Also from GAN

DRC: The new platform for growth in Africa
Wed, 11 Nov 2009 14:51
Nelly Nyagah

The DRC with an estimated population of 65 million has the second largest land area in Sub-Saharan Africa. It is rich in natural and human resources and in need of foreign direct investment to re-build an economy stagnated by prolonged civil war.

Given its vastness and turbulent history, the Democratic Republic of Congo (DRC) may be perceived as a tough country in which to do business. Few people would suggest it lacks potential for investment given the number of top companies operating in sectors such as banking, telecommunications, mining, retail, and oil.

Prof. Mathias Buabua, the man at the helm of DRC’s National Investment Promotion Agency, ANAPI, isn’t too perturbed by negative perception, or even the lowly ranking the country got in the World Bank’s Doing Business report.  “The DRC is still attracting foreign direct investment in many sectors, and particularly in mining,” he assures.

Nevertheless the government has taken in it's stride the mammoth task of inspiring confidence in potential local and international investors through the adoption of wide ranging measures, including the implementation of appropriate mining, forestry and investment codes.

DRC's robust mining sector was booming until the global financial crisis hit last year - dramatically changing the economic environment due to fallen international commodity prices, tightened credit and dampened investor confidence.

“We are diversifying the economy to include other sectors that can offer a safety net during hard times,” Buabua said to investors attending a business conference in South Africa in October, 2009.

The conference organised by the Cape Chamber of Commerce in association with Nedbank, the Nepad Council and the Private French Market Consultants was aimed at promoting investment opportunities in the DRC.

According to John Ilunga, deputy chief executive of DRC's Investment Promotion Fund (FPI), Special Economic Zones will be established to facilitate access to essential infrastructure, land and simplified mechanisms for business registration and operation. “The SEZ’s will allow pursuing of options to improve the overall business environment, thereby attracting investments in critical sectors.” he said.

The FPI, which is mandated to fund investment projects, has disbursed over US$40 million to 91 projects since last year.

Forming partnerships

Private sector participation is critical for sustained economic growth and the DRC is seeking areas of cooperation with private investors in various countries, including South Africa. Jo-Ann Johnston, chief director for trade and sector development at the Provincial Government of the Western Cape acknowledged the potential for growth and investment in the DRC.

"90% of the Western Cape economy is SMME based with rapid growth recorded in ICT, agriculture, education, clothing, mining and retail sectors," says Johnston. She pinpointed ICT as having a niche which would particularly benefit the DRC.

The trade balance between the two countries remains in favour of South Africa, a situation the DRC would prefer improved. So far, 32 bilateral agreements have been signed between the DRC and South Africa including an agreement on economic cooperation, a convention on the avoidance of double taxation and fiscal evasion with respect to income tax; and an agreement on mutual promotion and protection of investment.

"There are many bankable projects across the economic sectors. We are urging South Africans and other investors to stop the "wait and see strategy" and form joint ventures with Congolese businesses. A good start would be to invest in public private partnerships to build infrastructure in identified corridors in southern Africa in order to facilitate further private investment." said Muzungu Diakolo, head of the Economic Unit at the DRC embassy in South Africa.

Big companies investing in the DRC include mobile services providers Vodacom, Zain and MTN. Others are Standard bank, Rawbank, Ecobank, and mining giant BHP Billiton.

Flagship opportunities

A wealth of unique opportunities exist in the DRC and it's central geographical location makes for easy connections to the rest of the continent. Coupled with the legal and regulatory mechanisms in place, the country is a destination investors should be watching keenly.

DRC has a myriad of natural resources waiting to be tapped (both above and below the ground.) Straddling the equator and spanning two tropical zones, it's climate is also favourable for agribusiness development.

“We want to resuscitate all agricultural sub-sectors from growing of food and cash crops; biofuels production, dairy farming and processing to aquaculture.  Congo must be one of the few places in the world where fish are allowed to die of old age” said Mathias Buabua while describing the potential in aquaculture.

"Small-scale farmers are producing fruit, such as mango, and the crop is thrown away because it can't reach the market, or be processed,” he added.

DRC’s agriculture sector, the mainstay of the economy, has grown by an average of 2% per year, consistently lagging population growth at an average annual rate of 3%. The transportation infrastructure has also declined over the years, and in particular the road network through which produce is distributed around the country.

“Infrastructure is core to facilitate inter-trade, promote growth and enable investments,” says Nepad Council’s secretariat director Moses Mwanjirah while calling for regional integration of infrastructure projects in the Southern Africa Development Community (SADC).

Mwanjirah said the management of water resources in the SADC (currently chaired by DRC president Joseph Kabila) region is centre to agricultural competitiveness, which is currently stifled by over-dependence on rainfall for irrigation purposes.

Great possibilities abound in Congo's forest, the largest in Africa. It has remained largely intact due to the lack of viable transportation infrastructure in the country's hinterland. Consequently, timber exploitation has been underdeveloped and undertaken by only a few companies. Opportunities include transportation services, production and selling of wooden poles for power lines, industrial processing, manufacturing of medicines from indigenous plants and production of paper.

The country's vast natural resources reserves include metals such as ascobalt, copper, gold, and precious stones including diamonds.  Minerals account for the vast majority of the exports and represent the single largest source of foreign direct investment. The mining industry which suffered during the war appeared to be recovering given the high prices of minerals in global markets before the financial crisis.  Opportunities in the sector include boosting copper and diamond production, exploitation of methane gas in Lake Kivu, oil prospecting and exploration; and transport infrastructure.

Mining project in Katanga

DRC has inadequate physical infrastructure due to neglected development caused by challenges in the country's recent history. The multi-billion dollar chinese-Congolese agreement signed in 2008 could provide critically needed resources for infrastructure development, but there are still many other short and long-term opportunities for investors to take advantage of. These include the establishment of transport companies, upgrading of existing harbours, airports; and building of national and regional roads and railways; and residential and commercial buildings.

"The energy sector will require massive investment to ensure the undeveloped oil reserves and hydroelectric potential is realised," said Buabua when he commented on the potential of the country to supply power to the rest of Africa in the future. 

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"There is a crisis of raw materials in the East and West, and the DRC has huge energy and mining potential. The telecommunications sector has been quite successful but there's need for installation of fixed lines. Agri-business is a good bet - the DRC-South African land deal allowing SA farmers to grow crops in DRC is a watershed. We can resolve our own food shortage issues as well as feed our neighbouring desert countries. In fact, opportunities exist across all the sectors," said Buabua.