DM168

SENTRY REPORT

Chinese infrastructure-for-minerals project in DRC derailed by high-level corruption

President Félix Tshisekedi of the Democratic Republic of Congo. (Photo: EPA-EFE / Hayoung Jeon)

China left red-faced by exposure of illicit financial activity in its huge Congo infrastructure contract. 

The exposure of massive corruption in a major Chinese infrastructure-for-minerals project in Democratic Republic of Congo (DRC) embarrassed Beijing this week, just as it was boasting about its help to Africa at a meeting with the continent’s governments in Senegal.

The revelation by an American watchdog body and a consortium of journalists that millions of dollars meant to finance the $9-billion, 2007, so-called “Deal of the Century” instead went into the pockets of Chinese agents and former president Joseph Kabila and his family has also rocked the DRC’s fragile politics.

President Félix Tshisekedi has reportedly launched legal processes against implicated Kabila officials, prompting fears that the Kabila camp could retaliate by trying to regain power. On the other hand, there are some suspicions that Tshisekedi may not want a full clean-up of the corruption as he has appointed one of the key players in Kabila’s corrupt deal with China to his Cabinet.

In 2007, Kabila signed a landmark deal with two huge Chinese state-owned enterprises — the construction corporation China Railway Group Ltd (CREC) and Sinohydro, which built China’s famed Three Gorges Dam over the Yangtze River.

The terms of the contract echoed similar Chinese deals in Africa; in essence, DRC would barter millions of tonnes of its plentiful cobalt and copper deposits for billions of dollars worth of Chinese-made and desperately needed railways, hospitals and universities, with the entire deal to be financed by the Export-Import Bank of China (China Exim Bank).

The Congolese government and the Chinese state-owned enterprises were to manage the deal through a joint venture, called the Sino-Congolaise des mines (Sicomines), of which the Congolese state mining company Gecamines held 32%.

DRC’s traditional Western donors and creditors were vexed as the heavily indebted country was seeking substantial loan-forgiveness from them while, at the same time, offering to guarantee about $9-billion of Chinese investment in the Sicomines deal,  arguably playing one creditor off another.

Now the so-called Congo Hold-up — a huge leak of African financial records and data, obtained by the Platform to Protect Whistle-blowers in Africa (Pplaaf) and Mediapart, and shared with US watchdog NGO The Sentry by Pplaaf and the European Investigative Collaborations network — has revealed that most of the promised infrastructure did not materialise.

Le Monde Afrique reported this week that the “megacontract remains a mirage” — none of the 31 hospitals planned by Beijing has been built, nor the two universities.

Instead, according to The Sentry’s report, “The Backchannel: State Capture and Bribery in Congo’s Deal of the Century”, published this week, the Chinese state enterprises used a Chinese intermediary called Du Wei with accounts at BGFIBank DRC — run by Kabila’s brother Francis Selemani — to pump tens of millions of dollars into his own pockets and those of the Kabila family, their associates and businesses.

congo corruption
Former president of Democratic Republic of the Congo Joseph Kabila. (Photo: Chip Somodevilla / Getty Images)

They were abetted by major international financial institutions, such as Germany’s Commerzbank and the US Citibank, which The Sentry rebukes for ignoring obvious signs of corruption. By facilitating financial transactions “with little or no documentation”, they failed to protect Congo’s poor from kleptocracy.

At least $138-million intended for infrastructure was diverted, according to various sources, though this is believed to be just the tip of the iceberg.

At the heart of the dodgy deal was BGFIBank DRC, the local branch of a bank based in Gabon. The leaked files show that Du set up Congo Construction Company (CCC) with several accounts at BGFIBank DRC.

Despite its name, CCC did no construction but was just a shell company designed to launder money.

The Sentry’s report documents in minute detail how Du and other players in the Sicomines infrastructure-for-minerals deal moved money back and forth, mainly through BGFIBank DRC and CCC, into and out of the accounts of Kabila and his cronies, to try to cover the money trail.

From 2013 to 2018, CCC transferred at least $31-million to companies and people directly linked to Kabila; $21-million, largely in cash, to unknown beneficiaries; $8-million primarily to the Kabila family’s commercial partners; and more than $2-million to Du’s own accounts.

The report says documents from BGFI-Bank DRC show that Kabila’s brother Selemani personally managed the banking relationship with CCC, and companies he and his wife owned and controlled were the beneficiaries of as much as $9-million in transfers from CCC.

The Sentry found that among the large number of presumably shell companies that funnelled suspicious money through CCC was one called Universe Faith (South Africa) Ltd. It was one of four anonymous companies registered in the British Virgin Islands, “a notorious haven for corporate secrecy”, as the report says.

These four companies wired an “unexplained” $18-million from bank accounts in China and Hong Kong to CCC. The Sentry believes that the four companies were linked to CREC, the Chinese railway group that was supposed to build some of the infrastructure in the deal.

The flow of cash through CCC increased as Kabila neared the constitutionally mandated end of his final term in office.

Over the course of three months in 2016, Sicomines wired $25-million to CCC, which then transferred the money to the Kabila family, their proxies and their commercial partners.

Du held 80% of CCC, with the remainder owned by Congolese lawyer Guy Loando, who would go on to be elected to the Senate in 2019. Loando was appointed to serve as minister of state in charge of regional planning by President Tshisekedi in April 2021.

As Kabila faced losing political power and control of the bank in 2018, CCC funnelled $10-million back out to safety for him and his family, The Sentry said.

In December 2018, after keeping the world guessing about his intentions, Kabila finally stood down from the presidency after 17 years in power and Tshisekedi was declared the winner of elections, which most observers believe were won by Martin Fayulu.

Though Kabila supported Tshisekedi’s takeover from him and the two initially formed a de facto coalition in which Kabila retained considerable behind-the-scenes power, especially in parliament, they later fell out as Tshisekedi managed to form his own majority coalition in parliament.

According to the journal Jeune Afrique, Tshisekedi has wasted no time in using the disclosure about the corrupt China infrastructure deal to his political advantage.

The journal said it had seen a letter in which Justice Minister Rose Mutombo Kiesse ordered a judicial investigation and, if necessary, prosecution “on the recent revelations of embezzlement of public funds involving several Congolese and international companies”.

These moves against corruption have caused some political turbulence. Last week, Tshisekedi’s close adviser Fortunat Biselele — who is also close to Rwanda — fled Kinshasa and turned up unexpectedly in Kigali.

Rumours began circulating that Kabila was mobilising foreign allies to back a preemptive strike against Tshisekedi to thwart any prosecution of himself and his allies.

However, J Peter Pham, a former US special envoy to the Great Lakes and now a distinguished fellow at the Atlantic Council, dismissed this speculation.

“Just because things happen at near the same time does not mean they are linked,” he told DM168. “There are many interests, especially financial and mining ones, under serious threat and whose advantage it is to increase perception of weakness.”

Apart from the possible prosecutions of those implicated in the Sicomines deal, Tshisekedi has also announced a ban on new mining licences and possible switching of existing ones, which is rattling entrenched mining interests in DRC.

Pham this week had a public spat with Zhu Jing, China’s ambassador to DRC, about the exposure of corruption in the China infrastructure deal.

“Now that we know what the people of DRC did not get from Kabila’s ‘minerals for infrastructure’ deal with China, it is time to audit what the Chinese managed to take in the Congo — essentially without paying,” Pham tweeted.

To which Zhu replied: “The real partners of the DRC are those who contribute concretely for this country, not those who dictate their law and sow discord.”

To which Pham retorted: “The problem is that your compatriots have not delivered the ‘concrete’ infrastructure. What the government of DRC and the rest of the world want to know is what was stolen from the Congolese people who did not get their due for minerals sent to China.”

Meanwhile in Dakar, Chinese foreign minister Wang Yi told the Forum for China Africa Cooperation that, over the past two decades, Chinese enterprises had built more than 10,000km of railways, nearly 100,000km of highways, almost 1,000 bridges, 100 ports and more than 80 large-scale power facilities in Africa. DM168

This story first appeared in our weekly Daily Maverick 168 newspaper which is available for R25 at Pick n Pay, Exclusive Books and airport bookstores. For your nearest stockist, please click here.

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