Previous Quarterly Editions
Expropriation Risk: 73 74 75 75 ►Political Violence Risk:74 73 73 73 ►Terrorism Risk:38 40 42 40 ▲Exchange Transfer and Trade Sanction Risk: 64 64 73 73 ►Sovereign Default Risk:75 83 83 83 ►
TREND ►
Protest intensity in 2022 and Q1 2023* 2022 Q1 2023Cost of living : Low LowAll protest: Low Low
Cost-of-living protest risk in 2023*Wage protest: Low Food/fuel policy protests: High
*Note: Protest intensity is calculated based on ACLED. Risk levels are calculated by WTW. Where data are missing no risk level will be displayed. For details of calculations, see the introductory essay.
President Félix Tshisekedi continues to engage in political horse-trading, ahead of general elections due to be held on December 20, 2023. Given the DRC’s infamously fractious and factionalised political landscape, this has involved Tshisekedi having to do political deals with an ever-wider range of heavyweight political actors and their parties.
With his own ruling coalition, the Union Sacrée, descending into internal squabbles – which partly reflects the coalition including political blocs once loyal to Tshisekedi’s predecessor, Joseph Kabila – the president recently sought to expand his platform by doing deals with people including former Vice-President Jean-Pierre Bemba (who is now back in the DRC, having been acquitted by the International Criminal Court on charges relating to his role in the Second Congo War, of 1998-2003), and his erstwhile Chief of Staff Vital Kamerhe (who was released from prison in December 2021, after serving 18 months of a 20-year sentence for corruption and embezzlement).
Tshisekedi’s political challenges are being made vastly more complicated by the deteriorating economic situation. Although GDP growth remains steady at around 5% per annum, inflation has been steadily rising, driven especially by the rising costs of essential food items, and of fuel. In March 2022, the annual inflation rate was 5.85%; in January 2023, it was 16.28%. This, combined with the rising cost of external debt, and poor management of public finances, has placed the Ministry of Finance in a constrained fiscal position.
One response has been for the government to try to reduce, and/or restructure, its programmes of subsidising both food and fuel (programmes which were expanded in the context of the COVID-19 pandemic). However, these efforts carry significant political risks. In late 2022, it emerged the finance ministry still owed oil companies USD590 million in unpaid subsidies, could only afford to pay them USD430 of this, and needed to restructure the remaining debt. When it emerged the government’s response could involve reducing future subsidies, a major public outcry ensued. This resulted in fuel shortages, as people made a run on petrol stations across the country.
President Tshisekedi remains committed to developing a business-friendly investment environment, following the DRC’s accession to the East African Community (EAC) trade bloc in March 2022. The president also regards a predictable investment environment as crucial for maintaining stability ahead of December’s presidential and parliamentary elections, and he will try to avoid any investment shocks ahead of those polls.
In recent decades, a key barometer for the DRC’s overall business-friendly environment has been Gécamines, the state-owned mining company with stakes in many of the largest copper and cobalt mines across the country. Following a protracted struggle to remove Kabila loyalists from key positions on Gécamines’ Board, in February President Tshisekedi appointed a new Head of Gécamines, Guy Robert Lukama Nkunzi. Nkunzi’s appointment has been widely welcomed by investors. A veteran of the DRC’s mining and banking sectors, Nkunzi is widely respected across both sectors, and is generally seen as a ‘safe pair of hands’.
The DRC’s external debt burden is currently rising. However, reflecting both recovering commodity prices and the success of various debt-restructuring programmes that the country has implemented in recent years, the IMF continues to classify the country as only at ‘moderate’ risk of debt distress, which is a lower risk rating than for many other African countries.
Ongoing armed violence in the country’s eastern regions, which has increased steadily since the start of the COVID-19 pandemic, continues to present significant challenges for Tshisekedi’s government. There are now more than 300 armed rebel groups operating in the east, many of which are increasingly emboldened by their control of vast networks of trade and regional smuggling.
In recent months, the deteriorating security situation has been further exacerbated by growing public distrust of the UN’s Stabilisation Mission in the DRC (MONUSCO), by a resurgence of eastern DRC’s largest rebel group, the ethnic Tutsi-dominated M23 Movement – which had been dormant for almost a decade – and by concomitant rising regional tensions, especially between the DRC and Rwanda (given that Kinshasa regards M23 as a Rwandan proxy).
In early March, the Angolan government brokered a ceasefire between the Congolese Army (FARDC) and M23. However, this held for barely a few days before fighting re-erupted in North Kivu Province, in clashes which left a number of civilians also dead. As has become customary with these episodes, both sides accused each other of having started the fighting.
For more than 20 years, insecurity within the DRC’s troubled Eastern Provinces has been somewhat contained by the United Nations’ peacekeeping forces. However, following growing criticism of MONUSCO’s ability to contain the current violence (January-August 2022 were the most violent months of the past decade, with over 2,179 civilian deaths) in December, the EAC began deploying its own peacekeeping force, the EAC Regional Force (EACRF). To date, Burundi, Kenya, South Sudan, and Uganda have all deployed troops as part of EACRF, and other countries including Angola are planning to do so as well. Most of these are soldiers are focused on the areas of M23 operations, although the ability of EACRF to have a significant effect on security and stability will be, as with MONUSCO before it, hampered by eastern DRC’s poor infrastructure.
TREND ▲
In 2019, the Allied Democratic Forces (ADF) pledged allegiance to Islamic State (IS), and in 2021 the U.S. State Department reclassified the group as a designated Foreign Terrorist Organisation. Since then, both IS propaganda, and the ADF’s own online content, have made increasing claims about the ADF’s inks between the group and jihadist groups elsewhere, and security assessments suggest the group is growing its links with Islamic fundamentalist networks and funding channels in East Africa, and beyond.
The pledge of allegiance IS, and the U.S. response, seem to have precipitated a shift in the ADF’s tactics. Buoyed by their new jihadist links, recent months have seen an uptick in the group’s use of suicide bombings, improvised explosive devices, and other kinds of terror attacks, in both the DRC and in Uganda. In early March, the group carried out an attack on a village in North Kivu Province that left at least 36 civilians dead.
However, both the FARDC and the Ugandan army (UPDF) are continuing a major counter-insurgency operation against the ADF in Eastern Congo, which has so far hampered the group’s ability to escalate their terrorist attacks.
The IMF forecasts that GDP growth for this year will be around 5% and forecasts a similar rise in 2024. Despite the pressures of inflation and rising interest rates, over the past twelve months, the DRC’s economy has benefitted from increased copper production (the DRC’s largest export earner) and by a strong copper price.
The DRC’s outlook also remains good over the medium-term, as the country will begin to see the benefits of the nascent electric vehicle revolution which, given it is already driving increased demand for cobalt and coltan for use in power cells, will help to spur further growth in the DRC (which holds 70% and 60% of the world’s cobalt and coltan reserves, respectively).
In January, the DRC also completed an auction of 27 new oil exploration blocks across the country. Although the auction raised the consternation of the international community, given many of the blocks are in ecologically sensitive areas, it has the potential significantly to advance the country’s nascent oil sector. Assuming a 35% recovery rate, the 27 blocks are estimated to contain oil worth approximately USD500 billion, at current prices.
The DRC has a track record of default on its commercial loans, most of which relate to a major Eurobond issue in 2007 of USD454 million. Kinshasa has defaulted on this twice, in 2016, and again in 2017. However, the risk of further defaults has diminished, following the Ministry of Finance’s restructuring of its external commercial debts with the oil companies last year.
Nevertheless, external debt still accounts for over 65% of public debt. Most of this is owed to multilateral donors, especially the IMF, which since the start of the pandemic has extended emergency finance to the DRC (including the Fund’s Catastrophe Containment and Relief Trust). With relations between the fund and DRC slowly improving after several years of difficulties, the multilateral community is unlikely to withdraw these kinds of mechanisms.
The tightening economic situation is unlikely to become a key driver in the upcoming election campaigns, nor to generate a broad-based ‘punishment vote’ against Tshisekedi’s government. This is based on the DRC experiencing much worse economic conditions in recent years, and the government managing to ride those out. In late 2017, a combination of internal and external factors resulted in the annual inflation rate reaching 67%. Older Congolese will remember the war years of the early 2000s, when inflation reached 500%.
Nevertheless, as the election campaign intensifies, local opposition leaders will doubtless attempt to harness public disquiet over the economy as a tool for mobilising anti-government sentiment, and for encouraging unrest. Indeed, this is already happening: in December, former Governor of Katanga Moise Katumbi used public disgruntlement over the economy as a means for mobilising a Katangan ethno-nationalist youth group, who went on to engage in violent clashes with government supporters.
Return to contents Next Chapter
