DRC: Has the economy made its comeback?

By Alain Faujas
Posted on Wednesday, 9 February 2022 12:05

IMF Managing Director Kristalina Georgieva and the DRC’s President Felix Tshisekedi in Paris on 17 May 2021. © Cyril Marcilhacy/IMF Photo

The Democratic Republic of Congo (DRC), which has a long history of poor economic performance, is recovering. Not only did it manage to avoid a recession in 2020, unlike most of its neighbours, but the IMF predicted comfortable growth that has even been revised upwards, to 5.4% instead of 4.9% for 2021, and 6.2% instead of 5.6% for 2022.

This strong acceleration is due to the surge in world prices for two minerals produced in the DRC, namely copper (+40% from November 2020 to November 2021) and cobalt (+80%).

Chinese buyers have also resumed purchasing these two minerals. The reserves of the Banque Centrale du Congo (BCC) jumped from $800m in 2020 to $3.3bn in mid-October 2021, thanks in particular to the IMF allocating $1.4bn worth of special drawing rights.

Increased transparency

The government has also demonstrated a willingness to improve governance. It signed a three-year programme – the first in nine years – with the IMF for an aid package of $1.5bn. A second disbursement of $217m took place in mid-December, showing the Fund’s satisfaction with the reforms. IMF Director Kristalina Georgieva’s visit to Kinshasa on 8 and 9 December was another boost for Kinshasa.

Prime minister Sama Lukonde Kyenge’s government has rolled out reforms requested by the IMF. The first was to create a new BCC board of directors, in accordance with a 2018 law, which was a prerequisite action required by the Fund.

The authorities accompanied this action by appointing Malangu Kabedi Mbuyi, who had been head of mission in Burkina Faso, as head of the BCC, replacing Déogratias Muombo, who was considered too close to the former head of state, Joseph Kabila.

Another Kabila loyalist, Albert Yuma, president of the Fédération des Entreprises du Congo (FEC), had to give up his position as director of the BCC and, on 3 December, was removed from the chairmanship of the Gécamines board of directors. The positions of two vice-governors were created and assigned to Dieudonné Fikiri and William Pambu, members of the Union Sacrée de la Nation (USN), President Tshisekedi’s political alliance.

No economic diversification will be possible if there are no roads, electricity or fibre-optics.

Budgetary revenues have been growing month by month and have allowed for an increase in the collective budget, which can be used for investment opportunities.

“This improvement is due to a real effort on the part of the tax administration in terms of collection, even if it is partly due to the result of controls and adjustments in the mining sector that will not be repeated every year,” said Gabriel Leost, the Fund’s resident representative in the DRC. “The ongoing digitalisation of the tax revenue chain is crucial to reduce the risk of revenue losses. Another cornerstone of these improvements is the mining sector’s transparency and the publication of contracts and audited accounts, as was done for Gécamines in August 2021.”

Only widespread transparency, including in logging permits, will make it possible to reduce the endemic corruption that relegated the DRC to 170th place out of 179 countries in Transparency International’s 2020 ranking on economic actors’ perception of corruption.

Resuming discussions with the Extractive Industries Transparency Initiative (EITI) augurs further progress.

The television broadcast of the corruption trials involving projects launched during President Tshisekedi’s first 100 days in office, which involved some of his former collaborators, illustrates the fact that Congolese people are demanding better governance.

The World Bank Group’s boost to the economy

Although the DRC’s prospects are encouraging, they remain fragile because its economy is not diversified. Kyenge’s government is rolling out policies to remedy this and is supporting the development of agriculture, industry and tourism by adopting a legal framework favourable to public-private partnerships.

However, other improvements are slow in coming. In fact, projects for a deep-water port in Banana, a vehicle assembly plant in Kinshasa and a special economic zone in Makulu are stalled. The unit created to oversee the business climate at the presidency has not yet borne fruit.

However, the executive’s efforts have won the backing of the World Bank Group, which has decided to fast-track its projects in the DRC in order to take advantage of this favourable climate. It financed projects worth $1.5bn in 2020, and its financing could reach $2bn in 2021.

The World Bank’s private-sector fund, the International Finance Corporation, will contribute $400m to the Scaling Mini-Grid project, which will provide the country with an installed capacity of 200MW by 2024 in 21 provincial capitals. Only one in five Congolese has access to electricity.

Another $250m programme will help reintegrate ex-combatants from armed groups in Ituri, North Kivu and South Kivu. Nevertheless, the bulk of the World Bank’s efforts will focus on road infrastructure, with $750m initially, as there is an urgent need to link the country’s three hubs, namely Kinshasa, Lubumbashi and Goma.

“No economic diversification will be possible if there are no roads, electricity or fibre-optics,” said Jean-Christophe Carret, the World Bank’s country director for the DRC. “Congo has 30 times fewer roads per square kilometre than other African countries. There are only 2,915km of paved roads. The country needs to be reconnected and tarred between the ocean, the Kasai and the Kivus, and dangerous areas, such as North Kivu, need to be tarred because roads help reduce violence, as armed groups prefer to operate in inaccessible areas.”

This support could encourage the authorities to continue reforms. It has already motivated them to review the so-called ‘contract of the century’, signed in 2008 with China, which is unfair to Kinshasa, according to the EITI and reports that the ministries of mines and infrastructure have just submitted to the head of state. It will be interesting to see what Kinshasa does when it finally goes head to head against Chinese interests.

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