Previous Quarterly Editions
Expropriation Risk: 65 67 75 76 Political Violence Risk: 84 85 86 87 Terrorism Risk: 35 35 35 35 Exchange Transfer and Trade Sanction Risk: 55 57 60 60 Sovereign Default Risk: 58 61 62 62
TREND ▲ OUTLOOK ▲
Despite suggestions of progress, the political situation remains unstable. Following the so-called Saint Sylvester Agreement, a deal brokered by the influential Catholic Bishop’s Conference (CENCO), elections are due to be held in December 2018. After intense pressure from both opposition parties and international actors, President Joseph Kabila finally announced in August that he will not stand again, having already completed his constitutionally-mandated two terms in office in December 2016. Instead, Kabila named former Interior Minister Emmanuel Ramazani Shadary as the ruling People’s Party for Reconciliation and Democracy’s (PPRD) candidate for the presidency. Although Kabila’s announcement was greeted with cautious optimism despite the fact that his chosen candidate is under international sanctions, it does little to alter the political dynamics of the coming months.
It is highly likely that the president’s ostensible ‘hand over’ is in fact a well-planned effort to ensure that he retains de facto control of government after the polls. In the DRC, the president effectively hand-picks the prime minister. Therefore, if Shadary, who has long been among Kabila’s most loyal deputies as he was for Kabila’s father before him, were to win the December elections, there would be nothing to stop him immediately appointing Kabila as prime minister. This would effectively leave Kabila in charge of the day-to-day running of the government and might even pave the way for him to run again for the presidency in five years’ time. Sensing that this might be the plan, the opposition have stepped up their own campaigning. Yet it remains highly fragmented, with support originally evenly split between three heavyweight candidates: Etienne Tshisekedi, who leads the main opposition party, the Union for Democracy and Social Progress, UDPS; Jean-Pierre Bemba, who recently returned to the DRC following his acquittal in June by the International Criminal Court after ten years in prison in The Hague on war crimes charges, and Moise Katumbi, whose attempts to return to the country in August were blocked. Although the Constitutional Court prevented both Bemba and Katumbi from standing in September, it is not at all clear that their supporters will unite behind Tshisekedi.
With the opposition struggling to achieve the unity needed to forestall a continuation of the Kabila regime, the potential for the current wave of popular unrest and low-level political violence to become more serious in the run up to the December elections is very high. Polls indicate that two-thirds of the electorate do not trust the authorities to ensure that the electoral process is fair.
The controversial changes to the 2002 Mining Code that were signed into law by President Kabila in March significantly redraw existing mining contracts in the state’s favour. The changes include raising taxes on mining profits, doubling the mandatory state stake in all mining projects to 10%, increasing royalties on all metal production, and adding a new 50% windfall tax when mineral prices rise 25% above a project’s feasibility study. Despite intense lobbying by the mining sector, the government, encouraged by the recent sharp rise in cobalt prices, appears determined to implement the revisions in their entirety. This includes scrapping the former stability clauses that several leading mining companies relied on. In this context, individual mining projects are faced with a dilemma over whether to accept the changes, contest them in court, or scale back their operations. A complicating factor is that the revised code actually offers a much fairer and more effective arbitration process. Whichever route the mining companies choose, profit margins will suffer in the short to medium term as a result of the changes. The government has asked the UN to classify the country’s humanitarian crisis less severely to avoid discouraging investment.
When he was the interior minister, Emmanuel Ramazani Shadary oversaw a brutal crackdown by the security services on all opposition rallies across the country. This approach will almost certainly continue throughout the election period. Recent months have also seen an escalation in a number of separate conflicts across the east. In North Kivu Province, fighting has been most intense between Mai-Mai ‘self-defence’ groups, and various ethnic (Hutu and Nande) militias. In July, the Congolese Army (FARDC) also clashed with its Ugandan counterpart (UPDF) on the waters of Lake Edward, leaving at least one Ugandan soldier dead. The ongoing insecurity is increasingly affecting humanitarian operations throughout the region. When North Kivu and Ituri were hit by a deadly new Ebola outbreak in August, for example, officials from the World Health Organization were unable to travel through the area to distribute a new vaccine due to the risk of attack. In the Kasais, sporadic clashes between the FARDC and Kamwina Nsapu are giving way to larger and more sustained incidents. In this context of growing violence across an increasing number of fronts, MONUSCO, the UN’s peace-keeping force in the country, remains stretched to breaking point.
TREND ► OUTLOOK ►
With so many separate insurgencies underway throughout the country and the long-delayed presidential election finally approaching, an outbreak of unanticipated violence is always possible. However, the risk of terrorist attacks on urban targets remains relatively low.
The changes to the mining code mean that DRC-registered mining companies must now 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 of Kabila’s allies in relation to the FARDC’s conduct in the Kasais, and on Emmanuel Ramazani Shadary in response to the security services’ handling of anti-government protests. However, the Trump administration remains reluctant to impose wider trade sanctions, in part because of Kabila’s use of lobbying firms in Washington. Kabila’s announcement that he will not stand in December makes it even less likely that wider sanctions will be imposed in the near future.
TREND ▲ OUTLOOK ►
The government has now formally requested assistance from the IMF and other financial institutions, but donors remain sceptical about its professed commitment to restraints on fiscal spending, especially with the election approaching and new revenue now expected from the mining sector.
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