DRC moves on
Karen Maccrecor
Published: 01-MAR-01

The rapid turnaround of political events in the Democratic Republic of Congo is now filtering through to the economy as moves to open it up get under way. Karen Maccrecor reports

Isaac Ngweza, a language teacher in Kinshasa, is tired of hearing about the Democratic Republic of Congo's vast wealth. "We keep being told how rich we are, but we have nothing except a daily struggle to survive. If we are rich but poor, who is to blame?"

Laurent Kabila blamed the West for the woes of the huge central African state he ruled after ousting hated dictator Mobuto Sese Seko in a rebellion in 1997.

It was his anti-West rhetoric, Ngweza explained, that inspired people in Kinshasa to attack foreigners following the President's assassination by a disgruntled bodyguard on 16 January this year.

"But we know that is not the full story. Our leaders have let us down."

People felt fearful and frustrated by Kabila's death, even though in the days afterwards most were not mourning the man who had raised and then dashed hopes of peace and democracy after more than 30 years of dictatorship. There was nowhere to place their hope.

"Life was difficult under Mobotu and difficult under Kabila. We're no better off now," said Badila Alfonsine, a 53-year-old mother of nine who sells peanut butter rolls in downtown Kinshasa. Most people in the city eke out a living hawking minimalist goods on run-down streets patrolled by gun-toting soldiers and police: GDP per capita is just $710 a year.

Kabila's killing sparked memories of the 1961 murder of liberation prime minister Patrice Lumumba, the only universally liked leader the Congo has had since independence from former colonial master Belgium in 1960. Belgium and the US's Central Intelligence Agency have since been implicated in Lumumba's death.

There will be no economic renewal until the end of a three-year war that has sucked in six African states and brought the Congo's already devastated economy to a grinding halt. Business cannot operate in a divided land violently ruled by multiple, looting forces.

North and east Congo are controlled by several rebel groups backed by neighbouring Uganda and Rwanda. Formerly his allies, the two countries turned against Kabilain 1998, accusing him of corruption and mismanagement.

It is the truly unenviable task of Joseph Kabila, the young former military chief who was quickly installed as president after his father's assassination, to negotiate an end to war and begin internal reform that pulls in all of the DRC's many political actors � processes he has pledged commitment to in talks with local and foreign leaders he has favourably impressed.

Only then will Kabila Jr be able to turn his attention to a devastated economy that had a 1999 GDP of just $17 billion (in market prices), and has been plagued by negative growth and hyper- inflation.

The south and west is government territory, but only with the support of some 15,000 troops from Zimbabwe, Angola and Namibia, who are expecting considerable kickbacks.

Said one diplomat: "We have been impressed with how the government handled the crisis. It was essential to quickly fill the leadership vacuum created by Kabila's death, given the strength of the rebel movement and divisions within the military, which left the country open to a coup. This the government did."

It was not ideal to have Kabila's son take over he is young, little known, and brought up outside the country. People also resent the idea of monarchical-style succession. However, said the diplomat, he and the government "have been making all the right noises so far".

"But if Joseph Kabila is to be accept- ed by the Congolese, he is going to have to make serious efforts to achieve peace, and to initiate a process of internal reform that includes all political actors and moves the DRC towards democracy.

"Both the government and international community are looking at the death of Laurent Kabila, who had become a spoke in the wheel of the Lusaka agreement, as an opportunity to get peace and democracy on track."

Observers took as a positive sign that one of Joseph Kabila's first acts was to legalise the US dollar - the only real currency in the Congo and to moderately devalue the country's over-valued franc: in January there were officially around 50 DRC francs to the US dollar, while the street rate was 140.

It might irritate Ngweza, but the DRC is indeed endowed with great potential wealth. It is rich in minerals cobalt, copper, diamonds, gold, silver, zinc, manganese, tin, petroleum, uranium, iron ore and coal, among others. It is also fertile, 77 percent covered by forests that yield timber exports, and has great rivers waiting to be tapped for hydroelectric power.

The DRC's mineral assets have also been its curse, contributing to the pro- longing of the war in the country as parties to the conflict plunder its resources which were also offered by the government as incentives for political and military support, the most notable case being Zimbabwe's Robert Mugabe.

Last month, the government said it had drawn up a mining and investment code which would offer incentives and guarantee security of tenure to foreign companies which had previously shunned the war-torn country.

Andre Lwanyi, permanent secretary in the Mines Ministry, said recently the government intended to provide regulations and incentives that would be attractive to investors.

The code will include a liberalised foreign exchange regime, a more trans- parent and predictable licensing system and it aims to standardise the process for project approvals, rather than ad hoc case-by-case reviews.

The mining minister will have the final say on mining titles which will be reviewed on a first-come, first-served basis and no longer require presidential approval.

A draft code of the new code will be ready by next month, according to Lwanyi. After it is finalised, the government will invite mining companies to Kinshasa to get their input on the legislation.

The mining code has been a work in progress for some time with the World Bank involved in its creation. Says Richard Linnell of mining company Billiton: "It should conform the best practice but the trouble has been getting it enacted. Now there is the political will, it may just happen."

Because the DRC operates in terms of civil law rather than contract law, any agreement properly entered into up to now is likely to be respected, Linnell reckons. This could include the "pay- back" concessions given to friends and political supporters by the past Kabila administration, if they were awarded in terms of civil law. If not, it was possible they could be overturned and the con- cessions re-issued, he says.

The large deposits there are a major drawcard but need big capital to be developed. "There are not really opportunities for small companies," he says.

While some of the big mining houses are still active in the DRC, others have put their operations on hold due to political instability.

First plundered by the Belgians, the DRC was then further raped by Mobutu, who during 32 years of tyranny became one of the world's richest men, moving much of his wealth abroad and living in opulent palaces scattered around Congo and abroad.

The only trickle down effect of Mobutu's businesses was to family and government cronies, while the vast majority of Congo's now 52 million people lived in abject poverty, with a life expectancy of 49 years and a human development index that is the world's 23rd lowest.

The economy of then Zaire declined steadily from the mid-1970s.

According to the Institute for Security Studies in Johannesburg: "Since the mid-1980s decline has been drastic, with a persistent stagflationary environment of recession combined with hyperinflation. In 1999 GDP contracted by 14.5 percent, and it is now a third of what it was in the mid-1950s, and one of the lowest in the world."

In the 1980s the economy was dominated by a mix of agriculture and industry based on oil and support ser- vices. Oil overtook forestry as the major sector of the economy, with rising oil revenues enabling economic growth and financing development projects.

"However, falling oil prices in the late 1990s subsequently cut GDP growth by 50 percent," reports the ISS.

Today, subsistence agriculture dominates the economy and DRC exports are based on minerals and some agricultural cash crops, making the country vulnerable to world commodity markets.

Much of the country's diamond industry is now under the control of rebels, and most diamond production including in areas under government control is stolen. One of the reasons for Angola's involvement in the DRC war is to ensure that its diamond trade does not fall into the hands of its Unita rebels.

Laurent Kabila consolidated diamond trading under one Israeli company but little official trading has been done.

Lack of investment and regular strikes have weakened the mining industry, which has continued production but at far lower levels than before. The ISS believes that revival of mining on the copper belt is vital to the DRC's economic future. Copper used to be a highly lucrative export.

Laurent Kabila, a 1960s style revolutionary with a socialist, interventionist economic vision, was a nationalist who want- ed a united Congo. He sought to exert state control over key areas of the economy, such as the diamond trade, and ran a tight fiscal policy that initially eased inflation and currency.

But his new policies had barely been implemented when the rebellion in the east began, and the small gains Kabila had managed to make were quickly reversed. Also, his economic policies were often very poorly advised. For instance, local business people say, he outlawed the holding of US dollars but demanded that businesses pay taxes in that currency.

Poor infrastructure, a weak legal system, corruption and lack of transparency in government economic policy and financial operation have discouraged investment and growth. However, the World Factbook 2000 believes could quickly grow to 5 percent if peace is achieved.

"The war has dramatically reduced government revenue, and increased external debt. Foreign businesses have curtailed operations due to uncertainty about the outcome of the conflict and because of increased government harassment and restrictions," it reports.

Richard Wynne, a Kinshasa businessman who runs the Congo's only Landrover distribution agency, agrees. "When Kabila came to power we were optimistic about economic progress. But then the war came and the market simply disappeared. Kabila's policies degenerated into economic fire fighting, stumbling from one crisis to the next.

"Today it is impossible to move around the country and the government is our only customer. We're just treading water, hoping for an end to the fighting so that we can begin operating again and attract investment. Things are so bad that even the arrival of UN peace keepers would be an economic boost."

According to the ISS, with the formal sector now dominated by poorly run parastatals, most economic activity has now moved into the informal sector, which the central bank estimates comprises over 70 percent of GDP together with traditional subsistence.

"Government administration is bloated and hugely inefficient, and corruption is rife. Hyperinflation, which stood at 220 percent by mid-1999, has resulted in the US dollar being the only reliable currency. An over-valued currency, restrictions on transactions in foreign exchange and the uncontrolled growth of the money supply all contribute to economic distortions.

"By decreeing that all business transactions be conducted in Congolese francs, which are to all intents and purposes worth- less, Kabila successfully wrecked what remained of the economy, and persuaded those that can do so safely to exit the formal sector."

Among the many, many economic actions Joseph Kabila will be called on to make in the coming months and years will be to liberalise the economy, stamp out corruption, improve efficiency within government and attract investment.

But peace is a prerequisite of economic regeneration, and that may even be the more tricky task. At the tender age of 31, and by all accounts reluctantly, Joseph Kabila has to be a man with one of the most difficult jobs on earth.

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