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Expropriation Risk: 66 67 68 68 ►Political Violence Risk:60 59 59 60 ►Terrorism Risk:35 35 35 35 ►Exchange Transfer and Trade Sanction Risk: 64 55 55 73 ▲Sovereign Default Risk:75 83 83 83 ►
TREND ▲
Geopolitical alignmentEast 1 2 3 4 5 West
Alignment five years agoEast 1 2 3 4 5 West
Degree of contestationSettled 1 2 3 Contested
The Republic of the Congo (ROC) was one of the four African countries visited by Russia’s foreign minister, Sergey Lavrov, in July 2022. This was part of the Kremlin’s ‘charm offensive’, hoping to win support for its attack on Ukraine begun in February 2022, as well as to absolve Russia from any blame from allegations the invasion has caused a global food crisis, rendering Russia responsible for a crisis which has seen world food prices rise, and food availability fall.
The ROC was one of the 17 African countries that abstained in the UN vote of March 2022 that sought a resolution to condemn Russia’s invasion of Ukraine. Russia is also specifically seeking to win over President Denis Sassou Nguesso, who is influential with some of his African peers, to secure support for the Kremlin on the international stage.
To increase Russia’s leverage, the Kremlin has promised to expand the footprint of Russian companies such as Lukoil group in the ROC’s oil and gas sector, including investing in the construction of the Pointe-Noire Brazzaville pipeline. Even so, at present Western companies largely dominate the ROC’s oil and gas sector, and this situation is unlikely to change in the medium term.
Despite the Kremlin charm offensive, however, President Sassou Nguesso is unlikely to pivot completely to Russia in the medium term. The ROC is almost certain to maintain ties with Western partners and allies. As an indication of this, President Sassou Nguesso has already accepted an invitation to the U.S/Africa summit scheduled to take place in Washington in December 2022.
Overall, Nguesso Sassou will try to strike a balance, being ‘in favour’ in Western capitals while at the same time courting Russia’s investment. As far as China is concerned, the ROC relies on Beijing for loans to undertake projects including building infrastructure. The foreign policy direction the ROC takes between the East and the West will wax and wane depending on which side is perceived to be meeting the ROC’s economic and financial interests.
TREND ►
The ROC is expected to return to economic growth in 2022 after a 10% contraction in 2020. With public finances under strain, the government has the tendency unilaterally to revise contractual arrangements, although over the years, cases of expropriation have been rare in the country.
The government is more likely to cancel contracts of companies in the infrastructure and mining sectors on the basis of perceived poor delivery. In 2020, the government cancelled mining concessions of some foreign companies for repeated delays in starting operations.
In power since 1997, President Sassou Nguesso was re-elected for another five-year term after a landslide victory in the first round of the March 2021 presidential election. At the legislative elections in July 2022, the president’s ruling Congolese Labour Party (known as PCT) secured a parliamentary majority by winning 111 out of the 151 seats.
In the medium term, there are no foreseeable political threats to Sassou Nguesso’s presidency. 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 Frederic 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 ROC’s 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.
There are a few instances of attacks by pirates both offshore and in Pointe-Noire anchorage area. In January 2021, three intruders boarded a Cyprus-flagged container ship. This prompted the crew to retreat into the citadel. Anchored container ships are increasingly targeted by robbers seeking to steal ships’ stores and escape with the loot.
There are no emerging sanctions risks at present. As a member of the Central African Economic and Monetary Community (CEMAC), the ROC’s foreign exchange regulation is directed by the bloc’s Central Bank of Central African States (BCEA).
A new foreign currency exchange regulation came into effect in March 2019, requiring companies in the ROC to seek BCEA authorisation before opening offshore current accounts. Firms also must seek renewal every two years of the permission to maintain foreign currency accounts in the CEMAC area. The new regulation has increased the period for repatriation of exportation proceeds above 5 million Central African francs (approximately USD7,557) into a certified commercial bank to within 150 days, up from 30 days.
However, the Central Bank has granted several concessions to resident companies operating in the mining and hydrocarbons sectors, significantly reducing the risks around capital controls and exchange transfers for the extractive industry, which is a major revenue earner for the ROC. Extractive companies can maintain foreign currency accounts both within and outside the CEMAC area and can transfer abroad the salary of expatriate workers from onshore foreign currency accounts. Payment can also be done in foreign currency to subcontractors operating in the CEMAC zone.
According to the International Monetary Fund (IMF), the ROC’s public debt is “unsustainable” even though the government has undertaken some debt renegotiations in recent years, including with private firms and with China. ROC Prime Minister Anatole Collinet Makosso noted in August 2021 the country’s current public debt stood at 91% of GDP, a gradual decrease compared with 105% of GDP in 2020. The gradual reduction has come from cuts in public expenditure. Even so, this is still above the CEMAC’s 70% debt-to-GDP ratio limit.
Overall, the ROC has a poor credit track record, having twice defaulted on its outstanding USD363 million 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 USD21 million coupon from reaching bondholders. The firm claimed the government owed it USD1 billion in arrears dating back to 1992.
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