Chinese firms have started building three major roads in the Democratic Republic of the Congo (DRC) following an agreement to raise investment to $7bn, from $3bn, under a new contract with state-owned mining firm Gecamines.
Under a joint venture (JV), two Chinese firms — Sinohydro and China Railway Group — will invest a further $3bn in developing a copper and cobalt mine in exchange for a 68pc stake in a JV with Gecamines, called Sicomines, as per the original agreement.
The firms have started on a $300m project to build a 63km ring road in the west of the DRC around the capital, Kinshasa, home to 17mn people.
The firms also plan to pave a 900km dirt road in the resource-rich province of Lulalaba between Mbuji Mayi and the town of Nguba, which will link to the highway between Kinshasa and the DRC's mining capital of Lubumbashi.
Also included in the plans is an upgrade to the 230km road between Kananga and Kalamba Mbuji, which leads to the border with Angola. The landlocked DRC relies heavily on ports in other countries, including Angola.
Neither party has disclosed new guidance for cobalt and copper production owing to the increased investment.
The deal follows years of disputes following an agreement made in 2008 that Chinese firms would invest $3bn in roads, railways, schools and hospitals for a 68pc stake in a Chinese-DRC JV.
The DRC last year demanded an additional $17bn in investment, according to the DRC state audit office, before the Chinese firms agreed to a $4bn figure.
This includes a $324mn investment, mostly in road infrastructure, every year from 2024-40, conditional on copper prices remaining above $8,000/t.
The LME 3M copper price traded at $9,150-9,152/t on Wednesday, above $8,000/t since 25 October last year, on a continued shortage of copper concentrate supplies and China's package of property stimulus policies.
Chinese mining firms accounted for 59pc of the DRC's total cobalt production last year. The DRC itself was home to 80pc of global production last year, according to industry estimates. Imports from the DRC accounted for 84pc of China's cobalt feedstock supplies.
China's grip on the region has expanded further still in recent weeks, with its Norin Mining having attempted to purchase Dubai-headquartered Chemaf Resources, the owner of two copper-cobalt mines in the DRC.
Overcapacity in the DRC has weighed heavily on chemical-grade cobalt metal prices in recent months, as demand has shifted to discounted Chinese chemical material. The midpoint of Argus-assessed non-Chinese chemical-grade material on Wednesday reached $12.325/lb, its lowest level since 5 August 2019.
Mixed reactions
"Where a road goes, development follows", Chinese foreign ministry director of African affairs Du Xiaohui said.
The ring road would be a "road to prosperity for Congo and the Congolese people", China's ambassador to the DRC, Zhao Bin, said, with the road offering the potential to reduce traffic jams for locals.
But the fruits of the investment for the people of the DRC are less clear, according to Mulengwa Zihindura, president of the Centre for Political and Strategic Studies and former spokesman for former president Joseph Kabila.
"I think this would be a very good thing for the country if this can be materialised," Zihindura said.
"[But] I have seen a lot of the Chinese roads that were built in the eastern part of the DRC, and it was disastrous. These are roads they try to build and they do not last long … they need a proper contract, proper people, well-trained to be able to build these roads, whether they get a loan or whether they exchange some of the country's resources with somebody."
