Democratic Republic of Congo
Index Trend Previous Quarterly Editions
Expropriation Risk: 73 73 ► Political Violence Risk: 4 74 ► Terrorism Risk: 40 ▲ Exchange Transfer and Trade Sanction Risk: 64 ► Sovereign Default Risk: 75 ►
Overal Risk Temperature TREND ►
Special topic: Government's commitment on climate policy 3
President Félix Tshisekedi is keen to emphasize his government’s environmental credentials. In recent months, a particular focus of Kinshasa’s efforts has been on strengthening regulation and improving transparency in the D.R.C.’s notoriously murky, and ever-expanding, forestry industry. The primary aim is to reduce greenhouse gas emissions from both logging and forestry related land use changes, which in amalgam account for the most of the D.R.C.’s overall emissions. Indeed, the country’s first Nationally Determined Contributions submission, in 2015, estimated they already accounted for 80.1% of total national emissions, with the industry growing exponentially since then then.
Kinshasa is also keenly aware illegal forestry operations may eventually jeopardise the vast sums of international conservation funding the D.R.C. receives each year. For example, in late 2021, the government referred to the risks posed to conservation finance to justify a major audit of all logging contracts nationwide, the process resulting in the suspension of several major concessions. The process focused in particular on the illegal logging of rosewood forests, the major market for which is China.
The whole world has a stake in the success of these initiatives, given the D.R.C. has the second largest area of tropical forest cover in the world, accounting for 10% of the global total. In addition to being
home to more than 10,000 plant and animal species, and of enormous cultural significance to millions of people, the Congo forests are also one of the last natural environments that absorb more carbon than they omit, taking in approximately 1.5 billion tonnes of carbon dioxide per annum, representing around 4% of total global emissions. The D.R.C. also has the world largest peatlands at approximately 100,000 kilometres squared, also a major contribution to the country’s total ‘carbon absorption service’.
Reflecting all of this, at COP26, the 2021 United Nations Climate Change Conference, Tshisekedi and U.K. Prime Minister Boris Johnson launched a major ten-year agreement to protect the
Congolese forest (between 2021-31). USD500 million will be given in the first five years in new donor funding with the aim of capping the D.R.C.’s forest cover loss at 2014-18 averages and regenerating 8 million hectares of degraded forest area. It also places 30% of the country’s natural areas into protected status.
Tshisekedi’s administration is also investing in renewable energy. For example, the Ministry of Hydraulic Resources and Energy has recently launched a series of major new solar projects. However, the challenges are great, with the International Energy Agency estimating the D.R.C. will need to invest around USD13 billion in renewals by 2040 if Tshisekedi is to meet his target of universal energy
access primarily through renewables. In addition, he is under growing pressure from voices within the government and the opposition to speed up oil production under the vast peatlands which straddle the D.R.C./Republic of Congo border. These pressures will only grow if Brazzaville brings oil production on-stream on its side of the border.
Expropriation Risk 73 (Medium-High) TREND ►
As part of his wider consolidation of power, Tshisekedi has continued to strengthen his control over Gecamines, the state-owned mining company with stakes in many of the largest copper and cobalt mines across the country. Having taken control of the Gecamines board last year from Kabila loyalists, Tshisekedi has continued to promote his people to the company’s most senior positions.
However, there are growing signs the President’s previous hard-line stance over mining reform, especially in relation to Chinese investors, is softening. In mid-February, he held direct talks with the head of China’s mining giant China Molybdenum, and with a leader of the Chinese electric vehicle maker CATL. The fact the President is now talking directly to these companies represents a marked change from late 2021, when he delivered a strongly worded speech announcing a review of the 30 Chinese mining concessions operating in Katanga Province.
The sense of a generally improving investment environment was further bolstered just a few days later by news the government may be close to a deal with Fleurette Group. This would enable the government to recover mining and oil assets worth approximately USD2 billion, and to recover royalties associated with Fleurette subsidiary Kamoto Copper Company.
Political Violence Risk 74 (Medium-High) TREND ►
Ongoing armed violence in the country’s eastern regions, which has increased steadily since the start of the COVID-19 pandemic, remains a thorn in Tshisekedi’s side. There are now more than 300 armed rebel groups operating in the east, many increasingly emboldened. Recent UN reports have drawn attention to the vast networks of trade and regional smuggling many groups have built up, especially in cocoa, timber, gold and coltan, which are funding their continued expansion.
The worst of this increase in violence has been focused in Ituri Province where a rebel group called the Cooperative for the Development of Congo (CODECO) is accused by the United Nations of mass killings, rape and beheadings and continues to clash with the Congolese Army (FARDC). For instance, in late-February, the Kivu Security Tracker network reported CODECO cadres had attacked a village in North-eastern D.R.C., killing 17 civilians, including five children.
In another part of Ituri Province, and into North Kivu, the long-standing Allied Democratic Forces (ADF) has continued its own offensive against military and civilian targets. The group is now the most active in the region and operates over a wide area, increasing the security enforcement challenge.
Meanwhile, in South Kivu Province, tensions continue to run high among ethnically aligned armed groups. The latest Ebola outbreak, which emerged in early February 2021, has now subsided. However, the social disruption it caused, combined with COVID-19’s effects, are still exacerbating insecurity.
Terrorism Risk 40 (Medium-Low) TREND ▲
In 2021, the U.S. State Department reclassified the ADF as a designated Foreign Terrorist Organisation. The State Department referred to the ADF as ‘The Islamic State of Iraq and Syria-Democratic Republic of Congo’ (ISIS-DRC). Since then, both Islamic State (IS) propaganda and the ADF’s own online content have made increasing claims about its links between the group and IS affiliates in Syria and elsewhere. Despite these claims, the UN Group of Experts has found no evidence of any links between the ADF and any other IS affiliates.
Nevertheless, the U.S. designation does seem to have precipitated a shift in the ADF’s tactics. Recent months have seen a significant uptick in the group’s use of improvised explosive devices against both the FARDC and civilian targets. One such attack, in December in Mangina Commune, left at least 16 people dead. The group has also begun suicide bombings targeting Uganda’s urban centres. In November, a series of such attacks killed at least four people in Uganda’s capital, Kampala.
Exchange Transfer and Trade Sanctions Risk 64 ( Significant) TREND ►
In 2021, the D.R.C. continued its recovery from the COVID-related slump of 2020. The International Monetary Fund (IMF) estimates gross domestic product growth (GDP) for the year was around 5.4%, and forecasts a further surge, of 6.4% in 2022, and 6.6% in 2023. In the past twelve months, this has been driven especially by increased copper production (the D.R.C.’s largest export earner), and by a recovery of copper process. In addition, the country is beginning to see the benefits of the nascent electric vehicle revolution which, given that it is already driving increased demand for cobalt and coltan, will help to spur further growth in the DRC (which holds 70% and 60% of the world’s cobalt and coltan reserves, respectively).
However, the government is still trying to manage the costs of an increased social spending programme on which it had to embark in response to a wave of COVID-19-related malnutrition. Although the costs of this are now receding, they continue to act as a drag on government investment.
Sovereign Default Risk 75 (H igh ) TREND ►
The country’s commercial loan liabilities, most of which relate to a major Eurobond issue in 2007 of USD454 million, are not up for refinancing in 2022. In addition, the country currently has a debt-to-GDP ratio of just 15.2%, making it one of the least-indebted African countries.
However, external debt accounts for over 65% of public debt. Most of this is owed to multilateral donors, especially the IMF, which since COVID-19’s advent has extended emergency finance to the country, including its Catastrophe Containment and Relief Trust. With relations between the IMF and D.R.C. slowly improving after several years of difficulties, the multilateral community is unlikely to withdraw these kinds of mechanisms.
