Resource information
This study examines the mining
sector's potential to contribute to economic growth
with governance in the Democratic Republic of Congo. In the
past, mining has been the main engine of the Congo economy.
But the revenues and other benefit streams generated by the
sector over the years have not been used in a wise or
sustainable fashion, largely due to key problems with sector
governance. During the past ten years of civil war and
conflict, flagship industrial mining declined substantially,
and informal and artisanal mining expanded significantly.
Now that peace has returned to most of the country and a new
democratically elected Government is in place, the potential
for the mining sector to contribute to economic growth is
excellent. However, achieving growth with governance
depends on three principal internal and external factors.
The first of these, international commodity prices, is
largely out of the Government's control. The second
factor, political stability, is clearly critical to growth
of the sector; however, a detailed discussion of this factor
is outside the scope of this study. The third factor,
rent-seeking culture, is at the heart of the challenge that
the Government must overcome to ensure sustained sector
growth with good governance. The probable future decline and
fluctuation of commodity prices has several implications for
the mining sector in DRC. First, the amount of investment
funding available for minerals exploration and investment
falls or rises in tandem with the commodity prices. During
the first quarter of 2008 there has already been a
significant fall-off in the amount of funding for smaller
companies in the international exchanges, due in part to the
financial turbulence in the markets. This fall-off in
investment funding could be exacerbated further by a
significant downturn in commodities prices. Second,
producing companies will generate lower revenues, and the
government will have a consequent decline in fiscal
receipts. Third, companies will face pressure to maximize
their economies of scale, generally by increasing
through-put in order to meet fixed costs. At the same time,
because of lower sales revenues, companies will be forced to
reduce operating costs, often by cutting staff and social
services. Fourth, lower commodity prices will have a direct
effect on the artisanal producers of mineral commodities,
whose day-to-day dependence on the amounts earned in the
mines renders them highly vulnerable to fluctuations.
