Democratic Republic of Congo
Why Invest in the DRC
Since the 2002 peace accords, the Democratic Republic of the Congo (DRC) has been emerging from a long period of State decline and protracted crisis, the roots of which go back to at least the mid-1970s. Today most of the country is at peace and experiencing a burst of economic rebound activity. Nevertheless, the DRC is still a fragile post-conflict country with enormous needs for reconstruction and economic growth (UNEP, 2011).
Since 2003, progress has been made in rebuilding the Congolese State, including the holding of national elections in 2006, the passing of key constitutional and legal reforms, and the establishment of new institutions such as provincial assemblies. Although some advances have been made in the security sector, there is continued instability in the eastern part of the DRC and the situation remains fragile. Second generation post-conflict elections held in November 2011, are critical for consolidating the DRC’s hard-won peace (UNEP, 2011).
It is important to recognise that, since 2004, the DRC has succeeded in halting declining trends on social and economic issues, and is registering progress, albeit slow, in key areas. Although development indicators remain low and generally below pre-conflict levels, important improvements have been made in terms of macroeconomic management, raising primary education enrolment, reducing infant and maternal mortality, improving drinking water supply, alleviating malnutrition, increasing the land area under formal protection, and re-launching ecotourism (UNEP,2011).
For example, real gross domestic product GDP growth has averaged between 5 to 6% per annum, drinking water access in rural areas increased from 12 to 17%, while the protected area has increased from 9 to 12% of the national territory (UNEP, 2011).
Equally important has been the remarkable re-emergence of people based social enterprises as an integral part of a Congolese bottom-up phenomenon, and the rapid take-off of new information and communication technologies (UNEP,2011)
Drivers for growth include:
- The Revised Mining code of 2002 – encourages private sector development of the mineral industry. The principal role of the Government is to encourage and regulate the development of the industry. Mining rights are vested with the Government (USGS, 2010).
- The Poverty Reduction and Growth Strategy (PRGSP 1 & 2) – designed to stimulate economic recovery and alleviate poverty through a growth focused strategy. It emphasises generating economic growth by attracting large-scale infrastructure investment and leasing industrial concessions to extract the country’s vast natural capital. Specifically, over the period 2011 to 2015, the PRGSP2 aims to accelerate growth in extractive industries and infrastructure investments to an average of between 8 to 9% per annum.
- Changing Legal Framework – the ratification of the Organisation for the Harmonisation of Business Law in Africa (Ohada) laws on June 27, 2012 means that the enablers for sustainable growth in the mining industry are falling into place.
Ohada was established in 1993 to harmonise business laws between west and central African nations. Ohada laws currently apply to 16 African countries: Benin, Burkina Faso, Cameroon, Central African Republic, Congo Brazaville, Chad, Comoros, Equatorial Guinea, Ivory Coast, Gabon, Guinea, Guinea-Bissau, Mali, Niger, Senegal and Togo.Within Ohada, there is a supranational court of justice like the European Court of Justice, ensuring uniform application of shared laws, particularly core business laws covering: commercial; corporate; security interests; insolvency and arbitration issues, and unlike EU directives, is directly applicable in all member states.Ohada will provide a more secure and cost-effective legal framework, thus facilitating business formation and growth. The reform also aims to facilitate regional integration by providing businesses with a common legal framework to foster economies of scale and boost competition.
The FDI and GDP Figures below illustrate the impact of the changing political and legal environment on foreign direct investment (FDI) since 2001. In 2010, infrastructure dominated FDI in the DRC accounted for 55% of the total FDI (ANAPI).
If the changing political, legal and security environment continues meets its promise, growth can only escalate rewarding early market entrants, as evidenced by the growth in resource exports from USD4.2 billion in 2009 to USD8.3 billion in 2010 (ANAPI).