Democratic Republic of the Congo Economy

27 January 2010
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MACROECONOMIC  PANEL
The Democratic Republic of the Congo is the third largest African country by population, rich in natural resources, forestry and mining.

The country is the third largest producer of diamonds by volume, though not in value, since most of the production is for industrial use instead of the field of jewelry.

Has the second rain forest in the world, with ample fertile land and vast water resources.

Always the mining sector, widely diversified (copper, cobalt, diamonds, gold, zinc and other base metals) and oil extraction contribute significantly to the formation of GDP.

Despite the abundance of natural resources, the formal economy of the country is quite literally collapsed in recent decades, as a result of mismanagement and perennial civil conflicts.

The impact of the long civil war has been disastrous, with particularly detrimental effects on the destruction of physical infrastructure and weakening of market institutions, with total loss of assets held by individuals and companies.

The economy, the second most industrialized of the continent after South Africa, has undergone a process of profound transformation with a resulting drop in exports and value-added activities.

The nineties have established the country's economic collapse as a result of wrong macroeconomic policies, political instability and wars that led to supply shocks.
The purchasing power and disposable income of families have been substantially eroded as a result of hyperinflation, while there has been a strong development of the informal economy.

Since 2002, the Congolese economy has shown a recovery, thanks to the soothing effects produced by the adoption of prudent macroeconomic policies that are strengthening the fiscal and monetary discipline, physical infrastructure and institutional and management capacity of public financial resources to order to firmly anchor the development process.

Agriculture, including forestry, livestock and fisheries, is the main sector of the economy of the DRC.

It accounts for 40% of GDP and employs about 75% of the workforce. Has a great potential for development.

Major cash crops are cocoa, coffee, cotton, palm oil, tea, rubber, sugar and the bark of cinchona, while the main food production consist of maize, rice, potatoes and cashew nuts. After the acute crisis suffered during years of civil war, there are emerging signs of economic recovery in the agricultural sector.

The mining sector is another economic engine of the country but so far, for a number of structural problems, its performance has been below potential.

The DRC has a large endowment of mineral resources: copper, cobalt, columbite-tantalite, diamonds, gold, zinc, uranium, tin, silver, coal, manganese, tungsten, cadmium and crude oil.

Nationalization policies, combined with a shortage of public and private investment, led to large production declines over the past twenty years.

Recently the industry has been the subject of an increasing flow of foreign investment, especially in the exploration for and production of base metals (mainly copper, cobalt and zinc) and diamond industry, a factor that has encouraged the acceleration of production .

Such foreign investment in the sector were also stimulated elapses from the new mining code, which guarantees the rights of investors by introducing a register for mining licenses and the presence of an agency employed to certify the diamonds.

The manufacturing sector accounts for 5% of GDP to education, has as its main segment as food processing, while there is limited production of industrial products, mainly steel, chemicals, construction materials, textiles and light manufacturing.

The construction sector, which accounts for 7% of GDP is recording average growth rates of 5% per year through the development of infrastructure.

The transport and telecommunications is about 6% of GDP and represents another important growth factor in the economy especially as regards growth in demand for cellular telephone services.

In early 2009, the country's economic conditions have deteriorated.

The continuous fall in prices of key raw materials exported from the country led to a decrease in exports, foreign investment and the terms of trade.

The effects of this situation has had negative effects on the entire economy, leading to a significant reduction in economic activity, rising unemployment and a significant deterioration in the budget and balance of payments, reduction of reserves and exchange rate pressure that required appropriate restrictive monetary and fiscal measures and financial support from the IMF.

Despite the reduction in world prices of raw materials, there has been a noticeable upsurge in inflationary pressures, induced mainly by the depreciation of the currency, combined with weak economic activity and exports have been a considerable increase in the cost of imports.

As a result of macroeconomic imbalances that have surfaced, the IMF intervened, allowing the government will pay approximately $ 200 million, under the Exogenous Shocks Facility, a recently created tool for dealing with exceptional situations of emergency arising from the economic crisis and financial affairs.

From the perspective of the real economy, probably the main field, which we hope will serve as a driving force for economic recovery in 2010 is agriculture as the sectors of construction and commodity mining even slow recovery.

The Democratic Republic of Congo has traditionally been export-oriented economy, heavily dependent on primary commodities. The diamonds have replaced copper and cobalt as the main item of exports.



OPPORTUNITIES  FOR ITALIAN COMPANIES
The Italian offer, both in the area of consumer goods that capital goods, has AN excellent image quality for consumers and entrepreneurs of the DRC.

In parallel with the improving economic situation and the continued inflow of investment and financial resources from abroad, the demand for Italian goods Congolese could increase significantly in coming years.

In particular, include the following production sectors that appear to offer the best chance of penetrating commercial equipment for the mining industry, equipment and construction materials, agricultural and forestry machinery, canned food, transport and commercial vehicles, chemicals and pharmaceuticals, telecommunications equipment and computer equipment and associated spare parts, equipment for refrigeration, air conditioners, equipment for generating and distributing electricity, medical hospitals.

At the present stage of progress infrastructures and manufacturing are essential, the largest companies in our country could serve as a driving force for opening the field to a desirable internationalization in these areas.

In addition to the constantly expressed by Italy, to examine opportunities for technology cooperation project for the greater Inga dam on the Congo River could be explored opportunities for cooperation in defense and monitoring of the area of environmental protection and pharmaceutical research cosmetics but also in the field fervent exploration, extraction and processing of minerals.

INDUSTRY
The industry is monopolized by the transformation in the mining industry: petroleum, cement and sulfuric acid.

There are also manufactures of tobacco, food, beer, shoes, textiles. The industry employs 13% of the workforce, providing 25.3% of annual GDP.



MINING RESOURCES
The country's wealth is based mainly on mineral resources, particularly cobalt and diamonds (industrial), copper and scrap iron, uranium, tin, gold, silver, zinc, manganese, tungsten and cadmium.



SECTORS IN EXPANSION
The mining sector in Democratic Republic of the Congo is rich in a very diverse range of minerals and offers enormous opportunities for investors.

The subsoil is rich in:

Minerals
- Diamonds: concentrated in the areas of Kasai Oriental, Kasai Occidentale,
   Bandundu, Equateur, Province Orientale.
- Gold in the provinces of Maniema, Katanga, Bas-Congo, North Kivu, South Kivu, Equateur.
- Copper: Katanga.
- Tin: North Kivu, South Kivu, Maniema.
- Tantalum Columbus North Kivu, South Kivu, Katanga, Maniema.
- Bauxite: Bas-Congo.
- Iron: Banali, Katanga, Kasai Oriental Luebo.
- Manganese: Katanga, Bas-Congo.
- Coal: Katanga.
- Cobalt: Katanga.

Hydrocarbons
- Oil: Catchment Moanda (Lower-Congo), the Central Cuvette, Ituri, Bandundu.
- Natural Gas: Lake Kivu.
- Production of bitumen road and Bas-Congo Province Orientale.
- Exploitation of the deposits in the Province Orientale (Ituri).



Forest
45% of the African rain forest belongs to the Democratic Republic of the Congo that this causes higher investments in this sector and those related to the processing of timber is mainly intended to 'export.

These activities include:
- Production and Transport of logs: Equateur, Province Orientale, Kasai Occidentale,
  Mayombe in Bandundu and Bas Congo.
- Transformation of wood on an industrial scale: Kinshasa, Kisangani, Kananga.
- Exploitation of Hevea: Equateur, Bandundu, Bas Congo.
- Production of medicines: Cinchona in Kivu.
- Production of cellulose paper: Kinshasa.

The types of wood in the forest are: Afrormosia, Ebony, Wenge, Iroko, Sapele, Sipo, tiama, Tola, Kambala, Lifaki.

 

AGRICULTURE
The eco-climatic conditions are very favorable in spite of this, only 15 - 20% of land is exploited.

 

Livestock and Fisheries
The main activities include:
- Livestock: Katanga, Kivu, Province Orientale, Bass - Congo. The capacity is 30 million heads of cattle, but this area has never exceeded 1.5 million.
- Breeding of pigs and poultry: there are around major urban centers of modern infrastructure capable of raising 5 million per year by 5000 in poultry and pigs.
- Production of milk: Katanga, Kivu, Province Orientale, Lower Congo.
- Breeding pigs for breeding: Kinshasa.
- Fishing. Practiced in lakes, rivers and the sea.

INDUSTRIAL SECTOR
Manufacturing
- Manufacture of food products.
- Tobacco industry.
- Textiles and leather.
- Manufacture of wood and paper.
- Chemical industry and manufacture of chemicals, petroleum products, rubber products and plastic.
- Production of construction materials.
- Production of Cement.

Basic metal
- Construction of steel companies.
- Production and processing of nonferrous metals.
- Production of metal products.
- Manufacture of machinery and equipment.
- Manufacture of motor vehicles.

Electricity And Water
The Congo River's flow more regular and more powerful in the world (40 m / sec) after the Amazon. The potential energy of all the DRC is estimated at 100,000 MW / hour (100 GW / h), of which 42% is concentrated at the site of Inga.

Here we explain in detail the current investment opportunities:



Electricity
- Construction of hydroelectric power Katende (Kananga) and the strengthening of the hydroelectric power Tshiala (Mbuji-Mayi).
- Rehabilitation and construction of high voltage power lines:
- Rehabilitation of the Inga power line - Katanga.
- Construction of power line Inga-Angola-Namibia-South Africa.
- Construction of power line Inga-Nigeria.
- Construction of power line Inga-Egypte.
- Withdrawal of energy Tshimbulu (Kasai Occidental and Kasai Oriental).

Water
- Improve the distribution of drinking water throughout the country.
- Construction of pipelines: Project Congo concerning the exploitation of desert areas of Africa.

BANKING SECTOR
The Congolese banking sector offers many opportunities.

And it is easy to open bank branches in the country.

The insurance sector remains small even if used should not underestimate investment opportunities.

SECTOR INFRASTRUCTURE
Excellent opportunities within this sector can be taken into account by investors in the following fields:
- Construction and / or rehabilitation of major national highways.
- Interconnection of North Street to the south of Ituri DRC (Kalemie).
- Construction of roads connecting the region of Central Africa, East Africa (COMESA) and Southern African (SADC).
- Rehabilitation of existing railway networks: Ubundu-Kisangani, Kinshasa-Matadi, Sakanyi-Ilebo, Kamin-Kalemie, rail Uele.
- The construction of the railway Ilebo-Kinshasa.
- Rehabilitation of ferries: Kindu, Kisangani, Ubundu.
- Dredging of the river Congo (Matadi - Atlantic Ocean).
- Construction of a railway between mwen Ditu and Mbuji-Mayi.
- Construction of a deep water port at Banana (Lower Congo).
- Construction of a railway Banana-Matadi (Bas Congo).

TRANSPORT AND PORTS
The transport sector is growing rapidly in the DRC, given the vastness of the territory, the intensity of economic activities and the large number of people.

The following opportunities are offered to investors with regard to:
- Rehabilitation of the airports N'Djili, Lubumbashi and Kisangani.
- Creation of transport companies.
- Equipment and modernization of ports: Matadi, Kinshasa, Ilebo, Mbandaka and Kisangani.
- Improving the navigability of the main rivers with the system of dredging and marking.

TELECOMMUNICATIONS

The telecom industry is currently in expansion.

Companies operating in this field has rapidly gathered a great success and suddenly were able to extend their activities covering almost the entire national territory.

Nevertheless, the sector still offers good investment opportunities in the following areas:
- Installation of shortwave transmitters / receivers to cover the whole country;
- Rehabilitation of OCPT cable network;
- Distribution of the telephone network cable throughout the country.

CONSTRUCTION SECTOR
Excellent opportunities are also present in this area, we need a strong rehabilitation and modernization of existing facilities and the creation of accommodation for tourists and new home to meet the needs of a growing population.

Specifically, investors are asked to:

- The construction, rehabilitation and equipping of basic infrastructure (schools, hospitals, apartment buildings), office buildings and commercial buildings (ICAC).
- Rehabilitation of the Center for International Trade of Congo (ex SOZACOM), with its 22 floors;
- Construction of houses in reduced rent in several cities: Kinshasa, Matadi, Bandundu, Kananga, Mbuji-Mayi, Mbandaka, Kisangani, Goma, Bukavu.

 

Investment Law
The DRC has in recent years launched several initiatives to create a climate conducive to investment, aimed at creating the legal framework for the regulation thereof, implemented with the enactment of: the investment law "Code des Investissement (LN 004 / 2002 February 21, 2002), the Mining Code (LN 007/2002 of 11 July 2002), the forestry code (LN 011/2002 of 29 August 2002) and the Code at Work (LN 015/2002 of 16 October 2002) .

Instituted by the law n.4/2002 of 21/02/02, which introduced the code for investment, Anapa and the public agency responsible for fostering the DRC, approving new investment projects, administer the facilities provided, provide a range of support services to investors and remove the administrative-bureaucratic barriers that impede .. li

To obtain approval of Anapi, within a maximum period of thirty days, should be created a Congolese law company that provides a minimum investment of 200,000 U.S. dollars (10,000 dollars if they are SMEs) and which provides added value by at least 35% and they undertake to comply with environmental standards and train local staff to the technical functions associated with the initiative and their responsibilities.

The approval of the initiative allows for the following character customs and tax incentives:

- Exemption from import duty on machinery, equipment, materials and spare parts up to a maximum of 10% of cif value;
- Tax exemption on export of finished products or parts thereof;
- Exemption from income tax associated with new investments;
- Exemption from registration fees fixed for the establishment of new companies and ad valorem tax on limited liability companies;
- Exemption from land taxes and land for the project;
- Exemption from value added tax applied to local purchases of goods or services.

For small and medium enterprises, there are additional advantages:
- Total relief from import duties for materials and equipment, including second
hand, except for administrative fees;
- Tax deduction for costs incurred for training and further training for
responsible for the firm and its personnel, and the amounts used for protection
environmental
- Ability to perform accelerated depreciation;
- Exemption from taxes on acts of incorporation of companies and cooperatives and stamp duties.

These facilities include a time limit varies depending on the region of location of the investment, in economic and spatial distributions of three settings:

- Three years for the region A (Kinshasa)
- Four years for the region B (the provinces of Bas-Congo, Lubumbashi, Likasi and the
Kolwezi)
- Five years for the economic region C (Bandundu, Equateur, Western Kasai, Eastern
Kasai, Maniema, Northern Kivu, Southern Kivu, Katanga and Eastern Province).

The ANAPI has identified the following areas in which the Congolese government is trying to attract potential investors:

- Mining: diamonds, gold, copper, tin, columbite-tantalite (coltan), bauxite, iron,
manganese, coal, oil, natural gas, cobalt.
- Agriculture - forestry: crops and tropical fruits, organic farming,
production and transport of timber and its processing industry, paper production,
production of medicines and essences.
- Breeding: cattle, pigs and sheep and goat dairy.
- Fishing: river and sea.
- Industry: food production, textiles, leather, chemical, rubber and plastics, cement.
- Financial services: banking and insurance.
- Tourism: hotel management, tourist sites and creating new ones.
- Transport: rehabilitation of the main airports (Ndjili, Lubumbashi and Kisangani)
establishment of transport companies, modernizing ports (Matadi, Ilebo, Mbandaka and
Kisangani), construction seaport Banana, Matadi railway-construction
Banana.
- Electricity: rehabilitation of the Inga hydroelectric power plant on the Congo River, rehabilitation
the line of the electrical distribution system.
- Infrastructure: construction and rehabilitation of major national roads, rehabilitation
rail networks, dredging of the river Congo.
- Telecommunications: A networking cabling fiber optic line rehabilitation
fixed telephony.
- Buildings: construction and rehabilitation of schools, hospitals, buildings.

The main problems associated with foreign direct investment in the country stem from
lack of certainty in the regulatory and tax system, the complexity of legal practice and
administrative, often applied unevenly and discretionary.

There is a large informal sector economy, with camouflage transactions by collusion with corrupt officials and widespread phenomenon of tax evasion and tax fraud and avoidance legislation.

Any business that is as close to reality in the DRC is faced with the stark contrast between the enormous potential of the country and the heavy failure in the presence of strong institutions of economic governance and virtuous business practices, needed to turn this potential into concrete opportunities.

It is possible to inspect the entire investment code by clicking here ....


CONGOLESE  TAX SYSTEM
The tax system Congolese includes the following types of taxes:

- Direct taxes

- Indirect taxes

- Administrative fees and assimilated

- Tax levies
 

 

Within the direct taxes are:

- Taxes real: that is, those on vehicles, property taxes and related concessions in its urban districts, including taxes on oil and mining concessions.

 
- Tax Coupon: affects income, which in turn are divided into tax on rental income properties and concessions imposed on the tenants and taxes on income from movable property affecting dividends and other income from capital invested by the property industrial and patents.

Also in this category are there are the  professional taxes regarding the gains from managing individual business, the professions and profits of domestic companies operating abroad.

 

Indirect taxes include:

- Customs duties: that the rights of entry and exit.
- The tax on turnover: organized by the import turnover tax (on all goods imported for consumption in the DRC) and taxes on turnover that is derived from domestic sales of locally manufactured for the domestic consumption, the provision of services of any kind in the country as well as those arising from construction work.

- Turnover tax on exports of the following products: wood, crude oil, coffee and mineral products.

- Rights on consumption and excise taxes which relate to particular products. Tobacco, mineral oils, alcoholic beverages, bottled water and perfume liquids.

 

Administrative fees and analogous

Cover all administrative acts, public domain, judicial constitute revenue for the coffers of the Public Treasury.

 

Tax levies

Are fees paid for the delivery of services provided by public companies such as:

airport services, water, shares and insurance premiums or government agencies such as industrial promotion funds, funds of cultural promotion, etc. National Energy Commission.



TRADE AGREEMENTS
There is an 'agreement between the Government of the Italian Republic and the Government of the Democratic Republic of the Congo on the Promotion and Protection of Investments.

Are in effect over the following agreements and bilateral treaties: Cotonou Agreement; ICSID (arbitration facilitated by the World Bank), the New York Convention on Recognition and reinforcement of international arbitration.



CUSTOMS DUTIES


The ad valorem duties, calculated on the cif value of goods shall be fixed by decree and are as follows: 5% for heavy equipment, industrial raw materials and agricultural, 15% reading on the equipment, spare parts and goods for social use; 20% on products which compete with local production, but to limited supplies, 30% on products which compete with local production, but to offer adequate, and luxury goods.

The DRC in 1988 adopted the harmonized system of classification of goods.

Most of the trade barriers resulting from regulations in the DRC complex, often non-encoded, the proliferation of administrative agencies with legal authority in trade matters and their frequent lack of professionalism and control. The application of standards varies across the country and suffers discretionary changes locally.



PROPERTY  
Private property is recognized, and it is an essential component of economic freedom.

Private property, including industrial property rights, is fully protected legally.

Property rights on buildings and furniture  are recognized and protected.

Levels are not recognized as soil properties for which the government offers concessions lasting 50 years with renewal options.

In fact, the system of concessions is the replacement of the full ownership, with the difference that the soil can not be used to guarantee bonds.

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