Lack of electricity hinders DR Congo mining sector

The minerals in the south-eastern Katanga region represent potential riches for the Democratic Republic of Congo, but a lack of electricity is preventing the country from fully exploiting them.

In Katanga's regional capital Lubumbashi, power cuts regularly shut down the furnace at the STL factory that extracts cobalt, copper and zinc oxide from a nearby mountain of slag.

It takes 34 megawatts of electricity for the site's giant furnace to operate at full capacity, but DR Congo's national power company Snel is only supplying 24 megawatts.

"We are living in a situation of continual stress and it's hell," said Jean-Pol Tavernier, STL's maintenance director.

Worse still, according to Tavernier, are the outages that disrupt production, sometimes several times a day, for up to seven hours.

"Electricity began to become a problem during the mining boom of 2006-2007," said Tavernier. "It kept on getting worse until becoming really catastrophic in 2012."

The lack of power has even forced Chinese company CDM to cut 300 jobs.

"We can't work with the little power we have," said CDM's director in Katanga, Akili Peter. "This is what forced us to shut down the four furnaces and lay off all those people working with us."

- Lacks about 600 megawatts -

DR Congo's mining sector had been enjoying a renaissance amid an influx of foreign investors and high commodity prices.

The state-owned sector had suffered from under-investment and mismanagement during the dictatorship of Mobutu Sese Seko from 1965 to 1997, only to be thrown into tumult during five years of war that followed his ouster.

But a new mining code adopted in 2002 brought improvement to the sector by attracting foreign investment to boost production with lowered tax rates.

That activity and Katanga's fabulous deposits have made the DR Congo a top producer of cobalt -- a metal used to make alloys prized by the high-tech industry -- and a major producer of copper.

The government is eager to promote further expansion of the mining sector to spur the overall development of the country, which despite over seven percent of average annual growth in recent years is still ranked among the world's least developed nations.

But Kinshasa has also proposed a contested reform of the mining code involving higher taxes for foreign investors that actors in the sector warn will further brake activity already stymied by the electricity shortage.

DR Congo's mining sector lacks about 600 megawatts of electricity according to Ben Munanga, director of energy and infrastructure at the Kazakh group ENRC, and who deals with mining energy issues on the country's Chamber of Business.

The problem is that the age and poor maintenance of its power stations do not allow state-owned Snel to meet electricity demands.

In 2013 it generated about 1,500 megawatts of electricity despite an installed capacity of nearly 2,450 megawatts, according to its website.

- 'Need new production' -

The head of the Snel's grid in Katanga, Jean Marie Mutombo Ngoie said the supply problem was just temporary.

"We think that within a year we'll be able to increase power..." he said, citing renovation of power stations that serve mining companies as a reason for his optimism.

But Munanga also noted "that won't absorb all of the deficit. You need new production, that is the pressing need."

The problem of insufficient electrical supplies isn't exclusive to DR Congo. Regular power outages in South Africa led officials there to warn in May that shortages have significantly undermined economic growth. Even worse energy deficiencies beset cities elsewhere across the continent.

Awaiting enduring solutions some mining companies in DR Congo are installing generators to alleviate their power problems, while others import electricity from Zambia -- both expensive options.

The cost of lost production is also steep.

Munanga said copper output -- which topped one million tonnes in 2014 -- could be increased by 250,000 to 300,000 tonnes per year with more power.

DR Congo is faced with "horrible energy insecurity," said a source close to the government who requested anonymity as he warned "in the short term, the situation risks worsening" for the mining sector.

In partial response to that, the government issued a decree in April exonerating mining companies for four years from customs duties and sales tax on imported electricity and foreign equipment purchased to generate power.

While the mining companies appreciate that gesture, one executive said wryly that this shows "they don't have any real solution during the next four years."