Special Update: As of August 1999, GECAMINES is involved in a massive labor dispute. Kabila's Government wants to lay-off more than 16,000 workers as part of some type of economy-move and production cut-back. The Congolese Workers' Union is balking at this decision and trouble is brewing. These destabilizing labor problems are clearly an outgrowth of the chain of events described initially in this paper over two years ago. / A. Madsen, M.Ed.
CLICKABLE January 2000 Article in French from LE SOIR (Brussels) on the Out-Going Zimbabwean PDG of Gecamines, and his 'replacement' by a Kabila Appointee
La Générale des Carrières
A State-Owned Mining Enterprise in
The Democratic Republic of Congo
Art Madsen, M.Ed.
The Case of Gecamines, located in Shaba Province of the newly renamed
Democratic Republic of Congo, is of special interest to corporate administrators
and students of international management. The shift in this colossal mining
firm's industrial policies, managerial strategies and organizational structure
since its creation by the Belgians in colonial times is certainly worthy
of examination in detail. The best of European thinking and the most insightful
of African and multinational expertise are surely available, within the
vast history of GECAMINES, for analysis in a Case Study focusing on fostering
of markets, industrial policy and public / private sector relations.
The primary objective of this Case Study will be to describe the history
of Gecamines, trace its managerial policies under (1) the Belgians, (2)
the Mobutu Government and (3) its present prospects under the new regime
currently in power. Examined will be some of the major policies adopted
throughout the decades, strategies to deal with price fluctuations, concepts
related to the creation of markets overseas, and some of the personalities
who influenced decisively the direction which one of the world's largest
producers of copper has taken. Attention will also be devoted to the relationship
of the Private Sector to Gecamines which is, and has historically been,
a state-owned enterprise.
The Union Miniere du Haut-Katanga (UMHK), the forerunner of Gecamines,
was founded by the Belgian Colonial Government in the early days of the
Belgian Congo. When copper ore deposits of considerable magnitude were
discovered in the south of the Congo, specifically in ex-Katanga Province,
attention was concentrated on the creation of a mining enterprise which
could economically exploit these massive deposits. In the area just to
the northwest of Elizabethville (today called Lubumbashi, the Congo's second
largest city), a major copper extraction project was initiated. During
the operation of this colossal open-pit mine at Kolwezi, the Belgians also
discovered other minerals of significant value in the main ore body and
adjacent to it. Cobalt, zinc and manganese, notably, were considered minable
in profitable quantities.
As demand for these strategic minerals developed in the years prior
to World War II, markets worldwide sprang up, attracted by the colonial
price structure and by the large volumes of ore being mined and processed.
In the early days of extraction, the Societe Generale of Belgium refined
the ore in the Mother Country, and re-exported it for considerable profit.
In fact, almost all mining operations were conducted in this fashion during
colonial times. The Colonizer was able to realize massive profit on minerals
refined at home, but generated thousands of miles away in Central Africa.
The Belgians added value to the raw ore and set higher world prices for
copper, in conjunction with the London Metals Exchange (LME).
This aggressive repricing policy built the Belgian firm today known
as SGM, La Societe Generale Miniere, an off-shoot of the original parent
firm which deals, even today, with a broader range of products. It can
be readily seen that the old UMHK, among the world's largest producers
of copper both now, as Gecamines, and earlier, and the Societe Generale,
as well as SGM, worked hand in glove during pre-Independence days. Together,
they supplied the world with copper and zinc. Cobalt deposits were not
exploited until later to any meaningful degree. The Belgians created the
logistical infrastructure for removal of these, and other, strategic minerals
from the Congo during World War II. This mineral evacuation route, known
as La Voie Nationale, still operates essentially as it did in the
earliest days. Interestingly, the Belgian system of transporting and marketing
non-refined and/or refined copper lasted long after Independence of the
Belgian Congo in 1960.
Societe Generale Miniere -----------> World Markets
Source: Adapted from M'bendi, Jonathan
Kwitny, and Transnational Research Associates
Figure I displays the straightforward linear relationship of ex-UMHK,
SGM and World Markets. This simple arrangement, with incremental "value-added"
price increases built into each stage of refinement, worked well for all
Belgian purposes, but did not work well for the Africans whose mineral
wealth was being depleted and whose people were not benefiting in proportion
to their exhaustive efforts on behalf of the colonizer. It was clearly
the Belgians who determined the wage and price structure for these products
during this pre-independence period.
Under the colonial government, the President-Director-General of UHMK
was invariably Belgian, and price and wage policies were established in
compliance with standard Industrial Legislation designed and promulgated
in Belgium. In effect, the President-Director-General of UMHK reported
to the colonial Governor General and received instructions essentially
from Brussels, i.e. from the Ministry in charge of Colonial Administration.
When the Belgian Congo gained independence in 1960, but only after a five
year Civil War lasting until 1965, the prize of which was the Copper mine
in Katanga being run by the UMHK, Joseph Desire Mobutu assumed control
of the country. He successfully avoided the secession of Katanga, by exiling
his opponents (notably Moise Tshombe), seized control of the copper mining
operation and renamed it GECAMINES.
The managerial hierarchy within Gecamines in the initial years of Mobutu's
regime was comprised largely of Belgians. These men were aware that, at
the slightest whim, Mobutu's troops could seize control of GECAMINES' production
facilities. But Mobutu was too shrewd to destroy an operation which had
such vast potential to enrich him and his ruling clique. By negotiation
with Belgium from a position of strength, Mobutu was able to arrange a
heavy percentage of revenues from Gecamines for use by his military regime.
However, with some of this profit he built on-site refining facilities
in Katanga, now renamed Shaba, and enhanced his leverage over Belgium.
SGM's share fell from a major portion of proceeds to less than 35%.
Mobutu's network of technocrats and administrators, implanted in upper
echelons of Gecamines in the 1970s, kept him informed of the Belgian PDG's
plans and strategies. Gradually, a newly trained class of Zairean "cadres"
emerged who were essentially loyal to the Mobutu regime. In 1982, Mr. Krem
was the last Belgian PDG of Gecamines. He had ensured efficient operation
of this state monopoly for several years, perfecting the centralized
command structure so that it could respond to all contingencies.
Gecamines remained competitively intact under the new PDG, Mr. M'Bo,
and his staff, all of whom were newly approved by the increasingly confident
and autocratic Mobutu Government. This new arrangement was able to remain
viable, because technical personnel were still Belgian and because
of subcontracting agreements with private firms. Such was the extent
of private participation that it could be said that, at times, it verged
on virtual privatization of Gecamines.
Figure II, below, illustrates some of the major foreign firms which
cooperated with Gecamines from 1970 to 1995 under the Mobutu Government.
- Tenke-Fungurume: A Canadian Mining Conglomerate
- Brown-Boveri: A Swiss and German Engineering
& Construction Enterprise
- Tractionel: A Belgian Electrical
- Anglo-American: A South African Mining
- Societe General Miniere: A Belgian Mining
- Haranbee: A Newcomer to the Mining
Scene in ex-Zaire
- Sodimiza: A Japanese Consortium
- America Mineral Fields: A Texas-Based
Prospecting and Development Firm
Source: Adapted from Transnational and M'bendi.
As President Mobutu consolidated power and tightened control of his
nation's industrial output and priorities, Gecamines was affected to some
degree by these changes. It is crucial to note, however, that Mobutu's
government limited direct interference in the operation of Gecamines during
the first two decades of his regime. As long as his personal and governmental
requirements were being met, he was satisfied with remaining at some distance
from day-to-day managerial decisions. This allowed his Belgian administrators
a certain degree of autonomy.
With management of Gecamines essentially under control of mid-echelon
Belgian administrators for the years 1965 to, arguably, 1995, the production
of copper stabilized at levels lower than total potential output, but was
satisfactory for maintaining the regime in power and for paying Belgian
technical cooperants for their services. Eventually, Gecamines copper production
reached 50,000 tons in 1996, even though the firm's Management, and the
Regime, wanted to produce additional tonnage. World prices and the desire
to avoid a glut of copper kept production at below-capacity levels.
The national debt of Zaire was on the order of five billion dollars
during this period, and debt service obligations were just barely being
met satisfactorily, with occasional delays and defaults.
The industrial policies of Gecamines during the initial years of the
Mobutu Government fluctuated as a result of several factors. The price
of copper plunged during the 1970s, for example, throwing caluculations
of expected revenue into chaos. But management was able to keep Gecamines
afloat and meet all essential financial responsibilities during this period,
minimally but adequately.
As was previously emphasized, the last Belgian administrator to control
Gecamines was Mr. Krem who trained Zairean replacement personnel
to assume his functions. He made major decisions in the mid-1980s concerning
the firm's internal administrative hierarchy and established a realistic
price structure for products (cathodic copper and a range of bars, rods
and ingots) mined and manufactured on-site by Gecamines.
At a crucial meeting in Kinshasa in 1982, he decided NOT to assist
financially in the transporting of electric power, via transmission line,
to Shaba from Inga. He also interacted with Bank of Zaire officials on
a regular basis attempting to put some order into the fiscal confusion
which characterized Zairean finance at the time. Mr. Krem provided a sense
of stability to the administrative structure of Gecamines and ensured the
company's on going operations in conjunction with Belgium. His attempts
to expand the market for copper ore produced in Kolwezi were successful
in the sense that new customers were found in the western nations, notably
in the United States and in Europe, under his guidance.
Gecamines essentially retained its Belgian administrative order after
Mr. Krem's departure. However, President Directors General M'bo and, later,
Umitala-Unutakaya (spelling uncertain) modified the chain of command noticeably,
and shifted the balance of privatization and subcontracting which had been
traditionally held to a minimum under the Belgians.
As prices and markets underwent changes periodically, the types of
sub-contracting varied. Actual ownership of Gecamines was not affected
under sub-contracting, of course, but profit-sharing was subject to
contractual agreements. On balance, sub-contractors in Zaire were paid
equitably and in accordance with "conventions" or mutually beneficial
agreements. The Italians were frequently available for such arrangements
and, indeed, seldom did they actually enter into higher level "purchase
agreements" with Gecamines.
Such outright "purchase agreements" were later necessary
as economic conditions in Zaire deteriorated. Later, they were more than
subcontracting accords; they involved the actual purchase of mineral
rights from Gecamines and all profits derived from them.So, there were
essentially three types of arrangements into which Gecamines entered intermittently
during the Mobutu years. These distinct types of agreements are noted in
Figure III below:
* Subcontracting agreements:
according to which work was performed and profit
shared by pre-arrangement;
* Purchase agreements:
whereby actual mineral rights were sold by Gecamines and
a percentage of entitlements reverted to the purchaser; and
* Privatization agreements:
which were the highest of binding contracts,
actually involving a private firm purchasing a share of Gecamines itself.
Source: Derived from unpublished Transnational Research
As post-graft revenues of the Republic dwindled (down to 5.2 Million
U.S. Dollars per month in 1982 according to TRA's Corporate
Diplomacy in the Third World), desperation grew in Kinshasa and new
agreements were frequently negotiated. The parties involved were those
essentially listed on Figure II. The Mobutu government moved more often
to the third type of agreement, shown above. When entering into these privitization
agreements, Mobutu, his self-appointed PDG, and Gecamines (partially controlled
by Belgian influences, but not dominantly so) would frequently exclude
certain nations from bidding on activities controlled by Gecamines and
would favor other nations with which he had special interests.
During these final dictatorial years, actual production of the world's
fifth largest copper ore facility, Gecamines, varied annually. Sometimes
it did not achieve expectations, and at other times it exceeded them. Funds
for expansion of Gecamines facilities were always in short supply. In Shaba,
there were so many ore deposits of cobalt, manganese, copper and zinc that
it was difficult to exploit all of them simultaneously. The major decisions
of Gecamines were therefore always carefully considered.
As foreign companies approached Messrs. Krem , M' Bo or Umitala, during
these years, they met with a variety of responses. Usually, sums of money
to be invested were required "up front", before rights would
be granted to the foreign firm. One foreign firm that successfully bargained
with the Mobutu government and with Gecamines was Tenke of Vancouver, British
Columbia. The Canadians were always astute negotiators in Zaire, often
using their French Canadian personnel, originally recruited in Quebec,
to enter into direct talks with governing officials. Language was an important
element in establishing trust and strengthening ties. Tenke's final agreements
under the Mobutu government, shortly before the collapse of his regime,
were profitable to all parties and judiciously negotiated. Tenke is still
among the most respected of operators in Zaire and its financial backing
in Canada is quite adequate by world standards. Although details are held
in confidence, it is thought that Tenke today operates a large portion
of Gecamines holdings.
The Japanese were also successful in dealing with the Mobutu government.
Japanese interests in Zaire were focused on the extraction of raw ore and
mineral wealth. Mobutu dealt with them frequently and Gecamines entered
into the discussions upon his orders. As loan defaults and cross-defaults
proliferated, there was considerable banking pressure exerted on Kinshasa's
finances by the world community, among whom figured Japan.
During the Mobutu years, often tenuous Belgian administration of Gecamines
was further affected by extraneous factors, such as unpredictable decisions
on the part of the Dictator. In order to understand the background of managerial
and industrial problems in Zaire, it is useful to examine, as a simple
case in point, the following chain-of-events:
For several months, Zaire went
into a financial tailspin as Mobutu "installed", in the early
1980s, the economic principles of Kim Il Sung, after a whirlwind visit
to North Korea. These sweeping changes, initiated under force of law, required
Revolutionary Management Committees within all firms, both within the public
and private sectors. When these Committees began to plunder the assets
and inventories of most firms, economic chaos resulted.
However, by placing pressure
from outside Zaire on the Mobutu government, the international business
community could limit the damage inflicted to "momentary structural
changes". While billions in private investment were lost, this four
to six month imposition of North Korean "insights" was only a
temporary phenomenon, rescinded by Mobutu when he saw how valuable foreign
investment was to the stability of his regime and to the survival of his
people. During this brief "experiment", Gecamines was only peripherally
Later, as financial chaos swept Zaire in the mid-1990s, and Mobutu's
hold on power diminished, although he attempted to hire mercenaries to
shore up his regime, the fate of Gecamines -- as was the fate of the Kilo-Moto
gold mine and the Mbuji-Mayi diamond fields-- was, in fact, dramatically
Gecamines' management by Belgium was a feature of the distant past,
and after three successive PDG's of Zairean nationality, the financial
structure of Gecamines was seriously weakened. There were problems with
skimming of profit, embezzlement and other forms of graft. The last PDG
of Gecamines under Mobutu is now in exile, living with stolen funds in
The government of Laurent Kabila came to power in 1997 on a wave of
popular support, as Mobutu fled the country and died, surrounded by a close
entourage of family and supporters, in Morocco. As Kabila's troops moved
closer to Kinshasa, they secured areas of the country behind them and Kabila
gradually established a power base not only among his people, but also
among foreign firms vying for control of the vast mineral resources of
Katanga (formerly Shaba).
Kabila used this leverage to gain support from international businessmen
representing America Mineral Fields
, Anglo-American, and Tenke. He promised to reform the managerial structure
of Gecamines and enter into privatization agreements. Some of these accords
are in effect today; others are not. As is the case with their diamond
concession (ex-MIBA), the new Democratic Republic of Congo is interested
in keeping Gecamines as a State-Owned Enterprise, occasionally assigning
segments of its activities to private firms for exploitation, feeding revenue
back into the government .
A recent agreement between Gecamines and the Haranbee Corporation was
signed, according to which mineral rights will be extended to this firm
in exchange for further development. The same is true of another promising
development scheme known as the "Kipushi Copper Ore Tailings Project"
which will be further pursued by America Mineral Fields, once international
litigation is settled between AMF and Anglo-American.
As of this writing, Gecamines seems to adhere closely to the policies
of Kinshasa and the new President of Gecamines is demonstrably linked to
the government, taking his orders from Kabila himself, according to news
releases and dispatches emanating from AMF and from other foreign sources,
such as LE SOIR of Belgium.