On July 27, 2005 the President of the World Bank Group, Paul Wolfowitz, requested that the CAO audit the Multilateral Investment Guarantee Agency’s (MIGA’s) due diligence for the Dikulushi Copper-Silver Mining Project in Katanga Province of The Democratic Republic of the Congo (DRC). A key issue addressed by the audit related to MIGA’s due diligence with respect to security and human rights.

The project was developed by Anvil Mining, a Canadian company, and has been in production since 2002. Anvil Mining provided logistical support to the army in October 2004. When the town of Kilwa, some 50 kilometers from Dikulushi, was taken over by a small rebel group. Kilwa is the point of export for Dikulushi copper and silver concentrates to Zambia. In reestablishing control over the town, the armed forces of the DRC allegedly killed civilians, including by summary execution, looted, and carried out other crimes including extortion and illegal detention. In April 2005, Contracts of Guarantee were issued by MIGA providing $13.3 million of political risk insurance.

CAO found that MIGA adequately followed its underwriting and risk management due diligence, but that these core business processes did not address whether the project might either influence the dynamics of conflict or whether security provision for the project could indirectly lead to adverse impacts on the local community. While MIGA’s initial adherence to its Environmental and Social Review Procedures (ESRPs) was adequate, CAO considers that its follow-through on some social aspects was weak. CAO found that weaknesses in the ESRP due diligence, and on conflict and security issues specifically, echo a number of concerns that were the subject of recommendations by CAO in its 2002 review of MIGA’s ESRPs. 

Regarding security and human rights, CAO found that MIGA did not fully understand the implications for its client of implementing the Voluntary Principles on Security and Human Rights (as required by the Management Response to the Extractive Industries Review), nor did it assess whether its client had the capacity to properly implement them.

CAO also notes with approval that in its due diligence, MIGA for the first time took steps to engage with NGOs at the project level and to include provisions in the Contracts of Guarantee to reinforce the potential local benefits.

The full text of the report can be found below, including a comprehensive account of the findings and recommendations.