Democratic Republic of Congo President Joseph Kabila’s decree confirming the rights of companies part-owned by Khulubuse Zuma to Lake Albert’s oil block one and two has embroiled the South African president’s nephew in a legal dispute with a leading oil company operating in Africa, Tullow Oil.
Important questions for South Africans to ponder are, what benefit this kind of investment brings to our shores, and whether other South African investments in the DRC, such as gold mining, are undermined by this way of doing business?
Arguably much of the blame for the murky oil deal lies with the Congolese government and not with private investors. But political connections bring opportunities in places where there is no rule of law and the insecurity of contracts is only a fraction of the problem.
The illicit plunder of natural resources has long been the underlying cause of the DRC conflict. By contrast, well-regulated, formal mining offers one of the few routes to reconstruction and development.
South Africa has contributed peacekeeping troops, millions of rands and years of diplomacy to trying to bring stability to the eastern DRC, and in particular the Ituri province which borders on Uganda with Lake Albert between them. This involvement was based not only on a moral duty to share South Africa’s peace dividend with Africa — President Jacob Zuma and others said that it was in South Africa’s economic interest to stabilise the Great Lakes region.
But for Ituri’s gold and more recently discovered oil to be extracted legitimately and to the benefit both the local and South African economies there must be peace and security (including security of contracts).
Risk of doing business in DRC
This is why investors constantly have to assess the risks of doing business there. They also have to contribute to long-term development projects to qualify for a “social licence” to operate there.
For example, AngloGold Ashanti has struggled to get formal mining operations started in the area (about 50km from Lake Albert), where the company has held exploration rights in a joint venture with Congolese state-owned company Okimo for some time. AngloGold’s subsidiary, AGK, has said it plans to develop Okimo’s hydro-electrical potential to generate power for the mines and to the benefit of the surrounding communities.
Khulubuse Zuma and Michael Hulley, the Zuma family’s lawyer and business partner, have vehemently denied that they are involved in a get-rich-quick scheme and will sell the Lake Albert oil rights to the highest bidder after obtaining them. But little has been disclosed about the contract on the corporate social responsibility agreements in it.
If the plan is also to develop a hydro-electrical power project for Bunia, a town in Huri province, they may be undercutting AGK’s plans to develop the same electricity project. More information about the corporate social responsibility plans and benefits to communities in the DRC is needed. South Africans should hold all its extractive companies, big and small, established or entrepreneurial, to account for this.
What seems clear is that the Lake Albert oil deal will not be of direct benefit to the South African economy because Khulubuse Zuma’s companies named in the contract, Foxwhelp and Caprikat, are listed in the British Virgin Islands. Even clearer is that South Africa’s economic and security interests in this region would be best served by a commitment from the government and business to principles that ensure transparency and social responsibility in the extractive industries.
Dr Kathryn Sturman is the head of governance of Africa’s Resources Programme, South African Institute of International Affairs