Republic of Congo Economic Update: Investing Efficiently in the Country’s Infrastructure

WASHINGTON, September 18, 2014  - According to the first annual Republic of Congo Economic Update, published by the World Bank, efficient investments in infrastructure could enable the Congolese economy to make up for its slow start in the race for development.

The study shows that over the last three years, the country’s economic growth was not as vigorous (averaging 3.5% per year) as that posted by comparable economies (averaging 5%) and well below the target of 8.5% set in the National Development Plan for the period 2012-2015. The reason? Underperformance in the extractive sector, in a country whose chief resource is oil, which represents 60% of GDP. Although the Republic of Congo is still one of the main oil-producing countries in sub-Saharan Africa, its oil sector saw a decline of 8.2% in the last three years, chiefly due to accidents affecting offshore production.  

The report projects an annual growth rate in the Congolese economy of about 7.6% for the period 2014-2016, largely due to high-performing non-extractive sectors. Aided by increased public investments and the implementation of economic diversification policies, these sectors should grow by 8.6% in 2014, 7.2% in 2015 and 7.9% in 2016. The service sector should grow by 8.4% during this period, and the agricultural and manufacturing sectors by 7.7%, according to projections. Several internal and external factors could intervene, however, to affect the growth trajectory, such as a major drop in oil prices or new investments in infrastructure.

The World Bank study notes that China has become a new funding source for the State and that public investments could grow at an annual rate of 4.8% from 2014 to 2016. From 2003 to 2013, China financed nearly all the major infrastructure projects in the Republic of Congo. However, “any interruption in the flow of these funds, whatever its cause, could considerably reduce the growth outlook for the non-oil sector, and as a result, the growth of GDP,” the report observes.   

Infrastructure as a catalyst for growth?

Since 2006, the Congolese authorities have made substantial investments in infrastructure, particularly in the electricity and transportation sectors: construction and repair of roads and airports, hydroelectric dams, electrical distribution infrastructure, and so on. In 2014, the investment budget is set at 1,991.8 billion Congolese francs (CFA), about US$4 billion, amounting to 28.8% of GDP. 

“The report points out that during the period 2010-2025, current and projected infrastructure projects can have a significant impact on the country’s growth, because they can add an average of 1.5 percentage points to the growth of GDP,” notes Fulbert Tchana Tchana, lead economist for the Republic of Congo and one of the study’s authors. “Efficient management of public investments will not only optimize natural resource management but also improve the return on investments,” he adds.

“This report is an important element of the World Bank’s program in the Congo, a country that has benefitted from the boom in oil revenues for almost a decade and that is engaging in an ambitious rehabilitation and construction program of infrastructure, but social development is not improving at the same rate,” said Sylvie Dossou, World Bank Country Manager for the Republic of Congo.

The report puts forth a series of recommendations aimed at improving the efficiency of public spending. Among them:

• Creating Public Investment Committees within government ministries (on the model of Rwanda) to improve the selection and implementation of infrastructure projects
• Preparing investment projects better before including them in the budget
• Establishing tracking mechanisms for budget execution
• Improving spending efficiency by speeding up procurement procedures.
• Making the disbursement system more transparent