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Democratic Republic of the Congo

Executive Summary

The Democratic Republic of the Congo (DRC) is the second largest country in Africa and 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.  Despite its potential, the DRC often cannot provide adequate security, infrastructure and health care to its estimated 84 million inhabitants, of which 75 percent live on less than two dollars a day.

The accession of Felix Tshisekedi to the presidency in 2019 and his government’s commitment to attracting international and particularly U.S. investment have raised the hopes of the business community for greater openness and transparency.  The DRC government is currently working with USTR to regain preferential trade preferences under the Africa Growth and Opportunity Act (AGOA).  Tshisekedi created a presidential unit to lead business reform and improve DRC’s standing of 183rd out of 190 countries in the World Bank’s Doing Business 2019 report.

The natural resource and telecommunications sectors have attracted the most foreign investment in the past.  The primary minerals sector is the country’s main source of revenue, as exports of copper, cobalt, gold, coltan, diamond, tin and tungsten provide over 95 percent of the DRC’s export revenue.  Several breweries and bottlers, a number of large construction firms, and limited textiles production are active.  The highly competitive telecommunications industry is expanding into electronic banking.  Given the vast needs, there are significant commercial opportunities in aviation, road, rail, water transport, and ports.  The agricultural and forestry sectors present opportunities for economic diversification in the DRC.

In 2019 economic growth remained sluggish, with only the extractives sector exhibiting significant growth.  After reaching 5.8 percent in 2018, economic growth slowed to 4.4 percent in 2019 owing to the drop in commodity prices.  The outbreak of the COVID-19 pandemic sent growth negative as global demand for DRC’s exports dropped.

Overall, businesses in the DRC face numerous challenges, including poor infrastructure and a weak and corrupt bureaucracy.  Armed groups remain active in the eastern part of the country, making for a fragile security situation that negatively affects the business environment.  Reform of a non-transparent and often corrupt legal system is underway.  While laws protecting investors are in effect, the court system is often very slow to make decisions or follow the law, allowing numerous investment disputes to last for years.

Table 1
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2019 168 of 180 http://www.transparency.org/
research/cpi/overview
World Bank Doing Business Report “Ease of Doing Business” 2019 183 of 190 https://www.doingbusiness.org/
en/data/exploreeconomies/
congo-dem-rep
Global Innovation Index 2019 N/A http://www.globalinnovationindex.org/
content/page/data-analysis
U.S. FDI in partner country ($M USD, stock positions) 2018 $80 https://apps.bea.gov/
international/factsheet/
World Bank GNI per capita 2018 $490 http://data.worldbank.org/
indicator/NY.GNP.PCAP.CD

6. Financial Sector

Capital Market and Portfolio Investment

Portfolio investment is nonexistent in the DRC and there is no domestic stock market.  A small number of private equity firms are actively investing in the mining industry.  The institutional investor base is not well developed, with only an insurance company and a state pension fund as participants.  There is no market for derivatives in the country.  Cross-shareholding and stable shareholding arrangements are also not common.  Credit is allocated on market terms, but there are occasional complaints about unfair privileges extended to certain investors in profitable sectors such as mining and telecommunications.

Although reforms have been initiated, the Congolese financial system remains small, heavily dollarized, characterized by fragile balance sheets, and cumbersome to use.  Further reforms are needed to strengthen the financial system, support its expansion, and spur economic growth.  Inadequate risk-based controls, weak enforcement of regulations, low profitability, and excessive reliance on demand deposit undermine the shock resilience of the financial system.

The Central Bank of Congo (BCC)  refrains from payments and transfers on current international transactions.  The DRC’s capital market remains underdeveloped and consists mainly of the issuance of treasury bonds.  In 2019, the BCC issued its first domestic bond in 24 years, which was oversubscribed.  Most of the buyers were local Congolese banks.

It is possible for foreign firms to borrow from local banks, but their options are limited.  Maturities for loans are usually limited to 3-6 months, and interest rates are typically around 16-21 percent.  The inconsistency of the legal system, the often-cumbersome business climate, and the difficulty in obtaining inter-bank financing discourages banks from providing long-term loans.  There are limited possibilities to finance major projects in the domestic currency, the Congolese franc (CDF).

Money and Banking system

The Congolese financial system is improving but it remains fragile.  The BCC controls monetary policy and regulates the banking system.  Banks are concentrated primarily in Kinshasa, Kongo Central, North and South Kivu, and Haut Katanga provinces.  Banking rate penetration is roughly 7 percent or about 4.1 million accounts, which places the country among the most under-banked nations in the world.  Mobile banking has the potential to greatly increase banking customers as an estimated 35 million Congolese use mobile phones.

There is no debt market.  The financial health of DRC banks is fragile, reflecting high operating costs and exchange rates.  The situation improved in 2019 as deposits have increased.  Fees charged by banks are a major source of revenue.

The financial system is mostly banking-based with aggregate asset holdings estimated at USD 5.1 billion.  Among  the five largest banks, four are local and one is controlled by foreign holdings.  The five largest banks hold almost 65 percent of bank deposits and more than 60 percent of total banks assets, about USD 3.1 billion.  There are no statistics on non-performing loans, as many banks only record the balance due instead of the total amount of their non-performing loans.

There is one correspondent bank, Citigroup.  All foreign banks accredited by the BCC are considered Congolese banks with foreign capital and fall under the provisions and regulations covering the credit institutions’ activities in the DRC  There are no restrictions on foreigners establishing an account in a DRC bank.

Foreign Exchange and Remittance

Foreign Exchange

The international transfer of funds is permitted when channeled through local commercial banks.  On average, bank declaration requirements and payments for international transfers take less than one week to complete.  The Central Bank is responsible for regulating foreign exchange and trade.  The only currency restriction imposed on travelers is a USD 10,000 limit on the amount an individual can carry when entering or leaving the DRC.

The GDRC requires the BCC to license exporters and importers.  The DRC’s informal foreign exchange market is large and unregulated and offers exchange rates slightly more favorable than the official rate.  BCC regulations set the Congolese franc (CDF) as the main currency in all transactions within the DRC, required for the payment of fees in education, medical care, water and electricity consumption, residential rents, and national taxes.  Exceptions to this rule occur where both parties involved and the appropriate monetary officials agree to use another currency.

Remittance Policies

There are no legal restrictions on converting or transferring funds.  Exchange regulations require a 60 day waiting period for in-country foreigners to remit income.  Foreign investors may remit through parallel markets when they are legally established and recognized by the Central Bank.

Sovereign Wealth Funds

The DRC does not have any reported Sovereign Wealth Funds, though the 2018 Mining Code discusses a Future Fund that is to be capitalized by a percentage of mining revenues.

7. State-Owned Enterprises

There are 20 DRC state-owned enterprises (SOEs) operating in the mining, transportation, energy, telecommunications, finance, and hospitality sectors.  In the past, Congolese SOEs have stifled competition and have been unable to provide reliable electricity, transportation, and other important services over which they have monopolies.  Some SOEs and other Congolese parastatal organizations are in poor financial and operational state due to indebtedness and the mismanagement of resources and employees.  The list of SOEs can be found at: http://www.leganet.cd/Legislation/Droit percent20Public/EPub/d.09.12.24.04.09.htm .

There is limited reporting on the assets of SOEs and other parastatal enterprises, making valuation difficult.  DRC law does not grant SOEs an advantage over private companies in bidding for government contracts or obtaining preferential access to land and raw materials.  The government is often accused of favoring SOEs over private companies in contracting and bidding.

The DRC is not a party to the WTO’s procurement agreement (GPA), but nominally adheres to the OECD guidelines on Corporate Governance for SOEs.  The DRC is a Participating Country in the Southern Africa SOE network, with the Ministry of Portfolio and the Steering Committee for SOE reforms designated as Regularly Participating Institutions.

Privatization Program

The DRC has no official privatization program.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source USG or international statistical source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount  
Host Country Gross Domestic Product (GDP) ($B USD) N/A N/A 2018 $47 www.worldbank.org/en/country 
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) N/A N/A 2018 $80 BEA data available at
https://www.bea.gov/international/
direct-investment-and-multinational-
enterprises-comprehensive-data
 
Host country’s FDI in the United States ($M USD, stock positions) N/A N/A N/A N/A BEA data available at
https://www.bea.gov/international/
direct-investment-and-multinational-
enterprises-comprehensive-data
 
Total inbound stock of FDI as % of host GDP 2018 51.3% 2019 51.4% UNCTAD data available at
https://unctad.org/en/Pages/DIAE/
World%20Investment%20Report/
Country-Fact-Sheets.aspx
 
 
Table 3: Sources and Destination of FDI
No detailed information is available on the IMF’s Coordinated Portfolio Investment Survey (CPIS) website and no information is available on outward direct investment from Democratic Republic of Congo.
Table 4: Sources of Portfolio Investment
No detailed information is available on the IMF’s Coordinated Portfolio Investment Survey (CPIS) website and no information is available on outward direct investment from Democratic Republic of Congo.
Investment Climate Statements
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The Lessons of 1989: Freedom and Our Future