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Analysis: Congo poll leaves uncertainty for miners at heart of EV revolution


By Joe Bavier

JOHANNESBURG (Reuters) - The surprise outcome of Congo's election - a vote meant to bring closure to years of turmoil under - has done little to ease uncertainty for miners and investors in a country crucial to the electric vehicle revolution.

Democratic Republic of is the world's of cobalt, a mineral used in which has seen a surge in demand in recent years, with mines run by firms including and

Opposition candidate Felix Tshisekedi, an unknown quantity for executives, was declared the winner of last month's chaotic vote on Thursday, defeating Kabila's chosen successor,

The stakes for firms are high. In a study last year, forecast a 60 percent increase in demand for cobalt by 2025, and cited uncertainty in policy as one of the major risks to supply.

"It could be that, as a sector, we're worse off than when we were under Kabila," said one mining operator, who asked not to be identified. "There may be some improvements, but we're not counting on it."

Tshisekedi's supporters hailed the election result as the end of nearly two decades of corrupt rule under Kabila. But the outcome has quickly come under question, and the extent to which Kabila will continue to wield influence over the economy through sprawling remains unclear.

"It's going to be an extremely volatile period," said Jason Stearns, of New York University's Research Group. "If I were a savvy investor, I'd look at and just step back for six months."

Tshisekedi has little political track record for investors to

Few companies had expected him to win, one industry source said, and had focused attention on Martin Fayulu, another and ally of the former of Congo's mining region, Moise Katumbi. They fear that strategy could now hurt relations with the new president, the source said.

Tshisekedi's party, the Union for Democracy and Social Progress, has historically favoured an important state role in mining and opposed the privatisation of state assets. But in what appeared an olive branch to mining firms, Tshisekedi said on the campaign trail that he would take a second look at a new mining code introduced last year.

Relations between miners and the government hit a nadir over the code, signed into law in March, which raised royalty rates across the board. But even under Tshisekedi, the prospect of a rethink is slim, said Elisabeth Caesens, of Resource Matters, which advocates for better natural resource governance.

"Increasing taxes on multinationals was way too popular a move to easily turn back," she said.


Five mining executives contacted by said they were not yet operating on the assumption that Tshisekedi's win would be validated by the Kabila-appointed and expected the outgoing to fight to keep his stranglehold on the sector. None wanted to speak on the record.

Companies could find themselves caught in the crossfire of turf wars over ministry jobs and positions in the bureaucracy, not knowing who is really in charge.

"There are always people you have to sway if you want a contract or a mining permit," Stearns said. "At the top, these are Kabila's people. That's now going to be in a state of flux that, I think, is going to last months."

Even if Tshisekedi's win is validated, Kabila's influence is unlikely to disappear.

Supporters of Fayulu, who was declared runner-up, allege Tshisekedi's victory grew from a backroom power-sharing deal struck with Kabila and are challenging the result in court. Tshisekedi and Kabila's camps deny any such deal.

A observer mission concluded Fayulu was the clear victor, diplomats briefed on its findings said. and also questioned the result.

Kabila's allies retain a parliamentary majority, and with it the right to name the prime minister, according to results announced on Saturday, making it unclear who will control key posts. While the formally appoints ministers, those names are proposed by the

"You wield power in Congo via the power of appointment, and what I'll be looking at is who gets put where," said Gregory Mthembu-Salter, a former U.N. sanctions monitor in Congo who now heads Phuzumoya Consulting, which advises on due diligence and supply chains.


Despite the political uncertainty, Congo's mineral wealth remains a draw for mining firms. As well as its cobalt reserves, it is Africa's biggest and also mines gold and diamonds.

A day after the election results were announced, companies announced two mining transactions which could help bring concessions into production.

Australia's acquired a 60 percent stake in the Adidi-Kanga Gold project in province. And AIM-listed sold its Mpokoto gold project to Arrow Mining and African Royalty.

A source involved in the Adidi-Kanga transaction said that government approvals for the deal were secured long before the election. for Armadale said work on the Mpokoto deal began in 2016.

Tshisekedi will need a functioning mining sector to raise revenues and, importantly, ensure the is paid. Clawing revenue streams back from Kabila's would help consolidate his position, as would improving governance to help attract new investors.

Under Kabila, Congo lost at least $1.36 billion in potential revenues from 2010-2012 alone due to cut-price asset sales to offshore companies, according to a panel led by former U.N. Campaigners say the trend has continued.

A review of the most controversial deals of the past decades could also help Tshisekedi prove to the Congolese people that he's his own man, analysts said.

"Maybe Tshisekedi will set out and try to clean things up," said Ryan Cummings, of firm Signal Risk. "But I'm not sure I'd put any money on it."

(Additional reporting by in London, and in Kinshasa; Editing by and Nick Tattersall)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Sun, January 13 2019. 16:51 IST