Diversification to non-mining activity helps SRK’s DRC office weather volatility in the mining industry.
Susa Maleba (SM): When SRK first established an office here in Lubumbashi, our main focus was on SRK South Africa’s existing clients in the DRC. We began with just four consultants and two administrative staff, but today we number 12 permanent consultants. While about 60% of SRK Congo’s workload was initially made up of projects from our South African office, some 80% of our workload is today sourced and managed directly in the DRC, with review and support coming from our SA office. If necessary, we are always able to draw on SRK’s extensive global network to bring in experts in a given field.
SRK is known for its wide variety of services but does the DRC office have particular strengths?
SM: The DRC office is known mainly for its mining consulting services, as approximately 80% of its work is relat-ed to mining, but it also has a strong infrastructure practice. For example, our office handled geotechnical work (foundation investigation) for the $2-billion Luano City project in Lubumbashi, and the Office of Inter-modal Freight Management’s (OGEFREM) dry port at Kasumbalesa. We have also provided a full range of environmental services for major agricultural projects. This diversification into different markets protects us against volatility in the mining industry caused by the fluctuations in commodity prices. On the mining side, we take care of most of the exploration and resource estimations for projects in the Kolwezi area, so we have built up a strong local geological team.
How do you assess the level of compliance with environmental and social regulations among DRC’s mining community?
SM: Mining companies tend to require social and environmental impact assessment studies for two reasons. On the one hand, they have to meet lender or shareholder requirements, such as those of the International Finance Corporation or the World Bank. On the other hand, they must also comply with the DRC’s own regulations. Our office has particular expertise in the local legal requirements, so we are often called upon to ensure that the mines are acting in accordance with the law.
The idea of a social license to operate has gained serious traction in recent years. Are mining projects generally accepted by local communities?
SM: In the Katanga province, communities are not against the way that the mines are operating; the main friction arises with artisanal miners. However, there is no simple conflict over resource ownership; rather, it is part of a much larger developmental problem. If these people had an alternative, they would choose it, as the work of an artisanal miner is hard and dangerous. The government must act in tandem with the mining fraternity to resolve the underlying socio-economic issues and help bring these people into formal employment.
To what extent have current depressed copper prices had an impact on mining activity in the DRC?
SM: Although copper prices are currently depressed, everyone in the industry knows that commodity markets are cyclical and prices will rebound again. When we decided to open the office here, we recognized that it was a high-risk country with major challenges in terms of power supply and infrastructure. Nevertheless, the geological potential of the country makes it extremely attractive, and the miners understand this. Zambia, which has better infrastructure and power supply than DRC, produced around 1 million metric tons of copper in 2014. Here in the DRC, even with all the difficulties, we still produce about the same amount. If we can resolve these issues, the DRC’s production stands to triple or even quadruple. This is before you begin to look at the potential for other minerals; for instance, we have rich gold deposits in the east and northeast, gold and tin mineralization in the north of Katanga province, and diamonds in the Kasai region.
It seems that most of the deposits mined in Katanga have been well known for decades. Is there much greenfield exploration in the region?
SM: One problem with exploration in the DRC is that many companies want to look at sites where state-owned mining company Gécamines has already carried out some work, so there is not much interest in pure greenfields exploration. One exception is Ivanhoe’s Kamoa project. This company started looking in a previously unexplored area and discovered one of the largest copper deposits in the DRC, which goes to show how much untapped potential there really is. We need to approach exploration in DRC with this kind of mind-set.
Although the DRC is arguably one of the most exciting mining jurisdictions in the world, it remains rela-tively underdeveloped. What is the main setback to the mining sector?
SM: The lack of a reliable power supply is the main impediment to the DRC’s mining industry today. The government has been trying its best to secure investment in new generation capacity but the country as a whole has not been successful in defining its priorities. If we decide that mining is a priority for the country’s social development, we need to recognize that mines require a huge amount of electricity. There is no point in issuing mining licenses if operators will not be able to power their operations cost-effectively.
The second issue holding back the sector is the skills deficit. It is estimated that around 80% of people com-ing to the DRC from South Africa or elsewhere are here to support the mining industry because the local skills base is still low and has not adapted to new technologies. To resolve this, it is necessary to invest heavily in education, as Gécamines did in the past, especially for technicians and artisans. These changes will not happen overnight but, within 10 years, the DRC will have fixed its power supply problems and built up a solid foundation of skilled workers.
How do you hope to see SRK’s operation in the DRC five years from now?
SM: In five years, the DRC will be one of the world’s largest producers of copper and gold, which will help spur growth across the whole economy. The country will catch up with the levels of socio-economic develop-ment of its neighbors in southern Africa and improve living conditions for its people. As for SRK, we hope that the DRC office becomes one of the company’s busiest and most profitable operations.
This interview was part of research being conducted by GBR for its upcoming Mining in Africa Country Investment Guide (MACIG) 2016. To participate in this report, please contact Molly Concannon at email@example.com or +243(0)826300684.