Best Bitcoin Exchange for Congo
Although the country has the largest natural resources in Africa, it is one of the poorest in the world. The main reasons for this are more than three decades of mismanagement and corruption by the Mobutu regime, followed by severe armed conflicts to the present day.
In the early 1990s, the economy collapsed completely. Hyperinflation prevailed (1994: 7400 %). Riots among the workers reduced export earnings, the transport infrastructure collapsed, and foreign debt rose to 10 billion euros. The country was then dependent on food imports. Since the 2006 elections, hopes have prevailed among the people. In Kinshasa and Lubumbashi, a lot is being built. However, the socio-economic situation remains precarious and is improving only slowly.
Since 2003, the gross domestic product (GDP) of the Democratic Republic of Congo has risen by about 6 % annually due to continuing high export revenues from the mining sector and amounts to about 42.64 billion US dollars (as of 2018). The economy grew by 9.47 % in 2014. Solid commodity prices and favourable export opportunities were the decisive factors for this. Weaker economic growth of 2.4 % has been observed since the beginning of 2016. As the global economy cools down, commodity prices come under pressure. The country is experiencing a tense economic development, whereby it must be borne in mind that up to 80% of the population lives off the subsistence and poverty economy.
After inflation had risen from 18 % (2008) to 23 % (2010), the central bank intervened with a tight money market policy. The World Bank and the IMF provide very close support and advice to the Congolese government. The inflation rate in 2014 was only 1.2 %. Unfortunately, this has hardly any impact on the cost of living of the inhabitants of the poor settlements and marginalised rural areas. For example, despite the low general inflation rate, the prices of basic foodstuffs continue to rise.
The dollarisation of the Congolese economy has continued to progress to date. The US dollar is de facto the main means of payment in the DR Congo. All important transactions, including supermarket shopping, are conducted in US dollars. The Congolese government lacks the political will to change this situation.
At the end of 2017, government debt again amounted to US$ 5.1 billion, with an upward trend. The Democratic Republic of Congo thus ranked 192 out of 210 financial institutions. The official inflation rate was 41.5% and the low interest rate on the capital markets continues to tempt the resource-rich country into new debt. The newly elected President Tshisekedi presented a comprehensive economic program after analyzing the current economic situation.
According to various current forecasts, the economy will grow by approx. 5-8 % in the coming years and will be maintained. Despite the positive development of this growth rate, it will take several years to return to the level of the 1990s. The economy of the Democratic Republic of Congo is dominated by mining and related industries. The establishment and operation of economic enterprises is very risky under the given political and economic conditions. Programs of the World Bank and other international financing structures are slow to take effect. Legal uncertainty, corruption and insecure markets make new investments difficult.
The importance of the informal sector is remarkable. It is thanks to this that the urban population in particular receives a minimum supply of everyday goods. Together with the United Nations Development Programme (UNDP), the African Development Bank is compiling an ongoing overview of economic development in the 54 African countries. The national Human Development Report of the United Nations points to the difficult political and administrative framework conditions that stand in the way of economic and social development in the Democratic Republic of Congo.
Sectors of the Economy
The economy of the Democratic Republic of Congo is growing only slowly. Although the VAT introduced in 2012 and a restrictive monetary policy of the central bank offer good conditions for economic growth, corruption and unilateral dependence on raw material extraction have a destabilizing effect. Telecommunications have developed particularly rapidly in recent years. Nearly all cities and larger towns are connected to mobile phone networks. The financial situation deteriorated significantly in 2017. The annual average inflation rate rose to 47%.
The framework conditions for economic growth continue to be provided by good commodity prices. The question remains whether it will be possible to integrate the broad population into the economic process and reduce poverty and underdevelopment. The urban population, especially the people of Kinshasa, a city with ten million inhabitants, lives almost exclusively from the informal sector. Micro-enterprises, small traders and the local transport system ensure people’s livelihoods. The Congolese government offers many benefits to foreign investors and aims to stabilise economic growth at 5% in the medium term.
Mining and Associated Industries
Mining determines the economic activities in the DR Congo. 40% of GDP is generated directly or indirectly from mining, which is concentrated in the east and southeast of the country. The province of Katanga is still the central mining area, although intensive mining (including gold and diamonds) is carried out in the east (Kivu and Maniema) and Mbuji Mayi (Kasai Oriental).
The DR Congo has deposits of diamonds, coltan, copper, cobalt, gold, tantalum, zinc, silver, tin, germanium, tungsten and coal, the value of which is estimated at several hundred billion US dollars. Remarkable are the worldwide raw material reserves in the DR Congo: 10% for copper, 50% for coltan and 80% for Colombo tantalite.
Small-scale mining is an important industry in the DR Congo. An estimated 500,000 people live off the activities in this unregulated, informal sector. Mining often takes place under threatening transport conditions and there is a lack of efficient infrastructure. Unfortunately, fatal accidents often occur in unsecured mines; in dangerous tunnels and primitive processing plants. The living conditions of miners are unacceptable – corrupt officials and security forces enrich themselves with the modest mining results.
The conflict in the east of the Democratic Republic, which has been dragging on for years, has various causes, with the fight for raw materials taking centre stage. Corruption and the state’s inability to act are blocking all attempts to change this.
The DR Congo is also known for its rich coltan deposits. Coltan contains two of the most coveted metal ores (columbite and tantalite), niobium and tantalum. Tantalum is of great importance for the production of various consumer electronics devices (mobile phones, computer chips, video cameras). Niobium is used to manufacture heat-resistant components for rockets, jet aircraft and space capsules.
The DR Congo is a major gold producer, but only part of this “treasure” benefits the local economy. Corruption and smuggling dominate the scene. The local population hardly benefits from gold mining. One speaks of up to 1 million people, mostly young men, who earn their modest livelihood of one to two US$ per day as gold prospectors. Gold still occupies an important position on the international precious metals market. Other mineral resources that are mined are crude oil, silver, manganese, zinc, tin, cadmium, germanium and beryllium.
Copper is one of the most important raw materials on the world market. In 2017, copper production worldwide amounted to approx. 19.7 million tonnes. The Democratic Republic of Congo is an important producer after Chile, Peru and China with 850,000 tonnes. Demand is rising and the DR Congo is benefiting from this situation. A further price increase is expected. In 2017 the copper price rose by almost 30 % to an annual average of US $ 6,600. It remains at a high level, but at the same time there are fears that speculators will keep the price artificially high. A commodity crash would have devastating consequences for the Congolese mining industry and the affected population.
After copper, cobalt is the raw material with the greatest demand on the world market. Both raw materials are often found and mined in the same deposits. The demand is extraordinarily strong, because up to 10 kg of cobalt are needed per vehicle for the batteries of electric cars alone. Over the past two years, the price of cobalt has risen from US$ 23,000 per tonne to US$ 93,000.
DR Congo is the market leader with over 50% of the world’s cobalt production. Production is dominated by 17 international mines, which are equipped with state-of-the-art equipment and therefore require hardly any manpower. On the other hand, there are hundreds of thousands of workers and children who operate micro mines under inhumane conditions.
Large parts of the profits from mining disappear into private pockets. For example, the multinational raw materials company Glencore alone reported a profit of US$ 6.9 billion in 2017 – more than the national budget of the Democratic Republic of Congo.
The wood wealth of the country is enormous. About 52% of the country is covered with tropical rainforest, which belongs to the Congo Basin. This means that the country has the second largest continuous rainforest area after Brazil. Almost 6% of the world’s rainforest and about half of Africa’s forests are located in the Democratic Republic of Congo. Only about 8 % are used as timber, mainly as firewood for private households.
International reports show that despite international agreements with the Congolese government on the use of timber, further uncontrolled deforestation is taking place in the DRC. In response to pressure from the World Bank, the government has terminated particularly “predatory” concessions for foreign companies.
The responsible politicians and administrative staff lack the will to implement the measures in order to run a real forestry business. The government wants to involve local communities and civil society more closely in reforestation and forestry. Corruption and poorly functioning state administration are blocking this approach.
Illegal logging of high-quality tropical woody plants is becoming an increasing problem. Especially in the east of the country, armed gangs and paramilitary groups organise logging. Exports go via Rwanda and Uganda to Asia and Europe. German companies also appear to be involved in unauthorised logging.
The economic potential of the rainforest is hardly exploited. At the same time, the forest is increasingly being destroyed and the tourism industry is almost at a standstill. Violent conflicts and the lack of infrastructure are blocking the system. Of the approximately 1.2 million square kilometres of rainforest, 600,000 square kilometres are still completely untouched. The granting of illegal licences for logging, the incompetent administration and control bodies without any infrastructure permit a dangerously rapid deforestation of Africa’s green lungs.
All tropical cultivated plants were already cultivated during the colonial period. Oil palms, heve crops – Hevea Brasilliensis (rubber) – and a large number of different plantation crops are likely to become increasingly important for agriculture and forestry in the coming years.
GIZ is supporting the project as part of German development cooperation: Regional support for the Central African Forest Commission (COMIFAC). As part of the UN-REDD Programme (Reducing Emissions from Deforestation and Forest Degration in Developing Countries), FAO is promoting a rainforest monitoring system in the DR Congo.
Two thirds of the population lives from agriculture, which is estimated to contribute more than 30% of the gross domestic product. Subsistence agriculture is the determining factor. Large areas can be used for agriculture, but only around 5% are cultivated. It should be noted, however, that in some regions, e.g. Kivu, Katanga and in the vicinity of the large cities, all land is used and land scarcity exists, while the rainforest areas are hardly used for agriculture.
The main products are manioc, corn, rice, beans, potatoes, sweet potatoes, various types of spinach and plantains. These products determine the daily diet. Sugar cane, peanuts, oil palms, bananas, fruit and wild fruits complete the Congolese cuisine. The agricultural production of export products has almost completely collapsed. There is great production potential for oil palms, coffee, tea, rubber, cotton, soybeans and cocoa. According to official figures, agricultural production is rising significantly.
Goats, sheep, poultry and, depending on the region, cattle are traded on the local markets. The livestock population was significantly decimated by the warlike unrest, the same also applies to the game population. Agricultural production could be significantly higher if the marketing of the products were guaranteed. In many places there are good and sufficient yields, but poor transport links block marketing. There are no roads and, above all, no bridges. In many places, transport costs are so high that it is no longer worth marketing the harvest.
The government promotes commercial agriculture without creating the financial framework for it. There is no support for small-scale agriculture. The international donor organisations are endeavouring to promote agriculture. Since an agricultural advisory service no longer exists, there is no structure to support small farmers.
Legislative initiatives have little effect due to the existing balance of power. On the contrary, there is a danger that the commercial agricultural industry will claim land that has so far been cultivated by small farmers who do not have formal land titles.
The Congolese economy is dominated by mining and the timber industry. The transport industry benefits from the economic activities in the mining and forest regions. The mining industry is home to skilled craftsmen and service companies who maintain and repair machinery and processing equipment.
There are no exact figures on the export of minerals, although the information situation has improved in recent years. The Sec. 1502 Dodd-Frank Act requires the manufacturing industry to document exactly where the minerals extracted in the war regions of the Democratic Republic of Congo come from.
Local industry has come to a standstill in many places. The entire industrial sector has been severely damaged by economic decline and, above all, by rapid inflation since 1990. Simple shoes, cigarettes and drinks (soft drinks and beer) are produced in the country. Almost all goods of the daily need – up to many foodstuffs – must be imported. The decline of the local textile industry “Syntexkin” was particularly dramatic for the country. Several thousand workers lost their jobs in the course of time. In 2008 the last production unit was closed. At the same time, Chinese imports displaced local products.
Two hydropower plants are the main source of energy in the Democratic Republic of Congo. These two hydropower plants Inga I and Inga II, which dictator Mobutu had built in 1972 and 1982, are located on the Inga Falls, where Africa’s largest river, the Congo, plunges over 100 metres. Large companies from the USA and Europe joined together to form a consortium and granted loans for these power plants, which mainly supply the ten million metropolis of Kinshasa with electricity.
From the hydroelectric power plants, the longest direct current line in the world runs 1,725 kilometers across the country to the Katanga raw material region in the southeast. Since it is very costly to transform direct current into alternating current, the cities on the line (with hundreds of thousands of inhabitants) do not profit from this energy source. Like almost all regions in the DR Congo, they remain without electricity.
The INGA power plants are to become the world’s largest power plant. In October 2013, South Africa signed a cooperation agreement with the Congolese government to expand INGA. For years, a further – third – dam, INGA 3, has been planned, in which Chinese and various international consortia are involved in addition to South African consortia. However, the start of construction is not yet known.
The permeability of the borders makes it difficult to precisely quantify the imports and exports of the Democratic Republic of Congo. After the economic decline of the 1990s, local markets have developed strongly and now play a decisive role in the country’s economy.
Exports have been rising steadily since 2002. Investments, growing revenues and the support of international donors for various development projects as well as the weakness of the national processing industry and the agricultural sector have also led to a steady growth of imports. However, the positive development of the trade balance shows a reduced picture of reality. Imports consist largely of consumer goods and exports of raw materials and minerals. Today the economy is based almost exclusively on the export of industrial diamonds, crude oil, cobalt, copper, coltan, gold and rare metals.
The most important trading partners are Belgium, South Africa, Brazil, France, USA, Germany and India. The People’s Republic of China is now playing an increasingly important role in international economic and trade relations. Particularly in the race for raw materials and sales markets in the Democratic Republic of the Congo, China is successfully competing with the Europeans. In September 2008, China signed lucrative economic agreements with the DR Congo. The subject of the agreement is a billion-euro business that will last over a period of 30 years. The DR Congo wants to “guarantee a group of Chinese companies their supply of raw metals”. In return, the Chinese want to carry out major infrastructure construction measures in Congo.
Even though there are repeated delays in the implementation of Chinese-Congolese projects, China is still succeeding in expanding its economic influence. Today, China is one of the central players in mining and importing minerals from the DR Congo.