EAC players seek to clinch Congo’s $2b market from S. African states

La Corniche border between DRC and Rwanda, among the region’s busiest one-stop border posts, through which between 4,000 and 5,000 people cross on a daily basis with the majority engaging in informal trade. PHOTO | CYRIL NDEGEYA

East African states are scrambling to wrest the multi-billion dollar Democratic Republic of Congo (DRC) market from the Southern African players, buoyed by the prospects of Kinshasa joining the East African Community early next year.

The EAC Council of Ministers has cleared DRC for admission as the seventh member of the bloc, opening up a mass consumer market of about 90 million people and an economy rich in minerals and other natural resources.

But, as the EAC partners fall over each other to win Congolese President Felix Tshisekedi’s eye, South Africa and Zambia, both members of the Southern African Development Community (SADC), continue to dominate the export market to Congo, raking in a combined $2 billion in exports in 2020, according to latest data.

DRC is a member of SADC.

Already Kenya, Uganda, Rwanda and Tanzania are scouting for multiple opportunities in DRC, as they seek to expand their market base and take advantage of the huge population.

The admission of DRC into the EAC is expected to open an Indian Ocean to Atlantic Ocean trade corridor and link the region to Central Africa and other continental sub-regions.

EAC Secretary-General Peter Mathuki said that in the spirit of widening the EAC markets, the admission of the DRC into the EAC will be “a huge milestone towards strengthening our economic agenda.”

Among other things, Kinshasa will increase EAC consumer market from 177 million to 260 million people and boost the region’s GDP from $193 billion to $240 billion.

“This is good for investors who want to tap such a huge market,” said Manasseh Nshuti, Rwanda’s Minister of State for EAC Affairs. “The DRC has a lot of investment opportunities that other regional companies can harness for the good of the people of East Africa and beyond.”

Being Africa’s second-largest country by landmass, the DRC is endowed with mineral resources and boasts the world’s largest cobalt and coltan reserves, raw materials crucial in industrial and digital applications.

The Central African country also boasts vast agricultural land, the continent’s largest rainforest, and has an immense potential for hydroelectric energy production.

But years of political conflict, in the eastern parts of the country have made many foreign investors hesitate to put their money there.

The recent military incursion by Ugandan and Congolese troops in the east in pursuit of Islamic State-affiliated ADF rebels does not make many confident. But it is not stopping Dodoma, Nairobi, Kigali and Kamapala from pursuing trade interests.

The DRC economy is largely reliant on commodity prices, which has, in the past two decades, facilitated a robust economic growth.

But, in the past decade, the absence of political will, weak institutions and persistent conflict have continued to undermine the economy.

In 2020, the Covid-19 pandemic saw its GDP fall to negative 2.2 percent as the virus caused a worldwide slowdown in demand for Congolese raw materials. In July 2020, credit rating agency Standard & Poor’s lowered the DRC’s outlook from “positive” to “stable” because of the pandemic’s likely impact.

On the flipside, the 2019 political transition that saw President Felix Tshisekedi rise to power has been seen as a positive signal that the country is open for business.

But a weak manufacturing sector, porous borders, weak links between the capital and the periphery, and between the regions, have rendered the DRC an import-based economy, which has seen low-cost consumer goods smuggled from Angola and Zambia, undercutting local production and resulted in large-scale capital flight.

And this is the scenario the EAC partners are walking into.

Last week, Kenya began a 15-day trade symposium in DRC as Nairobi looks to increase its footprint in the market. The Kenyan trade symposium, comprising more 200 investors and businesses, features trade exhibitions, business forums, and site visits in four of DRC’s largest cities, Kinshasa, Lubumbashi, Goma and Mbuji Mayi.

Kenya’s Trade and Industrialisation Cabinet Secretary Betty Maina, the leader of the delegation, said the DRC is the sixth leading export destination for Kenyan products in the world, with agricultural and manufactured goods topping the list.

“We expect that the trade mission will strengthen service and product investment between the two nations. It will boost trade and development which in turn translates into an economic win for the region and the greater sub-Saharan Africa,” she told The EastAfrican.

Last year, Kenya exported goods worth over $140 million to DRC, according to the latest figures from Kenya Export Promotion and Branding Agency.

The trade mission came barely six months after Kenya’s president Uhuru Kenyatta made a state visit to the DRC, seeking to strengthen business ties with Kinshasa.

Tanzania, Rwanda and Uganda have not been left behind. In June, Rwandan President Paul Kagame and President Tshisekedi signed bilateral deals after two days of meetings. The deals signed included the promotion and protection of investments, taxation and tax evasion and a memorandum on gold mining co-operation.

The same month, Uganda’s Presidet Yoweri Museveni met Tshisekedi at Mpondwe, a border point between DRC and Uganda, and commissioned the construction of 223km of roads that will connect the two countries. The two leaders said the projects will “cause a tremendous change in socioeconomic transformation of the lives of the two people.”

In May, officials from Uganda and DRC signed agreements that will see the two countries bolster cross-border trade, development and the stabilisation of eastern Congo.

Even as the region is pursuing deals through its ongoing trade mission, DRC is also cleaning house, trying to woo investors with assurances that it is ready for business.

And this week, DRC President Tshisekedi sacked Albert Yuma Mulimbi, a close relative of former president Joseph Kabila, who has been chairman of the board of Gécamines, the largest state-owned mining company over longtime allegations that billions of dollars in revenue had gone missing.

The move, officials in Kinshasa said, was intended to fight corruption as the country becomes increasingly important in the global clean energy revolution.

Kinshasa is undertaking multimillion-dollar programmes to rehabilitate sectors such as agriculture, energy, construction, infrastructure, and transportation.

President Tshisekedi has created a working group to improve the business climate and is actively seeking to increase foreign trade and investment.

Last month, President Tsishekedi hosted a multistakeholder DRC-Africa Business Forum to discuss the development of battery electric vehicle and renewable energy value chain and market in Africa, to capture a share of the expanding BEV market projected to be worth $8.8 trillion by 2025.

Open market

Exporting to the DRC can offer high-profit margins as the market is not yet saturated. For East Africa, DRC remains crucial. Both Rwanda and Kenya are battling to create seamless transport hubs from Kigali and Nairobi, through their respective national carriers RwandAir and Kenya Airways.

The states have the best connectivity to DRC. Last month, Jambojet, a subsidiary of Kenya Airways, increased its frequencies to thrice a week between Nairobi and Goma, the eastern DRC trade hub, a route Rwanda also plies.

With the African Continental Free Trade Agreement (AfCFTA), the development of infrastructure in DRC will facilitate connectivity of the East African Coast to the Atlantic Coast, and an interlink of Southern Africa to West and North Africa.

Plans are also underway to connect the Burundi railway network with DRC’s, a decision that will provide an opportunity for increased access to EAC markets, leading to the reducing the cost of intra-regional trade.

For Tanzania, this is pure gold. Its standard gauge railway, being developed with Rwanda, will now have a new taker, Kinshasa, making the Dar es Salaam port a lucrative alternative to South Africa’s Durban.

The DRC is linked to the EAC through two corridors; the Northern Corridor, which connects the Mombasa Port in Kenya to Uganda, Rwanda, Burundi into Eastern DRC, and the Central Corridor linking the Dar port to Rwanda, Burundi, Eastern DRC, Uganda and northern Zambia.

Congo has three economic hubs, with significant commercial or industrial bases, which are served by different regional economic blocs. And this is where the EAC will have to pull its weight to wrest the business off SADC.

The Kinshasa and Kongo Central provinces currently serve the capital, and DRC’s seaports. Then there is the Haut-Katanga and Lualaba (Katanga) provinces that form the southern economic hub. These share borders with Angola and Zambia, and are connected to the southern African rail network. They drive the trade between SADC and DRC, and form the backbone of the country’s import economy.

Then there is the North and South Kivu, Ituri, Bas-Uele, Haut-Uele, and Tshopo economic hub. Bordering Rwanda, Uganda, Burundi and Tanzania, they are fed by Goma, and form the third economic hub. This is where the EAC connects to DRC.

Endowed with gold, diamond and copper deposits, the region is also agriculturally rich. But it is the most unstable, with chronic low-intensity conflict between various armed factions fighting the DRC, Uganda and Rwanda.

With all its wealth and economic potential, the DRC, being landlocked, has faced myriad of challenges, including insecurity. Paradoxically, as EAC looks at welcoming DRC into the fold, its militaries are already active within Congo.

Last week, Uganda became the latest EAC country to shoot its way into Congo, as the region seeks stability in the eastern parts of the vast country. Kampala sent more troops and equipment, including armoured vehicles, into eastern Congo in an operation against the Allied Democratic Forces (ADF) — a group blamed for massacres in eastern DRC and attacks in the Ugandan capital, and which the Islamic State group claims as an affiliate.

The Ugandan troops join their Kenyan counterparts, who deployed in August this year, to the troubled Beni region, North Kivu province, where the Congolese government has struggled to restore calm over the years. Tanzanian soldiers have been in the region since April this year, with South African and Nepalese troops also in but under the UN agency’s peacekeeping force.

Last month saw Gen Jean-Bosco Kazura, Rwanda’s Defence Force Chief of Defence Staff host his Congolese counterpart, Gen Célestin Mbala Munsense, in Kigali on the back of an attack by M23 rebels in Tshanzu and Runyoni, North Kivu in eastern DR Congo. Kigali has also seen its troops cross into DRC several times this year, even though they have no permanent mandate in the country.

At https://www.theeastafrican.co.ke/tea/business/eac-players-seek-to-clinch-congo-s-2b-market-s-african-states-3649024