Resource Governance Index Finds Significant Failings Across DRC’s Oil, Gas and Mining Sectors
28 June 2017
DRC’s mining sector ranks 75th among 89 assessments worldwide; DRC oil and gas comes in 84th
Gap between mining sector legal framework and implementation by government is significant
Country’s best index performance is in realizing value from minerals, but significant room for improvement remains
Gécamines ranks 53rd among 74 state-owned enterprises globally
DRC ranks last globally in subnational sharing of oil revenues, and revenue sharing in the mining sector performs poorly
DRC’s governance of local impacts of the oil and gas sector is rated poor
Cohydro is one of the least transparent state-owned oil companies in the world
KINSHASA, 28 June 2017—A global index assessing countries’ oversight of natural resources has painted a challenging picture for the Democratic Republic of Congo’s (DRC) mining and oil and gas sectors.
The 2017 Resource Governance Index, which is compiled by the Natural Resource Governance Institute (NRGI), gives DRC’s mining sector a poor score of 33 of 100 points for overall governance, ranking DRC mining 75th among 89 assessments. The country’s oil and gas sector scores lower, with 25 points, ranking 84th.
“In both oil and gas and mining, there is a lack of timely and reliable reporting supported by regular, independent audits,” says Jean-Pierre Okenda, country manager for the DRC. “There is a vital need for transparency in revenue flows and improvement in efforts to counter corruption and tax avoidance.”
Despite the importance of the mining sector in the DRC, governance challenges persist particularly in revenue management and the enabling environment—the degree to which rule of law, corruption control and freedom of expression prevail in a country. The DRC’s mining sector achieves a weak score of 52 of 100 points in the value realization category, reflecting a limited ability to raise revenue from the country’s resource endowment—although this is the country’s highest score in any component of the index. Lack of transparency around subnational resource revenue sharing, as well as a lack of fiscal rules, or disclosure of extractive resource revenue projections, results in a poor revenue management score of 35 of 100.
Gécamines, the DRC’s largest state-owned mining company, ranks 53rd among 74 SOEs assessed, and is representative of the DRC’s governance challenges. Little information is publicly available about the company’s joint ventures, contracts or the special fund into which proceeds from state-owned mining assets are deposited.
The DRC’s largely undeveloped oil and gas sector fares even worse with an overall score of 25 out of 100 points, ranking it 84th among 89 assessments. This result is reinforced by a lack of transparency in revenue management. The state-owned oil company, Cohydro, ranks in the bottom 10 among 74 state-owned enterprises assessed by the index. It has no website, and no annual financial reports are available to the public. Rules governing the fiscal relationship between the government and Cohydro are vague and rules on how Cohydro should sell its production share or oil collected in-kind from partners are lacking entirely. The parliament is not required to exercise oversight over the company, nor is there a requirement for an independent audit of DRC’s state-owned enterprises.
Of the broader political situation, Okenda added: “There is a lack of political stability in the country, and regular elections organized in accordance with the constitution are needed urgently. This situation impairs the ability of the government to fully utilize our rich resource wealth.”
The Resource Governance Index is the sum total of 89 sector-specific assessments in 81 countries (in eight countries NRGI assessed both oil and gas and mining sectors), formulated using a framework of 149 critical questions answered by 150 researchers, drawing upon almost 10,000 supporting documents.
For each assessment, NRGI has calculated the composite score using the scores of three index components. Two of the components comprise new research based on expert answers to the questionnaire, and directly measure governance of countries’ extractive resources.
The first component—value realization—covers the governance of allocating extraction rights, exploration, production, environmental protection, revenue collection and state-owned enterprises. The second—revenue management—covers national budgeting, subnational resource revenue sharing and sovereign wealth funds. The index’s third component assesses a country’s enabling environment. This componentdraws on pre-existing research to measure the broader governance context.