Congo Moves On From Lost Years

February 10, 2013

Eustache Ouayoro World Finance

The Democratic Republic of Congo needs to make better use of its natural resources to adequately support its growing population, says Eustache Ouayoro, Country Director at the World Bank

The signs are there, although they are still somewhat tentative, that the Democratic Republic of Congo (DRC) may be emerging from its many years of conflict and instability and navigating its way towards a new development era. It cannot come soon enough.

DRC’s ‘lost years’ of war and havoc devastated its economy and took the lives of more than 3.5 million peopled since 1998. For millions of others who survived the bloodshed, their lives were confined to makeshift refugee camps, without jobs and hope, while the social fabric all around them unravelled.

It is little wonder that, years later, the people of the DRC still experience poor health, little education, and high levels of poverty. The DRC ranks last among the world’s 187 countries in the Human Development Index. Poverty is widespread, with 71 percent of the population living with less than $1.25 per day.

Political uncertainty also persists. The situation in eastern DRC, where a rebel group called M23 is battling government troops, is a clear reminder of the country’s vulnerability to external and homegrown crises. The country will need to address the root causes of the repeated conflicts and significantly improve the poor social and economic wellbeing of its people to create the space to generate development, dramatically lower poverty, and create opportunity for all – not just the lucky few with the right connections.

Building alongside partners

Over the past few years, the DRC has been able to make significant progress to restore security across most of the territory, political reconciliation and economic recovery with the support of international partners, including the World Bank. Against the headwind of a tough global economy, the DRC has been posting solid economic growth figures, while inflation was under control and in single figures in 2012, compared to 500 percent in 2001. With economic growth of 7.2 percent in 2012, and 8.2 percent expected in 2013, the DRC is among the countries experiencing some of the fastest levels of economic growth in the world.

Debt relief to the DRC under the World Bank and IMF’s Heavily Indebted Poor Countries Initiative (HIPC) has provided the largest amount of debt relief ever granted to a country, estimated at approximately $16bn. This debt write-down has improved the country’s fiscal position and has allowed it to invest its debt savings in more development opportunities.

Consider that the DRC has massive deposits of the world’s most strategic metals and precious stones such as copper, diamonds, gold, tungsten, coltan, and many others; but on the other hand, it also has some of the world’s worst poverty, education and health prospects. The DRC can certainly seem like country of great paradox. And yet it has great opportunities to create significant growth and jobs thanks to these very same abundant natural resources, huge tracts of fertile land, a large population, and a commanding location in the centre of the continent.

Potential for development

Only 10 percent of its huge area of arable land is farmed, and only 13,000 hectares are irrigated against a potential of four million hectares. The DRC is currently importing at least 30 percent of its food needs, when proper farming of its land could feed a billion people. With 100,000MW of hydropower generation capacity, the DRC has 15 percent of the world hydropower generation potential but only nine percent of the population has access to electricity, and even then it is not always reliable.

" The Democratic Republic of Congo is currently importing at least 30 percent of its food needs, when proper farming of its land could feed a billion people "

Realising this huge potential, however, will require (i) drastic improvement to the business climate; (ii) serious progress on anti-corruption measures, economic governance and stronger government institutions; (iii) addressing the large infrastructure gap and prioritising food production and agriculture; and (iv) vastly improving the reach and quality of health, education, and other essential services to help people and their families become healthier, better educated, more hopeful, and ultimately better equipped for the workplace of the new, fast-changing Africa.

The DRC needs sustained, inclusive, double-digit growth to keep poverty on the back-foot and retreating, especially considering its 2.7 percent population growth rate is one of the highest in Sub-Saharan Africa.

The country’s economic growth per capita could increase by five percent a year if it could improve transport with better roads and bridges, improve telecommunications, and generate substantially more electricity. Improving the power supply alone could reduce costs to firms as much as 80 percent, and improving roads could reduce the cost of moving food and other agricultural products by 70 percent.

Transforming the country’s formidable potential into real progress has been the key challenge for the DRC and its development partners, including the World Bank. Of paramount importance is the need to address head-on the major obstacles that stand in the way of lasting peace and faster development, now that the age of war and despair has largely receded.

Since re-engaging with the DRC in 2001, the World Bank has rolled its sleeves up and been a strong and committed development partner. For example, the World Bank helped DRC to demobilise 110,000 adult and 31,000 child soldiers. When the DRC needed urgent financial help, and its coffers were empty, the bank mobilised $900m from 2002 to 2009. The bank helped to rehabilitate worn-out infrastructure to jump-start the economy and also provided vital support to the physical reunification of the country.

Important projects

I was especially happy with the work we did to upgrade the road from the country’s main port of Matadi to Kinshasa, which was vital in re-energising economic activity in the country. It has reduced travel time from eight days to six hours. Rehabilitating 750km of roads in Kisangani-Beni in the Province Orientale was critical to connecting more than 6.6 million people totally landlocked and to reduce cost of goods by 60 percent. Keeping a sharp eye on financial management of development aid and earnings from the DRC’s own natural resources was also essential to our work in close alliance with international aid donors.

Modernising the DRC’s forestry sector allowed the country to reduce its forestry concessions from 24 million hectares to 12 million hectares and cancel 76 forestry concessions. New procurement rules, approved in 2009, replaced outdated procurement regulations from 1969. Procurement units have been widely established in government ministries and in some of the provinces.

Almost all mining contracts are now published. Before 2010, this was not the case. Quarterly revenues from the extractive industries are published. Support to the DRC to be EITI compliant is ongoing and support to the revision of the 2002 mining code will help entrench transparency and competition principles in the new code, ensuring that the country retains a fair share of its natural resources.

Our support towards achieving better education and health has increased enrolment and completion rates in primary education, as well as improving learning outcomes, despite numerous challenges. Classrooms have now been built and rejuvenated, teachers were trained and more than 14 million textbooks were distributed.

Malaria prevention has been centre stage for a long time, and more than 14 million insecticide-treated bed-nets were distributed in several provinces, while general immunisation coverage has increased. In the 83 health districts supported by the World Bank out of the country’s 515 health districts, a 20 percentage point increase in DPT3 immunisation has been reported, and deliveries attended by trained staff have increased by 33 percent from 47 percent.

Supporting a growing population

Business as usual is not an option for a country that will be home to the world’s 11th-largest population by 2050. Looking ahead, development support to the DRC should prioritise faster economic development of the country, mainly building on the DRC’s unmatched regional advantage in agriculture. We must promote inclusive growth in the DRC by making its economy more irresistibly competitive and helping to spur the creation of new, well-paying jobs, especially for the country’s growing ranks of young people.

The World Bank, together with international partners, will support the government in creating the conditions for the economy to thrive, which will include strengthening public institutions through targeted civil service reform programmes and more searching corporate governance in major state-owned enterprises.

Recent reforms introduced by the government (such as the introduction of value added tax), cutting out the excessive red tape at the Port of Matadi, and regular audits of its main revenue-generating agencies, are all steps in the right direction. This is why so many of us are cautiously optimistic that the DRC could quickly regain its status as the giant of Central Africa. It cannot happen fast enough.

This Op-Ed was first published in World Finance