The DRCs disastrous nationalisation policy

Mining in the Democratic Republic of Congo (DRC) was nationalised by President Mobutu Sese Seko on 31 December 1966, forming the new mining giant Gécamines (Générale de Carrières et des Mines). Initially, the original personnel were retained but over time the employees were replaced by political cronies. Between 1989 and 2003 copper production declined by 96 per cent, zinc by 99 per cent and between 1991 and 2003 cobalt production declined by 88 per cent. By 2009 production had fallen even further, copper to 13,367t compared to the 440,848t produced in 1989.

Prior to 1974 the Zairian (now the DRC) economy grew at 7 per cent per year. However, following nationalisation, the country started on a downward spiral that continues to this day. Despite its rich mineral wealth, World Bank data reveals that the DRC is the third poorest country in the world and approximately 73 per cent of its citizens live below the national poverty line.

The DRC has however permitted some private mining ventures, which are operating successfully, such as Metorex Ltd’s Ruashi mine that has been steadily increasing output. Metorex has also indicated that it will spend as much as US$400 million over the next five years to boost output of copper more than five-fold causing copper output to climb to 140,000t by 2012 from 25,350t in the year ended 30 June 2010.

Author: Jasson Urbach is an economist with the Free Market Foundation. The above is an excerpt from the chapter, Problems with State Ownership of Enterprises, he wrote for the recently published FMF book, Nationalisation. The views expressed in the excerpt are the author’s.

FMF Policy Bulletin/ 8 March 2011