Issue 9 February - May 2002by Sagaren Naidoo

The history of the Democratic Republic of Congo (DRC), since being made a possession of the Belgium monarch, King Leopold II, has been one of systematic natural and human resource plunder, gross abuse of state and military power, and an unrivalled kleptocracy mastered by Mobutu Seso Seko. As a result, in spite of its enormous economic potential, derived especially from being the ‘cradle’ of the world’s mineral wealth, the DRC has some of the lowest social indicators globally. For most Congolese, Mobutu’s demise was, therefore, viewed as their ‘second independence’, a liberation from the trappings of colonial exploitation manifested by Mobutu’s dictatorship. The euphoria, however, soon vanished when their ‘liberator’ Laurent Desirè Kabila began governing no differently than his predecessor. Enforced by decree, political repression and orthodoxed economic policies set the stage for internal dissent and opposition toward the new DRC government. Reforms undertaken by Laurent Kabila that initially curbed inflation and currency depreciation, went largely unnoticed simply because they made no visible difference to the existence of a famished citizenry.

But it was Kabila’s (Snr.) expulsion of the Rwandans and Ugandans—who comprised his government and army—that ignited an externally orchestrated ‘rebellion’ against his regime and led to a war of unprecedented proportion and complexity, most often resembling the deadliness and destruction experienced under Leopold’s reign. Since the war to topple Kabila began in August 1998, over two million Congolese have died as victims of this conflict or from the direct consequences of starvation and the rampant spread of killer diseases. In addition, more than 1,8 million Congolese have been internally displaced. Compounding the DRC’s post-colonial socio-economic degradation inflicted by Mobutu, the current conflict has relegated the country to amongst the poorest in the world, ranking 142nd out of the 164 countries evaluated by the United Nations Human Development Report 2001.

The anti-Kabila war has, in effect, led to a de facto partitioning of the DRC, thus allowing for the country’s precious and strategic minerals to be further plundered by an ‘African scramble’ with clear foreign linkages. At the same time, an informal economy based on barter, smuggling and fraudulent trade in commodities has flourished as the sole means of survival for most of the population. The war has dramatically reduced the government’s revenue and escalated the country’s foreign debt. A ‘Balkanisation’ of the country has denied the Kinshasa authorities financial access to the entire revenue pool of the DRC. Confined only to the income generated from territory under its control and exacerbated by Kabila’s (Snr.) mismanagement, the DRC government’s coffers, from 1997 to 2000, experienced a real GDP cumulative drop of 21,9%, falling at an average of 5,3% a year. During this time consumer prices rose at an annual average rate of 287% and by another 68% in the first four months of 2001. By late 2000, the DRC’s external debt rose to US$13 billion, almost 280% of the GDP, with arrears accounting for about 75% of the total.

Under the new reform-minded government of President Joseph Kabila, significant steps to improve the country’s political and security situation have been undertaken, together with a bold economic process of liberalising, restructuring and revitalising a battered economy. Representing a clear break with the past, the DRC’s new authorities have adopted critical measures to provide the necessary government intervention in the economic reconstruction of the country. These include:
- The adoption of a floating exchange rate
- The removal of price controls on almost all products
- The liberalisation of the diamond sector
- The drafting of new mining and investment codes
- The implementation of an action plan to tackle pervasive corruption in the public sector
- The introduction of a monthly treasury cash flow plan
- Strengthened co-ordination of government actions through the inter-ministerial committees.

In addition, new statutes promulgating the Central Bank’s independence in the conduct of monetary policy, as well as having its accounts audited by an internationally recognised firm, is currently being developed. Forthcoming is a new banking law that will strengthen the supervision of the banking system. The new government also intends to empower commercial courts with the sole authority to settle disputes involving economic and financial matters. The new measures to realign Congo’s economic course will, however, in the short term, have to be undertaken within an environment of monetary instability, runaway inflation, persistent fiscal deficit, heavy external debt, great social tension, and almost in a void of civil institutions.

Already in place is an International Monetary Fund (IMF) staff-monitored programme (SMP) that has undertaken adjustment measures aimed at breaking hyperinflation, stabilising the economy, promoting growth and reconstruction, and reducing poverty. To achieve the programme’s targets, strong fiscal adjustment, a tight monetary policy, well-sequenced structural and sectoral reforms, and a strengthening of the government’s administrative capacity, will be vital. Indeed, the SMP represents an ambitious effort by the Kinshasa authorities to address the DRC’s economic and social malaise and, therefore, deserves the timely support of the international community, through technical assistance and concessional aid to finance strategic projects, especially regarding the country’s infrastructure. A preparatory technical meeting organised by the World Bank (WB) and scheduled for late December 2001, was to take stock of the country’s economic progress and rally international community support for the reconstruction programme.

A steady resumption of business has signalled confidence in the new DRC government and optimism about a resolution to the conflict. American Mineral Fields Inc. (AMFI) was among the first to appreciate the improved economic climate. The mining conglomerate announced in late April 2001 that the Kinshasa government had approved its US$300 million deal for the Kolwezi copper-cobalt tailings project, potentially the largest direct investment in post-Mobutu Congo. Australian-based Anvil Mining announced that it will start exploiting the 1,7 million ton copper and silver deposits at Dikulushi, in Katanga province, from July 2002. While the Canadian mining company, Quantem, will begin mining copper at Lonshi under the name of Bwana Mkubwa Mining Congo, in the near future. In addition, the resumption of flights to Kinshasa by South African Airways and Air France bodes well for a renewal of business activity. The recent R370 million joint venture between South African cellular network operator, Vodacom, and Congolese Wireless Networks (CWN) is another example of capitalising on an untapped market. Such investments will contribute much in the short term to rebuilding the damaged business climate in the DRC. But the ultimate challenge for Joseph Kabila is how in the interim to discontinue an old tradition of keeping the state weak enough to allow outsiders a chance to plunder its mineral wealth.

Moreover, instituting the desired economic practices will not exempt Joseph Kabila from the political transition that his government is required to undertake. In mid-October 2001, the Congolese government pulled out of the much-awaited inter-Congolese dialogue complaining that the process was not truly representative. A more inclusive dialogue, rescheduled to take place in South Africa, still has some major obstacles to resolve. Firstly, the financial support for the talks have failed to materialise. In mid-December 2001, the Southern African Development Community (SADC) secretariat said that international donors had not provided the sum required for the dialogue because of the lack of progress made by the parties to the talks. Given the limited funds available, the inter-Congolese dialogue is likely to be held later than the end of January 2002, the period previously set. Secondly, most delegates were unhappy that the venue chosen was Sun City. They argued that it is the gambling capital of South Africa and as such not appropriate for the event. It is hoped that such delays will not combine with the consequences of September 11th, to put the future of the Congo—very much to be determined by the dialogue—into the shadows of world affairs.

Author’s contact details:
Tel: +27 11 339 6585
Fax: +27 11 339 6616
email: sagaren@igd.org.za

Author's Contact Details
Author: Sagaren Naidoo
Tel: +27 11 339 6585
Fax: +27 11 339 6616
Email: sagaren@igd.org.za
Website: www.igd.org.za