Previous Quarterly Editions
Expropriation Risk: 65 65 65 66 Political Violence Risk: 58 58 58 60 Terrorism Risk: 35 35 35 35 Exchange Transfer and Trade Sanction Risk: 73 73 73 73 Sovereign Default Risk: 75 75 75 75
TREND ►
President Denis Sassou Nguesso was re-elected for a fourth term after a landslide victory in the first round of the March 21, 2021 presidential election, securing 88.57% of the vote. The runner-up, Guy-Brice Parfait Kolélas, who obtained 7.84% of the votes, died of COVID-19 on election night during his evacuation to France. The third-place finisher, Mathias Dzon, a former finance minister turned opponent, won 1.90% of the vote.
Describing the electoral commission as “partisan” and implying its involvement in election-fixing, Dzon had earlier warned that he would not accept the official results given the unlevel playing field. With Henri Bouka, the first President of the Supreme Court and a key ally of the President, heading the judiciary and the electoral commission, Dzon’s contestation of the results was easily dismissed.
In the short term, there are no foreseeable political threats to Nguesso’s presidency. His immediate governing priorities will be improving the beleaguered economy (including rescheduling debt payments with private oil traders) receiving the second disbursement from the International Monetary Fund (IMF), ensuring fiscal prudence and boosting public revenues.
COVID-19, together with the slump in the crude oil price, has rolled back some of the modest pre-pandemic gains which saw growth rise to 1.6% in 2018. It has also set back some major infrastructure projects. The most notable to have suffered delays include the USD83mn agro-industrial zones to be funded by the African Development Bank (AfDB) and the USD550mn Brazzaville-Kinshasa road-rail bridge, with the AfDB already having provided USD210mn of the overall estimated costs.
With public finances under tremendous strain, the government has the tendency unilaterally to revise contractual arrangements. In 2019, Congolese authorities decided to put an end to Eni’s 171,000 barrels per month, stating that the company’s contract with the government to finance infrastructure projects in exchange for oil exports had ended, a decision the company challenged.
The Congolese government is undertaking public sector reform to fight corruption, increase the tax base and enhance financial prudence. The government 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 Nguesso to show that his government is committed to fiscal discipline and stopping public funds waste. Nonetheless, the IMF and key development partners such as France want to see sustained commitment, such as the HALC's independence and auditing the SNPC annually.
TREND ▲
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 Ntumi and his 7,500 ex-combatants are unhappy with the government’s handling of their compensation and socio-economic reintegration. Pastor Ntumi 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.
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 ship’s stores and escape.
The Republic of the Congo is a member of the Central African Economic and Monetary Community (CEMAC), a regional bloc with Cameroon, the Central African Republic, Chad, Equatorial Guinea and Gabon also as members. As a CEMAC member, Congo’s foreign exchange regulation is directed by the bloc’s Bank of Central African States (BEAC).
A new foreign currency exchange regulation came into effect in March 2019, which requires companies in Congo to seek BEAC authorisation before opening offshore current accounts. Every two years, firms also must seek renewal of the permission to maintain foreign currency accounts in the CEMAC area. The new regulation has increased to within 150 days the period for repatriating exportation proceeds above 5 million Central African francs (approximately USD9,203) into a certified commercial bank.
However, given the COVID-19 disruption, resident mining and hydrocarbons companies are exempt until December 31, 2021.. The regulation raises various risks, including for onshore bank credit, currency convertibility and transferability and for exchange rates. Together with a stricter enforcement of foreign exchange regulations, this is seeing stronger accumulation of net foreign assets at the BEAC than initially anticipated.
According to the IMF, Congo’s public debt is “unsustainable”, even though the government has renegotiated its debt with China (2019) and with the Orion Trading Company (2020). The government faces IMF pressure to conclude renegotiation of its debt of about XAF965bn (about USD1.8bn) with private external creditors, notably oil traders, including Glencore and Trafigura. The debt renegotiation was meant to have been concluded in December 2020 with all oil traders. The IMF has conditioned the disbursement of a second tranche of the USD448.6mn, three-year Extended Credit Facility arrangement to the successful conclusion of the debt renegotiation with traders.
Overall, Congo has a poor credit track record, having twice defaulted on its outstanding USD363mn 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 USD21mn coupon from reaching bondholders. The firm claims that it was owed by the government USD1bn in arrears dating back to 1992.
Congo’s public debt exceeds the CEMAC region’s 70% debt-to-GDP ratio limit; Congo’s public debt would be close to 105% of GDP in 2020, rising from 83.3% of GDP at end-2019, according to IMF data published in October 2020. High debt service also continues to present challenges, with the debt service-to-revenue ratio at 37%, and the debt service-to-exports ratio at 14%, according to IMF.
The country’s 2020 budget used a benchmark global oil price of USD55 per barrel, leaving insufficient room for a shock in the global market. Debt restructuring would prove essential to restore Congo’s fiscal space for economic development in the short-to-medium term.
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