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DRC: Congo Investors Beware of 'peace-means-war' deal

Bottom Line: A DRC “peace” deal signed in Ethiopia last week is a “war” deal that will see the creation of a UN-backed “military brigade” of 2,000-2,500 South African troops who will descend on North and South Kivu to fight M23 rebels who are threatening the Congolese government’s control of the area. Control of the country’s mineral and oil resources will be remapped to some extent in the chaos. Look to South Africa for answers.

Analysis: South Africa is keen to back the Congolese government against any opposition (most notably right now M23) to protect its dubious rights to two oil blocks in eastern DRC. In 2010, the Congolese government awarded these oil blocks to two companies (Caprikat and Foxwhelp) registered in the British Virgin Islands and tied to Khulubuse Zuma, the nephew of the South African president. This situation has kept other foreign investors away.

Also linked to the oil blocks is Israeli businessman Dan Gertler (a major investor in DRC who enjoys very close ties to DRC President Kabila. Right now, these oil blocks are languishing in a state of non-activity. South Africa will use this UN-backed opportunity to secure its foothold in DRC, and its interest go well beyond these two oil blocks: South Africa is deep in the mining sector, and has its eyes on a massive dam on the Congo River which would eventually be able to provide power to South Africa’s entire industrial sector. This is the big prize. It made gains towards this in 2011 with an MOU on the dam’s construction with the DRC President, but there is a significant amount of opposition within DRC to this project, which some elite opposition figures oppose: They want the dam for DRC, not South Africa.

There has been no movement on the dam since the 2011 MOU.

Recommendation: Forego any potential investment opportunities in DRC for the time being. Once South African troops descend on the scene in greater numbers, we can expect an intensified conflict and a remapping of the playing field in terms of resource control. (ISA Intel networks are closely following the movement of key players in the energy industry as this develops).




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