Miners Told to Move Congo HQs as Provinces Vie for Revenueby
Local units of Glencore, Ivanhoe among those asked to relocate
Country’s newly defined provinces seen competing for revenue
The Democratic Republic of Congo told local units of Glencore Plc, China Molybdenum Co., Ivanhoe Mines Ltd. and four other mining companies to relocate their head offices as newly demarcated provinces fight over tax revenue and control of mineral projects.
The companies, all headquartered in Lubumbashi, the capital of Haut-Katanga province, must move to Kolwezi town in neighboring Lualaba, where their mines are based, Mines Minister Martin Kabwelulu said in an April 14 letter, a copy of which was seen by Bloomberg and confirmed by the ministry.
“The objective is to move the administration of these companies closer to where they mine and consolidate the decentralization process by building stronger relationships between the mining companies and the relevant provincial authorities,” Kabwelulu’s chief of staff, Valery Mukasa, said by phone from the national capital, Kinshasa.
Congo was divided into 26 administrative regions from 11 in July 2015, as part of a decentralization drive stipulated in the 2006 constitution to strengthen local government across the sprawling central African country, which is about the size of western Europe. While governors were elected for each territory in 2016, other aspects are lagging behind, with many new regions lacking the infrastructure, revenue and human resources to staff and run a provincial administration.
Congo’s former Katanga province, Africa’s biggest copper producer and the world’s largest source of cobalt, was divided into four new regions, including Lualaba province, where most of the country’s biggest mines are now located. The nation last year produced 1.02 million metric tons of copper and 68,822 tons of cobalt.
The mines minister’s instruction came four days before Haut-Katanga Governor Jean-Claude Musonda Kazembe was removed by the provincial assembly in Lubumbashi. The parliament cited mismanagement of public funds that may have included a $27-million tax payment made by Glencore’s unit, Mutanda Mining Sarl, after the Swiss trader bought out Israeli billionaire Dan Gertler.
While the mine is in Lualaba province, the payment -- a 3 percent duty on the $922-million share sale -- was paid to Haut-Katanga based on the location of the company’s headquarters, in accordance with provincial regulations. That sparked a battle between the provinces for control of the money.
“The amount paid was for stamp duty related to the recent Mutanda transaction and was in accordance with instructions received from both the central and local governments,” Glencore said in an emailed response to questions. There is no suggestion of wrong-doing by Glencore in relation to the tax payment. Glencore declined to comment on the instruction to relocate the headquarters of their Mutanda and Kamoto Copper Co. mining projects.
The deputy head of the provincial assembly, Aerts Joseph Kayumba, said the body had voted to remove Kazembe because of his mismanagement of the provincial government.
His management of the $27-million tax payment from Mutanda is yet to be referred to the provincial assembly, but the body’s economic and financial commission will immediately begin an audit of Kazembe’s government, Kayumba said by phone from Lubumbashi. Kazembe didn’t respond to two phone calls and a text message seeking comment.
Kabwelulu said in the letter asking companies to move that he was acting after recommendations made by Lualaba’s governor, Richard Muyej. Muyej didn’t answer two calls to his mobile phone seeking comment.
A spokesman for China Molybdenum, whose Tenke Fungurume Mining was asked to move, declined to comment. Ivanhoe Mines, which owns Kamoa Copper, didn’t immediately respond to requests for comment.
Peter Grauer, the chairman of Bloomberg LP, is a senior independent non-executive director at Glencore.