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
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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
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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.

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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