The Democratic Republic of Congo (DRC) is known for two dueling realities…
Below ground, the DRC sits on immense natural resource wealth, including some of the world’s highest-quality copper reserves and potential hydropower capacity that could eventually generate 42GW of energy and effectively double Africa’s entire electricity output.
Above the surface, however, the DRC is a war-torn kleptocracy whose natural riches continually fail to improve daily life for the populace of one of the world’s poorest and most unstable countries. That instability is now set to grow even worse with the announcement that overdue presidential elections will not be held until April 2019 at the earliest.
The DRC’s worsening political situation has cast a bright light on the massive economic potential that is going to waste. The mining sector is excessively corrupt, and despite being the main driver of GDP growth, only some 6 percent of revenue garnered from it goes to the cash-strapped government. The rest is shamelessly looted or otherwise spirited away, which explains why the state-owned Gécamines company—which owns the world’s greatest deposits of cobalt and copper—is hemorrhaging money. If Gécamines cannot make ends meet, there’s little hope for the rest of the economy: copper and cobalt collectively make up around 89 percent of the DRC’s exports.
Beyond metals, international observers are increasingly appreciating the country’s immense green energy potential. The $14 billion, 4.8GW Inga 3 hydroelectric project has been repeatedly delayed due to corruption concerns. The latest blow came after the World Bank pulled funding following a non-transparent government takeover. Even if the dam could treble Congo’s current installed capacity of just 2.5 GW, it would just represent the tip of the iceberg of Congo’s energy potential. In a new report published last month, International Rivers outlined 85GW in “abundant, low-cost and accessible wind and solar potential” that could power not only the DRC but also many of its central and southern African neighbors. Related: Half A Million Bpd At Risk From Geopolitical Firestorm
It’s difficult to overstate the extremity of the DRC’s energy poverty. Only 13.5 percent of the DRC’s 78 million inhabitants have access to electricity. This is a major reason why the country has one of the world’s lowest GDPs per capita, ranking 176 out of 187 in the UN Human Development Index. International Rivers seeks to demonstrate that the country has alternative options to hydropower, but a development strategy focused on delivering energy will need to leverage all available options. Wind and solar may not be as easily deployed as the report suggests.
To put things into perspective, the DRC’s hydropower potential ranks behind only China and Russia globally—and yet just 2.5 percent of it is being exploited. So what’s preventing foreign investors and local actors from unlocking the country’s economy? A toxic yet painfully familiar mix of politics, corruption, and internal conflict. From 1965 until 1997, strongman Mobutu Sese Seko was allowed to rule—and spectacularly loot—the DRC with tacit Western backing. Since deposing Mobutu, the Kabila family (first Laurent and now son Joseph) have held power in Kinshasa.
So far, there has never been a peaceful transfer of power, further jarring already weary investors. That was supposed to change last year, with Joseph Kabila stepping aside after his second and final term as president and the people voting to choose a successor. Instead, Kabila’s government is actively stalling elections—likely in order to preserve a corrupt economic system that directly benefits his associates and family members. The corruption scale is off the charts. Between 2013 and 2015 alone, Global Witness found that mining revenues of up to $1.3 billion—twice what the DRC spends on health and education yearly—didn’t make it to the treasury.
This goes far beyond the political realm. By trampling on the constitution to stay in power, Kabila undermines the state’s legitimacy and economic stability. There are growing calls for resistance from the opposition, as the threat of civil unrest increases. A paralyzed political process also aggravates bureaucratic mismanagement. Related: The U.S. Shale Play To Watch In 2018
There have been no environmental impact studies conducted for Inga 3, for example, despite this being an ironclad precondition for any outside financial backer. The DRC is dependent on the World Bank and other Western and Chinese investment vehicles to finance major projects, making the idea of proceeding without environmental assessments an obvious non-starter. Obvious, at least, to everyone outside Kabila’s government.
The standoff is also hardening the stance of the political opposition. Chief among them is Moïse Katumbi, the governor of the resource-rich Katanga Province from 2007-2015. Katumbi is effectively president in waiting and has experience working with mining companies and dealing with the region’s infrastructural challenges. No wonder he is topping opinion polls to replace Kabila by a wide margin, which is almost certainly why he was sentenced in absentia to 36 months’ imprisonment on trumped up charges.
From his self-imposed exile in Europe, Katumbi seems to be sounding the right notes. As he told African Arguments, “I’d fight corruption. Create jobs. We need to have a strong economy. How? First, you need energy. I would call the private sector and all partners to help us and use money you have locally to improve energy.” Unlike Kabila, he’s also shown an ability to respect term limits: he relinquished power after serving two terms as governor.
If and when Kabila is replaced, a significant amount of damage will need to be undone. Despite its massive untapped resources, the DRC already had a poor reputation as a place to invest and do business, and outside capital is becoming even more wary as the crisis drags on. The global cobalt industry is starting to turn its back on the country and looking to smaller (but safer) sources in Canada and Russia, based entirely on political risk. The mining sector could be a key partner in expanding energy access—but if the fragile security situation continues to break down amid the presidential impasse, they will most likely vote with their feet and leave.
By Richard Talley for Oilprice.com
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