Why Kenya sees DRC’s entry as a game-changer to intra-regional trade in East Africa

By Mwangi Maina
Posted on Thursday, 30 December 2021 11:06, updated on Monday, 3 January 2022 16:13

Men hold flags during the launch of a new flight to the Eastern DRC city of Goma, at the Jomo Kenyatta International Airport (JKIA), in Nairobi
Men hold flags of the Democratic Republic of Congo and Kenya, near an airplane belonging to the Kenyan budget airline Jambojet, during the launch of a new flight to the Eastern DRC city of Goma, at the Jomo Kenyatta International Airport (JKIA) in Nairobi, Kenya, September 10, 2021. REUTERS/Edwin Waita

Kenya is intensifying its investment interests in the Democratic Republic of Congo. The country’s private sector recently sent a trade mission to the DRC.

As the DRC nears its official admission into the East African Community (EAC), Kenya organised a 200-member trade delegation to the central Africa country in November.

Kenyan firms that have expressed interest in the DRC include Jubilee Insurance, Equity Bank and Kenya Commercial Bank (KCB), which have started a plan to enter the country through acquisition of an existing lender.

Deepening relations between Kenya and the DRC

According to Equity Group — a key player in the strategy — the 15-day trade mission to the DRC, between 29 November and December 2021, was to deepen trade relations between Nairobi and Kinshasa.

“The […] mission will highlight trade and investment opportunities in DRC and is in line with both governments’ agenda of fostering regional trade and driving business growth by unlocking investment opportunities in East and Central Africa,” the banking group said in a statement.

It [DRC] has 11 major economic transport corridors that facilitate trade flows in the region while connecting with Central Africa, Southern Africa, and a part of East Africa.

The group added that the Kenya-DRC trade mission would be targeting over 200 investors and business participants from Kenya, and a similar number from DRC as well as the public. It would be held in four of the largest cities of the DRC: Kinshasa, Lubumbashi, Goma and Mbuji Mayi.

“Through the trade fair, Kenyan corporates /SMEs (Small and Mid-size enterprises)/entrepreneurs will get an opportunity to exhibit what they offer and partner with their counterparts in DRC, who will similarly be showcasing their business offering and seeking to partner with Kenyan entrepreneurs.

DRC has the most robust regional interconnectivity in the region making it favourable for cross border trade. It has 11 major economic transport corridors that facilitate trade flows in the region while connecting with Central Africa, Southern Africa, and a part of East Africa”.

Youthful population and resources

Speaking to Kenya Broadcasting Corporation on 12 November, Equity Group CEO James Mwangi said the group saw an opportunity in the DRC on account of its nearly 100 million population, most of which comprises the youth.

“When we went to DRC, only 4% of the population had bank accounts and that reminded [us] of Kenya in the early 90s.  That’s the huge opportunity that we saw: providing the Congolese with access to financial services,” he said.

We are going to see people moving from DRC to the region and vice versa, so the entry of DRC will be a game-changer in as far as intra-regional trade in East Africa is concerned.

The other opportunity that the group cited is in the DRC’s endowment of natural resources.

“Today, the world will not succeed with clean energy, particularly […] electric cars, without [the] DRC because it produces 70% of the world’s cobalt and almost 50% of the world’s copper… We also saw DRC’s potential in producing hydropower and feeding the continent, so we wanted to be pioneers in funding DRC so that it can realise its potential,” Mwangi said.

Asked about other sectors that investors might tap into, Mwangi mentioned agriculture, timber industry and local and regional supply chains, particularly in manufacturing.

DRC expected to grow

According to the Africa Development Bank, the DRC’s real GDP is expected to grow by 3.3% in 2021 and 4.5% in 2022 — despite Covid-19 shocks — driven by higher prices for major mining products, such as copper, and recovery in both consumption and investment.

The country’s growing economy; construction of roads, schools and health facilities; and factories to produce consumer goods also form part of the business opportunities.

During an interview, EAC secretary general Peter Mathuki told Kenya’s The Star newspaper that with its population, DRC will offer a huge market for the community, thus making the region economically competitive in the world.

“We are going to see people moving from DRC to the region and vice versa, so the entry of DRC will be a game-changer in as far as intra-regional trade in East Africa is concerned.

“In 2018, for instance, the value of imported goods into the DRC stood at $7.4bn. From this, the value of EAC exports to the DRC stood at $855.4m only, which represents just 11.5% of DRC imports. Consumables imports is about 31%, I’d even say from China, and South Africa, which is about 16%, while Zambia takes 15%” Mathuki said.

With DRC coming on board, the secretary general said the 11% is likely to multiply by four times to up to 50%.

Everyone wants a piece of the pie

It is not only Equity Bank that has seen an opportunity. The Kenya Commercial Bank (KCB) has also jumped on the bandwagon. In August 2021, the KCB Group announced plans – as part of its expansion on the continent – to enter the DRC through the acquisition of an existing lender.

Group CEO Joshua Oigara told The East African newspaper that the bank is in negotiations with “two to three banks” in the DRC, as it looks to settle in Kinshasa by the end of the year. “That is our key focus for the second half of this year. We are looking at two to three potential opportunities in that market. They look exciting.”

  • Jubilee Insurance, the biggest insurer in the region, announced – in October 2015 – its entry into DRC where it had planned to tap high demand for cover in the country. It partnered with state-owned insurance company Sonas to offer medical and life cover products. It targets to cover 5.5 million customers over the next five years
  • Jambo Jet, a Kenyan low-cost airline and a subsidiary of Kenya Airways, launched flights to Goma in the eastern DRC in September, in a move set to open up the region to tourism and business opportunities for Kenyans eyeing the mineral-rich country.

“We have an ambitious plan to grow our network, and we are proud to be the first low-cost airline to venture into this route,” Jambojet CEO Karanja Ndegwa said during the inaugural flight launch on 10 September.

Two months later, in November, Jambo Jet increased its flights to three times a week, citing an increase in demand from passengers.

Kenya’s government: Key facilitator

Earlier this year, in April, President Uhuru Kenyatta was in the DRC on a state visit when the two countries signed agreements on transport, security and trade in an attempt to improve low figures of bilateral business.

Among the deals between Presidents Kenyatta and Félix Tshisekedi was an agreement to handle cargo from the port of Mombasa with certain privileges for DRC.

Kenya is also opening diplomatic missions in Goma and Lubumbashi in Eastern DRC, in what President Kenyatta said will ease consular services for traders.

The economic sectors targeted by the broad framework are agriculture, education, health, sports, and tourism. Others are environment, SMEs, housing, energy, and infrastructure development.

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