Congo, Democratic Republic - Executive SummaryCongo (DR) - Executive Summary

The Democratic Republic of the Congo (DRC) is the second largest country in Africa and potentially one of the richest in the world in terms of natural resources.  With 80 million hectares (197 million acres) of arable land and 1,100 minerals and precious metals, the DRC has the resources to achieve prosperity for its people, and serve as a catalyst for African economic growth.  Despite its potential, however, the DRC is still striving to provide adequate social security, infrastructure and health care to its estimated 81 million inhabitants, some 75 percent of whom live on less than two dollars a day.

The DRC’s political and security situation remains fragile, and the economy experienced several shocks in 2016 which are expected to limit growth in 2017.  The downturn in prices of DRC’s main commodity exports resulted in a trade balance shift from a $521 million surplus for the first half of 2015, to a $351 million deficit for the corresponding period in 2016.  Moreover, the commodity price collapse cut government revenues, forcing a sizeable and growing deficit.  Preliminary Government of DRC (GDRC) figures peg the 2016 growth rate at 2.4 percent, compared with 6.9 percent in 2015 and 9.5 percent in 2014.  Although commodity prices rebounded slightly in early 2017, the benefits of this uptick are not expected to be felt until 2018.  The GDRC is taking steps to mitigate the impact of low commodity prices on the broader economy through a push for diversification, targeting key sectors including agriculture, manufacturing, telecommunications, and energy.

The nation’s economy is highly dollarized, which has implications for monetary policy execution, financial development and systemic stability.  Approximately 90 percent of bank deposits and loans are denominated in US dollars and the prices of many goods, services and financial activities are indexed to the dollar.  This high dollarization weakens monetary policy execution and increases the systemic exposure to liquidity shocks since the minimum regulatory requirements of banks are defined in local currency.

Although the economy is dollarized, the domestic currency, the Congolese Franc (CDF), which had remained relatively stable for several years, depreciated significantly in 2016, falling nearly 40 percent against the dollar.  Similarly, inflation, which was stable at roughly 1 percent from 2013 through 2015, reached double digits in 2016.

Although the GDRC has demonstrated a growing commitment to foster sound economic governance and to attract foreign direct investment (FDI), progress remains slow.  The GDRC set up a “Competitiveness and Private Sector Development Project” which has reduced business start-up time by half and the number of taxes by three-quarters since 2014.  The GDRC also adopted an investment code in 2002 aimed at increasing and promoting foreign investment in the country by granting tax breaks or tax holidays for investors, though many investors and businesses still complain that tax burdens remain heavy, and the system remains overly complex, duplicative, and opaque.  Government agencies at all levels also exert significant administrative pressure on businesses with audits and inspections that often result in questionable legal fines.

Although the DRC has been a member of the Organization for the Harmonization of Business Laws in Africa (OHADA) since 2014, and GDRC investment reforms and investor protections make Public-Private Partnerships (PPPs) more secure and attractive for outside investors than they were previously, the GDRC has yet to implement several key OHADA goals.  Reform of a non-transparent and often corrupt legal system is also a prerequisite for investors to benefit more fully from the DRC’s OHADA membership.

Rehabilitation of basic infrastructure remains a priority for the GDRC, and will be necessary for the country to realize its potential.  Only one third of the 1,530 km (950 miles) of road in the east is in good condition, and although the Congo River has the potential to generate up to 100,000 megawatts of power, today less than 10 percent of DRC inhabitants have access to electricity.  The country’s two largest dams, Inga I and II, generate less than half of their 2,500 megawatt capacity due to poor upkeep.  The GDRC is seeking foreign investment partnerships on several hydropower projects, including a massive 40,000 MW Inga III project, as well as the construction of new transmission lines and geothermal power stations. 

Although the mining and extractive industries contribute more than 95 percent of export revenues, the country still has untapped potential.  In February 2017, a revised hydrocarbon code was published in hopes of making the sector more structured and attractive for investors.

Overall, businesses in the DRC face numerous challenges, including fragility of functional infrastructure, endemic corruption at virtually all levels of government, predatory tax agencies, limited access to capital,  a shortage of skilled labor, difficulties enforcing contracts, political uncertainty, a weak judicial system, ongoing armed conflict in eastern DRC, and the emergence of sporadic violence in other parts of the country. The Embassy strongly urges all prospective investors to read the latest country-specific information and travel warnings before traveling to the DRC.

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