Country Insight Snapshot Congo, Dem. Rep. (Zaire) April 2018

Transcription

1 Country Insight Snapshot Congo, Dem. Rep. (Zaire) Written 20

2 OVERVIEW O V E R A L L C O U N T R Y R I S K R A T I N G : D B 6 d Very high risk : Expected returns subject to large degree of volatility. A very high expected return is required to compensate for the additional risk or the cost of hedging such risk. Rating Outlook: Deteriorating CORE OUTLOOK + DRC has abundant natural resources and a large, rapidly growing and young population concentrated in major towns and cities, creating investment opportunities and market potential. - Political instability, insecurity and commodity-price volatility pose risks to sustainable and balanced long-term economic growth. - The logistics environment is undermined by inefficient customs clearance, poor transport infrastructure and high associated transaction costs. - Power-generation and transmission infrastructure is underdeveloped and poorly maintained, leading to inadequate and erratic power supplies. KEY DEVELOPMENT President Kabila has signed into law a new mining code that imposes more onerous and costly regulations on mining ventures in the DRC. CREDIT ENVIRONMENT OUTLOOK Trend: Stable Key Development has had a negative impact on the outlook. SUPPLY ENVIRONMENT OUTLOOK Trend: Deteriorating Key Development has had a negative impact on the outlook. MARKET ENVIRONMENT OUTLOOK Trend: Deteriorating Key Development has had a neutral impact on the outlook. POLITICAL ENVIRONMENT OUTLOOK Trend: Deteriorating rapidly Key Development has had a neutral impact on the outlook. 2

3 KEY INDICATORS Rating History and Comparison Source : Dun & Bradstreet Note: 1 = Low Risk, 7 = High Risk Regional Comparisons Source : Haver Analytics/Dun & Bradstreet Copper (USD/tonne) Source : World Bank/Dun & Bradstreet 3

4 Economic Indicators Indicator f 2019f 2020f 2021f 2022f C/A balance % GDP Debt Service Ratio, % Govt balance, % GDP Inflation, annual avge % Real GDP Growth, % Source : Haver Analytics/Dun & Bradstreet TRADE AND COMMERCIAL ENVIRONMENT DRC is grappling with a fragile economic, political and security environment. National finances are stretched as a result of low export and fiscal revenues, limited availability of FX reserves, and a weak Congolese franc. The political situation is highly uncertain owing to President Joseph Kabila's opaque intentions and his current attempts to unconstitutionally cling to power, which are fuelling civil unrest and armed conflict in some provinces. Presidential elections could take place in December 2018, but equally could be delayed once again. Amendments to the mining code have been signed into law by Kabila, creating a heavier fiscal burden and imposing more onerous conditions on international mining companies. Political and security risk premiums are very high, and unlikely to fall in the short term. Payment and commercial risks are high in DRC: we recommend CiA terms for most, if not all, transactions. TRADE TERMS AND TRANSFER SITUATION Minimum Terms: CLC The minimum form of documentation or trading method that Dun & Bradstreet advises its customers to consider when pursuing export trade with the stated country. Recommended Terms: CiA Dun & Bradstreet's recommended means of payment. The use of recommended terms, which are generally more stringent than minimum terms, is appropriate when a customer's payment performance cannot be easily assessed or when an exporter may wish to limit the risk associated with a transaction made on minimum terms. Usual Terms: days Normal period of credit associated with transactions with companies in the stated country. Local Delays: 3-4 months The time taken beyond agreed terms for a customer to deposit money in their local bank as payment for imports. FX/Bank Delays: 5-6 months The average time between the placement of payment by the importer in the local banking system and the receipt of funds by the exporter. Such delays may be dependent on FX controls, FX availability and the efficiency of the local banking system. 4

5 Exchange Rate Source : International Monetary Fund/Dun & Bradstreet LCU (local currency unit) = Congolese franc Credit Conditions Source : Export Credit Agencies Insured export credit exposures, short-term, USDm. 5

6 RISKS AND OPPORTUNITIES Business Regulatory Environment Mining laws promulgated President Joseph Kabila signed into law the new mining code in early March, and the resultant regulatory changes came into effect in April. The new code amends the earlier legislation of 2002 that governed the sector and introduces measures that raise the fiscal and social liability of foreign firms operating in the country. Key policy changes include an increase in royalty rates, an increase in taxes on profits, removal of stability clauses that protect existing investments from regulatory changes, an increase in local ownership of mining ventures (including an increase of the state's free stake in new projects from 5% to 10%) and the requirement for mining firms to plough funds into local development projects. The legislative change creates a more onerous and costly environment for foreign investors and was promulgated despite their fierce resistance. The regulatory changes may deter some future mining investment in DRC. Business Continuity Rail services to Angola resumed Rail services between southwestern DRC and Angola resumed in Q The rail link crosses the border between the towns of Dilolo in DRC and Luau in Angola, then runs some 1,344km to the Angolan port at Lobito. New rail lines were laid by a Chinese construction firm over the course of the past few years, which also refurbished stations along the line and provided new rolling stock. The redeveloped railway offers a relatively fast and cheap freight transport option for mining ventures operating in southern DRC (including copper, cobalt and manganese mines) and possibly Zambia. The railway provides a major boost to the DRC mining sector at a time when regulatory changes are raising project costs, particularly as most mining output was previously transported by road through Zambia and then onto ports on the eastern and southern seaboards, which was a time consuming and expensive journey. Political/Insecurity Risk Kabila election intentions remain unclear The DRC is scheduled to hold long-delayed presidential elections in December 2018, although the timetable and the intentions of President Joseph Kabila remain highly uncertain. Kabila is barred by the constitution for running for another term, although this has not prevented him from remaining in office despite his term officially coming to an end in December Kabila and his supporters appear intent on putting in place a succession plan or altering the constitution to allow him to run for office again. An alliance of opposition parties has nominated Moise Katumbi as their presidential candidate, who could present a serious challenge to the continuation of Kabila as president. However, the election process is unlikely to be free and fair, which could favour Kabila should he secure the right to stand for re-election or his successor should he step aside prior to the election. DRC will continue to be blighted by political instability and the risk of civil unrest in the short term. 6

7 COUNTRY PROFILE AND STATISTICS Overview The Democratic Republic of Congo (DRC) is located in Central Africa, and has a land area equivalent to two-thirds of the European Union. The DRC has a large population, vast hydroelectric potential, enormous mineral wealth and abundant fertile land, all of which provide the country with long-term economic potential. The regulatory, business and logistics environment can be very challenging. Widespread corruption, patronage networks and the influence of vested interests are significant barriers to business and investment. Power supplies are inadequate and unreliable, while the main transport routes suffer from inefficient customs clearance, interference with shipments, and severe infrastructure deficiencies. DRC suffers from political instability, poor governance and insecurity, especially in the resource-rich eastern provinces. Key Facts Key Fact Head of state Capital Detail President Joseph KABILA Kinshasa Timezone GMT Official language French Population (millions) 81.3 GDP (USD billions) 45.0 GDP per capita (USD) 553 Life expectancy (years) 58.9 Literacy (% of adult pop.) 77.0 Surface area (sq km) 2,344,860 Source : Various sources/dun & Bradstreet Historical Data Metric Real GDP growth (%) Nominal GDP in USDbn Nominal GDP in local currency (bn) 30,051 33,224 35,592 42,161 66,764 GDP per Capita in USD Population (year-end, m) Exchange rate (yr avge, USD-LCU) , ,484.0 Current Account in USDbn Current Account (% of GDP) FX reserves (year-end, USDbn) Import Cover (months) Inflation (annual avge, %) Govt Balance (% GDP) Source : Haver Analytics/Dun & Bradstreet 7

8 Forecasts Metric 2018f 2019f 2020f 2021f 2022f Real GDP growth (%) Nominal GDP in USDbn Nominal GDP in local currency (bn) 96, , , , ,611 GDP per Capita in USD Population (year-end, m) Exchange rate (yr avge, USD-LCU) 1, , , , ,255.0 Current Account in USDbn Current Account (% of GDP) FX reserves (year-end, USDbn) Import Cover (months) Inflation (annual avge, %) Govt Balance (% GDP) Source : Haver Analytics/Dun & Bradstreet Comparative Market Indicators Indicator DRC Angola Kenya Nigeria S. Africa Income per Capita (USD) 637 3,507 1,710 2,046 7,211 Country Population (m) Internet users (% of population) Real GDP Growth (% p.a., ) Source : Various sources/dun & Bradstreet 8

9 LINKS User Guide Please click here to visit our online user guide. Other Dun & Bradstreet Products and Services Sales Publisher Dun & Bradstreet Telephone Marlow International UK: +44 (0) Parkway US: Marlow Rest of World Bucks SL7 1AJ contact your local office United Kingdom or call Tel: Fax: Dun & Bradstreet provides information relating to more than 240m companies worldwide. Visit for details. Additional information relevant to country risk can be found in the: International Risk & Payment Review : Provides timely and concise economic, political and commercial information and analysis on 132 countries. Available as a subscription-based internet service ( and monthly update journal, the IRPR carries essential information on payment terms and delays. It also includes the unique D&B Country Risk Indicator to help monitor changing market conditions. Legal and Copyright Notices While the editors endeavour to ensure the accuracy of all information and data contained in this Country Insight Report, neither they nor Dun & Bradstreet Limited accept responsibility for any loss or damage (whether direct or indirect) whatsoever to the customer or any third party resulting or arising therefrom. All rights reserved. No part of this publication may be reproduced or used in any form or by any means graphic, electronic or mechanical, including photocopying, recording, taping, or information storage and retrieval systems without permission of the publisher. Disclaimer Whilst Dun & Bradstreet attempts to ensure that the information provided in our country reports is as accurate and complete as possible, the quantity of detailed information used and the fact that some of the information (which cannot always be verified or validated) is supplied by third parties and sources not controlled by Dun & Bradstreet means that we cannot always guarantee the accuracy, completeness or originality of the information in some reports, and we are therefore not responsible for any errors or omissions in those reports. The recipients of these reports are responsible for determining whether the information contained therein is sufficient for use and shall use their own skill and judgement when choosing to rely upon the reports. 9