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Instructions for use Title Business and Economic History of Copper Industry in the Democratic Republic of Congo Author(s) Kalenga, John Ngoy Citation 第3回北海道大学サステナビリティ学生研究ポスターコンテスト = The Third Hokkaido University Sustainability Research Poster Contest. 平成23年10月25日(火) - 11月6日(日). 北海道大学学術交流会館, 札幌市. Issue Date 2011-10-25 Doc URL http://hdl.handle.net/2115/47457 Type conference presentation Note Winner of Research Poster Contest (Discipline 3: Sustainable Production & Consumption ) File Information C3-12.pdf Hokkaido University Collection of Scholarly and Academic Papers : HUSCAP

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Page 1: Winner of Research Poster Contest (Discipline 3: Sustainable ......Note Winner of Research Poster Contest (Discipline 3: Sustainable Production & Consumption ) File Information C3-12.pdf

Instructions for use

Title Business and Economic History of Copper Industry in the Democratic Republic of Congo

Author(s) Kalenga, John Ngoy

Citation 第3回北海道大学サステナビリティ学生研究ポスターコンテスト = The Third Hokkaido University SustainabilityResearch Poster Contest. 平成23年10月25日(火) - 11月6日(日). 北海道大学学術交流会館, 札幌市.

Issue Date 2011-10-25

Doc URL http://hdl.handle.net/2115/47457

Type conference presentation

Note Winner of Research Poster Contest (Discipline 3: Sustainable Production & Consumption )

File Information C3-12.pdf

Hokkaido University Collection of Scholarly and Academic Papers : HUSCAP

Page 2: Winner of Research Poster Contest (Discipline 3: Sustainable ......Note Winner of Research Poster Contest (Discipline 3: Sustainable Production & Consumption ) File Information C3-12.pdf

Acknowledgments We thank all professors, managers and contributors for their advice and support to conduct

this study.

Introduction The Democratic Republic of Congo as resource-rich developing country suffers from a

phenomenon termed the resource curse. Paradoxically, wealth in the form of natural resources

appears to be detrimental to the economic development of the country. The mining sector has

constituted the cornerstone of Congolese‟s wealth since colonial times. The country on average

has lower growth rates, lower levels of human development, and more inequality and poverty.

The current scenario of production shows high risk to compromise sustainable development for

future generations. The copper ore reserves of DR Congo are estimated to last for about half a

century. Sustainable management of natural resources is essential to assure the socio-economic

development. Historical analysis of primary and secondary sources identifies bad institutions and

corruption as the main reasons why the country performs badly in economic terms. There is a

risk to maintain people in poverty up to depletion of resources.

Production of Copper The output of Congolese copper industry is depicted in the following graphs. The graph 1

depicts the first phase of output of Union Miniere du Haut Katanga nationalized in 1967 and

renamed as Gecamines. The second phase of output is shown in graph 2.

The production collapsed in the 1990s. The ores reserves are estimated to last about fifty years.

The output is exported to industrial countries as depicted in graphs below.

.

Conclusions The copper industry in DR Congo has high potential capacity to contribute to economic growth. The

interactions of economic, political and managerial factors had negative impacts on the industry for the last

century of exploitation. The data of production, consumption and GDP give evidence that the past and

current scenarios of management are not sustainable. In order change the trends:

The Congolese government should stop the patterns of illicit exports and corruption, as well as

interference of political and military officials in mining deals.

The study suggest new concept of “clean deals” in minerals at every stage as solution to improve the

management of mineral resources in order to achieve sustainable development.

There is hope that copper industry can afford sustainable development with concerted efforts of public

officials and local people by better use of natural resources.

Sustainability Weeks 2011

BUSINESS AND ECONOMIC HISTORY OF COPPER INDUSTRY

IN DR CONGO John Ngoy Kalenga —Graduate School of Economics and Business Administration, Hokkaido University, Sapporo, Japan

Literature cited 1 Primary Sources

Annual Reports of Gecamines 1967-1996

Annual Statistics of Production of Sodimico 2002

Annual Reports of Sodimico 1974-2010

DR Congo Mining Code 2002

Interviews conducted in March 2010 and February 2011 with:

Mr Musafiri, Director of Production Sodimico,

Mr Kalay, Director of Human Resource Sodimico,

Mr. Nyembo, Research Department Director of Gecamines

2 Secondary sources

Fischer, F.M., et al., An econometric model of the world copper industry, The Bell Journal of

Econometrics and Management Science, Vol. 3, No. 2 (Autumn, 1972), pp.574-575

Humphreys, D., Sustainable development: can the mining industry afford it? Journal of Resources

Policy 27 (2001), pp.1-7

Figure 2 Forest and Mineral deposits in DRC

Objectives The purposes of the research are:

1 To assess the contribution of copper industry to economic growth.

2 To explain the turning points of copper industry.

3 To understand the impact of mineral resource mining on environment at local and global

levels.

Study Area This research is conducted on the south-eastern part of Katanga Province, in the Democratic

Republic of Congo. This area long of 300 kilometers contains in excess of 10% of the world„s

known copper resources and about 34% of global cobalt deposits which are exploited by

Gecamines and Sodimico in DR Congo. It is called the Central African Copper belt.

Economic Analysis of copper industry:

- Production oriented to exportation..

- Unexploited demand from local and African markets

- Supply of raw material instead of adding value by further processing of copper

- Price fluctuation changes the shape of demand and supply curves.

- Need of new investment in research, technology and further refining

- Economic wars of resources in region .

Management:

- Efficient management of scarce copper resources should generate income for economic development.

- Lack of expertise of managers

- Historical analysis revealed that past and current scenarios of production and consumption of minerals is not sustainable.

- Local populations are not involved in copper projects and decision-making.

Political factors:

- Bad institutions lead to corruption and plundering of mineral resources.

- Colonial legacy of the country .

- Lack of internal pressures on officials

- Total dependency on foreign investments from multinational companies

- Lack of patriotism to ensure that copper resources benefit to all population.

Materials and methods We use interviews conducted in March 2010 and February 2011with managers of Sodimico and

Gecamines. The Annual Reports of these two companies and Archives are primary sources

collected for this study. We use qualitative method to explain the impact of copper industry on

economic growth and environment protection. The study integrates Interdisciplinary Approach

including History, Economics, Politics, and Business.

Consumption of copper The quantity of metals consumed determines the stage of economic development of the country.

DR Congo consumes less than 10 percent of its output as depicted in graph 5 below.

Analysis and Results The contribution of copper industry to GDP and the evolution of Per capita GDP are depicted in the following

graphs.

Figure 1: Map of Central Africa Copper Belt

Source: ICS Copper Systems

Graph 1 Production of UMHK 1910-1967

Source: Author using data from Mobutu Sese Seko 1965-1975.

0

50000

100000

150000

200000

250000

300000

350000

1910

1912

1914

1916

1918

1920

1922

1924

1926

1928

1930

1932

1934

1936

1938

1940

1942

1944

1946

1948

1950

1952

1954

1956

1958

1960

1962

1964

1966

To

nes

Year

Copper

Cobalt

Graph 3 Congolese Export of copper and cobalt 2005

Source: Author using data from OFIDA Report 2005.

Belgium

3%

China

52%

Finland

31%

Germany

2%

Japan

1%South Africa

0%

South Korea

0%

Sweden

0%

The Netherlands

0% United Kingdom

1%

United States

0%

Zambia

10%

Graph 5 Consumption of copper in DR Congo

Source: Author using data of Annual reports of Gecamines and Ministry of economy.

0

500

1000

1500

2000

2500

3000

1952

1954

1956

1958

1960

1962

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

Qu

an

tity in

Ton

s

Year

National

Consumption

Clean Deals in Minerals

Environment

(Minerals)

Economy

(Growth)Society

(Actors)

Sustainable production

Reduce, Reuse,

Recycle

Reinvest in new

businessOver extraction

Depletion

Clean deals

New policies

Empower locals

Suggestions The study has identified corruption and

bad institutions with dependency on

multinationals in copper industry as

causes of bad performance. In order to

change the trend, new policies that focus

on clean deals should be implemented in

DR Congo. In addition, clean practices

such as fairness, win-win deals,

transparency, in production, consumption

and mining contracts are required. All

actors should emphasize clean deals that

promote environmental protection to

achieve sustainable development.

Graph 6 Industrial consumption of copper

Source: London Metal Exchange 2010.

Industrial

machinery

9%

Construction

28%

Transportation

12%

Electric /

Electronic

42%

General

consumer

9%

Graph 4 Regional Refined copper Production

Source: London Metal Exchange January 2010.

0% 10% 20% 30% 40% 50%

Asia

America

Europe

Africa

Oceania

Asia

America

Europe

Africa

Oceania

Graph 8 GDP growth rate per capita 1974-2000

Source: Author, data from Parliament’s Report of contracts in mining industry March 2006.

-20

-18

-16

-14

-12

-10

-8

-6

-4

-2

0

2

4

1974 1983 1984 1986 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

GDP growth rate per capita

Graph 7 Contribution of copper industry to GDP

Source: Author using data of Annual reports of Gecamines and Ministry of economy.

0

10

20

30

40

50

60

1953

1954

1955

1956

1957

1958

1964

1966

1967

1968

1969

1970

1987

1988

1989

1990

1991

1992

1993

1994

1995

Per

cent

to G

DP

Year

% to GDP

The contribution capacity of copper industry to GDP declined significantly after the collapse of

industry in 1990s. What happened? Figure 3 Ruashi Mining Site

Figure 4 Ruashi Water Tank close Mining Site

Figure 5 Musoshi Mine

Figure 6 Musoshi Mine Site

Figure 7 Export of Copper

Graph 2 Total output of Gecamines 1967-2006

Source: Author using data from Annual Reports of Gecamines 1967-1996 & BCC 2006

0.00

100,000.00

200,000.00

300,000.00

400,000.00

500,000.00

1967

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

Ton

s

Year

Cobalt

Copper