Freeport mcmoranversus the people

oF Fungurume: How the largest mining

investment in DRC has brought poverty not prosperity

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COPYRIGHT STATEMENT

© SARW, OSISA (2012)

This publication was produced by the Southern Africa

Resource Watch (SARW) and the Open Society

Initiative for Southern Africa (OSISA).

Copyright is vested in SARW and OSISA. This

publication can be reprinted in whole or in part as long

as correct attribution is followed.

Contents

The Tenke Fungurume concession

Impact of the Tenke Fungurume mine on local communities

Recommendations

Conclusion

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Freeport McMoRan versus the people of Fungurume: How the largest mining investment in DRC has brought poverty not prosperityOPEN POLICY 03

FUNGURUME

LIK ASITFM

TFM

“The inhabitants of Fungurume consider this an unwarranted infringement on their freedom to travel and a clear indication that TFM has political protection while they do not.”

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FUNGURUME

LIK ASITFM

TFM

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The Tenke Fungurume concession

The Tenke Fungurume Mining (TFM) company controls a 1,600 square kilometre mining concession in the Democratic Republic of Congo (DRC). The company has three shareholders: Freeport McMoRan Copper & Gold Inc., which operates the mine and holds 56 percent of the shares, and is the world’s largest publicly-traded copper company; Lundin Mining (24 percent); and, the state-owned Gécamines (20 percent).

Impact of the Tenke Fungurume mine on local communities

A delegation consisting of two members of the Southern Africa Resource Watch (SARW) and two representatives of the ad hoc Episcopal Committee for Natural Resources of the Congolese National Episcopal Conference (CERN/CENCO) visited Fungurume, which is located in the TFM concession, in July 2011. The aim was to consult a wide range of officials, members of institutions, groups and organisations, and other interested individuals living in the concession area about the impact of the TFM mine on their lives and livelihoods – and to provide local communities with an opportunity to voice any concerns about mine-related changes in and around the towns of Fungurume and Tenke.

ocated around 180km north-west of the city of Lubumbashi in the southern province of Katanga, the Tenke Fungurume deposits

make up one of the most important reserves of copper and cobalt in the world with abundant quantities of high assay ore. The TFM project, which started in 2009, focuses on the extraction and processing of ore with an average assay of 2.1 percent for copper and 0.3 percent for cobalt.1

The open cast mine operates with surface miners, mechanical loaders and dump trucks and current production forecasts are 115,000 tonnes of copper and 8,000 tonnes of cobalt annually – figures that a TFM senior manager said were achieved in 2010, producing an income of nearly US$1 billion. Drilling, exploration and metallurgical trials are currently under way to evaluate the total potential of the mining reserves more precisely.2 However, the reserves have been estimated at 119 million tonnes.

According to TFM’s brochure, the company plans to drastically scale up production over the next five to seven years by developing a world-class mine, which is capable of reaching an annual production of 400,000 tonnes of copper alone per annum. The investment injected into the project is estimated at more than US$2 billion – the largest mining investment to date in the DRC.

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1. TFM, summarised description taken from the management committee’s proposal to

the Board, June 2007,

2. TFM Information sheets

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Economic disempowerment

Previously, the main source of income in the region was agricultural produce. However, farmers have lost their fields – without adequate compensation in most cases – and now struggle to find good vacant land for their crops because almost all the most fertile agricultural land is located within the concession area, and TFM does not allow the former owners to farm there. Farmers have to walk long distances to find an area where TFM still allows farming and the yields from these new fields are often mediocre, even though TFM does provide them with some agricultural products, such as fertilisers, as compensation for their lost land. However, this programme is only due to run for three years. So the question raised by the farmers is what they will do then?

The same problem applies to artisanal miners, who are denied access to the source of their livelihoods. People living within the concession even have trouble collecting stone or wood for construction because everything – even natural resources like rocks and trees – belongs to TFM. As a member of the Federation of Congolese Enterprises (FED) said, “It is as if TFM has bought the minerals and people of Fungurume: we are prisoners.”

This loss of traditional livelihoods has not been compensated for sufficiently by the provision of extra funds or jobs on the mine. Indeed, the general expectation that TFM would employ local labour and use local contractors does not appear to have been met. According to its initial programme, TFM intended to employ 4,500 workers at peak operations. It currently has a staff of 2000 full-time workers and about 1500 contractors. TFM claims that 98 percent of its workers are Congolese and that it prioritises the hiring of locals. However, this is disputed by the people of Fungurume – and by both local administrators and elected representatives – who argue that the mine appears to prefer to hire workers from outside

the Tenke Fungurume area. Even those local people who have university degrees apparently do not meet the requirements of the mine. An example of the mine’s general attitude is that it used to advertise vacancies on its website in the full knowledge that very few inhabitants of the region can access the internet. There is now a TFM liaison office in Fungurume to assist with recruitment but local people say it has made little difference. And even when the mine does recruit locally, it uses fixed-term – in other words, temporary or casual – contracts. The exclusion of local people from employment at the mine raises a serious suspicion that TFM is avoiding employing local people who might be more likely rise up to demand better work conditions and better wages than outsiders.

The situation regarding the use of local contractors is equally unpromising. Back in 2009, TFM held a meeting with representatives of small and medium-sized enterprises, which attracted more than 200 local contractors. However, businessmen in Fungurume complain that their tenders for TFM contracts always fail. None of the 18 economic operators, who are members of the Federation of Congolese Enterprises (FED) Fungurume, has been able to conclude a sub-contract with TFM. Even when they fulfil the contract conditions after the call for a tender, local economic operators are not selected and no valid reason is given. TFM defends its position by saying that it has assisted with the development and technical training of more than 60 small and medium enterprises and that it has supported the supply of goods and services by local suppliers and contractors. But local contractors flatly refute this.

It appears that the mine follows a policy of exclusion in relation to Fungurume and the surrounding area. It does not use local businesses to provide goods and services and it houses its workers brought from outside Tenke Fungurume area in a hostel, known as Camp Bravo, more than 10 km away from Fungurume town. Camp Bravo was built by TFM to house

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Freeport McMoRan versus the people of Fungurume: How the largest mining investment in DRC has brought poverty not prosperityOPEN POLICY 03

more than 1,500 employees – the majority of whom are men. Fed, housed and transported to-and-from the mine by the company, these employees do not spend their money in Fungurume town so there is no benefit to the local economy. Instead, they send their salaries home to their families in Kinshasa, Lubumbashi, Likasi, Kolwezi and elsewhere. The company should close Camp Bravo and allow its workers – and their families – to live in Fungurume, where they will support the local economy.

Without the inf low of money from the mine, the economy in Fungurume is stagnant. It no longer has an agricultural base and has insufficient resources to become an industrial town. At the same time, the city has seen its population more than triple from 30,000 to 95,000 in recent years (due in part to the migration of people from the rural areas in search of work). But despite the growth in the population, formerly f lourishing businesses have closed down for lack of customers – and the majority of people are struggling to scrape a living.

Mining taxes and misdirected expenditure on social development

Since TFM was established in 2006, the company claims to have paid US$391 million to the government, including US$112 million for social benefits and other related social obligations; US$108 million for customs duties and related taxes; US$143 million for royalties and other tax obligations; and, US$28 million for work permit, visas and other related payments.

Clearly this is a substantial amount of money but it does not mean that this figure is fair or sufficient. In particular, there are calls for an adjustment in the number of shares held by the state-run Gécamines – perhaps from the current 20 percent to more than 30 percent.

“The people who have been relocated have seen their lives and livelihoods deteriorate rather than improve.”

There are also justifiable demands for TFM to publish the total profits that it obtains from the sale of the ore. TFM also claims to have spent US$36 million on social responsibility projects, including rehabilitating schools, upgrading the basic health centre, providing taps, improving roads, village relocation programmes, and the ‘re-establishment of the means of subsistence’. However, the general opinion of most of the interviewees was that the people who have been relocated have seen their lives and livelihoods deteriorate rather than improve, particularly as new means of subsistence have not been created – and infrastructure promises have not been kept.

As the team discovered when visiting Fungurume, it is difficult to detect TFM’s social contributions. Although taps have been provided, they have not all been intelligently sited in relation to their users. For example, during the rainy season, some of them become inaccessible for the families they were intended to serve. The schools built by TFM are woefully inadequate: in one case eight classrooms were provided, whereas 48 had been promised. While the hospital has been increased in size, its capacity to treat patients has not been improved because nothing has been done to modernise or augment its equipment.

The mine has started a Social Development Fund, which is allocated 0.3 percent of the net

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income of its metal sale. The Fund currently contains US$6 million, which is apparently intended to improve educational and sanitation facilities in the area. When TFM announced the creation of the Fund, it envisaged that it would be administered by representatives of the mine and the local community working together. However, none of the interviewees knew who manages the Fund or how that money is used or how much has been spent over the years. The community complains that it is not consulted on projects that the Fund finances, which are decided upon by TFM personnel.

Lack of consultation

Dealings between TFM and the population of the Tenke Fungurume region involve an almost complete lack of communication. Although TFM has established a Community Relations Office in Fungurume, its function is restricted to receiving complaints and submitting them to senior management at the mine. The office manager could not even answer simple questions without referring the matter to her bosses in either Lubumbashi or Kinshasa. Interventions made by TFM to demonstrate social responsibility tend to be designed and implemented unilaterally, without any real consultation with the parties most affected. The population of Fungurume acknowledges that they do have occasional meetings with TFM but that these are purely informative since the decisions have already been made. A particular source of grievance is that TFM’s land compensation plan has been poorly applied. As one inhabitant said, “TFM does not consult and does not take into account the populations’ points of view.” Another described the relations between TFM and the local population as like “An elephant which passes through a village and does not pay any attention to the barking dog.”

The power of TFM is illustrated by the company’s decision to erect barriers on the

national road to Likasi to control all the ore-transporting vehicles that use the route. The team that supervises each barrier consists of two TFM employees, one mine policeman and one state policeman – suggesting that these roadblocks have the approval of the DRC government. The inhabitants of Fungurume consider this an unwarranted infringement on their freedom to travel and a clear indication that TFM has political protection while they – the citizens of Fungurume – do not.

TFM’s close links to the authorities were also demonstrated in 2010 when hundreds of artisanal miners organised protests against TFM, which they accused of preventing them from mining on a few hills for their own survival. The police intervened and many people were wounded. It was clear during the clashes that the authorities were firmly on the side of TFM rather than the people of the area.

There are also concerns about TFM’s environmental impact. According to TFM, the company adheres to risk management strategies and complies with legal provisions and voluntary commitments in order to reduce the negative impacts of mining. TFM is supposed to have invested more than US$50 million in environmental conservation. But the TFM concession contains 292 hills and what will happen to the environment of the area when these are mined over the next 50 years. And what good are TFM’s claims if local environmental services are not given access to TFM installations since they cannot possibly evaluate the environmental impact without knowing more about the company’s operations.

Furthermore, people living along the Fungurume-Likasi road are inhaling dust from the large vehicles transporting TFM’s ore. The impact of this dust on human health is considerable yet this situation has hardly been addressed by the provincial authorities.

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Freeport McMoRan versus the people of Fungurume: How the largest mining investment in DRC has brought poverty not prosperityOPEN POLICY 03

Recommandations

TFM

•TFMmustimproveitsconsultationwiththelocalpopulationtoensurethatsocialprojectshavealong-termpositiveimpactonsurroundingcommunities

•TFMmustincreasethetransparencyoftheSocialDevelopmentFundanddirectlyinvolvethepopulationindecision-making

•TFMmusturgentlyclosedownCampBravotoensureemployeeslivewiththelocalcommunityandtoboostthelocaleconomy

•TFMmustfavourtheemergenceofalocalmiddleclassbygrantingsub-contractstolocaloperators

•TFMmustgivetheinhabitantsaccesstofertileagriculturallandfortheirsubsistenceandencouragelocalagriculturalproductionandco-operatives

•TFMmustallowtheinhabitantstocollectlocalconstructionmaterialssuchasstoneandwood

Government

•Governmentshouldurgentlyrehabilitatetherailwayssothatorecanbetransportedbyrail,whichwouldlessentheimpactonthehealthoflocalcommunities

•GovernmentmustgivethelocaladministrationtheresponsibilityformanyissuesratherthandecidingontheminKinshasaandLubumbashi

•Governmentmustimmediatelyremovethebarriersonthenationalroad

Civil society

•Fungurumealreadyhasanumberofbodies–suchasFED,theco-operativeAssociationofFarmers,StockBreedersandForestryandMiningOperators,andtheFederationofAgriculturalAssociationsofCongo–thatcouldlaunchaconcertedcampaigntoholdTFMtoaccount

•Localcivilsocietymustbeorganisedanditscapacitystrengthened•Thereisaneedtostrengthenthecapacitiesoflocalcommunitiessothatthey

canparticipateeffectivelyindiscussionswithTFMandthegovernment

Conclusion

At present, it appears that multinational mining companies in the DRC are able to serve their own best interests without any supervision from the government, or any concern for the socio-economic effects their operations may have on local communities. Although TFM produces documents that

promise substantial benefits to these communities, very little has actually been done to improve their lives. On the contrary, in the three years since TFM started digging up their copper and cobalt, the people of Fungurume have experienced an increase – not in prosperity – but in poverty.

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The mission of the Southern Africa Resource Watch (SARW) is to ensure that extraction of natural resources in southern Africa contributes to sustainable development, which meets the needs of the present without compromising the ability of future generations to meet their needs. SARW aims to monitor corporate and state conduct in the extraction and beneficiation of natural resources in the region; consolidate research and advocacy on natural resources extraction issues; shine a spotlight on the specific dynamics of natural resources in the region and building a distinctive understanding of the regional geo-political dynamics of resource economics; provide a platform of action, coordination and organization for researchers, policy makers and social justice activists to help oversee and strengthen corporate and state accountability in natural resources extraction; and, highlight the relationship between resource extraction activities and human rights and advocate for improved environmental and social responsibility practices. SARW focuses on 10 southern Africa countries but is also working to build a strong research and advocacy network with research institutions, think tanks, universities, civil society organizations, lawyers and communities in southern Africa, the African continent and beyond that are interested in the extractive industries as it relates to revenue transparency, corporate social responsibility, human rights and poverty eradication.

Henry Muhiya is the secretary of the Ad-hoc episcopal Commission on Natural resources

in the DrC. Previously, he worked for the episcopal Commission for Justice and Peace in charge of its programme on reconciliation

and good governance.

Claude Kabamba is the Director of the southern Africa resource Watch (sArW).

Before joining sArW, he worked as the Chief research Manager of the Human sciences

research Council and the research Manager at the electoral Institute of southern Africa.

He has also worked at the Development Bank of southern Africa as a trade policy

analyst. Claude holds an MA in International relations (Political economy) from the

university of Witwatersrand.

Georges Bokondu Mukuli has an LLB from the university of Kinshasa. He has been

sArW-DrC Manager since 2008. He has also worked in the DrC President’s office as

a legal and administrative adviser.