Here comes the September surprise; DR Congo is having one of its best times of recent years

The dark suits from New York have been visiting, and the numbers look glossy. Is the much-maligned giant rousing itself?

IN recent months it has been easy to worry for the Democratic Republic of Congo, as political uncertainty over a perceived third term plot by president Joseph Kabila continues to keep many on edge.

Deadly protests over the touchy issue in January left at least 40 people dead, according to rights groups, as the government claimed a much lower number, but it was clear that the run-up to the presidential election scheduled for 2016 presents a minefield, more so if the incumbent continues to keep his cards close to his chest.

But behind the political headlines is a story of recent economic expansion that would retain the attention of even the most pessimistic. Recently, the International Monetary Fund (IMF) was in the country, and the numbers from its economic report make for some surprising data.

The central African country’s real Gross Domestic Product  (GDP) growth is last year estimated to have come in at 9.2%—among the highest rates anywhere in the world.

And despite a difficult external and domestic environment further roiled by a faltering China, a key export market, the second largest country on the continent after Algeria is projected to retain the same high growth this year.

GDP growth is expected to be a still-strong 8.4% in 2016-17, and stabilise at 6% in 2018-20—brisk figures in a country still recovering from years of brutal conflict, which have displaced as many as 2.75 million, according to Oxfam, the anti-poverty campaigner.

Year-on-year inflation at the end of December 2014 was at 1%, well within its 2.5% target, on the back of strong fiscal practices, the IMF said.

A budget surplus!

Due to an improvement in terms of trade and strong exports of mining products—the country is the Africa’s largest producer of copper—its current account deficit shrunk 1.4 percentage points to 9.2%.

It also had a balance of payments surplus, because of an inflow of foreign direct investments. At a time when its neighbours are losing their heads, its real exchange rate, which is the level at which the consumer actually buys a good, remained stable, and even declined, reflecting the increase in exports.

Notably also, the growth has been coming from services, the IMF said, helping provide a buffer from the vagaries of trade in commodities and covering for agriculture, which is still flat.

And to add some icing to the cake, the budget also threw up a surplus. It is a position many African countries would be envious of in the current environment, and even the IMF was impressed.

“Executive directors commended the authorities for their prudent macroeconomic policies, which have supported robust economic growth and macroeconomic stability despite the country’s fragility and limited external financial assistance,” it said in its statement September 11.

Black swan

Mid last year, M&G Africa suggested the DRC might well turn out to be a black swan and could be Africa’s richest nation by 2035. We argued for a large domestic market provided for the population of nearly 70 million - Africas’ fourth largest - its fast pace of urbanisation and the relief from servicing debt, helping it raise spending on social services.

The country’s resources—estimated by some at a staggering $24 trillion, while its energy potential remains deep—the planned Grand Inga dam would be nearly eight times more in capacity than Ethiopia’s Grand Renaissance dam. 

What could go wrong?

So what could possibly go wrong? Plenty, say the dark suits. Despite the robust numbers, poverty and unemployment remain high, while the benefits of the growth have remained stuck at the top. Nearly seven in 10 of its population still live in poverty, while infrastructure deficits are significant.

The Central Bank of Congo’s financial numbers remain fragile, making it difficult to conduct monetary policy. It has also depleted its international reserves, which stood at just over six weeks of import cover in December, while current laws make its credibility weak.

Investor money is also flowing out, while rising imports may push the current account deficit into double digits by 2018, even if the overall balance would still be in the black, the IMF said.

The biggest threat appears to come from a prolonged decline in commodity prices, which the country has so far braved, and the inability to increase domestic tax. This past week Glencore, the Swiss-based commodities supplier announced it would suspend copper production at its Katanga mine for 18 months due to high costs, with 20% of the workforce set to lose their jobs.

Never too far, political instability continues to be the elephant in the room.

Also, the weak energy situation, where the lights have struggled to stay would further hurt its export numbers, while stifling domestic enterprise.

But the country’s main obstacles are domestic. The trading climate remains difficult as measured on the World Bank’s ease of doing business, while agriculture has not weighed in much, partly due to internal conflict especially in the east. 

Fix the politics, and the DRC will take its place at the high table—mirroring a recent AU-backed report that showed that by 2050, most African countries will have transition into middle-income status.

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