Congo miners demand power reforms as copper output declines

The Chamber of Mines in the Democratic Republic of Congo called for radical reforms in the country’s power industry after disrupted electricity supplies and lower copper prices reduced output in Africa’s biggest producer of the metal.

Copper production dropped 3 percent to 995,805 metric tons in 2015, the first time annual output dropped since 2009, the Chamber of Mines at the Federation des Entreprises du Congo said in an annual report distributed Wednesday in Cape Town. Output in the fourth quarter slumped 12 percent from the previous year, it said.

“Inadequate and highly non-transparent management by state- owned electricity supply company SNEL is the single biggest factor inhibiting the development of the mining industry” the chamber said. The shortage of electricity in Congo grew to 950 megawatts in 2015 from 542 megawatts a year earlier, Eric Monga, the head of the Katangan branch of Congo’s Chamber of Commerce, said at a conference in Cape Town on Wednesday.

Since 2012, inadequate power supply has required copper miners to import electricity from neighboring Zambia or invest in expensive diesel-powered generators, increasing operating costs at a time when metal prices are falling. In response, Baar, Switzerland-based Glencore Plc in September suspended production at its Katanga Mining operation for 1 1/2 years to build new processing facilities that it said will cut output costs.

Decaying Infrastructure

Congo has installed electricity-generating capacity of 2,442 megawatts. Underinvestment in infrastructure has seen output decline as facilities fell into disrepair, with generation declining to 1,329 megawatts in 2014, FEC data shows. The country is also the world’s largest source of cobalt and a producer of metals including gold and tin. Gold and cobalt output both increased last year.

The chamber said privatization of the power industry is required for the shortfall to be addressed. “Potential investors in the energy sector do not have the slightest confidence in the existing structure,” it said. A 2014 electricity law provides for the liberalization of the sector dominated by Societe Nationale d’Electricite, the state-owned utility, though progress has been slow.

The chamber also criticized tax legislation that rewards government officials who enforce a tax penalty with a percentage of the fine imposed. “The system has become such that officials are more committed to obtaining penalties than applying the normal tax rules,” it said.

Tax Collection

The 2003 decree establishing the revenue authority gives it the right to retain 40 percent of all penalties recovered to provide incentives to tax collectors.

In 2014, the mining sector paid more than $1 billion in taxes to the state and mining revenue represented $761 million of the government budget, according to the Extractive Industries Transparency Initiative.

Mining and specifically copper output has been the key driver of growth in Congo since the end of civil war in 2003. The economy is forecast to expand 7.3 percent this year, the fastest in sub-SaharanAfrica after Mozambique and Ethiopia, according to International Monetary Fund data.

 – Bloomberg