Previous Quarterly Editions
Expropriation Risk: 71 72 69 67 Political Violence Risk: 88 89 87 88 Terrorism Risk: 35 35 35 35 Exchange Transfer and Trade Sanction Risk: 54 52 55 55 Sovereign Default Risk: 56 58 63 63
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Although the COVID-19 pandemic has progressed relatively slowly in the DRC, largely because of the country’s relatively young population, the number of new cases continues to climb steadily. By mid-July 2020, official figures showed 8,500 confirmed cases and 200 deaths. In April 2020, the government began to ease the restrictions in the capital Kinshasa, which remains the epicentre of the national emergency, after almost a month of lockdown. However, it was clear that it would take only a moderate upsurge to overwhelm the country’s weak public health infrastructure, which lacks the capacity to respond to a large number of cases of acute respiratory distress. Moreover, public hospitals in some cities, including Kinshasa, are still recovering from recent epidemics of measles, one of which last year left more than 6,000 people dead, whilst those in the East have also been battling two separate Ebola outbreaks, including a new one in Équateur province. In June 2020, President Felix Tshisekedi announced a 2.6-billion-USD 'Multisectoral Emergency Programme' to mitigate the impact of the COVID-19 crisis but the government has only committed 450 million USD to the programme and is clearly hoping that international donors will make up much of the rest. The pandemic has clearly increased the pressure on Tshisekedi’s already fragile government. This is a multi-layered alliance between his own coalition (Cap pour le Changement, CACH) and that of his predecessor Joseph Kabila (the Front Common pour le Congo, FCC). Kabila’s coalition has actively hampered Tshisekedi from the start, using its large majorities in both the National Assembly and the Senate. Moreover, the CACH itself is also highly fractious. In mid-April 2020, the president had his own chief of staff, Vital Kamerhe, arrested on charges of embezzling 48 million USD from a state infrastructure programme. This is important because Kamerhe, who was sentenced to twenty years in June 2020 after a trial that was marred by the murder of its initial judge, had signed a pre-2018 election agreement with Tshisekedi to be the CACH flagbearer for the presidential polls due in 2023. Meanwhile, Kabila’s FCC began a new effort at mid-year to take control of key domestic institutions, targeting the country’s election commission and working to politicise the judicial system by increasing the power of the justice ministry. By deepening the rift between the FCC and the CACH, Kabila’s aim appears to be to render the coalition as unworkable, despite declarations of unity at the top. Meanwhile, the COVID-19 pandemic has also exacerbated tensions in Congo’s troubled eastern regions, which have seen an uptick in violence in recent weeks.
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President Tshisekedi took a big step towards strengthening his control over the mining sector when he won approval from the Minister of the Public Portfolio in June 2020 to appoint his own loyalists to the board of Gecamines, the state-owned mining company that has stakes in many of the largest copper and cobalt mines across the country. It had been previously controlled by Kabila loyalists, and although a Kabila associate still chairs the board, the former president’s ability to disrupt Tshisekedi’s push towards a more business-friendly environment for the sector is now greatly reduced. Before he left office, Kabila had pushed through changes to the country’s 2002 mining code which, if fully implemented, would have raised tax rates on mining profits and doubled to 10% the mandatory stake that all mining projects must give to the state. Tshisekedi will now find it easier to abandon or modify many of these changes.
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Since the start of the pandemic there has been an increase in fighting among armed groups in the DRC’s troubled eastern regions that has included greater violence against civilian targets. In Ituri Province, a rebel group called the Cooperative for Development of Congo (CODECO) has continued to clash with the Congolese Army (FARDC) but is escalating its attacks against villages, which have left dozens dead. In response, local villages are increasingly forming vigilante groups along ethnic lines that risk worsening the situation. In another part of Ituri Province, and into North Kivu, the long-standing Allied Democratic Forces (ADF) has continued its own offensive against both military and civilian targets. In June 2020, it ambushed a MONUSCO convoy, killing an Indonesian peacekeeper. Meanwhile, in South Kivu Province, recent violence between different ethnic groups has left at least 100 people dead. With the national government currently focused on the COVID-19 pandemic and new outbreaks of Ebola, both of which are centred in the west of the country, the potential for eastern insecurity to increase over the coming months is extremely high.
TREND ► OUTLOOK ▲
Although the Islamic State has claimed that the ADF is now operating as part of its organisation, there is no convincing operational evidence that this is the case. The ADF is the oldest and most enigmatic of the armed groups active in eastern DRC and, while its leaders are Muslim, they seem to have developed and internalised very different views from those of IS. At present, it seems unlikely that the ADF has any immediate intention to switch its focus to the types of international targets that IS favours.
In June 2020, the central bank projected a contraction of 2.4% this year, down from a pre-COVID prediction that saw growth of 3.9%. The advent of COVID-19 makes it less likely that the international community will seek to broaden trade sanctions against the DRC over the short or medium term, even if Kabila’s ongoing influence does remain a concern. However, the epidemic will undoubtedly cause a major economic shock and one outcome may be a controlled devaluation of the currency, the Congolese Franc.
The country’s commercial loan liabilities, most of which relate to a major Eurobond issue in 2007, are not up for refinancing in 2020. However, interest repayments on concessionary loans may still put it into debt stress over the coming months. In mid-April 2020, the IMF approved an emergency grant of 20 million USD under its Catastrophic and Containment and Relief Trust (CCRT), which effectively pays the interest on the country’s external debts for six months. The CCRT is currently underfunded, as not all money pledged by donors has been received, but if those pledges are met then the DRC could potentially extend its grant to cover debt servicing until April 2022. With relations between the IMF and DRC slowly improving after several years of difficulties under Kabila, the IMF may offer a new extended credit facility (ECF) before the end of this year. However, even if both the CCRT and ECF are fully utilised, falling commodities prices and lower tax revenues means that the government still has very limited scope for a wider fiscal stimulus package.
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