KATANGA'S NEW GOVERNOR: MAN WITH A BOLD PLAN

C O N F I D E N T I A L SECTION 01 OF 02 KINSHASA 000330 SIPDIS SIPDIS E.O. 12958: DECL: 03/08/2017 TAGS: PGOV ECON EMIN ZA CG SUBJECT: KATANGA'S NEW GOVERNOR: MAN WITH A BOLD PLAN Classified By: ECONOFF WBRAFMAN FOR REASONS 1.4 b/d. ¶1. (C) Summary. Katanga Governor Moise Katumbi is an ambitious political newcomer with bold plans for Katangan revival. His stated priorities for the province include increasing provincial revenue and supporting social development, and he has indicated his tactics will not necessarily be orthodox. End summary. Background - Skeletons in the Closet -------------- ¶2. (C) EconOff met February 21 with new Katanga Province Governor Moise Katumbi. Katumbi is a young, charismatic and attractive - if not very intellectual - political newcomer and strong supporter of President Kabila. He is keenly aware of his popularity and the fact that it and his donations for public projects were the primary reasons for his election. Katumbi is a successful businessman; he owns the DRC's best-known soccer team and was co-founder of the Mining Company of Katanga (MCK). Katumbi says his father is Jewish-Italian and his mother Congolese, but that he has renounced his Italian citizenship. ¶3. (C) Katumbi also makes no secret of his ties to former Zambian President Frederick Chiluba and his currently contentious relationship with the GoZ. He told EconOff Zambian officials expelled him about three years ago because he supported Chiluba, including what amounted to a gift of about USD 15 million. Following Katumbi's recent decision to suspend overland exports of unprocessed ore into Zambia, discussed below and septel, the Zambian Task Force on Corruption sent a request to the GDRC that Katumbi come to Zambia to give oral evidence in pending matters. Contrary to local and international media reports, Zambian authorities have neither charged Katumbi with criminal offenses nor requested his extradition. (Comment: It is not clear if the export suspension and Zambia's request are linked, but the timing is suspicious. End comment.) PRIORITIES - INCREASING REVENUE AND SOCIAL DEVELOPMENT -------------- -------------- ¶4. (C) Katumbi's stated priorities are to support economic growth that results in social benefits for the population. His tactics are aggressive. The goal he particularly emphasized is to increase Katanga's income, and to do so he intends to leverage the province's economic driver - the mining sector. His two-pronged approach is to combat the 
illegal export of ore, while pressuring mining companies to comply with their concession agreements. The DRC loses millions of USD annually in revenues from ore through theft, smuggling and fraud, particularly by way of the Kasumbalesa customs post in Katanga. Katumbi said he considers the numerous small to medium-sized trading firms operating in Katanga to be chiefly responsible for this illegal activity, including, per Katumbi, about 70 Chinese companies and several Indian and Pakistani firms. ¶5. (C) Katumbi put his words in action March 6, when he ordered the suspension of unprocessed ore exports from Katanga, following his visit to Kasumbalesa. The Vice Minister of Mines told EconOff Katumbi did not have authority to take this action, and said the Ministry sent its Secretary General to investigate. (Comment: The GDRC has not publicly condemned this action. End comment.) In an Official Communique and letter announcing this suspension, Katumbi says he took the action to stem customs fraud that results in the loss of public revenue. ¶6. (C) Katumbi is targeting the higher end of the mining sector - large foreign mining companies - as a means to increase public revenue. He expressed particular concern about the loss of revenue due to companies who hold but have not developed mining concessions. During the meeting with EconOff, and recently in public, he said companies that do not comply with their agreements with the GDRC and Gecamines, the DRC's copper/cobalt mining parastatal, will face consequences that could include revocation of their concessions. (Note: Provincial Governors do not have the power to annul or enforce mining agreements. End note.) According to the DRC Managing Director of First Quantum (Toronto and London AIM-listed),Katumbi privately told First Quantum that mining companies will do what the GDRC tells them or face problems. In discussion with EconOff, Katumbi did not seem to care greatly about pressing for the review of most existing joint venture contracts with Gecamines. KINSHASA 00000330 002 OF 002 ¶7. (C) The new Governor also told EconOff he will unilaterally withhold forty percent of GDRC income generated in the province. The new DRC Constitution stipulates that the provinces are entitled to a forty percent share of national revenue, but it does not clarify how that process will work, nor does it authorize provincial governors to make this determination. Parliament must pass legislation to set out the procedure for this revenue-sharing arrangement; it is expected that the law will require all provinces first to remit all national revenue to Kinshasa and await the 40-percent retrocession. Katumbi made clear to EconOff he believes he and the province have enough political and economic clout to take unilateral action. ¶8. (C) Katumbi spoke at length about the need to develop sustainable development programs in Katanga. He said mining companies in particular need to take a major role in this socioeconomic effort. While World Bank projects might be useful, according to Katumbi they need greater oversight, transparency, and management. CONFLICTS OF INTEREST -------------- ¶9. (C) During his meeting with EconOff, Katumbi made several remarks suggesting conflicts of interest. For example, he repeatedly praised Nikanor - a London AIM-listed copper/cobalt mining company in the DRC. Several days later international trade media reported a USD 30 million deal construction contract between Nikanor and MCK, the company Katumbi co-founded and from which he claims to have divested. (Note: Katumbi also mentioned several times he remains close friends with his former partner, MCK's current owner. End note.) By contrast, he made repeated, negative references to Belgian businessman George Forrest, including a comment that Forrest's mining company contract with Gecamines is the only one the GDRC should seriously consider reviewing. He denied his views are influenced by the fact that Forrest's mining and construction businesses are MCK's and Nikanor's competitors. COMMENT -------------- ¶10. (C) Katumbi is not afraid to cut corners to fulfill his populist promises to Katangans of economic prosperity and social development. He is willing to take unilateral action on issues the national government has thus far failed to address, such as ending customs fraud and smuggling of natural resources from Katanga. Whether he actually has the public good or his own interests in mind is, however, debatable. In any case, as the hand-picked gubernatorial candidate of insiders close to Kabila, Katumbi will be reined in should he roam too far. End comment. MEECE