Before September 2008, the Katangese mining sector witnessed a remarkable revival after several decades of decline of the state-owned company Gécamines, which represented the bulk of the mining activity in the province .Asaresult of the gradual decrease in conflict in the DRCongo as a whole, the first democratic elections since Congolese independence and the adoption of a new mining code, the investment climate in Katanga became a lot more favourable than it used to be. Furthermore, the well-known reputation of the Central African copperbelt as the repository of 34% of the world’s cobalt reserves and 10% of the world’s copper reserves also helps to explain why several major mining companies showed renewed interest in the Katangese mining business. While, in recent years, the global demand for copper rose due to the combination of increased consumer spending and expanding infrastructure in rapidly developing countries such as China and India, the global demand for cobalt went up as a result of the growing use of rechargeable batteries and worldwide increases in chemical applications such as catalysts.
Unfortunately, the global financial crisis threw a spanner in the works. As pointed out in the ‘World Economic Outlook’, published by the International Monetary Fund in October 2008, the financial crisis that erupted in August 2007 as a result of the collapse of the US subprime mortgage market started gaining momentum in September 2008. Confidence in global financial institutions was undermined and increasing solvency concerns brought about a series of bankruptcies, forced mergers and state interventions in the United States and Europe. This led to a dramatic change of the financial landscape and, most importantly, to a slowdown of the global economy and a sharp decline in the copper and cobalt prices on the international market.
The goal of this report are twofold. Our first intention is to present an overview of the different ways in which the global economic crisis is currently impinging upon the Katangese mining sector. Although there have been numerous newspaper reports on the effects of the crisis on Congo’s most important mining province, to the best of our knowledge no efforts have yet been made to compile the available information in a way that allows for the identification of a number of general trends. The second purpose of this paper is to make an assessment of the initiatives the Congolese authorities have taken to manage the crisis. Since mining has always constituted an important source of revenue for the country, the development of a sound policy for crisis management is of vital importance to protect the health of the Congolese Treasury and to keep in tact the possibility of stepping up government efforts in terms of poverty reduction and infrastructure development once the global economy starts to recover.
Contents
Executive summary
1. Introduction
2. The implications of the global financial crisis for mining activities in Katanga
- 2.1 Consequences for industrial mining
2.2 Consequences for artisanal mining
3. An evaluation of government initiatives to cope with the crisis
- 3.1 Measures taken by the central government in Kinshasa
3.2 Measures taken by the provincial government in Lubumbashi
3.3 An assessment of the collaboration between Kinshasa and Lubumbashi
4. Conclusions
List of abbreviations
Download
PDF Ebook The impact of the global financial crisis on mining in Katanga
