Wednesday, 26 March 2008

DR Congo's mining renegotiation

Reportedly (, Democratic Republic of the Congo is cancelling or renegotiating many of its mining contracts, because "none of the contracts met international standards".

It could be a smart move. African mining deals can give foreign companies returns on their investment which are laughably high. The company only has to operate for a month and it has recovered in profits all of its original investment. OK, Africa's sometimes risky, but not that risky.

It could be a smart move... if the renegotiated deals are transparent. Otherwise, the new terms could be similar to the old ones, but with a different minister or civil servant pocketing a bribe, and investors thinking that the government is volatile and corrupt. The current Congolese administration has overseen a good macroeconomic performance given the extraordinarily difficult circumstances, and hopefully it will continue to improve the economy.

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