Falling cobalt prices push DR Congo to reform its economy

The new leadership of the Democratic Republic of the Congo is under increasing pressure to diversify the country's economy from its dependence on commodities following the collapse of the cobalt price.

The economic experts currently visiting the country have a disappointing figure to base their work on: the cobalt price at the London Metal Exchange has fallen from $ 80,000 to $ 28,000.

DR Congo is the world's largest producer of cobalt, an essential component of rechargeable batteries needed for smartphones and electric cars.

But the economic growth of the largest country in sub-Saharan Africa is comparable to that of the world price of cobalt.

"GDP growth has risen from 3.7% in 2017 to 5.8%, due to a sharp rise in cobalt prices," said the International Monetary Fund earlier this month in a report. on the economy of the DRC.

"GDP growth is expected to slow to 4.3% in 2019 on the basis of a slowdown in mining activity in the context of lower cobalt prices," the statement added.

Another sign of DR Congo's heavy dependence on exports of ores and metals is that this deceleration comes as growth has more than doubled in the rest of the economy thanks to public investment and growth. postelectoral optimism.

Whatever the case may be, Congo's GDP is minimal for the size of the country and its population.

With less than $ 40 billion for 81 million people in 2017, according to World Bank figures, this equates to less than $ 2 a day per person on average.

The IMF's mission "is focused on policies that would lead to the diversification of the economy and the fight against high levels of poverty and unemployment in the context of a rapidly expanding population. ", according to the report.

The diversification and transformation of the country's economy are also the theme of the sixth French week of Kinshasa organized by the Franco-Congolese Chamber of Commerce and Industry.

With 80 percent of DR Congo's export earnings generated by the mining sector, this "creates vulnerability because of the price volatility of its major commodity exports," the organizers said.

liberalization

They indicated that many other sectors should be explored in the following areas: agriculture and food, textiles, tourism, communications, transport services, forestry, energy, pharmaceuticals and recycling.

France is keen to promote an initiative recently unveiled by President Emmanuel Macron, which will aim to provide funding of 2.5 billion euros (2.8 billion dollars) to 100,000 African startups and small and medium enterprises by 2022.

But the best intentions for business development have to face the challenges posed by the situation in a weak state due to the uneven perception of tax revenues in a context of endemic corruption.

An economic badyst who requested anonymity said that "50% of the containers that enter the river port of Matadi do not pay customs duties".

The IMF urged the new president Felix Tshisekedi "to accelerate the adoption of the proposed anti-corruption law" and the creation of an independent anti-corruption commission.

The IMF also said it is concerned about low tax collection.

Reforms in some areas are advancing, albeit slowly.

The insurance sector has been liberalized with three operators authorized to take over from the former state monopoly Sonas.

And the multinational mining companies will meet in Lubumbashi to discuss the fall in cobalt prices and the impact of the reform of the mining code last year.

Chantelle Kotze, an expert in the mining sector, said the reform would increase taxes and royalties on strategic minerals such as cobalt and coltan, a mineral that is another crucial element in the production of electric car batteries.