Democratic

Republic of
Congo

The Democratic Republic of Congo has immense

potential but remains a risky investment location. 2nd
largest country in
Main hurdles include pervasive poverty, political Africa
turmoil, security issues, vast land area and inadequate
infrastructure. If it were not for the numerous
obstacles, the Democratic Republic
of Congo (DRC) would be a highly
Central African Republic attractive investment location. It
South Sudan
is the second-largest country and
Lag
os- has the third-largest population in
Gabon Mo
mb
asa Africa. Most significantly, the DRC
Tripoli-Cap

Hig
hw
ay is considered to have among the
Congo River Kisangani
Uganda largest endowments of minerals
e Town Hi

on the continent.
North Kivu
Social and economic conditions
ghway

Province
are very challenging and the
Rwanda
DRC is recognised as one of the
Congo Ilebo Burundi most difficult places in which
Pointe to do business in the world. In
Noire
Kinshasa Tanzania addition to these factors, transport
Matadi
infrastructure is a major impediment
Port of to economic growth.
SN

Banana Port of
CC

(extensions/ Matadi
deepwater port)
An escalation in conflict in the
Katanga Province
Angola eastern DRC also stands to impact
growth prospects, but not as severely
C

Atlantic
C

ighway
SN

obito H Kolwezi
Ocean Beira-L as a commodity price crash scenario,
Lobito
Lubumbashi given the country’s high dependence
on the mining sector.
Zambia
Notwithstanding the challenges it
faces, the DRC should see sizeable
economic growth over the short
to medium term, while remaining
an extremely challenging place in
which to do business.

These bubbles represent the cities of the DRC and the size of the bubbles indicates the population size of the city

Airport Port Future Airport Future Port Future Railway Future Road Railway Road

PwC 31
Democratic Republic of Congo
Gold industry
largely
underdeveloped

A campaign similar to the one The country has significant offshore

Conflict minerals established to control the spread oil and gas reserves. Angola and
of blood diamonds, but focusing the DRC are negotiating a new
“Conflict minerals are on conflict minerals, is gaining production-sharing agreement in the
minerals originating from momentum. Section 1502 of the so-called ‘zone of common interest’
Dodd–Frank Wall Street Reform off the West Coast.
the Democratic Republic and Consumer Protection Act
of Congo or neighbouring requires electronics companies to The DRC has a relatively small
countries. They include verify and disclose their sources of market size, with GDP estimated at
tantalum, tin, gold, and certain minerals that are used in the US$17.2 billion in 2012. With per
manufacture of electronics such as capita GDP of just US$230, only
tungsten.
smartphones and computers. Burundi and Malawi rate worse than
the DRC globally.
Companies are required to This was reinforced in 2012 when
publicly disclose the use of the US Securities and Exchange Coming off an extremely low
conflict minerals if those Commission (SEC) passed rules base, the country has nevertheless
requiring companies to disclose experienced strong economic
minerals are ‘necessary to the growth, estimated at 7.1% annually
the purchase of tin, tantalum,
functionality or production tungsten and gold from the DRC.i between 2010 and 2012. The IMF
of a product’.” It is thought that making it more expects this to increase to an annual
difficult to export conflict minerals average of 8.6% between 2012 and
U.S. Securities and Exchange could decrease the level of conflict 2017. The economy is dominated by
Commission (SEC) in some areas and perhaps allow the the agricultural sector, contributing
country as a whole to benefit from around 39% of GDP and employing
its mineral resources. over 60% of the labour force.
The economy and
resources The DRC has made distinct efforts The DRC has historically suffered
to improve its integration with high levels of inflation, but
International trade activity world trade. In the aftermath of authorities have recently managed
contributes significantly to domestic a diagnostic study to draw up the to moderate price inflation and it
economic growth in the DRC, with DRC’s trade policy – conducted in is expected that it should remain
exports and imports accounting for 2010 with the aid of the World Bank within the single-digit range over
68% and 78% of GDP respectively. – the DRC set up a steering group to the IMF forecast period until 2018.
There was notable growth in exports introduce a one-stop-shop reform to
and imports between 2001 and
2011, estimated at 8.6% and 12.3%
simplify foreign trade operations. Risk to business
per annum respectively. The country is also a member of The greatest impediment to
several African trade communities, economic development in the DRC
Over 90% of exports are in the including the Common Market has been the political turmoil in
form of extracted commodities. for Eastern and Southern Africa the country. The unsettled socio-
This fragility was exposed in 2009 (COMESA), the Southern African political environment is a key risk
when a crash in commodity prices Development Community (SADC) factor for businesses.
coincided with an escalation in and the Economic Community of
conflict in the eastern region, Central African States (ECCAS). High political risk has severely
revealing the country’s dependence undermined prospects for diversified
on external demand and financial It is not only the recent issue of growth, while protection of property
flows. conflict minerals that is holding rights is hampered by dysfunctional
the DRC back from fully utilising public administration. Furthermore,
Despite exports being expected to its massive mineral reserves. For enforcement of the complex legal
increase, there could be temporary example, decades of conflict code is selective. Another challenge
drops in volumes as a result of and turmoil have kept the gold is the local financial sector, which
international developments. industry largely underdeveloped. remains fragile and underdeveloped.

32 Africa gearing up
 Large population of Potential to be
Africa’s largest
65.7m power exporter

High poverty, low

productivity
The DRC’s high taxes are a further The DRC has a large population, this publication, has a labour
discouragement for investors, with estimated at 65.7 million in 2012. productivity of US$1 239 per person
a corporate income tax rate of 35% A high population growth rate of employed.
and additional types of taxes that 2.7% will intensify the already
can increase the total tax payable challenging social conditions. Power potential
significantly. According to the World Bank,
approximately 50 million live on Power blackouts and electricity
The DRC’s immense natural less than US$1.25 a day. The DRC shortages occur frequently and
resources have fuelled conflict has a low HIV/Aids infection rate as present major problems to the
rather than development. Human years of war and little infrastructure rising number of mining companies
rights abuses and banditry deter development have restricted human operating in the country. This
economic activity, but at the movement and the spread of the situation is fuelled by fast-rising
moment this mainly affects the virus. demand for power and ageing
country’s eastern region, close to the infrastructure. About 40% of firms
borders with Rwanda and Uganda. Despite having a labour force of in the DRC own and operate their
nearly 25 million, available labour own backstop generator to shield
The eastern part of the country still is mostly unskilled, with only 23.2% themselves from frequent power
sees frequent clashes between the of the population having secondary interruptions.
rebels and government forces, and education. Labour productivity is
there is sporadic fighting in other extremely low, with every person Despite these challenges, the DRC
parts of the country. Security forces employed contributing US$691 has immense power generation
are known to set up occasional, to national GDP. In comparison, potential. It boasts the largest and
spontaneous roadblocks, especially Tanzania, the second-lowest most cost-effective hydropower
after dark, which places a constraint of the ten countries profiled in potential on the continent and could
on transportation and results in produce up to 100 000MW of power.
delays. The entire installed capacity of sub-
Saharan Africa is only 48 000MW
Key indicators and the DRC has the potential to
become Africa’s largest power
Population size (million, 2012) 65.7 exporter.

Population growth (2012-2020, avg p.a.) 2.7% The Government has ambitious
GDP (US$ billion, 2012) 17.2 plans. While less than 10% of the
population has access to electricity
GDP growth forecast 2012-2017 (avg, y/y rate) 8.6%
today, the Government has set
GDP per capita (US$, 2012) 230 an ambitious target to provide
electricity to 60% of the population
Global competitiveness index 2012 (global rank/144 n/a
(score 1-7))
by 2025. The first step in achieving
this goal is the construction of the
Corp. Income Tax (CIT) rate 35.0% Grand Inga dam, which will produce
Top exports Cathodes and sections of about 40 000MW at a cost of US$80
cathodes (24.7%); Cobalt billion.
ores and concentrates
(17.8%); Copper ores
and concentrates
(11.9%)
Logistics Performance Index 2012 (global rank/155 143 (2.21)
(score 1-5))
Global Competitiveness Index 2012 - Infrastructure n/a
(global rank/144 (score 1-7))

PwC 33
Democratic Republic of Congo

2/3 China promises

US$3bn
Around
of the country
is by navigable for road and urban
waterways infrastructure

Resources sector
While the DRC’s economy is country declining from 85th to in the DRC is among the highest in
currently dominated by the 143rd out of 155 countries on the Africa. Unless spending is increased
agricultural sector, mining will be Logistics Performance Index. and efficiency improved, it will take
the main driver of economic growth more than a century to redress the
in the medium term. Copper, the All indicators of logistics country’s infrastructure deficit. But
country’s largest export product, infrastructure worsened during in the last few years there have been
will play a key role in medium-term this period: logistics competence, promising signs.
economic growth. In 2011, mine timeliness, customs, international
production of copper in the DRC shipments, infrastructure, and Since 2006, there has been a large
increased by an estimated 28%, tracking and tracing. The DRC’s upswing in external financing
reaching 440 000 tonnes. This is performance in terms of the number commitments from OECD and
equivalent to around 2.7% of global of documents required and the time non-OECD partners. For example, a
copper output. to import and export is significantly major new financing agreement
higher than the sub-Saharan signed with China promises US$3
The large population, coupled with average, while the cost to import billion, primarily for road and
robust population growth, implies and export is more than 50% higher urban infrastructure projects.
high potential for the retail sector. than that of its peers in sub-Saharan
However, given the low per capita Africa. The DRC’s population and economic
GDP, this is likely to be concentrated activity are concentrated in three
in the area of basic consumer goods. Infrastructure areas – Kinshasa in the southwest,
Lubumbashi in the southeast, and
Kisangani in the northeast. There is
Logistics The DRC probably has the most
little well-developed infrastructure
challenging transport infrastructure
environment in Africa. linking these three cities. The most
Logistics performance has serious impact of insecurity on
dropped significantly in the The DRC is one of the most infrastructure development has been
infrastructurally challenged felt in the east, where conflict and
last two years.
countries in the world. Ground instability have had a major impact
transportation has always been on infrastructure development.
Logistics Performance Index
difficult and the country’s vast
geography, low population density, Ports
Customs
5
extensive forests, and criss-crossing
4 rivers further complicate the With poor connections to the
Timeliness
3
Infrastructure
development of infrastructure sea, the DRC is predominantly
2
networks. landlocked.
1
0

As a result of conflict, networks Port infrastructure in the DRC is

have been seriously damaged or very poor and connection to the
Tracking International left to deteriorate. Road and rail ports is hampered by the country’s
and tracing shipments
infrastructure is dilapidated and the nature and vast area. No ports
Logistics quality and competence
rail network has fallen into disuse. in the DRC can take direct calls
from conventional cargo liners
DRC Top performer (South Africa) On a positive note, the country has and the country has to rely on
thousands of kilometres of navigable transshipments from Pointe Noire in
Source: World Bank waterways and water transport has the Republic of Congo using smaller
traditionally been the dominant vessels.
Poor trade facilitation infrastructure means of moving around
and inefficiency limit growth approximately two-thirds of the There are two main ports in the
prospects for transport and logistics country. DRC, Boma and Matadi, which have
businesses in the DRC. Logistics low capacity and a low draught
performance fell significantly According to the World Bank, the and are unable to fill the needs of
between 2010 and 2012, with the infrastructure investment needed the western part of the country
adequately.

34 Africa gearing up
 Regulatory Rail network used
oversight needs to extensively for
be strengthened in copper exports
airline industry

In addition to the two main ports, The Congo River traverses the Airlines – a company partially owned
the DRC has the sea port of DRC, linking two of its main cities, and technically supported by SN
Banana, which currently has Kinshasa and Kisangani, while its Brussels.
limited capacity and is used numerous tributaries cross much
mainly for crude oil export. of the country. About 15 000km of Rail
the Congo River and its tributaries
According to AICD, the Port of are navigable, or potentially so with The DRC has two main rail systems
Matadi on the Congo River is regular dredging and relatively of strategic importance to the
playing a greater role in serving modest investments in quays and country, “Société Commerciale des
Kinshasa and the southwest area signalling. Transports et des Ports” (SCPT,
of the country, but also has limited formerly ONATRA) and the “Société
cargo-handling capacity and a Air transport Nationale des Chemins de Fer du
low draught, as well as costly and Congo” (SNCC). The networks are
inefficient port services. Air transport could open up access inefficient and tariffs are relatively
to this vast country if security high. Both have fallen into disuse for
Because of the high internal improves. the most part.
transport costs and large distances
involved, trade from southeast DRC, There are a number of airports in SCTP railway connects Kinshasa
notably copper, is channelled mainly the DRC. Since 2000 the number to the Port of Matadi. The line is
through Durban in South Africa of domestic air transport routes only 30 years old and the track is in
and to a lesser extent through Dar has dramatically increased and reasonable condition.
es Salaam in Tanzania. Mombasa the aircraft fleet has undergone
in Kenya remains the key port for renewal. Given the vast size of SNCC operates an extensive network
Kisangani and the northeast part of the DRC, its disparate population centred in the southeast of the
the country. centres and deficiencies of the country. The most important branch
surface transport network, the of this network connects Katanga on
While an improved Port of Matadi air transportation system has an the Zambian border to Dilolo on the
will be able to service the southwest important role to play in passenger Angolan border. It also connects the
DRC for some years to come, in the travel. However, the DRC is not well northern part of the Katanga region
longer term additional capacity will connected with other countries, to Ilebo in the Kasaï region.
need to be found. To achieve this, being served primarily by South
the DRC faces two strategic options. African Airways, Ethiopian Airlines The SNCC network is used
One is to further develop the Port and Kenya Airways. extensively for copper exports
of Banana and convert it into a leaving the DRC for the port of
deep-water port. The establishment The DRC’s domestic air transport Durban and will also facilitate
of such a port would cost around services have a worrying safety exports through Lobito in Angola
US$2 billion and take 10 years to record and the most urgent issue once construction on the Benguela
complete. The other option involves facing the sector is to strengthen Railways is completed. The SNCC
strengthening land links with the regulatory oversight in order to network is in poor condition, with
Republic of Congo to facilitate access improve the safety of domestic speed limits of 10-35km/h.
to the Port of Pointe Noire. flights. One of the consequences
of this problem has been the Railway connections to
While the network of rivers across diversion of a significant volume neighbouring countries are set
the country poses one of the biggest of domestic air transport outside to gain importance, as the three
challenges for national roads and of the country to avoid using major companies providing railway
rail lines, it provides an opportunity domestic air services. This means services for Zambia, Tanzania and
for inland water transportation. that domestic transit was often the DRC have signed a tripartite
Inland waterways can provide undertaken via a foreign country. agreement in the hopes of making
low-cost surface transport, with This situation has significantly traveling and transportation of
only relatively modest investments changed since the arrival of Korongo goods easier.
needed to improve navigability.

PwC 35
Democratic Republic of Congo

Conclusion
With this agreement in place, cargo Based on our analysis, we have assessed the investment potential for DRC’s
can now move in either direction transportation and logistics sector as shown in the graphic below.
and from Dar es Salaam to Kapiri
Mposhi and Lubumbashi, and DRC – Investment potential assessment
vice versa, without necessarily
trans-shipping, re-marshalling or
complications of any sort. Other 1. Demographics and resources
projects that are widely funded
by the World Bank mainly include
renovation, rehabilitation and 2. Economics
upgrading of existing lines.

Recently, the SNCC acquired nine 3. Business environment

locomotives to revive the rail sector
in the southern region. In addition,
the company is planning a new 4. Trade and logistics
acquisition of 47 locomotives by
2015 under World Bank funding.
5. Transport and infrastructure
Roads
Key: Attractive Strong improvement expected
Following years of armed conflict,
much of the DRC is disconnected Average Some improvement expected

with the majority of the road Unattractive Stagnation/marginal change expected

infrastructure being in poor
condition, and only 1.8% being
tarred.

Since the end of the national

conflict in 2003, rehabilitating the
road network has been a priority.
The country has secured major
development funding as well as an
infrastructure-for-minerals deal
with China. Private enterprise is
also playing a role, with mining
companies also investing in roads.

These initiatives cover many of End notes

the country’s major road corridors i
Sovereign Wealth Fund Institute, 24 Oct. 2012, online: http://www.swfinstitute.org/tag/1
linking Kinshasa and Lubumbashi, as “SEC Adopts Rule for Disclosing Use of Conflict Minerals”, US Securities and Exchange
well as roads along the eastern side Commission, http://www.sec.gov/News/PressRelease/Detail/PressRelease/1365171484002
of the country. The effort is already
paying off. Rehabilitation of rural
infrastructure, specifically roads, has
been recognised for the contribution
it has made to the agricultural
recovery that started in 2006.

36 Africa gearing up