Economics in DRC

2

Overview

SADCLeadership IssuesLogistics and InfrastructureEthnic DiversityMineral ResourcesHydroelectricTelecommunications

DRC inAFRICA:A uniqueconfiguration.Nine neighboringcountries

4

SADC REGION

Angola

DRC

Zambia

MalawiTanzania

South Africa Mozambique

ZimbabweBotswana

Madagascar

LesothoSwaziland

Namibia

The Congo at a Glance• 3rd Largest country in Africa (size of Western Europe or the U.S. west of the Mississippi),

with the 4th largest population.

• One of the five poorest countries in the world.

• One of the ten richest countries of the world in terms natural resources

• Oil reserves of 180 million barrels

• 100,000MW Hydroelectric potential which would be sufficient for all of Southern & Central Africa’s needs

• Bordered by 9 countries

• Population (2004 est.): 58 million

• More than 200 ethnic groups

• Religions (2004 est): Roman Catholic 50%, Protestant 20%, other syncretic sects and traditional beliefs 10%, Kimbanguist 10%, Muslim 10%

• Language: Official--French. National languages--Lingala, Swahili, Kikongo, Tshiluba

Former Leaders of the Congo

The Transitional Government President and the Vice-Presidents

DR Congo is a Huge Countryas big as the US East of the Mississippi

Congo is a Country of Huge ChallengeHere are all of the Paved Roads of Congo.

Insufficient infrastructure

• Africa’s road density today is lower than India’s in 1960

– Colonial transport infrastructure was designed to exploit commodity resources, resulting in underdeveloped networks

• High transportation costs:To move 1 ton of fertilizer 1 000 km requires:

USD 15 in the United States USD 30 in India USD 100 in sub-Saharan Africa Double if truck returns empty

(Vijay Modi, Columbia University)To move 1 ton

of maize requires: USD 50 from Iowa to Mombasa (13 600 km) USD 100 from Mombasa to Kampala (900 km)

(World Bank)

The proportion of transportation costs of retail prices of cassava in Central Africa amounts to 60%

(IFAD)

Km KmUSA 20,987 Guinea 637France 12,673 Ghana 494Japan 9,102 Nigeria 230Zimbabwe 1,586 Mozambique 141South Africa 1,402 Tanzania 114Brazil 1,064 Uganda 94India 1,004 Ethiopia 66China 803 Congo, DR 59

Source: Encyclopedia Britannica, 2002

Kilometers of paved roads per million people in selected countries

Lack of Infrastructure Is Lack of Infrastructure Is Killing AfricaKilling Africa

One of those “paved roads”...

And an “unpaved road”

ALUR, AMBA, ASOA, AUSHI, AVOKAYA, BABANGO, BAKA, BALI, BALOI, BAMWE, BANDA, MID-SOUTHERN, BANDA, SOUTH CENTRAL, BANDA, TOGBO-VARA, BANGALA, BANGBA, BANGI,

BANGUBANGU, BARAMBU, BEEKE, BEMBA, BEMBA, BEMBE, BENDI, BERA, BHELE, BILA, BINJI, BOGURU, BOKO, BOLIA, BOLOKI, BOLONDO, BOMA, BOMASSA, BOMBOLI, BOMBOMA, BORNA, BOZABA, BUDU, BUDZA, BURAKA, BUSHOONG, BUYA, BUYU, BWA, BWELA, BWILE, CHOKWE,

DENGESE, DING, DONGO, DZANDO, EFE, ENYA, FOMA, FRENCH, FULIIRU, FURU, GBANZIRI, GBATI-RI, GILIMA, GOBU, HAMBA, HAVU, HEMA, HEMBA, HOLOHOLO, HOLU, HUNDE, HUNGANA, JOBA, KABWARI, KAIKU, KAKWA, KALIKO, KANGO, KANGO, KANGO, KANU, KANYOK, KAONDE, KARI, KELA, KELE, KETE, KITUBA, KOMO, KONGO, KONGO, SAN SALVADOR, KPALA, KUSU, KWAMI, KWESE, LALA-BISA, LALIA, LAMBA, LANGBASHE, LEGA-MWENGA, LEGA-SHABUNDA, LELE, LENDU, LENGOLA, LESE, LIBINZA, LIGENZA, LIKA, LIKILA, LINGALA, LOBALA, LOGO, LOMBI,

LOMBO, LONZO, LUBA-KATANGA, LUGBARA, LUNA, LUNDA, LUSENGO, LWALU, MA, MABAALE, MAMVU, MANGBETU, MANGBUTU, MAYEKA, MAYOGO, MBA, MBALA, MBANDJA, MBESA, MBO, MBOLE, MFINU, MITUKU, MOINGI, MONGO-NKUNDU, MONO, MONZOMBO, MPUONO, MÜNDÜ, MVUBA, NANDI, NDAKA, NDO, NDOBO, NDOLO, NDUNGA, NGANDO, NGBAKA, NGBAKA MA'BO, NGBANDI, NORTHERN, NGBANDI, SOUTHERN, NGBINDA, NGBUNDU, NGELIMA, NGIRI, NGITI,

NGOMBE, NGONGO, NGUL, NGUNDU, NKUTU, NTOMBA, NYALI, NYANGA, NYANGA-LI, NYINDU, NZAKARA, OMBO, OMI, PAGIBETE, PAMBIA, PELENDE, PHENDE, POKE, RUUND, RWANDA,

SAKATA, SALAMPASU, SAMBA, SANGA, SANGO, SEBA, SENGELE, SERE, SHI, SO, SONDE, SONGA, SONGE, SONGO, SONGOMENO, SONGOORA, SUKU, SWAHILI, CONGO, TAABWA, TAGBU, TALINGA-BWISI, TEKE, CENTRAL, TEKE, EASTERN, TEMBO, TEMBO, TETELA, TIENE, TSHILUBA, VANUMA,

WONGO, YAKA, YAKOMA, YAMONGERI, YANGO, YANSI, YELA, YOMBE, YULU, ZANDE, ZIMBA, ZYOBA

Congo is a Country of Great Diversitywith 218 Living Languages from “A” to “Z”

DEMOCRATIC REPUBLIC OF CONGO

Located at the heart of Africa, DRC is the third biggest country of that continent, after Algeria and Sudan, with following specificities:

• 2,345,410 sq km• 9 neighboring countries

(Congo, CAR, Sudan, Uganda,Rwanda,Burundi,Zambia, Angola, Tanzania)

• 47% of the all africa’s tropical forest

• 52% of the country covered by forest

• Many Mountains, Lakes and Rivers

DRC is a country blessed by Nature, considering its unlimited natural resources, spread in all over the country; among that:

• Copper• Cobalt• Coltan• Diamond• Petroleum• Gold• Uranium• Manganese• Tin• Iron

• Radium• Bauxite• Germanium• Silver• Zinc• Cadmium• coal• Timber• Coffee• Methane gaz

Among all DRC’s Natural Resources, the most important is definitely Congo River, 3,100 kilometers, the second river in the world after Amazon by its rate of flow, evaluated to 40,000 cubic meters per second.

Congo River is crossing twice the Equator. This configuration results to a very stable level of water during the year, which generates at the site of Inga, close to the embouchure, the most powerful potential hydroelectricity site of the world.

44,000 Megawatts of electricity will be produced at that site, at the final stage.

INGA DAM

Although blessed by Nature, DRC’s economy hasn’t been able to take off and drive a sustainable development. This is mainly due to political instability the country faced since Independence. Economic key parameters are as follow:

• Nominal GDP: 7.328 billions USD ( 2005)• GDP/ capita : 700 USD (2005)• Inflation rate : 13.20 % ( 2005)• Growth rate : 6.5 % (2005)• currency : FC ( Congolese franc) 1$ US= 490 FC

To grow, DRC must overcome critical challenges:

• National reconciliation• Building of basic

infrastructures(roads, bridges, railways, ports and airports)

• Development of telecommunications

• Relaunch of mining production and exportation

• Relaunch of Agriculture • Production of

hydroelectricity.

Among priorities, telecommunications stand as a key factor to drive the entire economy.

Telecommunications will overcome the lack of basic infrastructures like roads, railways, airports, and allow people to exchange useful information, idea, image, data and values for their development.

DRC’s telecommunication infrastructure, was totally obsolete and neglected.

This justified the option taken by the Government in 1988, to open this sector to Private Investors.

TELECOMMUNICATION OF DRCIN JANUARY 2000

• 2 GSM Operators: CWN, CELTEL• 2 AMPS Operators: TELECEL, COMCELL• 1 CDMA Operator: AFRITEL• 1 Land line Operator: OCPT• 1 Wireless Operator : SOGETEL• Total Subscribers base: 145,000• Total cities covered : 10• Penetration rate : 0,07% (1:1,300), (the

lowest of all Africa)

Hunting the mobile telephone signal: A public payphone on the tree in DRC

VODACOM CONGO(RDC)SPRL SUCCESS STORY 2

• 31/12/2003: 58 cities covered, 622,478 subs• 01/05/2004: 93 cities covered, 741,100 subs• 31/12/2004: 120 cities covered, 969,326subs• 21/01/2005: 1,000,000 Active subscribers• 01/05/2005: 143 cities covered, 1,056,000 subs• 31/12/2005: 183 cities covered 1,391,000 subs• 01/03/2006: 1,500,000 Active subscribers• 01/05/2006: 187 cities covered, 1,650,000 subs• 30/08/2006: 200 cities covered, 1,950,000 subs

NETWORK DEPLOYMENT• 200 CITIES COVERED• 328 BTS• 15 BSC• 5 MSC• 96 VSAT• 3 EARTH STATIONS

STANDARD B• 1 International

Gateway• MW Back bone 1760

KM

D9

Vodacom and Celtel

MSC

VODACOM CONGO (RDC) s.p.r.l.

A26

B16

A4

A10

A28

A21

A7

A14

A20

A13

A30

A8A23

A1A16 A11

A22

A15

A29

A27A5

A6

A12

A11

B6

B7

B22

B20

B2

B21

B5

B23

E10

E13

D13

E12

E9

E11

E8

E7

E4

E5

E6

E27

E37

E22

E20

E26

E23

E1

E25

E32

E14

F12

E31

E29

E17 E3

E15

E21

E16

E28

E19

E24

E18

E2

F7

F11

F9

F5

B14B15

B11

B1

F19

F17

F13

B12

F18

F10

F20

F15

F21

F22

F24

F23

B13

F16

F14

F4

F25

F3

F1

B17

B18

B9

B31

B30

B33

B26

B25

B27

B32

B8

B24

B28

C19

C6

C16

D21

C8

C17C10

C11

C7

C12

C23

C13

C24

D26

D4

D2

D20

D27

D18

D15

D10

D16

D14

D8

D11

D23

D25 D5

D6

D3

D12

D29

D22D7

D30D31D28

D1

D17

D19

D24

C14

C3

C27

C4

C26

C2

C25

C15

C21

C1

C29

D32

C22

C9

C5

C30

C18

(100)

C20

B4

A3A24

E30

E38

B34

E36

D25

Vodacom only

(C45)

F2

E33

Updated on 18th January 06

A17A9

B10

B29

A18

C21

D32

E34

C28

Cove

rage

Rol

lou

t

MSC: 4

BSC: 15

Sites: 298

Towns: 184

Democratization of the telephone: the voice of my son!

The Way Forward• Good Governance - including; the quality of the rule of law; the

absence of armed conflict or of a high risk of such conflict; respect for labor standards and human rights; recognition of and willingness to protect the rights of indigenous peoples; and government capacity to promote sustainable development through economic diversification.– Such a framework must be developed with public participation,

opportunities for public input, comment, and feedback – not drafted by consultants or hurried through as a condition of Bank procedure.

• Transparency - Companies and governments must be required to publish what they pay governments for the right to access and exploit natural resources.– including taxes, fees, royalties, production power agreements,

host government agreements, and other payments, including signature bonuses.

33

Outcomes Recommendations

• Human Capital and Skills Development• Harmonization of Policies, Legislation and

Regulations• Promotion of Foreign Direct Investment and

Indigenous Participation• Value addition and Sustainable Development

World Bank Portfolio in DRC• US$ 50 million Emergency Early Recovery Project (Approved 2001) financed a

limited set of priority activities that will provide the backbone of the assistance needed in the first phase of the Transition Support Strategy (TSS) .

• US$450 million Economic Recovery Credit I (Approved 2002) first tranche US$ 410 clear arrears, US$15 million forest code, US$25 Gecamines reforms.

• US $454 million Emergency Multisector Rehabilitation and Reconstruction project ( Approved in August 2002), to rehabilitate key infrastructure and social services delivery;

• US $120 million Private Sector Development and Competitiveness Project (Approved in July 2003, effective in December 2003) to restructure key public companies, and to provide partial guarantees to investors through the Africa Trade Insurance Agency (ATI);

• US $214 million Emergency Economic and Social Reunification Support project (approved in September 2003), to support balance of payments, institutional strengthening, infrastructure repairs, and community-driven development;

World Bank Portfolio in DRC• US $200 million Post Conflict Economic Recovery Credit II (approved in

February 2004, effective in May 2004) to support policies that stabilize the economy and pave the way to environmentally and socially sustainable growth and poverty reduction;

• US $102 million Multisectoral HIV/AIDS project (approved in March 2004, effective in October 2004) to mitigate the negative impact of the HIV/AIDS epidemic on the stabilization, recovery, and development of the country;

• US $100 million Emergency Demobilization and Reintegration project (approved in May 2004, effective in October 2004) to help consolidate peace and promote economic stability and sustainable development in DRC and in the Great Lakes region;

• US $60 million Emergency Social Action Project (approved in August 2004, effective July 2005) to improve access of the poor to social and economic services, and increase the availability and management of development resources at the community level;

• US $82 million Emergency Living Conditions Improvement Support project (approved in May 2005 and not yet effective).

Steady Deforestation in KisanganiDemocratic Republic of Congo

These images show slow but steady deforestation of dense forest cover

• 1975: The city and surrounding areas are clearly visible

• 2001: The cleared area around the city has grown and become consolidated, spreading along rivers and roads

Lake Kivu-one of Africa’s “killer lakes”Congo/Rwanda

These images show dramatic changes before and after the eruption of Mt. Nyiragongo in 2002

• 2001: Before the January 2002 eruption

• 2003: Shows the track of the lava flow

Current Mining Projects• Anvil Mining, a Canadian company, and has been in production

since 2002. – In April 2005 MIGA provides $13.3 million of political risk insurance

after Congolese and international civil society groups raised a number of concerns regarding labor problems, governance, development benefits, and security issues by letter to the Board.

– Board report states “illegal extraction of natural resources remains a main source of funding for groups bent on perpetuating the conflict in the eastern and northeastern parts of the country”.

– October 2004 Kilwa Incident - Allegedly Anvil Mining provided logistical assistance to bring in government troops to halt a rebel uprising. The government troops’ intervention turned very quickly to the massacre of “more 100 deaths”.

• Currently a CAO investigation into the due diligence process by MIGA instigated by Kilwa Incident of October 2004.

Dem. Republic of Congo

Village in Dem. Republic of Congo Ruzizi Valley

Fishing Net Across the CongoLarge wood netting across the Congo River near

Kisangani (formerly Stanleyville).

Women in a Dugout Canoe on the Congo

Congo River Village along the River

Barge TransportationA barge transports goods down thewaterways of the Congo

Trade• Africa is rich in natural resources such as minerals, timber and oil,

but trade with the rest of the world is often difficult. • Factors include poor infrastructure, government instability,

corruption and the impact of Aids on the population of working age. • Poorer countries and agencies such as Oxfam also argue that

international trade rules are unfair and favour the developed world. • They say rich countries "dump" subsidised products on developing

nations by undercutting local producers. • And they accuse the World Trade Organisation (WTO) of forcing

developing nations to open their markets to the rest of the World but failing to lower rich countries' tariff barriers in return.

• But the WTO says that low income countries receive special treatment, including exemption from some regulations that apply to richer nations.

Democratic Republic of Congo

• Coastline: 37 km

• 1300 personnel

• 5 patrol craft

Global Maritime Traffic FlowGlobal Maritime Traffic Flow