with proven reserves). The George Forrest Group had to exchange them for deposits of unproven reserves.
    The man was the victim of a forced nationalization, but in the Belgian newspaper "De Standaard" he stroke a triumphalistic tone saying that he received a pledge of 4 million tonnes of copper and 200,000 tonnes of cobalt or if there would be insufficient ore, a state guarantee of 825 million USD!
    The risk here is for the Congolese state, as it was during the lowering of the price of copper, making the contract of 9 billion USD has been reduced to 6.
    The Congolese government wanted to give additional mine supplies to add up to this difference, but the IMF considered it an unacceptable risk that the Congolese government would look again for 3 billion USD additional deposits (as it is already done before with the Forrest Group).
    Finally, as a matter of fact, from the study from the Centre for Chinese Studies on the Chinese public works in Southern Africa I understand that the Chinese manufacturers (and their equipment) are in Africa to stay there ....

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