Previous Quarterly Editions
Expropriation Risk: 67 75 76 74 Political Violence Risk: 85 86 87 85 Terrorism Risk: 35 35 35 35 Exchange Transfer and Trade Sanction Risk: 60 60 58 58 Sovereign Default Risk: 61 62 62 59
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Although it passed off uneventfully, the inauguration of Felix Tshisekedi as the country’s new president on January 25 will do little to move the country forward from an election result that was met with widespread accusations of ballot-rigging and collusion between Tshisekedi’s camp and the outgoing president, Joseph Kabila. However, both the Congolese people and international stakeholders appear to prefer stability to any further confrontations over the outcome. The official results of the December elections also give Kabila’s Common Front for the Congo (FCC) an overwhelming parliamentary majority, suggesting little will change now that President Tshisekedi is constitutionally obliged to appoint a prime minister drawn from the FCC, who must then countersign the president's appointment of senior state officials. The elections should have been held in December 2016 when Kabila, constitutionally limited to two terms, was due to step down. By delaying them, he was able to remain in office for a further two years. After polling closed on December 30, the election commission, which is closely allied with Kabila, delayed issuing results until January 10, when it said that Tshisekedi has won. The highly influential Catholic Bishop’s Conference (CENCO) immediately cast doubt on the result, arguing that data collected by its 40,000 election monitors instead pointed to an overwhelming victory for another presidential challenger, Martin Fayulu. Rumours soon began of a political fix between Kabila and Tshisekedi under which the latter would take office while the former retained influence. Data from the electoral commission that was subsequently smuggled out of the country suggests that CENCO was correct and Fayulu did in fact win by a landslide. However, the constitutional court, which is also loyal to Kabila, went ahead and confirmed Tshisekedi’s victory. Following the announcement, Fayulu described the outcome as a ‘constitutional coup d’état’ and called on his supporters to take to the streets in protest. In this context, there was the possibility of large-scale public unrest, especially in Kinshasa and other urban centres. However, an acceptance that Fayulu would not be allowed to take power and clear signals from the international community that it would not intervene in his support, all buttressed a widespread sense in the country that the departure of Kabila from office constitutes an acceptable, if illegitimate, outcome from the election.
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One of the few positive outcomes of the contentious election may be an improvement in the DRC’s investment environment, especially in the mining sector. In March 2018, President Kabila signed controversial changes to the 2002 Mining Code that significantly redrew existing mining contracts in the state’s favour. The changes included higher taxes on mining profits, doubling the mandatory stake that all mining projects must give to the state from 5% to 10%, increasing royalties on all metal production, and a new 50% windfall tax that takes effect when mineral prices rise 25% above those used in a project’s feasibility study. Despite intense lobbying by mining companies, Kabila appeared determined to implement the revisions in their entirety to maximise state revenue from the sector. With the election over, the incoming administration appears less likely to implement all of these new regulations as it comes under internal and external pressure to create a more business-friendly environment to encourage investment. For their part, mining companies now have an incentive to work towards a comprise with the government rather than scaling back their operations.
The run-up to the election produced a rise in political violence, although incidents were relatively small-scale and localised. The potential for more significant unrest, especially in urban areas, after the results were announced was not borne out, although the US troops dispatched in early January to neighbouring Gabon to assist or evacuate US citizens in Kinshasa if necessary remained positioned there. Meanwhile, the period of uncertainty both before and after the elections has been used by armed groups in the troubled Eastern Provinces of the country as an opportunity to ramp up their military campaigns. The region’s increasingly numerous and fragmenting militia groups have stepped up attacks on a wide range of military, economic, and civilian targets. These have included an attack in late 2018 on a joint force from the Congolese Army (FARDC) and the UN peacekeeping mission (MONUSCO) in which at least 12 government soldiers and 7 UN personnel were killed. In recent months, at least 75 FARDC soldiers have been killed in sporadic clashes in neighbouring Ituri Province.
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With so many separate insurgencies underway throughout the country, an outbreak of unanticipated violence is always possible. However, the risk of terrorist attacks on urban targets remains relatively low.
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One aspect of Kabila’s alterations to the mining code that companies are particularly keen to soften is the requirement to repatriate 60% of funds during the ‘investment return phase’ and 100% of funds thereafter. Funds repatriated in this way cannot be used to subsequently service foreign debt. The EU and US have imposed targeted sanctions on some individuals in Kabila’s inner circle, notably Emmanuel Ramazani Shadary, who was the president’s preferred candidate in the December elections. However, his poor showing means that this will not create problems going forward and it is unlikely that the targeted sanctions will have much impact on senior figures in the incoming government. The Trump administration remains reluctant to impose wider trade sanctions, in part because of Kabila’s long-time use of lobbying firms in Washington.
The outgoing government had formally requested increased economic assistance from the IMF and other financial institutions. It is too early to gauge their response to the new administration, although they are likely to remain sceptical about professed commitments to restraints on fiscal spending. However, Kinshasa can expect a high degree of goodwill among the international community after what was, however imperfect, the first democratic transition in the country’s history. Greater economic assistance is likely to be the preferred international response to the Tshisekedi government, at least initially.
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