Mr. Jac Nasser
BHP Billiton Limited and BHP Billiton Plc
RE: Proposed BHP Billiton smelter and Inga 3 in Democratic Republic of Congo
Dear Mr. Nasser,
We wish to bring your attention to the adverse impacts of BHP Billiton’s ongoing negotiations with the government of the Democratic Republic of Congo (DRC) for a $5 billion aluminum smelter near the port of Banana on the Atlantic Coast to be powered by the proposed Inga 3 hydropower scheme. In one of the world’s poorest and most corrupt countries, this purely commercial venture is set to reinforce existing poverty. Without due action, it will cost the Congolese people electricity, jobs and development.
In February 2006, BHP Billiton signed a Memorandum of Understanding (MoU) with the Congolese government to develop a massive aluminum smelter, now valued at $5 billion, in Bas Congo Province. The smelter would produce 800,000 tonnes of aluminum per year and consume 2,500 MW of electricity. Prerequisites for the smelter’s construction include the availability of electricity from the $3.5 billion, proposed Inga 3 hydro scheme and construction of a $500 million deep sea port. In 2007, BHP Billiton agreed to finance a feasibility study for the 4,500 MW Inga 3 project. The Banana deep sea port may be constructed as part of an infrastructure-minerals deal now under discussion between the governments of DRC and South Korea.
The MoU between BHP Billiton and the Congolese government conflicted with the DRC’s pre-existing Westcor agreement – signed in 2004 – to develop and equitably share Inga 3 power with four other African countries. It appears that BHP Billiton negotiated the proposed smelter, despite the conflict it would cause over electricity supplies. BHP Billiton’s interests led to Westcor’s eventual cancelation of the Inga 3 project, resulting in strained relationships between the Congolese government and other Westcor member governments. BHP Billiton’s behavior raises concerns that the corporation may advance its interests in Inga 3 and the aluminum smelter at any cost.
Consequences to the Power Sector
Just 6% of Congolese people have access to electricity, representing one of the world’s lowest access rates. The Congolese government has set a goal to increase access to electricity to 60% of its population by 2025. But development of Inga 3 does not actively support this goal, and would likely derail any progress toward that goal. Capital investments required for Inga 3 would reduce government resources for smaller, hydropower dams in areas currently not electrified. Excess power from Inga 3 may be delivered to Kinshasa, Katanga’s mining industry or even to South Africa, but it won’t improve DRC’s access rate. Without a clear government plan for reaching DRC’s access to energy target (60% by 2025), BHP Billiton’s negotiations will adversely influence the much-needed expansion of national power distribution.
Current efforts to rehabilitate the Congolese power grid, namely the Inga 1 and Inga 2 dams adjacent to the proposed Inga 3 site, have stalled. The situation is likely the result of limited government interest to effectively execute the rehabilitation for the public good. Corrupt systems within government are also expected to be causing delays and concerns about financial accountability. By continuing to advance the Inga 3 project in spite of the Congolese government’s poor track record to rehabilitate the national power supply, BHP Billiton is demonstrating its own disregard for the Congolese people.
Consequences to Development
Aluminum smelters create some of the most energy-intensive jobs in the world. BHP Billiton suggests that the new smelter would create 1,200 permanent jobs and require 1,600 sub-contractors, representing an astounding 4,286 MWh of consumed electricity per job/sub-contract. While these jobs and local sub-contracts are important, they come at the opportunity cost of similar investments which could create more jobs and local development. Attracting a variety of manufacturing and processing industries to the region could create far more jobs, spurring the local economy while consuming the same amount of, or even less, electricity.
Aluminum smelters also pay some of the world’s lowest electricity tariffs. Other electricity consumers, especially Congolese households, are at risk of paying higher power tariffs to offset the disproportionately low tariffs BHP Billiton is expected to negotiate.
In order to justify low power tariffs and energy-intensive job creation in a country with such low energy access rates and high unemployment, other economic and financial benefits are expected to offset the opportunity cost. However, investment contracts commonly reduce tax burdens and royalty rates paid to the state. Indirect economic benefits, such as indirect job creation, can also be misleading as they would likely accompany investments in other new industries as well.
Without transparency in investment and power sales contracts between BHP Billiton and the Congolese government, these contracts are expected to provide preferential terms to BHP Billiton, at a cost to the Congolese people through unearned state revenues and subsequent state development projects.
Given these factors, we fear that BHP Billiton’s commercial plans to develop its massive Congolese aluminum smelter using Inga 3 power will come at an unacceptably high cost to Congolese citizens. We ask BHP Billiton to work in partnership for the development of the Congolese people by taking the following steps:
- In order to promote the government’s attention to existing power grid rehabilitation and access targets, we call on BHP Billiton to:
- Agree to a moratorium on promotion and planning of Inga 3 until the rehabilitation of Inga 1 and Inga 2 is successfully completed and the government has prepared an action plan to achieve its 2025 electricity access target of 60%;
- Make no financial agreements for the development of Inga 3 or the proposed aluminum smelter until the Congolese power sector has demonstrated at least two years of successful, post-rehabilitation financial and technical operation of its Inga 1 and Inga 2 dams.
- In order to ensure that the projects will provide fair economic benefits for the people of DRC, we call on BHP Billiton to release the terms of its MoU with the Congolese government and agree to the transparency of the terms of all future contracts related to the development of Inga 3 and the nearby aluminum smelter.
We understand that BHP Billiton takes its commitment to sustainable development very seriously. We ask that you take these outlined actions in the spirit of those commitments. Without these actions, profits made by BHP Billiton from these investments would undermine the development of Congolese people. We look forward to your response.
Jean Claude Katende
ASADHO – African Association for the Defense of Human Rights (DRC)
Southern Africa Resource Watch (South Africa)
Nondo E. Ejano
Women’s Global Network for Reproductive Rights (Tanzania/Philippines)
Justiça Ambiental! Friends of the Earth- Mozambique
groundWork, Friends of the Earth – South Africa
Friends of the Earth – Australia
Indigenous Peoples Links (UK)
The Corner House UK
Friends of the Congo (US)
Capacity for Development (Belgium)
Terri Hathaway and Lori Pottinger
International Rivers (US)
London Mining Network (UK)
Urgewald e.V. (Germany)
Mr. Ian Wood
Vice President Sustainable Development
Dr. Xolani Mkhwanazi
President and Chief Operations Officer, Aluminium South Africa