The Democratic Republic of Congo (DRC) is both vast and mineral rich.
These two factors do not combine well and it is one of the most difficult places on earth for mines to operate.
Most of them set up in the eastern province of Katanga, the same region that was at the heart of a bloody civil war in the early 1960s when it tried to break away from the newly decolonised DRC.
Under its soil lies some of the largest, purest deposits of copper and cobalt, which now make up almost 90 per cent of the DRC's exports.
DRC continued to be the world’s leading source of mined cobalt, supplying more than one-half of world cobalt mine production, according to the US Geological Survey (USGS), Mineral Commodity Summaries, January 2017. With the exception of production in Morocco and artisanally mined cobalt in DRC, most cobalt is mined as a byproduct of copper or nickel.
In 2016, global cobalt mine production decreased, mainly owing to lower production from nickel operations. Growth in world refined cobalt supply was forecast to increase at a lower rate than that of world cobalt consumption, which was driven mainly by strong growth in the rechargeable battery and aerospace industries.
As a result, the global cobalt market was expected to shift from surplus to deficit. China was the world’s leading producer of refined cobalt and the leading supplier of cobalt imports to the United States. Much of China’s production was from ore and partially refined cobalt imported from Congo (Kinshasa); scrap and stocks of cobalt materials also contributed to China’s supply, USGS says.
In 2015 and 2016, China’s state reserve sureau purchased cobalt for its stockpile. China was the world’s leading consumer of cobalt, with nearly 80 per cent of its consumption being used by the rechargeable battery industry, the report says.
Because of the lack of infrastructure, mines have to build everything from their own power plants to airfields. For instance, Randgold Resources has built four hydrodams to supply its Kibali gold mine.
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All this adds to capital costs. The Luxembourg based Eurasian Resource Group now building a cobalt and copper mine in the DRC, will burn almost US$1 billion in capital before the project is ready to begin extraction.
It is also difficult for companies to avoid getting sucked into political conflicts there, which spring up readily. The Toronto-based Banro had to suspend work at its Namoya gold mine after a local ethnic militia cut off roads during a dispute with the DRC military.
Tensions are also high over the repeated delaying of elections that should have been held in 2016. The president Joseph Kabila is ineligible for re-election under the DRC's laws, having already served two terms. Opponents say Mr Kabila is deliberately stalling to prolong his time in power to enable family and supporters to continue looting the treasury.
According to Global Witness, $1.3bn - twice what the DRC spends on health and education yearly - disappeared between 2013 and 2015 alone.
The DRC also has vast hydro-electricity potential. The Congo River could generate twice as much electricity as China's Three Gorges Dam - enough to double Africa's entire electricity supply currently.
South Africa is considering sponsoring the project to build the necessary dams, but the daunting task of protecting the facilities and transmission lines from potential rebel attacks are among the reasons nothing has come of this so far.
Despite these deterrents, the DRC continues to attract mining companies because it is one of the last places on earth where large untapped reserves of cobalt, copper, gold and nickel are found.
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Company Profile
Name: Direct Debit System
Started: Sept 2017
Based: UAE with a subsidiary in the UK
Industry: FinTech
Funding: Undisclosed
Investors: Elaine Jones
Number of employees: 8
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
