$9 Billion Barter Deal

The Democratic Republic of Congo is trading with a massive state-owned firm based in Beijing, the China Railway Engineering Corporation (CREC). They’re planning a new road which will be the first endeavor of the biggest single deal China’s ever done in Africa, worth $9 billion.

Due to be signed in Beijing shortly, it gives DR Congo $6 billion of desperately needed infrastructure — about 2,400 miles of road, 2,000 miles of railway, 32 hospitals, 145 health centers, and two universities.

In return, China gets a slice of DR Congo’s precious natural resources to feed its booming industries — 10 million tons of copper and 400,000 tons of cobalt. It’s a barter deal, what the Chinese side loves to call “win-win.” Not aid with strings attached, like Western powers have given DR Congo over the years, but pure business.

Decades of kleptocratic dictatorship and brutal civil war have brought DR Congo to its knees. Most of its infrastructure barely functions. “We’ve been mining for two centuries but people only see minerals going out,” says deputy Mining Minister Victor Kasongo. “People talk about roads, schools, water; yet they hardly see anything from the huge assets.”

The Chinese ambassador to DR Congo, Wu Zexian, is equally frank about his country's agenda: “China needs many things. In this world China cannot live closed off which is why we have adopted a politics of openness towards the outside world. We must come to a co-operation that benefits everyone.”

The deal was clinched by finding a mine in Kolwezi that had enough proven reserves to persuade the Chinese that it was financially safe for them to begin disbursing about $3 billion, right away.

China’s state-owned Exim Bank, which is financing this deal and many others in Africa, is taking on a level of risk that few Western banks would consider. It’ll take about three years, and another $3 billion or so of investment, before the disused mine (formerly owned by the Belgian Forrest Group) is up and running.

When production begins, the Chinese companies signing the deal, CREC and Sinohydro, will disburse a final $3 billion on roads, railways and hospitals.

The idea is that China will recoup its total investment within 10 years.

Thereafter the joint venture (one third Congolese, two-thirds Chinese) continues to exploit the mine. And yet, despite China’s pledge of openness, the deal has still not been published...to the fury of human rights groups.