Democratic Republic of Congo: Political risks weigh on investment

31 January 2017

Over the next two years real GDP growth will accelerate in Democratic Republic of Congo (DRC), driven by a recovery in the extractive sectors. However, elevated levels of political risk will weigh on investment in the short-term. Although a transitional deal to end the rule of President Kabila has been agreed, the political situation remains fragile, and protests are likely in 2017.

Security Environment

As President Joseph Kabila remained in office beyond the 19 December 2016 constitutional limit, protests and riots in Kinshasa, Lubumbashi, Boma and Matadi led to the deaths of at least 40 people in December 2016 as security forces used tear gas and live ammunition to disperse protestors. On 31 December 2016, politicians agreed a deal in which Kabila will remain in office until elections occur at the end of 2017, but will not be able to seek a third term in office. This will mitigate the risk of sustained opposition protests in the short term. 

However, recurring one day protests are likely in urban centres in 2017, particularly if the transitional deal breaks down and elections are further delayed. Anti-Kabila sentiment in the eastern Kivu provinces will be exacerbated by the president’s attempts to remain in power, escalating the risk of small-arms attacks by militant groups on mining and cargo assets.

Trading Environment

The DRC’s budget deficit will narrow over the next few years due to the government’s commitment to cut expenditure and a positive outlook for copper prices. However, further unrest in the lead up to proposed elections by the end of 2017 could limit government efforts to reduce spending, as international donors may withdraw funding. Delays to the presidential election have led the World Bank and African Development Bank to put approximately USD 250 million in budget support on hold.

Further to this, additional public spending will be required to hold the election itself, with costs estimated to be as much as USD 1.8 billion. Economic growth prospects for the DRC are positive in the medium-term due to significant foreign investment in the mining sector. The recent increase in commodity prices, in particular in copper, means that real GDP growth will likely rebound to 5% in 2017, having decelerated in 2016 to 4%. 

The international community continues to support the DRC, and its substantial natural resource base also means that the sovereign credit position is stable. Debt levels are very low, constituting approximately 13.9% of GDP, which also mitigates sovereign credit risks. 

Investment Environment 

Corruption risks remain significantly elevated in DRC, with informal payments by companies across the economy a commonplace. Graft within government and the public sector is endemic. The Kabila family’s business interests are worth hundreds of millions of dollars and span numerous sectors including mining, banking, pharmaceuticals and energy. 

A United States Securities and Exchange Commission report released in October 2016 estimated that over USD 100 million had been paid in bribes to public officials by US hedge fund Och-Ziff between 2005 and 2015, in order to gain preferential access to the Congolese mining market.

Despite this, Kabila’s proactive approach to attracting foreign investment and creating a functioning operating environment for international companies has helped drive significant economic growth since the end of the civil war in 2003. Large multinationals such as Anglo-Swiss firm Glencore Plc and American company Freeport-McMoRan Inc. have entered the Congolese mining industry. 

The Kabila administration has worked alongside its international partners to improve the business environment, introducing investment codes and creating commercial courts in the country’s 10 largest cities since 2008, with support from the European Union. In February 2016, Kinshasa hosted the United Nations Private Sector Investment Conference for the African Great Lakes Region, showcasing investment opportunities to the international community.

Integration with the international business community, alongside the DRC’s reliance on external concessional funding, lessens the risk of expropriation of assets for international firms. 

CPS Risk Outlook Feb 17

** Pricing will depend upon the exact location of the risk given challenges in the country; it will vary on a case by case basis.

In this month’s Risk Outlook, we also provide a detailed forward looking assessment of developments within the security, trading and investment environments for South Africa, South Korea, Brazil and Kenya, all of which have been the subject of recent enquiries from JLT’s client base.

South Korea - risks impacting daily trade and investment

Download February Risk Outlook

For further information, please contact Eleanor Smith, Political Risk Analyst on +44 (0)121 626 7837 or email