US companies will face higher risk of retaliatory action and contracts signed with foreign investors face heightened risk of contract frustration and non-payment as the US imposes targeted sanctions on Congolese officials.
On 27 May, US Senators Richard Durbin, Edward Markey, and Christopher Murphy announced they had introduced a Senate resolution aimed at imposing targeted sanctions against senior Congolese officials allegedly responsible for human rights violations and outbreaks of violence. The resolution seeks to pressure the government of President Joseph Kabila to respect its constitutional mandate for a democratic transition of power by December. The resolution enjoys bipartisan support and the Foreign Relations Committee’s Africa subcommittee has already discussed the resolution with State Department officials.
President Kabila is due to step down at the end of his second term in office on 19 December following elections that had been slated for November. Yet in May the constitutional court ruled that President Joseph Kabila would remain in power beyond the end of his two-term mandate if the government was unable to hold presidential elections in November, referring to article 70 of the Congolese constitution. The government has already said the elections are likely to be delayed due to logistical and budgetary constraints. On 5 June, secretary-general of the ruling party Henri Mova Sakani said that a constitutional referendum would be an option to alter presidential term limits and allow President Kabila to run for a third term. In the meantime, the government and security forces have begun intimidating opposition politicians and its critics.
President Kabila’s main emerging opponent, former Katanga province governor, Moise Katumbi, since declaring his candidacy for the November elections, has been forced to flee DRC for South Africa. Katumbi has faced politically motivated charges of illegally hiring US mercenaries and he was injured when police threw stones and fired tear gas at his entourage when he made a court appearance to hear the allegations. EXX Africa sources claim that Katumbi’s close connections in the US government, such as former national security advisor James Jones and former US Assistant Secretary of State for Africa Johnnie Carson have accelerated the resolution to impose targeted sanctions. In May, DRC’s former planning minister and Katumbi supporter Olivier Kamitatu led a delegation to the US to enlist the support of Katumbi’s allies in Congress.
Risk implications: Any sanctions imposed by the US could target at least 38 individuals and include asset freezes and travel bans. The list of potential sanctions targets includes government officials such as Interior Minister Evariste Boshab, Communications Minister Lambert Mende, state mining company Gécamines chairman Albert Yuma Mulimbi, and national intelligence agency (agence nationale de renseignements) director Kalev Mutond, as well as the governors of South Kivu, North Kivu, and Kinshasa provinces. Potential targets also include members of the president’s family such as Kabila’s brother Zoé Kabila, and sister Jaynet Désirée Kabila, both lawmakers, and key allies such as Israeli businessman Dan Gertler.
The imposition of targeted sanctions will significantly increase contract frustration risks for investors doing business with any entities that are associated with sanctioned individuals. US banks and clearing houses will be more likely to withhold payments to joint ventures or projects in which sanctioned individuals have an interest. Sectors that are at likely risk of frustration include mining, construction, telecommunications, banking and retail.
Moreover, the Congolese government will be more likely to seek retaliation against US companies operating in DRC. Companies such as Freeport McMoRan, which is seeking to sell its stake in the giant Tenke Fungurume copper and cobalt project for USD2.65 billion to China Molybdenum Company Limited will be at higher risk of frustration and imposition of new taxes or fines. The Congolese government has already indicated it will impose a new tax on the sale. Generally, US companies operating in DRC will face higher contract and reputational risks going forward.
Robert Besseling is the founder and executive director of EXX AFRICA, a specialist intelligence company that reports on African political and economic risk to businesses. He holds an MA (Hons.) in History from the University of St. Andrews in Scotland. He also has an MBA and a PhD in African political and economic history.
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