DRC econ­omy: The gi­ant awak­ens

Chronicle (Zimbabwe) - - Analysis - Franck Ku­wonu

MOST news head­lines from the Demo­cratic Repub­lic of the Congo (DRC) have one thing in com­mon — their fo­cus on con­flict, par­tic­u­larly in the east­ern part of the coun­try. True, con­flict is not new in the DRC, which has seen out­breaks in one form or an­other over the past three decades.

Of late, how­ever, wor­ries are mount­ing over pres­i­den­tial elec­tions slated for Novem­ber this year. Pres­i­dent Joseph Ka­bila, in power since 2001, is bound by term lim­its to step down af­ter hav­ing won elec­tions in 2006 and 2011.

His one-time ally now turned ri­val, for­mer gover­nor Moïse Ka­tumbi, has de­clared his in­ten­tion to run for the pres­i­dency, a de­ci­sion that has not gone down well with some of Pres­i­dent Ka­bila’s al­lies who would like to see him run for a third term.

At the same time, the sen­tenc­ing of Jean-Pierre Bemba, a for­mer Con­golese mili­tia com­man­der, last month, by The Hague-based In­ter­na­tional Crim­i­nal Court, for war crimes and crimes against hu­man­ity was a re­minder of the most tragic episodes of the vi­o­lent con­flicts — use of child sol­diers, sex­ual ex­ploita­tion, rape and pil­lag­ing — that have marred the DRC and parts of the African Great Lakes re­gion over the last two decades. Yet be­yond the trou­bling me­dia head­lines and the re­minders of a bloody past, the coun­try’s econ­omy is per­form­ing al­most un­scathed. Ex­cept for a slump in 2009, when the econ­omy grew by only 2.8 per­cent, eco­nomic growth has av­er­aged 7.7 per­cent over the last five years.

Ac­cord­ing to the World Bank, this is “well above the av­er­age in sub-Sa­ha­ran Africa.” Eco­nomic growth in 2016 is ex­pected to rise to 8 per­cent, which will make DRC’s one of the fastest-grow­ing economies in the world. The DRC may not be the most de­vel­oped coun­try in the Great Lakes re­gion, but its vast and var­ied min­eral re­sources present huge devel­op­ment po­ten­tial. The coun­try is a ma­jor sup­plier of cobalt, cop­per, di­a­monds, coltan and tin to global mar­kets.

While min­er­als like cop­per, di­a­monds and tin are well known to the gen­eral pub­lic, it may not be the case with cobalt and coltan. Yet fights over ac­cess to these im­por­tant re­sources have been one of the causes of the long and sim­mer­ing in­sta­bil­ity in the DRC.

Cobalt is used to make mag­nets and tur­bines — jet or gas tur­bines — be­cause of its re­sis­tance to high tem­per­a­tures.

Ac­cord­ing to 2013 US Ge­o­log­i­cal Sur­vey fig­ures, the DRC sup­plied 48 per­cent of global cobalt and has about 47 per­cent of the world’s cobalt re­serves.

Coltan, a con­trac­tion of columbite tan­ta­lum, is used in por­ta­ble de­vices like mo­bile phones and sur­gi­cal im­plants be­cause of its high re­sis­tance to cor­ro­sion.

It is also used in lap­tops, pagers and all other elec­tronic de­vices fit­ted with minia­ture cir­cuit boards. At a rel­a­tively high price of $200 per kilo­gramme, the coun­try sup­plies 17 per­cent of global needs, amidst con­stantly high de­mand from elec­tron­ics man­u­fac­tur­ers.

In spite of weak­en­ing global eco­nomic growth and a de­cline in both de­mand and price for min­er­als, DRC’s econ­omy is ex­pected to re­main re­silient, ac­cord­ing to the World Bank, be­cause of the in­crease in pub­lic and pri­vate in­vest­ments, par­tic­u­larly in in­fra­struc­ture, that have ac­com­pa­nied the re­cent min­eral boom. The an­nual av­er­age for­eign di­rect in­vest­ment in the DRC is about $2.07 bil­lion, al­though it de­creased to $1.7 bil­lion in 2015, ac­cord­ing to World In­vest­ment Re­port 2016 pub­lished by the UN Con­fer­ence on Trade and Devel­op­ment.

At the same time, signs of the coun­try’s trans­for­ma­tion can be seen in the cap­i­tal, Kin­shasa, and other ma­jor cities, from im­proved road in­fra­struc­ture to mul­ti­ple build­ing sites and tow­er­ing cranes across the city.

To sup­port the DRC’s re­mark­able eco­nomic growth, the UN, which has a peace­keep­ing force op­er­at­ing in the east­ern part of the coun­try, or­gan­ised an in­vest­ment con­fer­ence to pro­mote the DRC and the Great Lakes re­gion as an at­trac­tive des­ti­na­tion for for­eign in­vest­ment.

Meet­ing in Septem­ber 2013, the In­ter­na­tional Con­fer­ence on the Great Lakes Re­gion — a group of 12 coun­tries with the goal of pro­mot­ing last­ing peace and devel­op­ment in the re­gion — joined South Africa to agree on a UN-bro­kered peace, se­cu­rity and co­op­er­a­tion frame­work.

The 13 coun­tries pledged “to strengthen re­gional co­op­er­a­tion, in­clud­ing eco­nomic in­te­gra­tion with spe­cial con­sid­er­a­tion for the ex­ploita­tion of nat­u­ral re­sources.”

In Fe­bru­ary 2016, rep­re­sen­ta­tives from the 13 coun­tries gath­ered in Kin­shasa to dis­cuss in­vest­ment op­por­tu­ni­ties, in­clud­ing two dozen key devel­op­ment projects that needed im­me­di­ate fi­nanc­ing. Their ob­jec­tive was to lure in­ter­na­tional pri­vate in­vest­ments to the DRC with its land and min­eral po­ten­tial, and then to the rest of the Great Lakes re­gion.

In high­light­ing the eco­nomic at­trac­tive­ness of the re­gion, the Great Lakes coun­tries are mak­ing their case for what they call the “seven key driv­ers for eco­nomic growth” across the re­gion: tremen­dous nat­u­ral re­sources, an abun­dance of arable land, wa­ter and grow­ing food de­mand; a youth­ful fast-grow­ing pop­u­la­tion; an in­creas­ingly ed­u­cated and mid­dle­class pop­u­la­tion; ex­pand­ing ex­port mar­kets, trad­ing part­ners and donors; an improving gov­er­nance and busi­ness en­vi­ron­ment; in­creas­ing fo­cus on in­fra­struc­ture devel­op­ment; and com­pet­i­tively high re­turns on in­vest­ment.

The Great Lakes re­gion boasts 244 mil­lion hectares of arable land, ac­cord­ing to In­vest­ing in the Great Lakes Re­gion: An In­vest­ment Op­por­tu­ni­ties Brief, a re­view com­mis­sioned by the 13 coun­tries to help make their case to in­ter­na­tional in­vestors. As de­mand for food world­wide in­creases, the re­gion’s arable land rep­re­sents an op­por­tu­nity to in­crease food pro­duc­tion for both do­mes­tic and global con­sump­tion, says the brief.

The high fi­nan­cial re­turn on in­vest­ments is an­other key rea­son for in­vest­ing in the DRC and the re­gion. While no spe­cific fig­ures are avail­able for po­ten­tial in­vestors, a 2014 DRC coun­try min­ing guide by KPMG, a global fi­nan­cial con­sul­tancy, says DRC’s min­ing sec­tor presents a “high-risk high-re­turn op­por­tu­nity.”

In­vestors may be prof­it­ing from gov­ern­ment poli­cies, but Con­golese na­tion­als know that the DRC is still a poor coun­try strug­gling to end a long-run­ning con­flict. The im­pact of the growth has not trick­led down to its cit­i­zens.

DRC has one of the world’s low­est gross na­tional in­comes per capita, and UN Hu­man Devel­op­ment In­dex 2015 ranked the DRC 176 out of 188 coun­tries.

Re­spond­ing to the crit­i­cism that growth has not pro­duced any no­tice­able so­cial im­pact, the coun­try’s prime min­is­ter, Au­gustin Matata Ponyo, told Ra­dio France In­ter­na­tionale, a Paris-based broad­caster, that eco­nomic progress “has helped fund ed­u­ca­tion by qua­dru­pling pub­lic ex­pen­di­ture” over the past few years.

The lat­est World Bank as­sess­ment of the coun­try shows that, al­though still high, the rate of poverty fell from 71 per­cent in 2005 to 63 per­cent in 2012. And thanks to pru­dent poli­cies by the coun­try’s cen­tral bank, the rate of in­fla­tion, which was 53 per­cent in 2009, dropped from three per­cent in 2012 to an av­er­age of about one per­cent over the past three years.

While the con­flict in east­ern DRC is un­likely to end soon, the coun­try’s eco­nomic prospects re­main pos­i­tive. This is in spite of fears that should the global min­eral mar­ket fail to re­cover soon and the level of pub­lic and pri­vate in­vest­ments con­tinue to de­cline, the coun­try could find it­self fac­ing prob­lems aris­ing from con­flict, political in­sta­bil­ity and eco­nomic hard­ships, giv­ing cre­dence to the news head­lines with which the pub­lic is fa­mil­iar.

This ar­ti­cle was orig­i­nally pub­lished in Africa Re­newal

Pres­i­dent Joseph Ka­bila

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