Index Trend Previous Quarterly Editions
Expropriation Risk: 6 67 ► Political Violence Risk: 59 ► Terrorism Risk: 35 ► Exchange Transfer and Trade Sanction Risk: 55 ▼ Sovereign Default Risk: 83 ▲
Overal Risk Temperature TREND ►
Special topic: Government's commitment on climate policy 2
The Republic of the Congo (RoC) contributes just 0.04% of global greenhouse gas (GHG) emissions, as of 2018. In August 2021, the country submitted the updated version of its 2015 Nationally Determined Contribution (NDC). The current NDC sets out two targets for 2025 and 2030. The first target is to reduce GHG emissions by 39.88% and 17.09% by 2025 as the country’s conditional and unconditional targets respectively. The second target is 32.19% conditional and 21.46% unconditional by 2030. The conditional targets are contingent on financial support from the international community.
According to the government, the total investment of the mitigation actions is estimated at USD4.4 billion, with almost 98% of the amount to be provided by external partners. Also, the country’s financing needs for adaptation are estimated at USD3.8 billion, with over two-thirds of the amount expected from external partners as well. RoC is the third-largest crude oil producer in sub–Saharan Africa after Nigeria and Angola. Despite the country’s rich mineral resources, it is among the world’s poorest countries.
The country’s electrification rate is low, especially in rural areas, mainly because of a lack of electricity infrastructure. In 2018, almost half of the country’s population does not have access to electricity, although electricity access for urban populations rose to 92% from 60% in 2010, according to the World Bank. Hydroelectric and fossil fuel sources primarily accounted for electric generation capacity in the country. Hydropower produced 37% of RoC’s net electricity generation in 2018 from the country’s three existing hydropower plants.
RoC has significant hydropower potential, estimated at 2.5 gigawatts (GW), but less than 5% of this has been developed. A number of hydropower projects are reportedly under consideration for development. The government is seeking investments for the construction and development of a 1.2-GW hydropower plant at Sounda Gorge.
Overall, the government’s focus is skewed to hydropower at the expense of other forms of renewable energy. The government has yet to adopt a National Adaptation Plan, which will set out its priorities in terms of adaptation to climate change.
Expropriation Risk 67 (Medium-High) TREND ►
The country is expected to return to economic growth in 2022 after a 10% contraction in 2020. With public finances under strain, the government has the tendency unilaterally to revise contractual arrangements. Over the years, cases of expropriation have been rare. The government is more likely to cancel contracts of companies in the infrastructure and mining sectors for poor delivery. In 2020, the government cancelled the mining concessions of some foreign companies for repeated delays in starting operations.
The government is undertaking public sector reform to fight corruption, increase the tax base and enhance financial prudence. It has finally appointed members of the country’s first anti-corruption agency, the High Authority for the fight against Corruption (HALC) and audited the state-owned oil company (SNPC). These moves are attempts by President Denis Sassou Nguesso’s team to show it is committed to fiscal discipline and stopping public funds being wasted. Nonetheless, the International Monetary Fund (IMF) and key development partners such as France want to see sustained commitment, such as the HALC's independence and auditing the SNPC annually.
Political Violence Risk 59 (Significant) TREND ►
In power since 1997, Nguesso was re-elected for another five-year term after a landslide victory in the first round of the March 2021 presidential election. In the medium term, there are no foreseeable political threats to his presidency. Political violence has plummeted following the imprisonment of General Jean-Marie Michel Mokoko and the signing of the ceasefire and cessation of hostilities agreement in December 2017 between the government and Frédéric Bintsamou, alias Pastor Ntumi, who waged a rebellion to oust Nguesso from power.
Since the agreement was signed, armed attacks by Ninja rebels have ceased, leading to the reopening of the road between the capital Brazzaville and Pointe-Noire, the port city and hub of the oil industry. Key elements to prevent a return to hostilities are the successful implementation and execution of the ‘reintegration’ component of the disarmament, demobilisation and reintegration programme.
However, the peace in the Pool region remains fragile as Pastor Ntoumi and his 7,500 ex-combatants are unhappy with the government’s handling of their compensation and socio-economic reintegration. Pastor Ntoumi has yet to engage fully into mainstream politics and his non-engagement in the presidential election raises questions over whether he is fully at peace with the government. Although a return to a full insurgency is less likely, leaders in the Pool region could provoke some violence to pressure the government to do more for their region and ex-combatants.
Terrorism Risk 35 (Medium-Low) TREND ►
There are instances of attacks by pirates both offshore and in Pointe-Noire anchorage area. In January 2021, three intruders boarded a Cyprus-flagged container ship, prompting the crew to retreat into the citadel. Anchored container ships are increasingly targeted by robbers seeking to steal ships’ stores and escape.
Exchange Transfer and Trade Sanctions Risk 55 (Significant) TREND ▼
There are no emerging sanctions risks at present. As an Economic and Monetary Community of Central Africa (CEMAC) member, RoC’s foreign exchange regulation is directed by the bloc’s regional Central Bank of Central African States (BCEA). A new foreign currency exchange regulation came into effect in March 2019, which requires companies in Congo to seek BCEA authorisation before opening offshore current accounts. Firms must also seek renewal every two years of permission to maintain foreign currency accounts in the CEMAC area. The new regulation has increased to within 150 days, up from 30, the period for repatriation of exportation proceeds above 5 million Central African francs (approximately USD8,378) into a certified commercial bank.
However, the central bank has granted several concessions to resident companies operating in the mining and hydrocarbons sectors as the new foreign exchange regulation came into effect on January 1, 2022, for the extractive sector. These concessions reduce the risk of capital control and exchange transfer for the extractive industry, a major revenue earner for RoC. Extractive companies can maintain foreign currency accounts both in and outside the CEMAC region and can transfer abroad the salary of expatriate workers from onshore foreign currency accounts, while payment can be made in foreign currency to subcontractors operating in the CEMAC zone.
Sovereign Default Risk 83 (High ) TREND ▲
According to the IMF, Congo’s public debt is “unsustainable”, even though the government renegotiated its debt with China (in 2019) and with the Orion Trading Company and Trafigura. The government faces IMF pressure to conclude renegotiation of its debt of about 965 billion Central African francs (about USD1.8 billion) with all its private external creditors, notably oil traders. The debt renegotiation was meant to have been concluded in December 2020 with all oil traders. However, negotiation with Glencore is still ongoing and proving challenging.
Nevertheless, the IMF Executive Board finally approved in January 2022 the immediate disbursement of about USD90 million from a USD455 million three-year Extended Credit Facility arrangement. One objective of the IMF three-year programme is to bring down public debt to a sustainable level.
Overall, RoC has a poor credit track record, having twice defaulted on its outstanding USD363 million Eurobond. In 2016, administrative issues reportedly caused the government to miss a scheduled coupon payment, which was subsequently paid two months late. Also, a legal order filed by a local construction company intercepted a USD21 million coupon from reaching bondholders. The firm claims the government owed it USD1 billion in arrears dating back to 1992.
Congo’s public debt exceeds the CEMAC region’s 70% debt-to-GDP (gross domestic product) ratio limit; recently appointed Prime Minister Anatole Collinet Makosso noted in August 2021 that the country’s current public debt stands at 91% of GDP, a gradual decrease compared with 105% of GDP in 2020. The gradual reduction in the public debt has come from cuts in public expenditure, with a 7.5% cut envisaged in the revised 2021 budget, according to Makosso.
