DEMOCRATIC REPUBLIC OF CONGO

Accra (gtai) – After years of recovery, the economy of the Democratic Republic of Congo is
in crisis. The main reasons for this are high political instability as well as a crisis in its copper
mining industry. Whether things will improve is difficult to say at the beginning of 2017. For
German companies doing business with Congolese customers there are tougher times ahead. In
2016, German exports to the Central African country fell by more than 40%.

ECONOMIC
OVERVIEW
The economy has declined significantly since
2016, and forecasts for coming years are poor. The
Economist Intelligence Unit (EIU) predicts GDP
growth of 3,5% in 2017 and only 3,1% for 2018. In
2015, GDP growth had been at least twice as high
for several years and gave the country an economic
boost that nurtured hope of stability. High inflation
and political instability, are likely to result in a
decline in real per capita income.
One of the main reasons is the low price of
copper. Since 2011, the price per ton has declined
from about 10 000 USD to under 5 000 USD. The
economic impact on DR Congo, which derives more
than 90% of its foreign exchange revenues from
copper exports, is massive. Since November 2016,
the price of copper has risen to about 6 000 USD,
which suggests an upswing. While western investors
are leaving, Chinese companies continue to invest in
copper mines.
It is unclear what the political situation is. The
term of office of President Joseph Kabila ended in
December 2016, but he is still in power. He is not
allowed to apply for another term, according to the
Constitution; observers suspect he is deliberately
delaying the election to buy time. In September
2016, a demonstration by opposition parties killed
more than 50 people. Western nations hope that
planned economic activities will put pressure on
Kabila. Conditions for companies that seek to trade
or invest are difficult.
INVESTMENTS
While mining companies such as Freeport-
McMoRan from the USA, are selling their shares,
Chinese mining companies are filling the gap. The
Sicomines mine under construction but in the
Katanga region the mood is sour. There are barely
any investments from service providers because no
one knows what will happen next.
Meanwhile, money is still pouring into the con-
struction of power plants by some mining companies
and donor organisations. The largest investment
ever made in the country, the construction of the 12
billion USD Inga III hydroelectric power plant, is
being postponed again and again. If the plans are to
be carried out, construction is expected to begin as
early as the end of 2018. The uncertainty is felt in
potential sectors such as food processing or construc-
tion. The political instability also means that donors,
who are heavily involved in the DRC, are reluctant
to release additional funds. Donors’ funds for further
infrastructure investments are likely to decline.
CONSUMPTION
Consumers are also rejecting the poor economic
situation. Rising food prices mean much of the
population has to cut back on consumption. At
only 470 USD per capita income, DRC is already
one of the poorest countries in the world. To make
matters worse, many foodstuffs are imported at
great expense. If the country was politically stable,
local production of food and other consumer goods,
such as personal care products, would be a more
promising business.
The upper class almost exclusively purchases
imported goods. Consumer centres are
Kinshasa (about 10 million inhabitants) and the
Lubumbashi area (about 5 million inhabitants).
Local supermarkets (including Shoprite and
Psaro) suffered recent losses, partly because
expatriates from Western mining companies have
withdrawn from Katanga. The situation is more
stable in Kinshasa where the middle class has lost
purchasing power but foreigners, mostly diplomats
or employees of other government organisations,
remain.
FOREIGN TRADE
According to provisional figures of the Federal
Statistical Office, German exports to the DR Congo
fell sharply. German companies supplied goods
worth 147,9 million euro in 2015, but this dropped

72 ANNUAL REPORT OF THE SOUTHERN AFRICAN–GERMAN CHAMBER OF COMMERCE AND INDUSTRY 2016–2017
 U b a ng
SOUTH SUDAN
Bangui i Juba
National capital
District capital Uele

Major airport K ib
al i

International boundary o ng a l a PROVINCE

UG ANDA

M
District boundary ng
o ORIENTALE
Lake
Co Lo p
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Main road

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Albert Kyoga
lo ng a
Railroad Lu
EQUATEUR Kisangani Kampala
CONGO NORD-
Mbandaka Ts h
uap Lo KIVU Lake

Lu
a Edward
Lake
Area 2 344 858 km²

ala
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Goma
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la Victoria

Lu

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Lake RWANDA
Kigali Population 79.7 million (2016)

(C o ng o )
li n
Kivu
Bukavu

di
Lac
Mai-Ndombe
KASAI Kindu Population growth 3,18%
Bandundu
L u ke ni e
ORIENTAL Bujumbura
K as SUD-KIVU
ai BURUNDI
Brazzaville
Kinshasa
Kw
San
MANIEMA Official languages French
KASAI
il u

ku r u
SA

Cabinda BAS-CONGO
K I NS
HA OCCIDENTAL
Capital Kinshasa
Matadi

L a ke
(ANGOLA) BANDUNDU Kananga ku g a UNIT E D
Mbuji-Mayi Lu
R EPUBLIC GDP growth 7,2%
OF

L ua l ab a
ATLANTIC Ka
s
TANZANI A President Joseph Kabila
Kw

OCEAN

Ta
ai
an

ng
Ease of doing
go

any
KATANGA
184/189 (2016)
Lu
vu a
business

ika
Luanda
L ulu

A N GOL A Lake
Mweru Currency Congolese franc
a

ZAMB I A Sources: World Bank, World Fact Book

L a ke M a l a w i
MAL AWI
ze Lake
Za
m be
Lubumbashi
Bangweulu

KEY ECONOMIC DATA SWOT ANALYSIS

Comparative Strengths Weaknesses
2016
Indicator 2015 data, Germany
(estimates) Vast mineral resources (copper, Underdeveloped infrastructure
2015
cobalt, tin, zinc, manganese, (energy, transport, water)
GDP (nominal, billions of USD) 35,2 35,4 3 357,6 tungsten, oil, diamonds, gold) Inefficiency, corruption
GDP per capita (nominal, USD) 470 473 41 147 Conurbations Kinshasa and nepotism in public
Population (millions) 77,3 79,8 81,6 (±10 million) and the administration
greater metropolitan area High political instability
Exchange rate of Lubumbashi (± 5 million)
926 1 011,7 represent a high demand for Poor security in parts of the
(1 USD = Congolese franc)
consumer goods country
*Estimate Abundant hydropower
resources
Source: EIU, German Federal Bureau of Statistics
Opportunities Threats
Especially at high raw material Unstable political situation
FOREIGN TRADE (USD MILLIONS) prices: demand for equipment makes investors nervous
and machinery for mining Armed conflict and kidnappings
2015 2016 % change
Repair and expansion of in the east of the country
Imports 10 575 8 671 -18 infrastructure
Exports 10 285 8 228 -20 In a good economy:
opportunities in consumer
Balance of trade -290 -443 goods
Source: EIU

SELECTED MAJOR PROJECTS

Investment
Project Project Status Comment
amount (USD)
Inga III hydropower station (Public Three consortia are currently applying for the 4 800 MW
12 billion Planned, delayed
Private Partnership; PPP) hydroelectric power plant
Owned by the Congolese state as well as Sinohydro and China
Sicomines copper and cobalt mine 3 billion Under construction Railway Group. The excavation capacity should be 250 000
tonnes.
Concessionaire is Ivanhoe Mining, striking capacity: 300 000
Kamoa-Kupfervorkommen 2,5 billion Planned jato
The power station is to obtain 145 MW and also to supply
Hydropower station Rusisi 3 0,45 billion Planned Burundi and Rwanda with electricity. Financing inter alia by the
EU.
The 150 MW power station is being built by Sinohydro, financed
Hydropower station Zongo 2 0,365 billion Under construction by China EximBank

Source: gtai research, press reports

ANNUAL REPORT OF THE SOUTHERN AFRICAN–GERMAN CHAMBER OF COMMERCE AND INDUSTRY 2016–2017 73
DEMOCRATIC REPUBLIC OF CONGO
to a mere 79,1 million euro between January and
November 2016. This is a decline of more than 40%
compared to the same period last year. Germany
mainly exports vehicles, equipment for mining and
consumer goods. Within the sub-Saharan Africa
region, this country is one of the ‘medium-sized’
markets on the same level as Cameroon.
In light of the small presence of German companies
in the DRC, much export potential remains
untapped. In particular, China and India have made
major strides in the delivery business in recent
years. Other important suppliers are South Africa,
Belgium, France and the USA. Since the Congo has
its own import port only in the west (Matadi), much
is imported from the east and south of the country
via the neighbouring countries. The Katanga mining
region receives a majority of its products through
Durban and Johannesburg (South Africa). The east of
Congo is supplied by Dar es Salaam (Tanzania) and
Mombasa (Kenya).
SECTOR SURVEY
ENERGY
Planned construction of Inga III at a cost of about
8.4 billion USD, by far the largest energy project,
is continually being postponed and experts claim
construction may only begin at the end of 2018 at
the earliest.
Donors and mining companies, on the other
hand, are investing in smaller power plants to begin
meeting the electricity demand to some extent.
Despite the great potential of hydropower, experts
hold that an energy mix may be the most sensible
solution in the Congo. The construction of hydroe-
lectric power plants takes a comparatively long time
and is expensive – the country urgently needs power
now! Therefore, gas and coal act as an additional
source of energy. There are also opportunities for
renewable energies aside from hydropower.
74 ANNUAL REPORT OF THE SOUTHERN AFRICAN–GERMAN CHAMBER OF COMMERCE AND INDUSTRY 2016–2017
CONSTRUCTION
The local construction industry has also been
suffering from the deteriorating economic situation
since the end of 2015. The business opportuni-
ties will be reduced for the time being. Donor
projects are also being postponed throughout the
country because it is still not clear who is to rule
the country in the next few years. Some private
building projects are being carried out in Kinshasa.
These include residential buildings, shopping
centres, offices and hotels. In Lubumbashi, the
second major economic centre in the country, the
private construction boom seems to have stopped.
Building contractors already reported a contraction
at the end of 2015. This concerns private construc-
tion activities as well as the construction of mines
and the removal of mines in the mines.
AGRICULTURE
The state tries – with the help of donors – to boost
agriculture. This has almost come to a standstill in
the course of the civil war. Agro-industrial parks
such as the Bukanga Lonzo, located 200 km from
Kinshasa, have been cultivated since 2014 by the
South African Africom. There are to be cultivated
on 80 000 hectares, among other maize and beans
for the local market. A further expansion of the
surfaces is provided. Pure private investment is
rare because of the high political instability. A lack
of transport and poorly developed retail are further
hurdles for farmers to bring their goods to their
customers.
FOOD
Like other industries, the food industry has always
suffered becaue of a poor national power supply.
The political uncertainty that has now been added
is making sure that investments are not forthcom-
ing. The potential in individual areas is large. The
Congo also has to introduce expensive staple foods.
The production of poultry and dairy products,
beverages, confectionery, tomato paste or pastries,
for example, would be met with high demand. In
particular, companies in Kinshasa have settled
in some of these sectors. The supply of food and
packaging machines is particularly interesting for
German companies. This is also likely to have little
effect on the modestly declining machinery imports
from Germany in 2016.
In light of the scarcely developed agriculture
and food processing, almost all foodstuffs have
to be imported. Given the declining purchasing
power of more parts of the population, the business
environment for food suppliers is likely to deteriorate
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With Lufthansa to more
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at least in the short term. The sales market is roughly
divided into two segments. The majority of the
approximately 70 million inhabitants buy their food
in more informally organised markets. There the
price is the measure of all things. Manufacturers of
cheap mass products have good chances there, for
example in meat. In the supermarkets and the expats
aimed supermarkets in the big cities Kinshasa and
Lubumbashi, however, luxury items are also found.
ENVIRONMENT
By 2020, some 300 million USD will be available
for new water projects. The expansion of the
water supply is also one of the key areas for
German development cooperation. The largest
development project in the water sector is the Projet
d’Alimentation en Eau potable en Milieu Urbain
(PEMU), which is financed by the World Bank.
PEMU focuses on modernisation and expansion
of networks in the major cities of Kinshasa,
Lubumbashi and Matadi; Kisangani should
eventually also be added. Although wastewater
and waste projects have not been a priority for
donors environmental problems are increasing,
particularly in Kinshasa and Lubumbashi.
ANNUAL REPORT OF THE SOUTHERN AFRICAN–GERMAN CHAMBER OF COMMERCE AND INDUSTRY 2016–2017
28.07.17 12:08
AUTOMOTIVE INDUSTRY
The demand for new cars is declining due to the
difficult economic situation. Asian manufactur-
ers dominate the small market for new cars in
Kinshasa and Lubumbashi. German sedans and
SUVs, distributed by CFAO and Tractafric, are
evident in the luxury segment. Robust, off-road
vehicles are needed. In the Katanga mining region,
a large number of commercial vehicles are also
needed during good economic conditions. Here too,
demand declined sharply.
MINING
As a result of the recent collapse in copper and
gold prices, the mining sector is struggling. In 2015,
Glencore closed its Kamoto mine and Freeport-
McMoRan sold its shares in the Tenke-Fukurume
copper mine.
The large Sicomines copper mine under construc-
tion at Kolwezi in Lualaba Province demonstrates
that Chinese companies are investing, thanks to a
good capital base. German companies are mainly
active as suppliers of mining technology. The sale
of conveyor technology or construction machinery
could decline in terms of Chinese investment, since
Chinese miners tend to buy Chinese equipment. ■
75