What role does KPMG play in the DRC mining industry?

The mining industry plays a significant role in KPMG’s operations and represents a considerable amount of our revenue in the DRC. The company provides audit services, tax services and advisory services to the mining industry, and we work with companies across the board, but currently the majority of our clients are in the major category. Our advisory services relate to everything from financing and optimizing project infrastructure to IT management. In addition, we provide on-site training to mining companies where we, for example, help them navigate the new mining and subcontracting laws. The training sessions are very thorough, and, in addition to workshops and presentations, we often do scenario exercises to prepare the company for real situations. Currently, we have offices in Lubumbashi and Kinshasa as well as Goma where we are the only major tax and audit firm present.

In your advisory role, how can KPMG assist companies in navigating a politically volatile environment?

Key aspects to navigating a politically volatile landscape include having a deep understanding of existing laws, understanding which laws are likely to remain versus those that are subject to change and also to maintain close dialogue with leadership. However, in the situation we experienced after the shift in leadership last year when the new mining code was signed into law, all we can do to assist companies is help them understand the new law and restructure their financial plans. The significant change that the new mining code heralded was the amendment made to the stability clauses where the 10-year period of stability was slashed to five years. This obviously frustrated many of the big companies as the 10-year stability clause had formed the basis of many investment decisions in the country. This period of stability resulted in over US$10 billion in direct investments by the mining industry and created some 20,000 full-time jobs. However, comparing to other mining codes in Africa, the mining business can still be profitable in DRC.

In addition to the risk of changing laws and regulations, what are the main investor deterrents in the DRC?

There is a long list of factors that deter investors from entering the country, and at the very top of the list is corruption. The issue is that corruption is so widespread, it touches the entire country and across sectors. Ironically, the ones who are often hit the hardest are the people who attempt to do business in a law-abiding manner. Approximately 70% of our economy is informal and several entities escape from paying taxes; the tax authority will instead target the remaining 30% and especially registered companies that are doing well as they know these companies have the money to pay the extra, illegal taxes. Maybe half of the registered companies are trying to abide by the law. After they have been exposed to racketeering, they have the option to take legal action. However, if they turn to the Ministry of Finance, the chance of getting their attention is unlikely, and if they choose to pursue litigation, the success of this path is not assured because their policies do not allow them to bribe the judges.

Unfortunately, this is the current reality of our country, and it is a reality that stops investors from investing in DRC. Some companies, like Anglo American, have come here, invested money and left after experiencing the high levels of corruption.

The government has pledged to stamp out corruption. Are tougher laws and reinforcement the way forward?

Tough regulation is pointless if the laws are not enforced. We already have a regulatory framework in place, but the issue is that there are no repercussions for ignoring that framework. In other countries where corruption is pervasive, it all happens behind closed doors and under the table. In the DRC, it is all out in the open because everyone knows no one will enforce the laws that forbid corruption. If corruption is called out or reported, someone might get suspended for a week or two, but we do not see someone sentenced to prison for corruption or bribery. We also have to realize that in order to stamp out corruption, we have to pay people enough to have a life. If a police officer continues to earn a salary of US$50 per month, he will be pressed for money and it is unsurprising that many turn to corrupt practices.

How have the heightened import taxes affected business in the country?

The import tax rates are not that high, so we have not seen a major impact. Hopefully, the regulation will incentivise more local produce as well as downstream investment and beneficiation. There is potential for downstream processing in the mining industry, such as battery plants, and I think the government is right to encourage this. The government also seeks to diversify the economy to lessen the dependence on a few commodities. So far, there has been talk of agriculture, but apart from that I have not heard a holistic plan for diversification.

KPMG has a solid track record of never having been involved in a corruption case. What are your standards and procedures to maintain that record?

From a recruitment perspective, our employees go through training that clearly teaches them what corruption means and how exactly to comply with existing laws. Everyone in our staff has to sign an anti-corruption engagement at the beginning of every financial year. We also combat corruption by paying our staff adequately, which gives them a chance to forecast their financial future and also envision a long-term career in the company.  From a practice perspective, the most crucial aspect is to be independent from your client: this means never having an investment in a client company or family members working for the company. In addition, there are always a minimum of two people working on every assignment as a way of keeping checks and balances.

Where do you see opportunity for growth for KPMG in the mining space?

There are valuable metals such as copper all over DRC, but right now we want to increase our engagement with the mining sector in Katanga and especially Kolwezi. We see a lot of future potential in Kolwezi, and we are in the process of opening an office there with plans for completion later this year.