Anglo to snap up Gecamines?

Despite a veil of secrecy, it now seems certain that the Zairean mining giant, Gecamines is in the process of being sold off. Among the key players named in the deal is South Africa's Anglo American.

It seems that after years of flirting with the idea, the cash-strapped Government of President Mobutu Sese-Seko has finally decided to sell off the country's prime mineral asset, the mining giant Gecamines. Nothing in Zaire is simple or straightforward however. So far there has been no official announcement about the privatisation, yet speculation is rife that key international players are already parcelling out Gecamines and its subsidiaries.

Since early 1994, World Bank officials have openly recommended that Gecamines and other Zairean parastatals be privatised. Among several compelling reasons for doing so is the fact that the only shareholder - the Zairean state - is bankrupt.

Gecamines itself has been brought virtually down to its knees following years of decline; for example, in 1994, copper output from its mines only reached 33,725 metric tons as against 500,000 tons in the late 1980s. Cobalt has suffered a similar sorry trend with production in 1994 down to a mere 3,681 tons against 9,981 tons in 1990. Zinc output has been similarly affected, falling from 38,204 tons in 1990 to 2,515 tons in 1994.

In May, the Government decided to merge the three subsidiaries of Gecamines Holdings, bringing together Gecamines Exploitation, which dealt with the extraction and refining of copper, Gecamines Commerciale which marketed the products, and Gecamines Developpement, dealing with agriculture, health, and road projects in Katanga. Given the sharp decline in revenue, there was no way the holding company could continue to sustain the heavy costs of these subsidiaries and their large workforce of 30,000 people.

Observers quickly interpreted this move as a prelude to privatising the mining giant.

Rumours abound

The policy had no sooner been announced than all kinds of rumours about the probable selling of Gecamines abounded. The opposition Kinshasa paper Le Potentiel claimed a few days later that the Zairean state was about to sell 50% of Gecamines' assets to a joint French, Belgian and Swiss consortium, but failed to reveal the names of the companies concerned. Le Potentiel contended that the would-be investors were prepared to repay the debt of $278m owed by Gecamines to the African Development Bank (ADB) and other debts owed to the World Bank. According to the report, the ADB would then provide a $600m loan to relaunch Gecamines' activities.

Speculation about the deal took on added substance when two Paris based newsletters Lettre du Continent and Africa Energy and Mining revealed details about the deal in a different version of the story. According to these newsletters, Anglo American had acted through its international division MINORCO, which controls Engelhard, to set up a Swiss based joint venture - the Swiss Procurement Company (SWIPCO) - with Comptoir Lyon Allemand controlled by M Marc Ladreit de Lacharriere, the former number two in the French cosmetics group L'Oreal. Sources in Brussels, told African Business that the Belgian based Belgolaise Bank is also part of the operation.

The newsletters say an agreement was signed on May 5 in Lausanne between SWIPCO and Mobutu's Special Adviser M Bosekota Watshia, who also sits on the Board of the Bank of Zaire.

SWIPCO, it was reported, would secure a loan of $500m for Zaire with which the country would pay back its arrears to the ADB and other creditors. In return SWIPCO would cash a 4.5% commission on the loan; and Anglo and M Marc Ledreit would get preemptive rights over the privatisation of the four companies concerned.

On May 24, another report appeared in the Belgian daily De Morgen. Quoting "trustworthy" sources, The paper published a list of names involved in the agreement, which included Mr Nicky Oppenheimer, Deputy-Chairman of both Anglo American and De Beers, M Marc Ledreit and a representative of the American non-ferrous giant, Engelhard.

The reports created a storm of controversy in Zaire. Opposition groups angrily denounced Prime Minister Kengo and President Mobutu of exceeding their mandates in selling off the national asset. The air of secrecy with which the deals were allegedly done increased suspicion that something underhand was involved.

Anglo, obviously embarrassed by the Paris newsletter revelations, claimed in a communique that the references to it were "inaccurate and without foundation". Although technically information on the possible sell-off of Gecamines is still speculative, few observers are in any doubt that some form of privatisation is under way.

Fury in Katanga

But the international chase for Zaire's assets does not stop with Gecamines. Belgolaise, one of the shareholders of the Banque Commerciale du Zaire, has already bought 10% of the shares in a new company, Sizarail. Sizarail was formed in March following the acquisition of two subsidiaries of Zaire's national railway company SNCZ for a mere $3m. The subsidiaries are: the Office des Chemins de Fer du Sud (OCS) which operates in Kasai and Katanga, and the Societe des Chemins de Fer de l'Est (SFE) which operates in the eastern part of Zaire.

The other shareholders of Sizarail are the SNCZ (20%), Gecamines (12%), and MIBA (7%). But the majority stake (51%) is held by a joint company. COMAZAR, composed of Transnet, the holding company of South Africa's railway corporation, Spoornet (called COMAZAR), and the Belgian Transurb Consult engineering company.

However, all will not be plain sailing for the new owners of Zaire's parastatals. For example, whoever finally does come to control Gecamines will almost certainly face problems with Gecamines' workers, the Katangese population in general, and the Zairean opposition.

Since early May, opposition papers in Kinshasa and Lubumbashi have continued to accuse the Kengo Government of selling national assets down the river. Zairean railway workers are also extremely upset by the way the privatisation of OCS and SFE has been carried out. Questions are being asked how both Gecamines and MIBA who in fact already owe $40m and $7m respectively to OCS acquired such large stakes in the railway company.

In Katanga, where the privatisation of Gecamines will probably mean massive retrenchments, people are worried that the benefits of mineral exploitation might be siphoned away. Indeed one of the reasons for the current secessionist feeling in the region is that many Katangese are convinced that most of the mineral wealth has either been gobbled up by the central government, or by President Mobutu's clique.

Even those who support the idea of privatisation do not seem to be convinced that the deals currently being put together are for the benefit of Zaire. They fear that national assets are being given away without any benefits accruing to the local population.