Previous Quarterly Editions
Expropriation Risk: 72 72 72 73 ► Political Violence Risk: 66 67 74 74 ► Terrorism Risk: 35 35 36 38 ▲ Exchange Transfer and Trade Sanction Risk: 73 73 73 64 ▼ Sovereign Default Risk: 75 75 75 75 ►
TREND ▼
President Félix Tshisekedi continues to consolidate his grip on power, at the expense of his predecessor, Joseph Kabila, and Kabila’s coalition (the Front Common pour le Congo or ‘FCC’). Having neutralised some of Kabila’s closest parliamentary allies, in July Tshisekedi consolidated his control over the Independent National Electoral Commission (CENI), with a law which confirms two-thirds of CENI appointments must be from political parties. This stacks the ostensibly independent body in the president’s favour, ahead of the 2023 presidential elections.
One of Tshisekedi’s close allies, parliamentarian Nsingi Pululu, also tabled in parliament the highly controversial Nationality Bill. If passed, the law would bar anyone not born to two Congolese parents from running for the presidency, in a move which appears to be targeted at another of Tshisekedi’s main challengers, former Governor of Katanga Moise Katumbi (whose father is Greek). As such, although the bill was tabled by a member of Tshisekedi’s coalition, the Sacred Union, it has the potential to break up that alliance, given that Katumbi’s own party, The Ensemble for the Republic, is one of the four main factions in that group. Meanwhile, other provisions of the bill have been also condemned by civil society groups, including by the highly influential Catholic Bishops’ Conference, as potentially divisive.
Tshisekedi has also accelerated plans to hold a national census. Although the next census is long-overdue, the president’s urgency to launch the process now has been widely interpreted as a delaying tactic for the 2023 elections. Given that the DRC currently has neither the budget, nor the infrastructure, to carry out a census, it is highly unlikely that the census could be completed by 2023. Yet once the census process is begun, it would be impossible to hold any elections until it is complete.
Whether Tshisekedi can ultimately hold on to power may be determined less by such machinations, and more by the success or failure of some of his more populist policies. Since the Sacred Union was formed, the coalition has launched no less than 343 new initiatives. The president’s own political standing is particularly tied to two of these: his promise to clear the backlog of unpaid pensions for civil servants (which in many parts of the country have not been paid since the 1970s), and his promise to achieve an effective system of universal primary education (which across the DRC, has been long hampered by teacher shortages).
Both these measures are hugely popular with the public, yet both are enormously expensive, and, despite donor pledges, it is not clear how the government might currently afford them.
TREND ►
As part of his wider consolidation of power, Tshisekedi has continued to strengthen his control over Gecamines, the state-owned mining company that has 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.
The president is also taking an increasingly hard line over mining reform, especially in relation to Chinese investors, in a move away from Kabila’s former Beijing-centric policies in this area. During a recent visit to the DRC’s minerals-rich Katanga Province, Tshisekedi delivered a strongly worded speech, in which he announced an upcoming renegotiation of all Chinese mining contracts in the region -- which account for around 30 of Katanga’s 40 foreign concessions, following the implementation of Kabila’s ‘minerals-for-investment’ deal with Beijing in 2008.
Tshisekedi’s move (which is further strengthened by a series of inter-connected grand corruption probes involving Congolese mining during the Kabila years, which are ongoing in Switzerland, the United Kingdom and the United States) was greeted favourably by US Ambassador Peter Pham. However, if the president’s stance was to lead to yet further revisions of the country’s notorious 2002 mining code, then it could result in all mining contracts being redrawn even further in the state’s favour, for all foreign miners.
Tshisekedi’s hardening stance raises concerns for existing foreign investors, especially in the mining sector. However, the president’s mooted reforms should improve business confidence over the medium term. The World Bank remains confident that the DRC’s underlying economic indicators remain strong -- aside from the COVID-19 slowdown -- and with improved transparency, should therefore be an attractive investment environment.
Ongoing armed violence in the country’s eastern regions, which has increased steadily since the start of the COVID-19 pandemic, remains another major thorn in Tshisekedi’s side. There are now more than 300-armed rebel groups operating in the east, many of which are increasingly emboldened. In June, the latest report from the UN Group of Experts on the DRC drew attention to the vast networks of trade and regional smuggling that many groups have built up, especially in cocoa, timber, gold and coltan, which are funding their continued expansion.
At present, the worst of this increase in violence has been focused in Ituri Province. There, a rebel group called the Cooperative for the Development of Congo (CODECO) -- which has been accused by the United Nations of mass killings, rape and beheadings -- has continued to clash with the Congolese Army (FARDC), and in July even launched an attack into Uganda’s Zombo District. The cross-border strike was repelled by the Ugandan Army, in clashes which left six CODECO fighters dead, and one Ugandan soldier.
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. The group is now the most active in the region and operating 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, was declared over in May. However, the social disruption that it caused, combined with COVID-19’s ongoing effects, have the potential further to exacerbate insecurity.
TREND ▲
In recent months, the US 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. However, 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 US 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. The group could expand these tactics, including mounting urban operations and suicide bombings soon.
In 2020, the DRC experienced its first recession in 18 years, due to COVID-19’s effects. Although the overall contraction was not as sharp as projected (in part, because of higher prices for major commodities, especially copper, the DRC’s largest export-earner) it was still significant at minus 1.7%. This compares to growth of 4.4% in 2019, and 5.8% in 2018.
Moreover, social spending will likely have to increase significantly soon, as the country responds to a wave of COVID-19-related malnutrition. However, all of this, combined with the response to Tshisekedi’s consolidation of power, makes it less likely that the international community will seek to broaden trade sanctions against the country over the short or even medium term.
The country’s commercial loan liabilities, most of which relate to a major Eurobond issue in 2007, are not up for refinancing in 2021. In addition, the country currently has a debt-to-GDP (gross domestic product) ratio of just 21.2%, 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 International Monetary Fund (IMF) -- who since COVID-19’s advent have extended emergency finance to the country (including the IMF’s Catastrophe Containment and Relief Trust). With relations between the IMF and DRC slowly improving after several years of difficulties under Kabila, the multilateral community is unlikely to withdraw these kinds of mechanisms.
Moreover, in early August, the IMF agreed to create an unprecedented USD650bn in Special Drawing Rights, in an attempt to boost the global economy post-COVID-19. About 6.4% of this new money will be earmarked for Africa, and the DRC should have a significant claim on this. Additionally, the DRC should benefit from another IMF instrument, the Resilience and Stability Trust, which is specifically aimed at low and middle-income countries, and is launching later this year.
Return to contents Next Chapter
