Brief Introduction (Political – Economy)

  • The Democratic Republic of Congo (DRC), previously called Zaire, is a vast, resource-endowed country with mining and agricultural sectors as the cornerstones of the economy. But despite its rich natural resource base, the DRC is among the least developed countries in sub-Saharan Africa.
  • Historically, the DRC has been a major mining country, a producer of copper/cobalt, diamonds and gold. The mining sector accounted for 25% of the GDP and three quarters of the total export revenue. Both large mining companies and artisanal miners extracted the mineral resources of the DRC. Artisanal miners have historically accounted for the extraction of the largest portion of diamonds (Coakley, 1995).
  • Despite civil war and insecurity, artisanal miners continued to mine diamonds and, in addition, produced approximately 9,000 kg of gold in 1994 (Barry, 1981).
  • Congo has experienced a marked economic revival since 2003, following an over ten-year period of political instability and armed conflicts. However, the consequences in terms of damages and destructions are considerable: schools, health infrastructure services, roads, water and power supply is inexistent in several towns and communities as a result of the conflicts (Bernard Krief Consultants, 2008).
  • Nevertheless, since 2003, Congo has made maximum use of its oil revenues in order to re-establish the balance of its public budget, reduce its debt, improve the management thereof and finance the reconstruction of the country. Moreover, the progress made in the income from oil exploitations together with the adhesion to the EITI (Initiative for the Transparency of the Extraction Industries) encouraged the support of the donor community (Bernard Krief Consultants, 2008).
  • Since Bosco Ntaganda’s mutiny in April 2012 and the creation of the 23 March rebel movement (M23), violence has returned to the Kivus. This crisis shows that today’s problems are the same as yesterday’s because the 2008 framework for resolution of the conflict has yet to be put in place.
  • Instead of implementing the 23 March 2009 agreement between the government and the CNDP (National Council for the Defence of the People), the Congolese authorities pretended to integrate the CNDP into political institutions, while the rebel group pretended to integrate into the Congolese army.
  • In the absence of army reform, military pressure on armed groups only had a temporary effect and post-conflict reconstruction was not accompanied by essential governance reforms and political dialogue.
  • To move away from crisis management and truly resolve the two-decades-old conflict, donors should put pressure on both Kigali and Kinshasa.
  • The M23 is behaving in a similar fashion to previous rebel movements by creating its own administration and its own financing system in parts of North Kivu.
  • Meanwhile, Mai-Mai groups are expanding in rural areas where they commit atrocities that exacerbate inter-ethnic tensions.
  • Pursuant to the peace and security architecture, the International Conference on the Great Lakes Region (ICGLR) organised in July a regional dialogue to avoid conflict between Rwanda and the DRC.
  • Unfortunately, it seems to be promoting an unrealistic and ineffective solution by advocating for the deployment of a 4,000-strong neutral force at the border between Rwanda and the DRC.
  • If international donors and African mediators persist in managing the crisis rather than solving it, it will be impossible to avoid the repetitive cycle of rebellions in the Kivus and the risk of large-scale violence will remain.
  • To move from crisis management to conflict resolution, Rwanda’s involvement in Congolese affairs must end and the reconstruction plan and the political agreements signed in the Kivus must be implemented.
  • For that to happen, Western donors should maintain aid suspension against Rwanda until the release of the next report of the UN group of experts (International Crisis Group, Oct 2012).

Sectorial distribution:

  • Primary sector (4.5% of the GDP and 58% of the working population): agriculture, fishing, and forestry.
  • Secondary sector (73.7% of GDP): hydrocarbon (55% of GDP), mining, industry (agribusiness, steel 
engineering, chemistry), Construction & Civil Engineering (4%).
  • Services sector (21,8% of the GDP): trade, market services, and transport.
  • According to ExecuJet Aviation Group’s MD Ettore Poggi, “An eight-seater flight from Johannesburg to the Democratic Republic of Congo has a price tag of about R300000 (US$ 35,000)”.
  • Democratic Republic of Congo’s economy will grow by 8.2 percent in 2013 but rising debt levels and continued poor governance in the extractive industries sector will weigh on performance.
  • D.R. Congo, which relies heavily on its copper and cobalt-mining sector to drive growth, is expected to achieve expansion of 7.2 in 2012.
  • Rich in an array of minerals but plagued by decades of misrule, the former Belgian colony has gradually attracted investors as it seeks to recover from two wars.
  • The IMF has delayed the release of some $180 million from Congo’s credit facility due to concerns over Kinshasa’s secretive sale of mining contracts, often at knock down prices.
  • The current account deficit widened in 2011 to about 11.5 percent of GDP as commodity prices weakened from their high levels in 2010 and the value of imports increased, especially for food, fuel, and capital goods.
  • The government has vowed to improve the business climate with a view to hitting the double digit economic growth needed in the medium term to dent poverty in the vast nation of over 65 million people.
  • About 89% of the country’s exports in 2010 were attributed to the oil sector.
  • Non-fuel minerals that were produced in 2010 were gold, diamond, iron ore, copper, lead, zinc and cement.
  • The Société de Recherche et d’Exploitation Minière, a subsidiary of Gerald Metals, Inc. of USA, with 90% equity interest along with the government holding 10% interest, was involved in the development process of the Boko Songo copper and Yanga Koubanza lead-zinc mines.
  • In 2010, Compagnie Minière du Chaillu, a subsidiary of Mexivada Mining Corp. of Canada, continued to explore the Moussondji permit.
    • In October the same year, Zamarat Mining Ltd. of UK acquired up to 70% interest in Mexivada’s gold exploration and prospecting licenses.
  • Several iron ore exploration programs and prefeasibility studies were underway during 2010.
    • Core Mining Congo S.A.R.L., a subsidiary of Core Mining Ltd. of UK, began mining for ore in the Avima project.
    • Waratah Gold Ltd. of Australia gained 90% equity interest in Afriresources Congo S.A., which owned the exploration rights for mining operations in the Youkou iron ore project.
  • The iron ore exploration activities of the Zanaga iron ore project (ZIOP) (including the Zanga-Bambama and the Zamba-Madzoumou exploration licenses) were funded by Xstrata plc of Switzerland.
  • In 2010, Cementos La Union of Spain constructed a 500,000-t/yr-capacity cement plant at Point Noire.
  • Diamond production was more than 380,000 carats in 2010 compared with 68,000 carats in 2009.
  • In 2010, Zamarat Mining also acquired up to 70% interest in Mexivada’s diamond exploration and prospecting permits, including the Camp Socobois, the Bitsandou, the Nzambi, the Malambani, and the Mbinda diamond permits.

Economy

Mineral, Metal and Fuel Resources

Metals
Industrial Minerals and Gemstones

The following are the other companies involved in diamond exploration:

  • La Société Congo Trading and Development of China
  • La Congolaise de Recherche et d’Exploitation Minière of Congo
  • La Société Motaba Mining of Congo
  • Despite the fact that some of the older oilfields in Congo are being depleted, experts believe that its petroleum sector will continue to be a key player in the country’s economy in the near future as new deep-water oilfield projects are set to begin functioning.
  • Development of diamond, gold, copper, and iron ore reserves will help diversify the country’s economy and decrease dependence upon oil.
  • However, the threat of civil disruption still exists despite the peace efforts organized by the Congolese government.
  • Thus the government is unable to ensure a secure environment for investors, which could prove to be a major deterrent to the country’s progress.
  • Namibia will soon set up a trade and industrial centre in the DRC to facilitate imports and exports of products between the two countries. The DRC Government on Friday officially handed over a site earmarked for the close to N$1 billion investment to the Namibian Government.
  • XSML (www.xsml.nl), an independent private equity fund manager with a strategic focus on emerging markets, announced on October 2, 2012, its investment in SOGETRA SPRL, through its Central Africa SME Fund.
  • The investment in SOGETRA, involved in river and road transport in Congo, will be used for the construction of new tugboats and barges for transport on the river Congo.
  • This investment enables SOGETRA to meet the increased demand for transporting mainly cement into the interior of DR Congo and to ship agricultural produce and other products back to its capital Kinshasa.
  • The funding from the Central Africa SME Fund will be used to completely rehabilitate tugboats and barges to significantly augment SOGETRA’s river transportation capacity.
  • This increased capacity will be used to assist SOGETRA’s partner CILU  (Cimenterie de Lukala), Congo’s primary domestic cement producer, as the latter seeks to reach customers in Brazzaville and the interior of Congo where access to essential construction material inputs are more scarce.

Investment

India’s Economic Assistance to DRC

Lines of Credit: The under mentioned Indian lines of credit have been extended to DRC:

  • US$ 33.5 million for setting up a cement plant and acquisition of buses for transport sector (2005-06);
  • US$ 25 million for Rural Water Supply Project (2008)—project completed
  • US$ 42 million Kakobola Hydro-Electric Project (2010). The work on the 
project has started in January 2011;
  • US$ 168 million for Katende Hydro-Electric Power Project (60 MW). The Line 
of Credit Agreement was signed on 11th July, 2011 in Kananga. 

Cement Market of DR Congo

  • HeidelbergCement was already operating a cement plant in DR Congo. The production of the Société Nouvelle des Ciments du Congo (SONOCC, ex-CimCongo) does not cover the increasing demand due to the reconstruction of the country’s infrastructure (Bernard Krief Consultants, 2008).
  • DR Congo is dependent on imports of building materials, resulting in high construction costs (Bernard Krief Consultants, 2008).
  • During a study visit, we recorded the price of cement ranging from CDF 11,000 to CDF 18,000 per bag during the months of May ~ July 2011 in various regions of the country.
  • China, Egypt and Nigeria are the main sources of Supply of grey cement to DR Congo.
  • HeidelbergCement AG in 2011 also agreed to buy a majority stake in three cement plants that account for about two-thirds of the country’s output (Kavanagh, 2011).
  • At the end of 2010 HeidelbergCement acquired majority shares in three of the Forrest Group facilities with a combined output of 0.5Mta. Two of the Forrest plants will be expanded to increase their output to 1.4Mta (Trond Waerp & Finn Arnoldsen, 2011).
  • Cimenterie Nationale (CINAT), Democratic Republic of Congo’s state-owned cement producer, has a factory 200km from Kinshasa capable of producing 1000tpd but has been hampered by a lack of investment.
  • Lucky Cement of Pakistan, announced (in August 2011) to form a joint venture with in Democratic Republic of Congo to build a one million-ton capacity plant in DR Congo (Sharif, 2011).
  • Factories in Congo produce 780,000 tons of cement annually, less than a quarter of the annual requirement of 3.2 million tons, according to the nation’s Portfolio Ministry (Kavanagh, 2011).
  • In May 2011, the government of DRC removed tariffs on imported cement to help the construction industry (Kavanagh, 2011).
  • Limestone is used for cement industries at five sites (near Likasi, Kalemie, Kimpese, Lubudi and Lukula). At the end of the 1970s, lime was produced on an industrial scale and by numerous small local industries with a total production of 120,000 tonnes (Gwosdz, 1996).
  • Further significant deposits of limestone and clay have been identified in Kasai Oriental (Lubilanji), Bas-Congo (LUFU/KIMPESE, KIASINKOLO), Katanga, and Province Orientale etc. Following steps are recommended for further action;
    • Obtain quarries’ deeds from the Mining Executive.
    • Make contact with the “Guichet Unique” of the national investment
authority (ANAPI) to set up the new company.
    • Make contact with the national electricity and water companies –
SNEL and REGIDESO – to arrange utility connections.

Recommendations for Cement Producers (New Entries)

The report is regular business int’l brief for free distribution. For further classified and deep insight, please contact our sales department at sales@thevisioncorporation.biz or research@thevisioncorporation.biz. For sector specific studies and feasibility reports, please contact us:

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