Investment May 2010

The Next Empire

All across Africa, new tracks are being laid, highways built,ports deepened, commercial contracts signed—all on an unprecedented scale, and led by China, whose appetite for commodities seems insatiable. Do China’s grand designs promise the transformation,at last, of a star-crossed continent? Or merely its exploitation? The author travels deep into the heart of Africa, searching for answers.

One of the largest and most populous countries in Africa, the Democratic Republic of the Congo is also perhaps the most star-crossed. It gained independence from Belgium in 1960 and promptly became the site of Africa’s first coup d’état. It then suffered for 32 years under the dominion of the American-backed dictator Mobutu Sese Seko, the continent’s most corrupt and influential despot. Over the past 10 years, it’s been the scene of the world’s deadliest conflict since World War II.

In spring 2008, Congo’s beleaguered government unveiled a package of Chinese investments totaling $9.3 billion, a figure later reduced, for complex reasons involving International Monetary Fund pressure, to $6 billion—still roughly half of Congo’s GDP. China will build massive new copper and cobalt mines; 1,800 miles of railways; 2,000 miles of roads; hundreds of clinics, hospitals, and schools; and two new universities. Speaking before the parliament, Pierre Lumbi, the country’s infrastructure minister, compared the package to the Marshall Plan, and called it “the foundation on which the growth of our economy is going to be built.”

In exchange, China will get almost 11 million tons of copper and 620,000 tons of cobalt, which it will extract over the next 25 years—a “resource for infrastructure” swap that China first pioneered, on a smaller scale, in Angola in 2004. Congo will choose from a menu of Chinese construction companies—pre-vetted and supplied with credit by China’s Export-Import Bank—which typically begin (and end) their work quickly, dispatching hundreds or thousands of workers to do the job.

Much of the Chinese mining activity will center around Lubumbashi, founded by Belgium in 1910 and built up with forced labor in the 1930s. Lubumbashi has long lived by the whims of distant global markets, its booms unfailingly followed by busts. The Belgians, British, Americans, South Africans, and even the Congolese themselves, under Mobutu, have all enjoyed runs there.

During my visit, the city was drenched in seasonal rains, but it bathes year-round in a deep-set shabbiness. Still, traces of charm and bygone ambition survive. An imposing whitewashed courthouse faces a large traffic roundabout circling an antiquated steam locomotive once used to haul copper-laden cars. The once grand European-style post office still stands, though its concourse is given over to Chinese merchants selling cell phones from rickety glass cabinets.

Evidence of Chinese industry is not hard to find in Lubumbashi. In many neighborhoods, Chinese road crews are busy sealing muddy, potholed avenues with asphalt. They’re also paving an old dirt route east to Kiniama, and building another road west, to copper-rich Kipushi.

Well before the new ore-for-development deal was signed, the city and its surroundings had become a sort of new Promised Land for Chinese fortune seekers. As copper prices rose fourfold between August 2003 and August 2008, thousands of migrants descended on the region, like forty-niners during the American gold rush. They were drawn by word of mouth about the mineral riches and the ease of doing business here. Congolese officials were reputedly easy to bribe. Visas could be cheaply bought, and so could mining permits, often in the name of poor Congolese front men.

Under a white-hot afternoon sun, I made my way to a vast, Chinese-dominated industrial zone at the city’s northern edge, where copper-smelting operations sat behind high walls. There, I met Li Yan, a brisk, 30-ish man who manages a medium-size copper-mining company. Li’s company, with its giant smelting oven, heavy rock-crushing equipment, and half-dozen oversize trucks, looks well funded and well run. But he shook his head in disgust as he spoke to me about the copper rush. “There’s a belief among Chinese people that they can realize anything,” he told me. “But the people who came here had no experience and no preparation. It was like children running around, really a mess.”

Many Chinese fortune seekers had hired African work gangs to dig for copper, sometimes even in Lubumbashi’s red-clay streets. “They were profiteers and speculators,” said one local businessman. “Congo got nothing from them.” Most of them dug “no more than 20 feet deep, which requires no investment at all.” The government belatedly tried to reassert control, requiring all those who mined copper to smelt it as well, and to make more-substantial investments in equipment, in order to generate more jobs and tax revenue and to make the industry more sustainable. In response, small operators scrambled to build small, inefficient furnaces. In 2008, as prices tumbled from $9,000 a ton to a low of $3,500, the makeshift smelters closed down and the Chinese owners fled, leaving their Congolese workers unpaid and the landscape littered with industrial refuse.

Beijing’s giant construction package, of course, is on an entirely different scale than the fly-by-night mine operations that have come and gone in Lubumbashi. But the conditions under which the deal was signed were in many ways similar to those under which many Chinese fortune seekers had obtained their permits. Negotiations, conducted in secret, were entrusted to one of President Joseph Kabila’s close personal confidants, a man without a government portfolio. Since then, questions about whose interests are being served by the deal—those of everyday Congolese, or merely those of Kabila’s cronies—have multiplied.

In the center of Lubumbashi, just off the roundabout with the old locomotive, I met with Kalej Nkand, director of the Congolese Central Bank for Katanga province. Inside, the bank faintly resembles a musty warehouse—cavernous, dimly lit, and mostly open. It was getting toward lunchtime, and a half-dozen employees sat at metal desks scattered about the office’s large open floor. One woman pecked at an antiquated computer; the rest read old newspapers or dozed.

Presented by

Howard W. French is the author of A Continent for the Taking: The Tragedy and Hope of Africa. He teaches at the Columbia University Graduate School of Journalism.

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