Previous Quarterly Editions
Expropriation Risk: 74 72 71 72 Political Violence Risk: 85 87 88 89 Terrorism Risk: 35 35 35 35 Exchange Transfer and Trade Sanction Risk: 58 56 54 52 Sovereign Default Risk: 59 57 56 58
TREND ▲ OUTLOOK ▲
President Felix Tshisekedi spent most of 2019 trying to establish his authority but had little success. Having come to power early in the year after an election that was widely regarded as fraudulent, he has struggled to refute claims that he is simply a ‘puppet’ of outgoing President Joseph Kabila, whose Common Front for the Congo (FCC) coalition forms the majority of Tshisekedi’s government. In an attempt to demonstrate his independence from Kabila and his allies, in recent months Tshisekedi has dismantled key parts of his predecessor’s security apparatus and replaced the head of the secret police, but rising violence in the east of the country, which has included the killing of four WHO Ebola response workers in November, has also undercut his authority. The president has also stopped short of taking on Kabila’s senior military supporters such as General Gabriel Amisi Kumba, who is accused of gross human rights violations for his role in the DRC’s eastern conflicts. After months of wrangling, Tshisekedi managed to keep out a number of key Kabila allies from his first cabinet, which was only sworn in six months after the election, but the FCC still holds more than 40 of the 66 ministerial portfolios. Talks continue between the new administration in Kinshasa and the IMF over a new three-year Extended Credit Facility programme, and there are separate discussions with the World Bank about a new five-billion-dollar aid package. The IMF is concerned by the size of Kinshasa’s unpaid debts to international mining companies, which could be close to ten billion dollars. Tshisekedi has been doing all he can to reassure the Fund of his intentions, especially with his new efforts to tackle corruption, but it appears to be waiting for more evidence that the president can implement his transparency and anti-corruption reforms. This will be difficult, as Tshisekedi will be unable to make much headway before the elections due in 2023. Meanwhile, tensions are also growing within Tshisekedi’s own coalition. There are signs at the start of 2020 that his ostensible ally Vital Kamerhe, whose Union for the Congolese Nation (UNC) is the second largest party within the coalition, may be preparing to break with Tshisekedi in the medium term and establish a separate political identity. Manoeuvring for the 2023 elections has already begun, with Kabila expected to be a candidate.
TREND ▲ OUTLOOK ►
Before leaving office, Kabila pushed through changes to the country’s 2002 mining code which raised tax rates on mining profits, doubled the mandatory stake that all mining projects must give to the state to 10%, and added a new 50% windfall tax that takes effect when mineral prices rise 25% above those used in a project’s feasibility study. Tshisekedi cannot overturn these revisions, but he is not strong enough to enforce them, leaving the sector in an uncertain situation. Meanwhile, it continues to experience significant change as a number of the larger Euro-American firms look to pull out of the country and several large Chinese miners to move in. In August, Glencore suspended production at Mutanda, one of the largest cobalt mines in the world. It is now clear that the move was part of an exit strategy that has been driven in part by an ongoing corruption case in the US that involves Glencore’s DRC operations. There is also a growing sense that Western mining companies can’t compete with state-backed Chinese miners such as China Molybdenum, which are expanding aggressively into African minerals in anticipation of surging demand from the global electric car market.
The DRC’s troubled eastern regions appear to be once again descending into widespread political violence. In the face of increasing attacks against civilian targets, the Congolese Army (FARDC) has launched another major offensive against the Uganda-born Allied Democratic Forces (ADF) in North Kivu Province. As before, this resulted in a series of counterattacks and a wave of civilian deaths and displacement. In Ituri Province, one armed group apparently tried to lay down arms but then attacked local villages when talks with the local authorities stalled. Meanwhile, in South Kivu Province, Rwanda and Burundi continue to fight what is effectively a proxy war. Both countries are continuing to provide direct and indirect support to armed opposition groups based in the DRC, with the intention of destabilising their neighbour’s borderland areas.
TREND ► OUTLOOK ▲
Despite the many separate insurgencies underway throughout the country, the risk of a terrorist attack, as usually defined, has historically been low. Despite claims from the Islamic State 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.
TREND ▼ OUTLOOK ▲
The EU and US sanctions that were imposed on Kabila’s inner circle in the run up to the 2018 election have not been extended, and there was little desire among the international community during 2019 to hamper Tshisekedi’s efforts to establish his authority. The Trump administration remains opposed to broader trade sanctions against the DRC even given Kabila’s continuing influence, due in part to Kinshasa’s long-time use of lobbying firms in Washington. However, if there is evidence that Kabila’s influence is growing further during 2020, this position may be reconsidered.
During the first half of 2020, a series of IMF and World Bank governance and transparency assessment teams will visit the DRC, and their findings will be a crucial step in determining whether new financing is made available. Kabila’s supporters will try to undermine Tshisekedi’s ambitious budget of ten billion dollars for 2020, which is an increase of 60% over the budget for 2019 and clearly aimed at the 2023 election. It will not help his credibility with the IMF and will contribute to a further delay in reaching an agreement.
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