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Home , Dilolo, Katanga Province, Kisangani, Lubumbashi, Matadi

Democratic Republic of Congo

The Democratic Republic of Congo has immense potential but remains a risky investment location. 2nd largest country in Main hurdles include pervasive poverty, political Africa turmoil, security issues, vast land area and inadequate infrastructure. If it were not for the numerous obstacles, the Democratic Republic of Congo (DRC) would be a highly Central African Republic South Sudan attractive investment location. It is the second-largest country and - Highway has the third-largest population in

Gabon Tripoli-Cape Town Highway Africa. Most significantly, the DRC is considered to have among the largest endowments of minerals on the continent.

North Province Social and economic conditions are very challenging and the DRC is recognised as one of the most difficult places in which Congo Ilebo Pointe to do business in the world. In Noire Tanzania addition to these factors, transport infrastructure is a major impediment SNCC Port of to economic growth. Banana Port of (extensions/ Matadi deepwater port) An escalation in conflict in the eastern DRC also stands to impact Atlantic growth prospects, but not as severely SNCC Beira-Lobito Highway as a price crash scenario, Ocean Lobito given the country’s high dependence on the mining sector. Notwithstanding the challenges it faces, the DRC should see sizeable economic growth over the short to medium term, while remaining an extremely challenging place in which to do business.

These bubbles represent the cities of the DRC and the size of the bubbles indicates the population size of the city

Airport Port Future Airport Future Port Future Railway Future Road Railway Road

PwC 31 Democratic Republic of Congo Africa gearingup 32 Africa Commission (SEC) andExchangeU.S. Securities of aproduct’.” orproduction functionality to the minerals are ‘necessary minerals ifthose conflict useof the disclose publicly areCompanies required to tungsten. tantalum, , tin, and include They countries. of Congo orneighbouring Democraticthe Republic from minerals originating minerals are “Conflict minerals Conflict international developments.international drops involumes asaresult of couldbetemporary increase, there beingexpected toDespite exports flows. andfinancial demand on external dependence revealing country’s the region, eastern inthe conflict in anescalation with coincided prices incommodity when acrash was in2009 This fragility exposed ofextracted . form are inthe Over 90%ofexports per annumrespectively. 2011, estimated at8.6%and12.3% betweenand imports 2001 and There inexports was notable growth 68% and78% ofGDPrespectively. for accounting andimports exports DRC, inthe economic growth with to significantly domestic contributes activity trade International resources The economy and underdeveloped largely industry Gold industry largely underdeveloped. industry have gold keptand turmoil the example, ofconflict decades For massiveits reserves. mineral DRCthe from fully utilising back isholding that minerals conflict It isnot recent issueof only the States African Central (ECCAS). of EconomicCommunity and the Development (SADC) Community African Southern (COMESA), the Africa for andSouthern Eastern CommonMarket the including communities, several trade African amemberof isalso The country simplify foreign operations. trade introduce aone-stop-shop to reform DRC– the to set group upasteering 2010 World aidofthe the with Bank DRC’s –conducted policy trade in a diagnostic study to draw upthe of world aftermath In the trade. to improve with integration its The DRC distinct hasmade efforts resources. mineral its from to asawhole benefit country in someareas andperhaps allow the levelcould decrease ofconflict the minerals conflict to export difficult makingitmore that It isthought tungsten DRC. andgold from the tantalum, oftin, purchase the companiesrequiring to disclose Commission (SEC)passedrules andExchange USSecurities the This was reinforced in2012 when andcomputers. smartphones as ofelectronics such manufacture are usedinthe that minerals certain sources of their anddisclose verify requires electronicscompanies to and ConsumerProtection Act Dodd–Frank Wall Street Reform 1502 Section momentum. ofthe isgaining minerals, on conflict butfocusingof blooddiamonds, spread toestablished control the A campaign one to similar the i

the IMF forecast period until 2018. until IMFforecast period the single-digit range over the within itshouldremain is expected that andit to inflation moderate price have recentlyauthorities managed but high levels ofinflation, The DRC hashistorically suffered over force. labour 60%ofthe around 39%ofGDPandemploying sector, agricultural the contributing 2017. Theeconomy isdominated by average of8.6%between 2012 and to increase to this expects anannual between 2010 and2012. TheIMF estimated at7.1%growth, annually strong economic experienced hasnevertheless country base, the anextremely lowComing off DRCthe globally. andMalawi rate Burundi worse than GDPofjust US$230,onlycapita US$17.2 in2012. billion per With market GDPestimated at size,with The DRC hasarelatively small West the off Coast. ‘zoneofcommoninterest’ so-called inthe agreement production-sharing DRCthe are negotiating anew Angolaoil andgas and reserves. offshore hassignificant The country remains andunderdeveloped. fragile sector, localfinancial is the which isselective.code challenge Another complexenforcement legal ofthe Furthermore, administration. public ishamperedrights by dysfunctional protection while growth, ofproperty prospects for diversified undermined hasseverely risk High political factor for businesses. environmentpolitical isakey risk country.the Theunsettled socio- in turmoil political has beenthe DRCeconomic development inthe The greatest impediment to Risk to business Large population of Potential to be Africa’s largest 65.7m power exporter

High poverty, low productivity

The DRC’s high taxes are a further The DRC has a large population, this publication, has a labour discouragement for investors, with estimated at 65.7 million in 2012. productivity of US$1 239 per person a corporate income tax rate of 35% A high population growth rate of employed. and additional types of taxes that 2.7% will intensify the already can increase the total tax payable challenging social conditions. Power potential significantly. According to the World Bank, approximately 50 million live on Power blackouts and electricity The DRC’s immense natural less than US$1.25 a day. The DRC shortages occur frequently and resources have fuelled conflict has a low HIV/Aids infection rate as present major problems to the rather than development. Human years of war and little infrastructure rising number of mining companies rights abuses and banditry deter development have restricted human operating in the country. This economic activity, but at the movement and the spread of the situation is fuelled by fast-rising moment this mainly affects the virus. demand for power and ageing country’s eastern region, close to the infrastructure. About 40% of firms borders with Rwanda and Uganda. Despite having a labour force of in the DRC own and operate their nearly 25 million, available labour own backstop generator to shield The eastern part of the country still is mostly unskilled, with only 23.2% themselves from frequent power sees frequent clashes between the of the population having secondary interruptions. rebels and government forces, and education. Labour productivity is there is sporadic fighting in other extremely low, with every person Despite these challenges, the DRC parts of the country. Security forces employed contributing US$691 has immense power generation are known to set up occasional, to national GDP. In comparison, potential. It boasts the largest and spontaneous roadblocks, especially Tanzania, the second-lowest most cost-effective hydropower after dark, which places a constraint of the ten countries profiled in potential on the continent and could on transportation and results in produce up to 100 000MW of power. delays. The entire installed capacity of sub- Saharan Africa is only 48 000MW Key indicators and the DRC has the potential to become Africa’s largest power Population size (million, 2012) 65.7 exporter.

Population growth (2012-2020, avg p.a.) 2.7% The Government has ambitious GDP (US$ billion, 2012) 17.2 plans. While less than 10% of the population has access to electricity GDP growth forecast 2012-2017 (avg, y/y rate) 8.6% today, the Government has set GDP per capita (US$, 2012) 230 an ambitious target to provide electricity to 60% of the population Global competitiveness index 2012 (global rank/144 n/a (score 1-7)) by 2025. The first step in achieving this goal is the construction of the Corp. Income Tax (CIT) rate 35.0% Grand Inga dam, which will produce Top exports Cathodes and sections of about 40 000MW at a cost of US$80 cathodes (24.7%); billion. ores and concentrates (17.8%); ores and concentrates (11.9%) Logistics Performance Index 2012 (global rank/155 143 (2.21) (score 1-5)) Global Competitiveness Index 2012 - Infrastructure n/a (global rank/144 (score 1-7))

PwC 33 Democratic Republic of Congo Africa gearingup 34 Africa between 2010 and2012, the with fell significantly performance DRC.businesses inthe Logistics andlogistics prospects for transport growth limit and inefficiency infrastructure Poor facilitation trade Source: World Bank Logistics area ofbasicconsumergoods.in the GDP, islikely this to beconcentrated However, low given the percapita high potential sector. for the impliesrobust growth, population The large with coupled population, copper output. equivalent to around 2.7%ofglobal tonnes. Thisis 440 000 reaching increased by anestimated 28%, DRCproduction ofcopperinthe In2011,economic growth. mine playwill akey role inmedium-term product, largest export country’s Copper, term. medium in the the ofeconomicgrowth main driver the sector,agricultural be miningwill dominated currently by the DRC’s the While economy is sectorResources and tracing Timeliness Logistics Performance Index Performance Logistics Tracking last twolast years. inthe significantly dropped has performance Logistics Logistics qualityandcompetence DRC Around Around waterways navigable is by of the country Customs 0 1 2 3 4 5 Top performer(SouthAfrica) 2/ 3

Infrastructure International shipments infrastructure investmentinfrastructure needed According World to the the Bank, . country approximately ofthe two-thirds means ofmoving around dominant traditionally beenthe has waterways andwater transport ofkilometres ofnavigablethousands has On apositive note, country the networkrail into hasfallen disuse. isdilapidated andthe infrastructure to deteriorate. Roadleft andrail have damaged beenseriously or networks As aresult ofconflict, networks. development ofinfrastructure complicate the further rivers extensive forests, andcriss-crossing geography, low density, population vast country’s andthe difficult hasalways been transportation world. inthe countries Ground challenged infrastructurally The DRC most isoneofthe environment inAfrica. infrastructure transport challenging The DRC most probably hasthe Infrastructure Africa. insub-Saharan peers ofits that than 50%higher ismore than and export average, cost to import the while sub-Saharan the higher than issignificantly to andexport import requiredof documents time andthe number ofthe interms performance TheDRC’s andtracing. tracking and infrastructure, shipments, customs,timeliness, international logistics competence, period: this worsened during infrastructure indicatorsAll oflogistics Index. Logistics Performance 143rd outof155 onthe countries to from declining 85th country US$3bn infrastructure andurban road for China promises China promises adequately. country ofthe western part the of needs the and are to unable fill low anda low capacity draught DRC, have which BomaandMatadi, There areinthe two mainports vessels. Republic ofCongothe usingsmaller from Pointetransshipments Noire in hasto rely on country and the from conventional cargo liners DRCin the cantake direct calls nature andvast area. No ports ishampered country’s ports by the to poorandconnection the very DRC in the infrastructure is Port landlocked. DRCsea, the ispredominantly to poorconnections With the Ports on infrastructure development.on infrastructure haveinstability hadamajor impact and east, where conflict felt inthe developmentinfrastructure hasbeen impacton serious ofinsecurity Themost cities. three these linking well-developedlittle infrastructure There is northeast. Kisangani inthe and southeast, Lubumbashi inthe southwest, areas –Kinshasainthe areactivity concentrated inthree The DRC’s andeconomic population . projects urban infrastructure and for road primarily billion, US$3 Chinapromises signed with agreement major new financing Fornon-OECD partners. example, a fromcommitments OECDand financing upswing inexternal hasbeenalargeSince 2006,there promising signs. last few havein the years there been But deficit. infrastructure country’s to redress the acentury more than improved,and efficiency take itwill UnlessAfrica. isincreased spending DRC highestin the in isamongthe

Regulatory Rail network used oversight needs to extensively for be strengthened in copper exports airline industry

In addition to the two main ports, The Congo River traverses the Airlines – a company partially owned the DRC has the sea port of DRC, linking two of its main cities, and technically supported by SN Banana, which currently has Kinshasa and Kisangani, while its Brussels. limited capacity and is used numerous tributaries cross much mainly for crude oil export. of the country. About 15 000km of Rail the Congo River and its tributaries According to AICD, the Port of are navigable, or potentially so with The DRC has two main rail systems Matadi on the Congo River is regular dredging and relatively of strategic importance to the playing a greater role in serving modest investments in quays and country, “Société Commerciale des Kinshasa and the southwest area signalling. Transports et des Ports” (SCPT, of the country, but also has limited formerly ONATRA) and the “Société cargo-handling capacity and a Air transport Nationale des Chemins de Fer du low draught, as well as costly and Congo” (SNCC). The networks are inefficient port services. Air transport could open up access inefficient and tariffs are relatively to this vast country if security high. Both have fallen into disuse for Because of the high internal improves. the most part. transport costs and large distances involved, trade from southeast DRC, There are a number of airports in SCTP railway connects Kinshasa notably copper, is channelled mainly the DRC. Since 2000 the number to the Port of Matadi. The line is through Durban in South Africa of domestic air transport routes only 30 years old and the track is in and to a lesser extent through Dar has dramatically increased and reasonable condition. es Salaam in Tanzania. Mombasa the aircraft fleet has undergone in Kenya remains the key port for renewal. Given the vast size of SNCC operates an extensive network Kisangani and the northeast part of the DRC, its disparate population centred in the southeast of the the country. centres and deficiencies of the country. The most important branch surface transport network, the of this network connects Katanga on While an improved Port of Matadi air transportation system has an the Zambian border to on the will be able to service the southwest important role to play in passenger Angolan border. It also connects the DRC for some years to come, in the travel. However, the DRC is not well northern part of the Katanga region longer term additional capacity will connected with other countries, to Ilebo in the Kasaï region. need to be found. To achieve this, being served primarily by South the DRC faces two strategic options. African Airways, The SNCC network is used One is to further develop the Port and Kenya Airways. extensively for copper exports of Banana and convert it into a leaving the DRC for the port of deep-water port. The establishment The DRC’s domestic air transport Durban and will also facilitate of such a port would cost around services have a worrying safety exports through Lobito in Angola US$2 billion and take 10 years to record and the most urgent issue once construction on the Benguela complete. The other option involves facing the sector is to strengthen Railways is completed. The SNCC strengthening land links with the regulatory oversight in order to network is in poor condition, with Republic of Congo to facilitate access improve the safety of domestic speed limits of 10-35km/h. to the Port of Pointe Noire. flights. One of the consequences of this problem has been the Railway connections to While the network of rivers across diversion of a significant volume neighbouring countries are set the country poses one of the biggest of domestic air transport outside to gain importance, as the three challenges for national roads and of the country to avoid using major companies providing railway rail lines, it provides an opportunity domestic air services. This means services for Zambia, Tanzania and for inland water transportation. that domestic transit was often the DRC have signed a tripartite Inland waterways can provide undertaken via a foreign country. agreement in the hopes of making low-cost surface transport, with This situation has significantly traveling and transportation of only relatively modest investments changed since the arrival of Korongo goods easier. needed to improve navigability.

PwC 35 Democratic Republic of Congo Africa gearingup 36 Africa in2006. started recovery that agricultural toit hasmade the contribution been recognised for the roads, has specifically infrastructure, Rehabilitation ofrural paying off. isalready country. of the Theeffort side well eastern asroads alongthe KinshasaandLubumbashi,linking as major road corridors country’s the These initiatives cover many of companies investing also inroads. mining playingalso arole, with is enterprise China.Private with infrastructure-for-minerals deal development aswell funding asan hassecured major The country road network hasbeenapriority. the in2003,rehabilitating conflict national endofthe Since the tarred. andonlycondition, 1.8% being beinginpoor infrastructure road majority ofthe the with DRC ofthe much isdisconnected Following conflict, years ofarmed Roads 2015 World under Bankfunding. acquisition of47 locomotives by companythe anew isplanning region. Inaddition, southern in the locomotives to revive sector rail the Recently, SNCC acquired the nine lines. ofexisting upgrading renovation, and rehabilitation Worldby the Bankmainly include are widely funded projects that complications Other ofany sort. or re-marshalling trans-shipping, necessarily vice versa, without Mposhi andLubumbashi, and and from to DaresSalaam Kapiri can now move direction ineither cargo inplace, agreement this With transportation and logistics sector as shown in the graphic below. andlogistics sector asshown graphic transportation inthe Based onouranalysis, we have investment assessedthe potential for DRC’s Conclusion DRC –Investment potential assessment Key: Transport andinfrastructure 5. Trade andlogistics 4. Businessenvironment 3. 2. Economics Demographicsandresources 1. End notes i

Commission, http://www.sec.gov/News/PressRelease/Detail/PressRelease/1365171484002 “SEC AdoptsRuleforDisclosingUseofConflictMinerals”,USSecurities and Exchange Sovereign Wealth FundInstitute,24Oct.2012,online:http://www.swfinstitute.org/tag/1 Average Unattractive Attractive Stagnation/marginal changeexpected Some improvement expected Strong improvement expected