By David Lewis, Giulia Paravicini and Sonia Rolley
GOMA, Democratic Republic of Congo (Reuters) -The M23 insurgents who routed Congo’s army to take control of the eastern part of one of Africa’s most populous nations now face a task as mundane as it is daunting: governing.
The long-term success of their uprising – which aims to overthrow the current leadership in the capital of Kinshasa – requires showing they can bring order and prosperity to the regions they already hold. Whether they can pull it off depends in large part on reviving the economy in seized areas that are home to more than five million people.
Virtually all banks are closed. Currency shortages abound. With supply chains disrupted, prices of some staples have jumped. Now residents are finding themselves subject to new taxes imposed by the insurgents, who need money to finance their revolution.
The changes can be seen near the town of Rubaya, where M23 has moved quickly to tighten its grip on a slice of Congo’s vast mineral wealth. Small, artisanal mines there produce around one-sixth of the world’s supply of coltan, a metallic ore crucial to the production of smartphones and other electronic devices. M23 now charges a tax of 15% on the value of that coltan production, according to rebel officials and traders who disclosed that figure for the first time to Reuters.
Rebel administrators are rolling out other levies too. Private businesses and aid agencies have been handed tax bills. They’re imposing duties as high as 20% on small-time traders to sell staples like bananas, cloth and cooking charcoal, even as cash-strapped consumers tighten their belts.
“Customers don’t come any more,” said Rachelle Monimpo, who sells cloth in a Goma market. “It’s becoming very complicated for us to get the money to pay this tax.”
Reuters journalists recently visited the M23-controlled cities of Goma and Bukavu, as well as Rubaya, a town to the west, and spoke to more than three dozen officials, residents, traders and businesspeople living or operating there. Most requested anonymity to speak freely about the latest upheaval in the years-long conflict in Congo. The fighting has displaced more than 4 million people, involved dozens of armed groups and sucked in armies from three neighboring countries. Over the past four months, M23 made a lightning advance across eastern Congo that has sent hundreds of thousands more residents fleeing.
During the day, the streets of Goma and Bukavu bustle with motorcycle taxis and pedestrians. Many businesses are open. The cities’ border crossings with neighboring Rwanda are booming as Congolese residents stream across to obtain cash and goods. As night falls, however, Goma and Bukavu are largely deserted, aside from rebel patrols and remnants of pro-government militia groups roaming the streets.
M23 receives backing from the government of Rwanda, according to the United Nations. In response, the United States, United Kingdom, Canada, Germany and the European Union have imposed a range of punitive measures, including cutting aid and sanctioning Rwandan officials and entities suspected of supporting the rebels.
Rwanda has repeatedly denied funding, arming or training M23. But Rwanda’s ruling party, mainly headed by ethnic Tutsis, shares the same concerns as the Tutsi-dominated M23 insurgents over the purported threat posed by rival Hutu groups operating in eastern Congo. Rwanda has said that it will do whatever it takes to defend itself.
Rwanda’s government spokesperson, Yolande Makolo, did not respond to questions sent for this story.
Guns alone can’t cement M23’s grip on eastern Congo indefinitely, says Zaynab Hoosen, a senior Africa analyst at Pangea-Risk, a South Africa-based consultancy. If the group fails to shore up the economy and restore essential services, she said, it “risks eroding local support and undermining its claims to legitimate governance, potentially weakening the durability of its rebellion.”
M23 officials disclosed their new coltan tax in interviews with Reuters, but did not respond to follow-up questions for this story.
BANKING WOES
Having seized Goma in late January and then Bukavu in February, M23 is keen to demonstrate that life there is returning to normal in the wake of fighting that the U.N. says killed at least 7,000 people.
The group has nominated governors in the respective provinces of those cities – North and South Kivu – and is training thousands of local administrators to take control of the civil service.
But paralysis in the banking sector reveals things are far from normal. Under pressure from Congo’s central bank in Kinshasa, banks remain shuttered in rebel-held towns. Gunmen tried to force their way into the vault of the Goma branch of the central bank on February 28 but couldn’t open it, three sources told Reuters. Videos posted on social media showed M23 troops deployed at the entrance to the bank that day.
Congolese francs and U.S. dollars are scarce. Kinshasa continues to pay the salaries of teachers and doctors in these areas, but like any local with a bank account, they struggle to access their funds. Including exchange rates, fees for mobile money transfers can be as high as 6%, three users said.
Residents and businesses needing currency sometimes travel hundreds of kilometers to bank branches in government-controlled areas of Congo, or to neighboring Rwanda. One Goma businessman said he regularly sends an employee to Butembo, a Congolese city to the north, on a week-long, 1,000-kilometer round trip via Uganda to obtain cash for operations.
Despite the hardships, Kinshasa won’t authorize banks to reopen in rebel-held territory because that would only serve to legitimize M23’s land grab “and make things easier for the illegal occupiers,” Daniel Mukoko Samba, Congo’s deputy prime minister for the economy, said at an April 14 press conference. “People in this part of the country are not suffering because of the government but because of the occupation.”
M23 leaders in April announced the re-opening of branches of state savings bank CADECO in Goma and Bukavu. “Open bank accounts. Launch and relaunch your activities. Dream again. Because this bank is yours,” the rebels said in a statement at the time.
But the branches are effectively cut off from Congo’s banking system with no way to obtain fresh cash. Some traders in those cities told Reuters they had paid their taxes owed to M23 at the re-opened CADECO locations but were uncertain if they could complete any other transactions there.
Samba, the deputy prime minister, told the press conference that CADECO was financially unsound even before M23’s invasion and is unable to guarantee depositors the full value of their savings as the institution is technically insolvent.
Colonel Joseph Bahati Musanga, newly appointed by M23 as governor of North Kivu province and the former finance czar of the movement, told Reuters the first new banking licenses would be handed out as early as mid-April. Reuters was unable to confirm whether any licenses had yet been issued.
But three banking experts told Reuters that any new bank would need to work with a foreign correspondent bank, and it’s highly unlikely that outside financial institutions would take the risk of getting hit with international sanctions to do business there. “No bank will come and set up shop there for M23,” one of the people said.
M23’s Bahati acknowledged that potential sanctions are an impediment. “We are currently figuring out how to solve this problem,” he told Reuters.
TAX HIKES
In a sign of deepening efforts to set up its administration – and generate revenue – M23 in March started overhauling existing tax policy and issuing its own tax bills. Reuters viewed a 562-page document issued in North Kivu detailing the range of levies that people and businesses there will have to pay under M23 administration.
That has put companies and aid agencies operating in rebel-held territory in a bind. Businesses that don’t pay could be closed by M23. Those that do risk violating U.S., EU and other sanctions by handing over cash to the rebellion.
One Goma-based importer said businesses in rebel-controlled territory had to juggle the conflicting demands of national taxes owed to Kinshasa for bringing goods into the country and the local levies that they must now pay the rebels. “We don’t have a choice. When they come through the door, you cannot tell them to go away,” he said. “You have to compromise and work with both.”
Traders in the informal economy said they, too, are getting hit by new levies collected by tax officials from the previous administration now working for M23. For women who sell brightly patterned cloth known as pagne, charcoal vendors, and farmers who grow fruits and vegetables in the region’s rich volcanic earth, the daily tax to sell in Goma’s lakeside market has more than doubled to 500 francs ($0.17), four traders said.
Bulonza Nzarimo Faustin said the taxes he pays to transport charcoal from the island of Idjwi on Lake Kivu to Goma now total around 25% of the value of the goods, leaving him little profit.
Jeanine Kahumbu, a palm oil trader in the Virunga market in Goma, said the tax collectors don’t play around. “If you don’t pay up, you risk physical punishment, like being whipped,” she said.
Locals have dubbed such levies “the Nangaa tax,” after the head of the Congo River Alliance, whose men are responsible for the tax hikes.
Neither Nangaa nor a spokesman for M23 responded to questions on these allegations.
NO MONEY, NO ADMINISTRATION
A brutal colonial legacy and decades of conflict have mired Congo in poverty, but its natural wealth is staggering. In addition to coltan, the nation boasts deposits of petroleum, copper, diamonds, cobalt, tin and gold. Over the years, rebel groups operating across eastern Congo have been funded, at least in part, by the illicit mineral trade. Kinshasa has issued edicts banning the export of all minerals extracted from areas under rebel control. Yet mining there continues.
In a December report, U.N. experts estimated that M23 was taking in $800,000 monthly from taxes collected from coltan mining in eastern Congo. Nangaa of the Congo River Alliance disputed that figure but did not disclose how much revenue insurgents collect from these levies.
During a visit to the Rubaya mine in March, three M23 officials told Reuters they were now charging a 15% tax on the value of all ore leaving the mine. They did not say how much total revenue has flowed to M23 as a result.
Reuters contacted a government expert with direct knowledge of the Rubaya mine, who said it produces $2.5 million to $3 million worth of coltan each month. That would equate to $375,000 to $450,000 in monthly tax revenue for M23.
The rebels also are profiting from their control of areas containing gold and tin mines worked by small-scale miners. In South Kivu, for example, M23 is charging traders $250 for a license to operate, and about $5 for every kilo of the tin oxide mineral cassiterite that’s extracted, three locals told Reuters.
M23 officials did not respond to further questions on mining.
Bahati, the rebel-appointed governor of North Kivu, said voluntary donations from members of M23 and other armed groups in the Congo River Alliance were another important source of revenue. He declined to disclose how much that brought in monthly but said individual contributions could range from $5 to $1,000.
In recent weeks, rebel advances have largely stalled. International attention is, for now, focused on diplomatic efforts let by Qatar and the United States to end the conflict. Having brokered an initial agreement in April, the U.S. government wants Congo and Rwanda to sign a peace deal within two months, a step that would trigger billions of dollars in Western investment, Massad Boulos, President Donald Trump’s senior advisor for Africa, said on May 1.
In the meantime, M23 faces the same challenge as the government it hopes to replace.
“You cannot run an administration without money,” the banking source said.
(Reporting by David Lewis and Giulia Paravicini in Goma, Democratic Republic of Congo; and Sonia Rolley in Paris.Editing by Marla Dickerson and Silvia Aloisi)
