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Opportunities and burdens DR Congo brings to EAC table

Monday April 04 2022
kinshasa

People and vehicles along a Kinshasa street. FILE PHOTO | AFP

By LUKE ANAMI
By VINCENT OWINO
By PARTICK ILUNGA

The resource portfolio of the Democratic Republic of Congo, the newest member of the East African Community, is impressive and unmatched in the region.

It has cobalt, gold, diamond, aluminium, copper and other precious minerals; 95 million people, numerous water bodies, vast farmland, rich biodiversity, and the world’s second-largest rain forest.

On its accession to the bloc on March 29, during an extraordinary Heads of State Summit, DR Congo’s President Félix Tshisekedi promised to optimise the exploitation of these economic assets in collaboration with his new partners.

That was music to the ears of many citizens and corporations of the EAC, who have been salivating at the opportunities Kinshasa brings to the table.

For instance, energy transition is one of the hottest areas of investment and, given the global challenges related to the development of industries, many states are seeking to create wealth based on this transition.

Congo’s mineral reserves, added to the hydroelectric power potential of the giant Inga dam — an Agenda 2063 flagship project meant to contribute to the East African Power Pool — are assets for which Kinshasa is being wooed the world over. And now the EAC has the dibs on ventures around this transition.

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The DRC is the world’s leading producer of cobalt, used in the manufacture of batteries. It is also the world's fourth-largest producer of copper, used in the assembly of electric cars and the infrastructure of most renewable energy sources. Lithium deposits, estimated at over 130 million tonnes, are also present in the southeast.

minerals

A man watches as a conveyor belt loaded with chunks of raw cobalt at a plant in Lubumbashi on February 16, 2018, before being exported, mainly to China, to be refined. PHOTO | AFP

In the Fourth Industrial Revolution, Kinshasa plays a central role in the provision of raw materials, without which important technological components would not exist.

Congo has most of the mineral ores that produce key components in making computer chips and electric vehicles, technologies that are powering the drive to the future. In a typical computer, copper and gold are key components used in making the monitor, printed circuit boards and chips.

Cobalt constitutes 6.45 percent of the materials that make electric vehicle batteries while copper constitutes 25.8 percent. Jointly, copper and cobalt constitute more than a third of EV batteries.

DRC is rich in these minerals, producing 68 percent of the world’s cobalt — the largest globally — and over 1.8 million tonnes of copper annually.

In an earlier interview with The EastAfrican, Equity Group CEO James Mwangi said they were seeking Tesla boss Elon Musk to establish a plant in DRC to avail himself of the raw materials and add value at the source.

“The global commodity prices of the raw materials that the DRC produces are at an all-time high. The world is going green, and the biggest driver is demand for green locomotive energy. Now 70 percent of coltan and cobalt comes from the DRC, and the highest copper quality in the world, accounting for 30 percent of the world’s supply. So we can see as demand picks up, as the world wants to have zero transport-linked emissions by 2030, the demand can only go up, and prices can only go up because of constrained supply,” he said.

Read: MWANGI: Why I believe Congo will drive Equity group’s growth

Uranium, a key fuel in nuclear plants and nuclear fission, is found in eight locations in the South Kivu and Katanga provinces in the south.

In 2020, these minerals accounted for $17.8 billion, about 91 percent of DRC’s total exports, and 36 percent of the country’s GDP that year.

Intra-trade

The admission of the DRC into the EAC, with a population of 95 million people, has been hailed as a game-changer in a region where intra-trade, infrastructure development, health and food security suffered shocks due to the Covid-19 pandemic.

The new EAC now offers a combined market-driven economy of 266 million people and a GDP of $243 billion.

DRC, sub-Sahara’s largest country, will also be EAC’s largest. It brings her French heritage and, together with Rwanda and Burundi, gives EAC a new identity: Africa’s largest Francophone bloc.

Connectivity

The trade potential of this is significant.

With this bloc now stretching from the Indian Ocean in the East to the Atlantic in the west, the DRC presents the potential to open the Indian Ocean to the Atlantic Trade Corridor and link the region to Central Africa, North Africa, and other continental sub-regions.

In return, the DRC will benefit from the EAC Common Market and Customs frameworks, with easier and seamless access to the markets and seaports of Kenya and Tanzania at cheaper rates.

During the admission summit, Tanzanian President Samia Suluhu emphasised the importance of Kinshasa in terms of infrastructure development.

While referring to the planned construction of the railway from Tanzania to Burundi and by extension to the DRC, President Samia observed that the entry of Congo has the potential to spur much more development in the region.

“Connecting the DRC railway network with the EAC will provide an opportunity for increasing access to EAC markets and reducing the cost of intra-regional trade,” she said.

Trade and investment

More cargo is expected to shift from the Northern Corridor to the Central Corridor. Truckers are weighing their options on which route to use to ferry goods to the vast DRC.

The Central Corridor, which is 1,300km long, begins at the Port of Dar es Salaam and serves Tanzania, Zambia, Rwanda, Burundi, Uganda and Eastern DRC.

The Northern Corridor, 1,700km long, starts at the Port of Mombasa and serves Kenya, Uganda, Rwanda, Burundi, eastern DRC and South Sudan.

DRC’s entry means integrating the EAC’s trade infrastructure, intermodal connectivity, one-stop border posts, and systems to reduce trade time and costs.

“With lower tariffs on goods and the removal of trading restrictions among partner states, we anticipate that goods and services will move more freely. With a larger market, manufacturers in the EAC will benefit from economies of scale, making them increasingly efficient and competitive,” said Peter Mathuki, EAC Secretary-General.

The private sector says Congo’s admission is a milestone in the transformation of the bloc into the most attractive trade and investment destination in Africa.

According to the East African Business Council, EAC’s exports to the DRC have averaged 13.5 percent in the last seven years to 2020. In 2018, the value of imported goods into the DRC stood at $7.4 billion against exports of $855.4 million.

“Following this milestone, trade is set to increase immensely, as DRC shares its borders with five EAC partner states. We call for the improvement of regional infrastructure connectivity plus the implementation of EAC commitments to unlock trade opportunities,” said the council’s CEO John Bosco Kalisa.

The Congolese expect a lot from the region. “The benefits expected from the EAC membership is the multiple administrative facilities, the reduction of charges and the increase in commercial and economic activities of citizens as well as the facilitation of their mobility between our countries; the reduction of Customs tariffs for goods received in the ports of Mombasa and Dar es Salaam,” said President Tshisekedi.

“We expect economic dividends and other benefits from this EAC,” said Sardou Kabongo, a 39-year-old Congolese.

“The EAC is said to be the most integrated sub-regional organisation on the continent. If this membership will impact the price of certain goods and services — notably the cost of transport — we welcome it. We must also learn not only to buy cheaply but also to produce, otherwise, we will remain a market for the other six members of this organisation,” Fiston Oleko, a 34-year-old Kinshasa resident, told The EastAfrican.

Fidèle Kitsa, 35, a resident of Goma in North Kivu on the border with Rwanda, said the DRC’s membership “is a good thing” because it will facilitate trade.

“Travellers will no longer have to pay for a visa, so it will be easier. As for goods, it will help to reduce taxes and, in turn, bring down the price of certain products on the market,” he said.

The EAC is reviewing the Common Market Protocol to spur intra-regional trade, which has stagnated at around 15 percent. The Heads of State Summit will review the protocol in a retreat before this year’s summit this month.

Explaining the rationale of the review, Kevit Desai, Principal Secretary in Kenya’s Ministry of EAC and Regional Development, who chairs the EAC PSs committee reviewing the CMP, said: “We want to review the CMP for everything from transport and logistics to the need for interconnectivity to market systems, to sector-based thinking, to promotion of innovation, technology, e-commerce and so on, which did not exist when we wrote the CMP about 12 years ago.”

Continental market

Roselyne Omondi, associate director of research at the Horn Institute says that, like Tanzania, DRC is a Southern Africa Development Community (SADC) member state and its entry into the EAC strengthens the EAC-SADC bridge, bolsters ongoing bilateral negotiations for a Grand Free Trade Area between EAC, SADC and Comesa.

Even before its admission, EAC countries had already signed bilateral deals with Kinshasa. For example, Uganda and Rwanda are already constructing three roads into eastern DRC to ease business and increase trade and investment between them.

In the region, Uganda is the second largest exporter to Congo, after Rwanda. Uganda mainly sells cement, cooking oil, rice, sugar and tubes and pipes. It also exports food and traders hope Congo will provide market for products such as food, spirits, textiles, plastics and others.

Read: Uganda, Rwanda paying Tshisekedi a king's ransom to access DRC

In the last quarter of 2021, DRC accounted for 96 percent of Rwanda’s total re-exports, covering food and live animals ($ 39.87 million), mineral fuels and lubricants ($ 33.55 million), according to Rwanda’s Institute of Statistics.

Rwanda’s total exports with EAC member countries, which represent 4.7 percent, rose by 32.9 percent in value, standing at $72.3 million in 2021. Imports from EAC increased by 6.4 percent, according to central bank figures.

Trade experts from across the continent under the Akademiya2063 think tank, who recently met in Kigali to discuss the regional trade outlook, said 40 percent of the region’s trade costs are attributable to transport, high cost of electricity and gaps in trade facilitation.

Although regional countries and trade partners have succeeded in eliminating some non-tariff barriers, it has had little impact on trade costs, a burden o en shouldered by the consumer.

“It is more expensive to transport avocado from Kigali to DRC by air compared with transporting it to Dubai. A lot needs to be done at a bilateral level to address these issues if the cost of trade is to be brought down,” Claude Bizimana, CEO of National Agricultural Export Development Board told the meeting.

“DRC is bringing a large mass of consumers and producers to join the bloc. This spells much more expanded trade fortunes for the region,” said Ousmane Badiane, chairperson of Akademiya2063.

Patience Mutesi, country director of TradeMark East Africa, said DRC has only had bilateral agreements with EAC member states, and these have limited its traders from enjoying some benefits.

“There are trade frameworks that traders for DRC will enjoy after joining the bloc. For instance, small traders will be exempted from duties while trading across the bloc. For a Rwandan trader to take goods to DRC the $20 CEPGL levy will no longer be applicable,” she said.

Congo has five immigration and tax bodies, which traders say encourages corruption.

Many analysts say the Congo’s EAC membership was long overdue.

“Majority of the countries in this Community border us. We share populations, languages, customs and natural environment. We have been engaged in significant economic exchanges for several decades,” said President Tshisekedi.

“In fact, the Congolese have always been part of East Africa. All that remained was to formalise this membership in an organised structure and to integrate into a sub-regional development dynamic.” Nicaise Kibel Bel, a Goma-based security expert said Kinshasa has been “a distant city for the people of the east of the country compared with Kampala, Kigali or Nairobi.”

“Trade is more with neighbouring countries than with Kinshasa. It was in our best interest to join the EAC,” he said.

Akilimali Chomachoma, a journalist also based in Goma, supported Bel’s argument: “To travel from Goma to Kinshasa city and back, you have to spend more than $450 on aeroplane tickets, while to travel to Rwanda from Goma, you just need $5, and $75 to get to Kampala from Goma.”

Cutting bureaucracy

Some provinces in the DRC have easier access by road to East African countries, while to reach Kinshasa and other western provinces, the only way is by air.

Mr Chomachoma noted that, for importers of products from East African countries, “This is another step in reducing bureaucracy and costs”.

But, for Daddy Saleh, a professor of economics, DRC’s membership will negatively impact local industries in the long term. Saleh told The EastAfrican that, given the nature of the Congolese economy, where almost everything is imported, local industries will face competition that could undermine local productivity.

“On the production side, we are below the regional average. We have few distribution structures, from a logistical point of view. In my opinion, the Congolese economy is not yet ready to join the EAC. In the current state, in the long term, this will inevitably destroy our production capacity. The other countries in the Community will produce at a lower cost than us. As a result, our products will not find a market,” Mr Saleh said.

Economic dividend, other benefits of DR Congo entry

Remy Zahiga a Congolese climate activist, in an article published in IPS, acknowledges the role Congo Basin plays in sub-Saharan Africa, in keeping droughts and extreme heatwaves at bay.

The Congo Basin forest has more than 600 tree species and 10,000 animal species, including forest elephants, lowland gorillas, bonobos, and okapi. Its vegetation is estimated to contain between 25-30 billion tonnes of carbon, equivalent to about four years of global anthropogenic emissions of carbon dioxide.

Congo is home to some of unique indigenous cultures and geographical phenomena not found anywhere else in the world, making it a significant tourist destination.

Kinshasa, the largest city in Africa, is famed as the “New York of Africa” for its large population. Fun is spelt out in its streets, with epic street art culture, boat rides, shore barbeque joints, and the Marche des voleurs (City Market), all of which hypnotise visitors with fun and colour.

The Lola ya Bonobo (Friends of Bonobo) in the southern suburbs of Kinshasa is the world’s only sanctuary for orphaned bonobos, a rare breed of apes, and the most visited part of the city.

Away from the capital, the Kahuzi Biega National Park in South Kivu Province, the Nyiragongo volcano near Goma, Lake Kivu, and the Zongo Falls are some of the tourist attractions.

Even before its entry into the EAC, DRC had been contributing a significant number of tourists to the region.

According to the UN World Tourism Organisation, 48 percent of non-resident tourists into Rwanda in 2019 were from the DRC, above tourism arrivals from all East African countries combined.

Kenya’s Tourism Cabinet Secretary Najib Balala told The EastAfrican of plans to woo Congolese tourists into Kenya, now that travel restrictions will be no more.

“We plan to send a team to DRC to assess the market there, their interests, and purchasing power, just to see how we can utilise this opportunity to increase Congolese visitors to Kenya,” Mr Balala said.

Recently, the EAC adopted French as the third official language after English and Kiswahili. “The Secretariat has developed a proposal for simultaneous translation into Kiswahili and French in EAC statutory meetings,” said Dr Mathuki.

Unending conflict

DRC has been tagged a ‘problem child’. Despite its wealth, it is one of the poorest and most underdeveloped countries in Africa.

With a population of 95.241 million, according to the IMF, its GDP is projected to reach $50.1 billion in 2022.

Congo’s natural resources appear to be more of a curse than a blessing, as they bring no substantial gains to its economy or citizens.

Until recently, most of DRC’s main copper and cobalt mines were controlled by private entities, mostly owned by Israeli businessman Dan Gertler, who allegedly acquired the mining rights in corrupt dealings with former president Joseph Kabila, at the expense of the state and the Congolese people.

The unending conflict has consistently ravaged the country, claiming the lives of more than five million people, driving millions more into starvation and exposing them to diseases, and has resulted in a violation of human rights, where millions of women and girls have been raped.

The conflict has claimed the na – nation’s political and economic stability to the benefit of international conglomerates that have interests in the country’s natural wealth.

Roselyne Omondi, associate director of research at the HORN Institute, in a blog this week, said becoming EAC’s newest member “will not suddenly melt away the socioeconomic and geopolitical problems that plague DRC.”

“DRC’s inability to improve its development outcomes sufficiently despite rising commodity prices and her expanded production capacity could point to poor economic management, geopolitical interference, and protracted political crises. To be clear, DRC’s entry into the EAC will not introduce anything that its six current members are not already accustomed to.

“With or without DRC, armed militant groups, terrorism, illegal migration, political turbulence, underdeveloped economies, youth unemployment, poverty, and poor infrastructure are realities that EAC has contended with...

However, it will recalibrate the bloc’s peace and security considerations,” she wrote.

More than 100 militia groups are active in eastern DRC. The change in the Allied Democratic Force’s identity from a militia group into a militia-terror group has also complicated DRC’s security challenges.

The DRC is the Great Lakes Region’s poster child for sustained conflict and insecurity across its vast territory, especially in the volatile eastern Congo provinces of Ituri, North Kivu and South Kivu.

Lydia Wanyoto, a former East African Legislative Assembly MP from Uganda, says it is time to tackle the well-documented Congo security issue before it spreads into the region now that the bloc guarantees Congolese free movement of persons.

“What Uganda is doing is the right thing, to take care of the insecurity in Congo,” she said, referring to the deployment of Uganda Peoples Defence Forces in Ituri and North Kivu provinces in November 2021, to fight the Allied Democratic Forces (ADF) terrorist group.

Originally from Uganda, the ADF fled to the DRC in the 1990s and is one of the armed groups in eastern Congo and from their bases and territory under their control, they kill, abduct civilians, levy taxes and engage in illegal wildlife, minerals and timber trade.

- Additional reporting by Roselyne Omondi.

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