Mandatory disclosure, a revenue system and a central bank digest give diligence teams new material.

By Kanisa Magazine · August 2022

A diligence analyst opening a Congolese file in August 2022 had more to work with than a year before, and the reason is rules rather than data. Three changes made in the preceding twelve months obliged state companies, revenue collectors and mine operators to produce records that did not exist, or did not circulate, before. Each leaves a trace that a counterparty can be tested against.

The argument of this piece is that a rule matters to a market only when it manufactures evidence someone can check. Read that way, the DRC’s recent reforms are less about new prohibitions than about new paper trails, and the paper trails have different reliability.

The numbers a central bank publishes

The BCC’s weekly digest separates state output from partner output, which is the first useful cut.

The starting point is the BCC’s statistical digest of 29 August, covering the week to 26 August. Its cumulative table, to the end of July, puts copper output at 1,088,364 tonnes against 812,566 tonnes a year earlier, a rise of 34 per cent. The table splits that between Gécamines and its partners, and the split is informative. Gécamines’ own copper was 1,529 tonnes, about 0.14 per cent of the total. Its cobalt was 11,554 tonnes out of 61,775, or roughly 19 per cent.

Anyone pricing exposure to the state miner should read those two lines before any presentation. The state company is a rounding error in copper volume and a real participant in cobalt, so its fortunes and the country’s copper statistics move apart.

The digest also tells the reader how its figures are built. International reserves are defined as gross reserves minus the foreign-currency accounts of residents held at the BCC, and reserves are expressed in months of next year’s forecast imports. A reader who compares those reserves with another country’s gross figure without adjusting is comparing different things.

Rules that force the state to publish

State companies must now post accounts on a deadline, and the deadline is checkable.

The World Bank’s June 2022 appraisal document for its first governance credit describes the information gap bluntly. It states that publicly available information on Congolese state companies was extremely limited, and that hard copies of financial statements could be obtained at the company registry but nothing was online. A Ministry of Portfolio circular changed that by making state enterprises publish annual reports within three months of year-end and audited statements within six months and one week, on a public website.

The arithmetic gives a testable date. For a December year-end, audited 2021 accounts were due by 7 July 2022. The appraisal names the strategic companies where monitoring starts: SNEL, REGIDESO, SCTP, RVA, SNCC and Gécamines. By late August, a counterparty file for any of them either held a published set of 2021 accounts or recorded that none had appeared, and both outcomes are evidence.

Rules that trace the money

Royalty and payment rules turn mining revenue into entries that provinces and communities can read.

The second set of rules concerns where mining money goes. The same appraisal summarises the 2018 Mining Code: copper royalties raised from 2 to 3.5 per cent, a 10 per cent royalty on strategic minerals and a windfall-profit tax of 50 per cent. Article 242 divides royalties 50 per cent to the central government, 25 per cent to the producing province, 15 per cent to the local decentralised entity, with the balance going to the Mining Fund for Future Generations.

Decree 22/20 of 13 May 2022 describes how the provincial and local shares are to be paid and managed, and sets quarterly and annual public disclosure of payments received. An inter-ministerial order of 21 December 2021 sets up the local bodies that manage the 0.3 per cent of turnover owed to mining communities. The same document cites the country’s EITI report, which found that an estimated US$59.8 million due to affected communities in 2018 and 2019 had not reached them.

The revenue side is being digitised, too. LOGIRAD, a management system for non-tax revenue, was to be compulsory in Kinshasa from 1 January 2023, with roll-out starting in July 2022. The appraisal also records that 192 of 201 mining contracts had been published through the EITI process. A due-diligence team can therefore compare what an operator reports paying with what a province should be recording.

What the evidence cannot yet do

New rules produce documents; they do not prove the documents are used or accurate.

Several of these trails are young. The accounts deadline had only just passed. The royalty decree is two months old. The roll-out of LOGIRAD was a plan. A rule’s effect on market behaviour appears only when a lender declines a deal on the evidence or a buyer prices it in, and the appraisal, as a World Bank document, is the institution’s own assessment, not independent testing.

There is also a gap between publication and reliability. A set of audited accounts is evidence about the past, and its value depends on the auditor and the board that picked the auditor. The Bank’s own series made the choice of statutory auditors by boards a later milestone for exactly that reason.

A checklist for the week after reading

Use three tests this quarter: published accounts, royalty traces, ownership of output.

A lender, trader or contractor dealing with a Congolese state-linked counterparty can start now. First, ask for the 2021 audited statements and note whether they were published by the July deadline. Second, ask which province and local entity received the royalty on the counterparty’s output, and compare the answer with Decree 22/20’s disclosure rules. Third, test any output claim against the BCC split between Gécamines and its partners.

The point is not to wait for perfect data. It is to build files that record what the rules now require, so the day a decision depends on them the evidence is already assembled. Firms that start now will treat disclosure as a routine check, and those that do not will find the new paper trails only after a dispute.