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People to watch, key data and analysis to guide you through the political and economic year ahead

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country reports

N ° 9 6 • D E C E M B E R 2 017 - J A N U A R Y 2 018

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Africa in

2018 INTERNATIONAL EDITION

Algeria 550 DA • Belgium €5.90 • Canada CA$ 7.95 • DR Congo US$ 9 • Denmark 60 DK • DOM 8 € • Ethiopia 90 Birr • France €5.90 • Germany €5.90 • Ghana GH¢ 10 • Italy €5.90 • Kenya KES 410 • Morocco 40 DH • Netherlands €5.90 • Nigeria 800 NGN • Norway NK 70 • Portugal €5.90 • Rwanda RWF 6,000 • Sierra Leone LE 15,000 • South Africa R40 (tax incl.) • Spain €5.90 • Sweden SEK 70 • Switzerland 9.90 FS Tanzania TZS 10,000 • Tunisia 5.4 DT • Uganda UGX 10,000 • UK £4.50 • United States US$ 6.95 • Zambia 48 ZMW • Zimbabwe US$ 4 • CFA Countries 3,500 F CFA • Euro Zone €5.90

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People to watch, key data and analysis to guide you through the political and economic year ahead

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reports 54 country N ° 9 6 • D E C E M B E R 2 017 - J A N U A R Y 2 0 18

Double issue

THE AFRICA REPORT # 96 - DECEMBER 2017-JANUARY 2018

Africa in

2018

JEUNE AFRIQUE MEDIA GROUP

INTERNATIONAL EDITION

105

ART & LIFE

116

COUNTRY PROFILES

FRONTLINE

06 EDITORIAL Zimbabwe: the people’s message

54 INTERVIEW Moussa Faki Mahamat, Chairman, AU Commission

100 BUSINESS IN 2018 Looking into the corporate crystal ball

08 LETTERS

56 KENYA The resistance begins, as does Kenyatta’s second term

ART & LIFE

10 OPINION Patrick Smith 14 YEAR IN IMAGES

COUNTRY FOCUS

24 OPINION Olusegun Obasanjo 26 QUIZ 17 questions from 2017

FRONTLINE 31 THE YEAR AHEAD What to watch in 2018 From restive regions to emerging tech hubs, including our round-up of a bumper election year ahead 45 CALENDAR

POLITICS 48 POWERPLAY From board to ballots Do CEOs make good presidents? Performance review on the business tycoons who have ventured into politics THE AFRICA REPORT

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65 DEMOCRATIC REPUBLIC OF CONGO What business wants Members of the business community on changes that can improve the operating environment for companies, large and small

BUSINESS 88 COMPANIES Corporate health check Taking the temperature of a cross-section of the continent’s major companies in 2018 96 INTERVIEW Akinwumi Adesina, President, AfDB 98 INNOVATION Africa’s technology testing grounds

D E C E M B E R 2 017- J A N UA R Y 2 018

105 INTERVIEW Mahi Binebine & Elnathan John The two writers discuss the future of the continent and the important role the youth play in its development 110 LOOKING AHEAD An arts & culture guide to 2018 114 REVIEWS Our pick of the best of 2017

COUNTRY PROFILES Your indispensable guide to the economic, political and social events that will dominate Africa’s 54 countries throughout 2018 116 INTRODUCTION 121 SOUTHERN AFRICA 141 EAST AFRICA 161 CENTRAL AFRICA 177 WEST AFRICA 199 NORTH AFRICA

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THE AFRICA REPORT A Jeune Afrique Media Group publication

BY PATRICK SMITH

Zimbabwe: the people’s message

57‑BIS, RUE D’AUTEUIL – 75016 PARIS – FRANCE TEL: (33) 1 44 30 19 60 – FAX: (33) 1 44 30 19 30 www.theafricareport.com

CHA I R M A N A ND F O UND E R BÉCHIR BEN YAHMED P UB L I S HE R DANIELLE BEN YAHMED publisher@theafricareport.com E X E CUT I VE P UB L I S HE R JÉRÔME MILLAN

he revellers in the streets from Bulawayo to Harare on 21 November were shouting out their hopes for a new country as much as cheering the end of an era. The dramatic events in Harare, which moved from putting Mugabe under house arrest to his resignation a week later, started with military power. But it won’t end there. This was mostly about the ruling ZANU-PF party managing its factions and succession battle. That doesn’t make it any the less significant. Zimbabwe’s military action against Mugabe, optimistically dubbed ‘Operation Restore Legacy’, is set to be a historical game-changer for reasons the generals may never have considered, triggering reactions far beyond Zimbabwe’s national borders. Immediately, the military action got the people back on side with the soldiers, but not the police and the intelligence organisation. The generals relied on the war veterans, for whom popular support runs deep across all parties, to mobilise support. War veterans leader and former ambassador Chris Mutsvangwa rallied tens of thousands behind anti-Mugabe demonstrations as the generals tried to negotiate with the 93-year-old president. Although those demonstrations helped the military, it will be hard for the new government to squash this new sense of the people’s freedom. For Zimbabwe’s 16 million people, the locomotive of political change has left the station. There will be hard bargaining ahead to unblock loans and investments to finance economic stabilisation and then recovery. Zimbabwe’s reputation for high educational standards – an undisputed legacy of Mugabe’s rule – and

entrepreneurialism could see an economic upturn faster than many of the gloomsters predict. Opposition parties are demanding a role in reforming the constitution and the electoral commission before the next national elections. They will be chary about powersharing with ZANU-PF, which outwitted them in that kind of political deal about a decade ago. Most important will be the restoration of fundamental rights: freeing civic acThe drama tivists, trade unionists in Harare and journalists to help shape the transition. will trigger Across the Limpopo, political there could be a demonstration effect in South change Africa. The ousting of far beyond an unpopular president the country’s and his ambitious wife has an obvious resoborders nance. Also, a resurgence in Zimbabwe, once the third-biggest economy in Africa, would concentrate the minds of those watching South Africa’s economy tread water. Change in Zimbabwe will underline the pace of reform in Angola, where President João Lourenço is dismantling his predecessors’ financial and political systems. It might also encourage President Filipe Nyusi in Mozambique to take radical action to resolve the scandal of $2bn of crippling secret loans, now the subject of international criminal investigations. Most of all, it is a message to the most sclerotic regimes – in Cameroon, the DRC, Eritrea, Sudan and Uganda – that the hunger for political and economic change is growing irresistibly across the continent with the world’s youngest population.

THE AFRICA REPORT

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M A R K E T I NG & D E VE L O P M E NT ALISON KINGSLEY‑HALL E D I T O R I N CHI E F PATRICK SMITH M A NA G I NG E D I T O R NICHOLAS NORBROOK editorial@theafricareport.com A S S O CI AT E E D I T O R MARSHALL VAN VALEN B US I NE S S E D I T O R MARK ANDERSON R E S E A R CH & P R O D UCT I O N OHENEBA AMA NTI OSEI RE G IO NA L E D I T O R CRYSTAL ORDERSON (SOUTHERN AFRICA) A RT & LI FE ED I T O R BILLIE ADWOA MCTERNAN S UB - E D I T O R S ALISON CULLIFORD ERIN CONROY P R O O F R E A D I NG KATHLEEN GRAY A RT DI R E CT O R MARC TRENSON DESIGN VALÉRIE OLIVIER (LEAD DESIGNER) SYDONIE GHAYEB CHRISTOPHE CHAUVIN (INFOGRAPHICS) CAMILLE CHAUVIN R E S E A R CH SYLVIE FOURNIER P HO T O G R A P HY PIERANGÉLIQUE SCHOULER SAMUEL BOUAROUA SALES SANDRA DROUET Tel: (33) 1 44 30 18 07 – Fax: (33) 1 45 20 09 67 sales@theafricareport.com CONTACT FOR SUBSCRIPTION: Webscribe Ltd Unit 4 College Road Business Park College Road North Aston Clinton HP22 5EZ United Kingdom Tel: + 44 (0) 1442 820580 Fax: + 44 (0) 1442 827912 Email: subs@webscribe.co.uk ExpressMag 8275 Avenue Marco Polo Montréal, QC H1E 7K1, Canada T : +1 514 355 3333 1 year subscription (10 issues): All destinations: €39 ‑ $60 ‑ £35 TO ORDER ONLINE: www.theafricareportstore.com A D VE RT I S I NG D I F CO M INTERNATIONAL ADVERTISING AND COMMUNICATION AGENCY 57‑BIS, RUE D’AUTEUIL 75016 PARIS ‑ FRANCE Tel: (33) 1 44 30 19‑60 – Fax: (33) 1 44 30 18 34 advertising@theafricareport.com PRINTER: SIEP 77 ‑ FRANCE N° DE COMMISSION PARITAIRE : 0720 I 86885 Dépôt légal à parution / ISSN 1950‑4810 THE AFRICA REPORT is published by GROUPE JEUNE AFRIQUE

NO MANDATE NEEDED

Sanusi Lamido Sanusi: “These people feel there is no future”

• NGOs: Is foreign assistance a blessing or curse? • Mauritius: New life after tax onslaught • New STAR: The Steinhoff shuffle

he civil society movement in Africa is under attack [‘NGOs: Blessing or curse?’, TAR95 Nov 2017]; from governments who would rather be the ones receiving the money; from itself, when accountability and transparency are questionable, and from critics within it whose views contradict the very essence of why we have NGOs; and from the “watchdogs for society”. “It’s “I ’ time i for f a change” Like many civil society groups in Africa, Greenpeace Africa stands up to be counted at great risk; such action has never required permission or mandate. Our strategy to power an environmental movement from Cape Verde to Cape Town and everything in between is funded by our volunteers, members and supporters – individuals who agree with our principles and values. Greenpeace has no permanent allies or enemies but instead exists to expose environmental criminals, and to challenge governments and corporations when they fail to live up to their mandate in safeguarding our environment and our future. To exist and to act should be free. Njeri Kabeberi, Executive Director, Greenpeace Africa N ° 9 5 • N O V E M B E R 2 017

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MOBILE MONEY ON THEIR MINDS

It is highly expected that the Vodacom-Safaricom deal will strengthen Safaricom’s M-Pesa offering in the region by promoting interoperability of its mobile financial services (MFS) across Vodacom’s Winnie footprint [‘Vodacom’s eastern pivot’, TAR95 Nov 2017]. But MTN Group is larger in Africa, both by subscription count and by the number of countries of operation. In addition, its footprint markets present a great opportunity in the MFS sector due to high demand for digital services, including financial services. As such, with the right strategy, MTN has the potential to grow its MFS business and become a top MFS provider on the continent. In addition, data roaming still remains very expensive in Africa, and Safaricom and Vodacom may leverage on the deal and recurring Fulani-herdsmento offer cheaper data roaming deals supervised massacres in Southern across the region. Telcos in the East Kaduna, make peace, and perhaps Africa region are facing serious unity, an illusion. However, the division challenges due to increased in Kaduna reflects the overall deafening competition and regulatory pressures. outcry of displeasure within Nigeria. As such, we are likely to see more The growing tension across the country mergers and acquisitions in the near is deeply rooted in the perceived future as telcos realign themselves for structural deficiency of Nigeria itself, profitability. Some operator groups are where some regions are believed rumoured to be planning an exit from to have been over-favoured and created the continent to venture into other to dominate others. Until this defect regions that have more potential for is restructured, the so-much-desired better returns. Increased regulatory unity might be a wait for Godot. pressures may also affect the strategies Adekoya Boladale, Public affairs analyst of certain telcos in the region. Former first lady Winnie Madikizela-Mandela says Zuma has led ANC to its lowest point JEUNE AFRIQUE MEDIA GROUP

INTERNATIONAL EDITION

WAITING FOR NIGERIA’S GODOT The story of Kaduna [‘Kaduna, a city divided’, TAR94 Oct 2017] reechoes the noted anticlimax across Nigerian states occasioned by the ‘lack of maintenance’ culture of public enterprises, bad and unstable public policies often influenced by money bags, and overdependence on religion rather than national unity. But if these erode development, the unchecked level of unlawful state-backed killings of Islamic Shiites by security forces, arbitrary arrest of dissenting voices,

and political commentator, Nigeria

Danson Njue, Research Analyst, Ovum

HOW TO GET YOUR COPY OF THE AFRICA REPORT

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ADVERTISERS’ INDEX MSC p 2; LIQUID TELECOM p 4-5; UBA GROUP p 7; OCP GROUP p 9; REP. OF COTE D’IVOIRE p 12-13; OLAM p 17; MAROC TELECOM p 19; PRIMATURE SENEGAL p 22-23; REP. OF DJIBOUTI p 27-30; LIEBHERR p 35; ENI p 37; AFRICA CEO FORUM 2018 p 39, 95; MCB GROUP p 41; MINING INDABA p 44; REP. OF BURKINA FASO p 46-47; STANDARD BANK p 51; TAR MONTS NIMBA p 53, 140; DSTV MEDIA p 59; LUALABA PROVINCE p 61-64; BCDC p 69; CONGO INVEST p 71; PROCREDIT BANK p 71; RAWBANK p 73; STANDARD BANK DRC p 75; PROMINES p 78-79; CONGO AIRWAYS p 82-83; BOLLORE LUBUMBASHI p 85; FED AFRICA p 85; MD SERVICES p 87; SULTANI MAKUTANO p 91; ACCESS BANK p 93; REP. OF TOGO p 101-104; O&G COUNCIL MOZAMBIQUE p 120; EDITIONS DU JAGUAR p 160, 176; SNE SOC. NAT. D’ELECTRICITE p 170-171; TAR DIGITAL p 198; CNN p 211; BOLLORE p 212 THE AFRICA REPORT

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WHAT TO WATCH IN 2018 | FRONTLINE 45

CALENDAR INVESTING IN AFRICAN MINING INDABA

DRC MINING WEEK 13-15 June

5-8 February

LUBUMBASHI | DRC drcminingweek.com

CAPE TOWN | SOUTH AFRICA miningindaba.com

BAUMA CONEXPO 13-16 March

JOHANNESBURG | SOUTH AFRICA Construction trade show. bcafrica.com

AFRICA ENERGY FORUM 19-22 June

EGYPT PRESIDENTIAL ELECTIONS

SOUTH SUDAN PRESIDENTIAL ELECTIONS

March

July

LIBYA PRESIDENTIAL ELECTIONS March

NIGERIA OIL & GAS 2-5 July

ABUJA | NIGERIA Industry players gather for the largest oil and gas event in sub-Saharan Africa. cwcnog.com

SIERRA LEONE PRESIDENTIAL ELECTIONS 7 March

ZIMBABWE PRESIDENTIAL ELECTIONS July/August

AFRICA CEO FORUM 26-27 March

MALI PRESIDENTIAL ELECTIONS

ABIDJAN | CÔTE D’IVOIRE theafricaceoforum.com

August

MO IBRAHIM GOVERNANCE WEEKEND April

18-25 September

KIGALI | RWANDA http://mo.ibrahim.foundation

NEW YORK | US un.org

AFDB ANNUAL MEETINGS

CAMEROON PRESIDENTIAL ELECTIONS

21-25 May

BUSAN | SOUTH KOREA www.afdb.org THE AFRICA REPORT

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73RD UN GENERAL ASSEMBLY

October •

D E C E M B E R 2 017- J A N UA R Y 2 018

Rwanda leads the AU in 2018

AFRICAN UNION SUMMIT January ADDIS ABABA | ETHIOPIA Following the successful African Union-European Union (AU-EU) summit held in November in Abidjan, the AU will organise its flagship annual summit at its headquarters in Addis Ababa in January. The continental body plans to engage actively in the fight against corruption, one of the greatest challenges for the continent, and has declared 2018 ‘The African Anti-Corruption Year’. Funding the AU and reducing dependence on external donors will be another key topic on the agenda, and finance ministers from the member countries are putting together a plan to be implemented in 2018. In July 2017, Rwanda was elected to replace Guinea as the ceremonial head of the organisation for a one-year term starting 30 January 2018. This will be the first time an East African country will lead the union since it was established in 2001.

WORLD BANK/IMF ANNUAL MEETINGS 12-14 October BALI NUSA DUA | INDONESIA imf.org

AFRICA OIL WEEK 5-9 November CAPE TOWN | SOUTH AFRICA africa-oilweek.com

AFRICA COM

13-15 November CAPE TOWN | SOUTH AFRICA Shaping the digital future of the continent. africa.comworldseries.com

MADAGASCAR PRESIDENTIAL ELECTIONS December

VINCENT FOURNIER/JA

PORT LOUIS | MAURITIUS africa-energy-forum.com

PROVINCE OF

LUALABA D E M O C R AT I C R E P U B L I C O F C O N G O

DRIVING PROGRESS IN LUALABA PROVINCE Under a dynamic leadership team, the new province of Lualaba is forging a path to prosperity, a push for diversification. With a thorough overhaul of its infrastructure, jobs creation and investment in tourism and agriculture, the Executive Governor Richard Muyej Mangeze Mans the new governor of Lualaba Province, one of four provinces created out of the former Katanga Province is determined to ensure that in the next fifty years – both the Province of Lualaba and the Democratic Republic of Congo – will be focused on new sources of wealth. Placing an emphasis on building Lualaba’s human capital, the Governor is ensuring that the health and education of the province’s population are paramount. From rehabilitating hospitals and clinics, to drawing up plans for more comprehensive technical and vocational training, the administration is betting on turning its demographic growth into a dividend. To secure the export markets, on which future prosperity depends, Governor Muyej is building new alliances with neighboring countries, ensuring seamless logistics for economic operators.

“

PROVINCE OF

LUALABA

Making good promise of Lualaba’s potential will allow us to be a shining example of everything that can be achieved

D E M O C R AT I C R E P U B L I C O F C O N G O

THE GOVERNOR’S CORNER

Richard Muyej Mangeze Governor of Lualaba Province

WORK ON THE CITY ROAD NETWORK

“It is almost unimaginable that : we have been independent for 57 years, and we still talk about our mines. Yet we can’t feel the benefit of these mining activities in our communities. This is why we have come up with a new vision of development. We absolutely have to diversify. Yes, the mines are a source of wealth, but we have to use them to finance other economic opportunities. We are betting on agriculture and tourism in the short term to bring a new life to our compatriots. This is what devolution actually represents for the people of Lualaba province. This means access to low interest loans to get involved in agriculture while working with mining companies to help finance infrastructure; taking women and children out of back-breaking labour in the mines, and into decent work and schools. This will help us build communities that believe in the value of our national sovereignty, the integrity of our territory: a decentralization that provides jobs and a future that the population can believe in. For a region that has known the temptations of secession in the past, it is all the more important to deliver concrete results in the here and now. Before the end of my mandate, we will have delivered new roads, such as connecting us to our neighbor Zambia from Mumena to Solwezi, and new power, through small hydro-electric plants. Ultimately, making good on the promise of Lualaba’s potential will allow us to be a shining example of everything that can be achieved in the Democratic Republic of Congo when we set aside our old ways, and drive forward together.”

CONSTRUCTION OF AN OLYMPIC SWIMMING POOL AT THE HEWA BORA SCHOOL COMPLEX (FORMERLY ATHÉNÉE ROYAL IN KOLWEZI)

MODERNISATION OF THE MWANGEJI GENERAL REFERENCE HOSPITAL IN KOLWEZI

UPGRADE OF THE MANIKA STADIUM IN KOLWEZI

new roundabout in Lualaba Province, painted by local artists, carries the images of provincial and national heroes, and critical figures in the history of the Democratic Republic of Congo (DRC), including all its presidents.

Of course, it is a functional piece of infrastructure in its own right but it has a deeper purpose: to help install the virtues of peace and unity into the population.“It is so important to educate the youth and the population at large that the history of the country has not been written by one single province”, says Governor Richard Muyej. “We even included the portrait of Dag Hammarskjöld, the head of the United Nations [who died in a plane crash while he was going to Ndola (Zambia) to meet Moïse TSHOMBE in order to discuss with him on how to put an end to the Katanga secession and reconciliate Congo, just], to show that people from many regions and even from abroad have been fighting for the stability of our country. We have to give our youth the image of a strong nation and keep an open mind”. Although he has been a politician since 1990, Governor Muyej originally taught contemporary history of the DRC. He became minister of the interior, was in charge of communicating the devolution project. “Now at last I get to put it into practice!”, declares Governor Muyej. The decentralization process is finally in full swing in the Democratic Republic of Congo, following the decisions taken at the 2005 constitutional referendum accoriding to the governor, moving from 11 to 26 provinces has allows them to get closer to the people”. Which is one of the principles of better governance: bringing ideas and initiatives out at the grassroots level, puts emphasis on local strengths, as a way of boosting development, even as we stay linked to the base, the nation”. This means providing jobs in a nation where the demographics are quickly accelerating. While mining remains a mainstay of the province – Lualaba has 75% of the mineral deposits of the former Katanga province – the agriculture and

A great province for a greater DR Congo

REHABILITATION OF HEWA BORA SCHOOL COMPLEX (FORMERLY ATHÉNÉE ROYAL IN KOLWEZI)

THE ROUNDABOUT OF INDEPENDENCE

tourism sector have been selected to fasttrack development, precisely because of their labour-intensive nature. The governor stated that there is an incredible amount of young people in Lualaba Province and if not provided with a means of livelihood, they would become a huge problem for the province and the nation as a whole. About 80,000 youths work in the informal mining sector around Kolwezi alone; and they have been bearing the brunt of the dip in the copper price. Fortunately, Lualaba Province has been seeing the results of the agriculture drive. By distributing free seeds and fertilizers, and reviving the dying art of the agricultural extention worker, there has been a sharp uptake in new farmers over the last year and this year we will do the same.The only difference being that while last year everything was imported, this year we have created our own maize seed field at Lubudi, and the same for cassava and rice.”

TOURISM, AN ATTRACTION IN EACH DISTRICT

To fix the problem of farmers unable to reach markets, various teams have been created to maintain roads, cutting back vegetation from the verges and making them passable all year round to counter the problem of credit, a microfinance scheme with a 1% interest rate has been put in place with the Afriland First bank who are still getting used to the idea. Last year there were 30 applications in comparision to this year’s 72 applicants an increase of 140%.” Tourism is also a priority, with spectacular waterfalls and natural parks identified, and the roads required for access being put in place.Those around Kolwezi, where there are a greater number of hotels and restaurants will be developed first.“In all our contact with tourism-related companies, we insist on the need to create hospitality infrastructure all across our province”, says the Governor. This drive to upgrade the local economy is matched by a will to improve the social and physical infrastructure, too. Hospitals are being rehabilitated, and new programmes designed to ensure doctors work in the rural areas and not

Lualaba province is home to impressive tourist sites, from shimmering waterfalls in Tshatuta and Kading, to caves in Kyantapo, and lakes in Kafakumba and Wansela. Building up the hospitality infrastructure is paramount to Governor Muyej, with new agreements struck with South African operators to provide world-class facilities.

PROVINCE OF

LUALABA

D E M O C R AT I C R E P U B L I C O F C O N G O

just the towns and cities. Lualaba’s geographical location puts it in the middle of an emerging cross-roads, between Zambia, Angola, and close to Zimbabwe. Governor Muyej is right at home here, as he is from the Lunda community, which stretches across this region. This international perspective is bearing fruit: from plans to link to the railway to Lobito in Angola, a road axis that passes through Angola to reach Kinshasa, and a new road to link with Zambia, Lualaba’s economic actors will soon have a multiplicity of logistics options to hit their export markets.

A new cement factory planned by Chinese partners, sourcing coal from Zimbabwe, that will take the Zambia road, supplying construction across the region, is a tangible sign that Lualaba Province is on the move.

FEEDING THE NATION

COPPER MINING AND PROCESSING

THE KOV OPEN PIT MINE (KAMOTO OLIVERI VIRGULE)

Digging for victory: mining sector reform

he Governor wants to reform the mining sector so that it delivers value to the inhabitants of the region. In particular, he is working with the big mineral purchasing companies to bring the provinces many informal miners – many of whom work in perilous conditions – into more structured arrangements. “In this way we have managed to bring women and children out of the mines”, says the Governor Muyej. “And the workers are starting to appreciate it – they are making more money. To back the initiative the national government has set aside 40 new mining areas for them to work on”.

Another way of making the mining sector deliver for the inhabitants of Lualaba is drive to create more companies in the mining services sector. Though local content provisions are still being worked through, a push to create genuine local subcontractors has been initiated. In addition, co-financing agreements are being made with big mining companies on building large infrastructure that the province would not be able to finance alone, but which benefit both private and public sector.

The vision of Lualaba province is to become the breadbasket not just of Congo, but of the whole region. From small-holders to big agribusiness, support is being provided across the whole value chain to boost productivity and create new jobs.

DIFCOM/DF - © PHOTOS: DRC UNLESS MENTIONED

RESURFACING AND UPGRADE OF THE ROADS AROUND KOLWEZI

COPPER MINING AND PROCESSING

Democratic Republic of Congo Companies are burdened with sky-high operating costs and arduous logistics

GWENN DUBOURTHOUMIEU FOR JA

What business

wants The Africa Report talks to members of the DRC business community to find out what changes they would like to see to diversify the economy and improve the operating environment for companies large and small, and which barriers to business they would like to see the government remove By William Clowes in Kinshasa

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oing busin ess in t he Democratic Republic of Congo (DRC) has always thrown up its fair share of difficulties, but the past couple of years have been especially challenging. “You’ve got to be endlessly optimistic to operate here,” says a factory owner. “Otherwise, you won’t last a minute.” An economic crisis triggered by a slump in commodity prices saw gross domesticproductgrowthcrashto2.2%in 2016 after averaging nearly 8% between 2010 and 2015. Copper prices

66 COUNTRY FOCUS | DEMOCRATIC REPUBLIC OF CONGO

DRC Rankings on Doing Business topics 62

Starting a business

121

Dealing with construction permits

142

Getting credit Enforcing contracts

172

Getting electricity

175 181

Paying taxes 190

163

136

109

SOURCE: WORLD BANK DOING BUSINESS 2018

What is it that really gives sleepless have rallied this year, while cobalt nights to those ballsy, or foolhardy, – the DRC dominates global production of this increasingly coveted metal – has enough to do business in the DRC? It soared, but the fundamentals remain is impossible to pose this question to ominous. The Congolese franc has lost anyone involved without unleashing more than 40% of its value against the a torrent of complaints about the fisUnited States dollar since late 2015 and cal regime, not the content of the tax inflation so far this year has exceeded code per se but its unfathomable and 43%, decimating the purchasing power opportunistic application. of the population and companies. The ‘LACK OF CONSISTENCY’ impact has reverberated around the economy. According to Hervé Otschudi, An owner of a financial services provider an economics professor in Kinshasa, explains: “There’s a complete lack of by mid-2017 a quarter of the banking consistency in its implementation. All sector’s loan book was non-performing, our competitors have different perthe rate of non-performing loans having ceptions of the tax law. We paid PwC almost doubled in 18 months. and EY for opinions, and both were Business must contend with ever different. We contacted the Direction Générale des Impôts [DGI, a tax agency] greater political instability on top of about value-added tax (VAT), and the the unpromising economic conditions. President Joseph Kabila refused to quit at boss said: ‘This is my opinion, but if I’m replaced tomorrow it may no longer the end of his second term in December be valid.’ We also know 2016, and many argue that he is willing to go to almost from experience that the any lengths to change or DGI’s regional hubs in, say, Goma and Lubumbashi ignore the constitution to may have different opinremain in power. In i t s 2 0 1 8 D o i ng ions to Kinshasa.” Business report, the World The uncertainty inBank ranked the DRC as centivises harassment, a 182nd out of 190 countries. problemexacerbatedbytax While it is a middling departments being given performer in terms of the annual targets for revenue collection and by agents ease of setting up a new being entitled to a cut of business, for example, it is $1.639 at the bottom of the global any fines brought in. The ranking for getting access problemissopervasivethat to electricity and paying in October prime minister Bruno Tshibala sent a letter taxes (see graphic). to his cabinet informing To find out what it is like in the trenches of comthem that he was suspendNumber of days mercial competition, The ing impromptu tax visits it takes to obtain for four months. “As a chief Africa Report assured its a renewable building finance officer, you spend interviewees anonymity permit valid for three years in the DRC, 80% of your time looking so that they could speak at a cost of $1,639 without fear of retribution. at your tax assessment

rather than your balance sheet,” says one financial director. “Everything is up for negotiation,” explains a business owner. There was a big public debate about telecommunications companies and the tax they pay in the middle of 2017 after the government hired local firm Business Company Consulting (BCC) to examine companies’ tax payments. BCC said that because firms are allowed to report their own call and SMS statistics, they were under-declaring their revenue by $61m per month, representing a loss to the treasury of $17.6m each month. The telecoms providers denied those claims and said that the consultants used incorrect models and made miscalculations. In the crucial mining sector, the introduction of a new legal framework in 2002 was supposed to provide fiscal predictability. The mining fraternity, however, argues that it has not been reliably implemented. “The government doesn’t even know what’s in the mining code,” says a mining executive. New charges unforeseen by the law – often tariffs added at the provincial level – are tacked onto bills, and the mandated taxes

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KRIS PANNECOUCKE/PANOS-REA

Companies are applauding VAT exemptions for businesses that can prove they are helping to build up the local value chain, and a ban on imports of certain goods from the DRC’s neighbours

“The government is stealing from us.” Earlier this year the government finalised the drafting of new mining legislation, which it had shelved in 2015 due to low commodity prices, and sent it to parliament. If the draft law is adopted, income tax, royalties and the state’s free stake will increase, while stability clauses will shorten (see page 76). The industry is nervous. For some, such as Mark Bristow, the garrulous Randgold boss, the revised code would murder the sector by making most new mining projects unviable. Others are more circumspect but worry that the industry has been insufficiently consulted. Meanwhile, once a company has battled the tax authorities, it must negotiate the sky-high costs of doing business in this vast, dysfunctional and poorly connected country. As one business owner says: “Legal costs are expensive. Banks are expensive and offer a very poor service. They are slow, make mistakes, and you must negotiate your transfer fees. They try to get away with up to 1% on an international transfer.”

JUNIOR D.KANNAH/AFP

LEGAL COSTS, ENERGY COSTS

are not straightforward either. “How can you maximise income tax if you’re a tax agency?” asks one miner. “You deny valid expenses and don’t let companies deduct them. It makes a huge difference.” It is VAT, however, that really works the mining sector into a lather. In September, DRC’s main business federation revealed THE AFRICA REPORT

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that the state owes mining companies more than $1.2bn in reimbursements for taxes and duties; non-reimbursed VAT accounts for about $900m. The diplomatically minded refer to the withheld money as “forced borrowing” by a cash-strapped state. But one mining executive is more forthright:

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The logistical demands on mining and manufacturing firms – importing and then trucking or barging material and equipment – are also heavy. “There were lots of surprises,” the factory owner said. “For example, we buy a tonne of coal from Richards Bay in South Africa for $85 to $90, but have paid $180 to $200 by the time it arrives at our site.” A major constraint on economic growth is the lack of electricity and, subsequently, the elevated cost of energy. The DRC’s installed power-generating capacity is about 2,500MW but, following decades of underinvestment and mismanagement, much of that is not currently available. Demand from copper and cobalt miners in the south-east is thought to exceed supply by more than 700MW, forcing companies to resort to pricey alternatives – importing electricity from Zambia or running diesel generators – or scaling back production targets. As a mining executive says: “The government is shooting itself in the foot.

68 COUNTRY FOCUS | DEMOCRATIC REPUBLIC OF CONGO

Power supply should be top of the list in terms of strategic initiatives. We will never have an industrial revolution in Congo without it. They need to think beyond natural resources and the mines to when all this shit runs out.” A manufacturer despairs: “You can count the number of proper factories in Congo on your fingers.” A further worry for Congo’s more ethically upright business operators is the reputational risk associated with the country. Damaging scandals have been commonplace. The authorities in the United States fined hedge fund Och-Ziff more than $400m in 2017 for funnelling bribes to Congolese politicians via the controversial Israeli investor Dan Gertler. CEMENT AND BEER

“Congo is perceived as a crooks’ haven, so lots of mining companies don’t want to come here,” says a local financial professional. “Do you want to go to a shareholder meeting and say you work in the same country as Glencore, Gertler and Gécamines?” While a lack of technical nous on the part of the government irritates investors – “officials always make the right noises but there’s always a complete lack of specifics”, says one – some departments are at least trying to remove some of the barriers to business. One manufacturer commended the government for offering VAT exemptions and reduced tariffs to businesses that can prove they are helping to build up the local value chain. Last year, partly due to the influx of cheap booze from Angola, Heineken’s Congolese subsidiary closed two of its six factories and took an assetimpairment charge of €286m ($337m). Another manufacturer told The Africa Report that he welcomes the recent decision by the trade minister JeanLucien Bussa to ban the import of basic goods, including cement and beer, from DRC’s neighbours. “That was a big win for us because Angola was dumping stuff at the border searching for dollars,” he says. He adds that he is unsure whether Bussa will extend the measure when it expires. “He has a hard choice: support local manufacturers or make goods cheaper for a poor population.” All too often, however, one gets the impression that Congolese decision makers are not acting in the interests of either group.

John Kanyoni

Vice-president, Chambre des Mines

We must invest in education TAR: With one of the largest territories on the continent, what is the government in Kinshasa doing to ensure the development of all of the country’s regions? The government has invested almost nothing in infrastructure in my region, Nord-Kivu. In Goma, we have put together mechanisms in the private sector to see how to build roads and rehabilitate old infrastructure. It is a partnership put in place locally between private companies and the provincial government. The situation is worse in Sud-Kivu.

Do you think non-governmental organisations (NGOs) have had a harmful impact on your country? NGOs developed the idea of ‘blood minerals’ and as a result there was a de facto boycott in 2010. They had a harmful role: buyers walked away, thousands of jobs were lost and government revenue dropped. Some NGOs now admit that their method was not a good one. Conflicts in the DRC are recurrent, old and tied to ethnic problems, not minerals. NGOs should change their approach: you have to work together, improve together and not boycott.

The Democratic Republic of Congo (DRC) is regularly in the Which African countries could news because of its rebel groups serve as a model for development and their links to the country’s for the DRC? natural resources. The African economies growing It is true that mining has indirectly regularly and sustainably, like Ethiopia, financed these groups. But the situation Rwanda and Côte d’Ivoire, are not has changed a lot. Guidelines from the dependent on the extractive sector. Organisation for Economic Cooperation Here are the lessons from these and Development were adopted that countries: you have to invest ask all companies in the supply chain to be sure We absolutely have to change that mining production the ideas that we have about does not have direct our economy and diversify it links to conflicts. There have been several suspect sales of state stakes in mining companies to Israeli magnate Dan Gertler and people close to him. They even hurt the government’s relationship with donors. Donors often say that there is a huge lack of transparency about what is happening in the mining sector. We have a framework for dealing with these sorts of things, the Extractive Industries Transparency Initiative. As companies, we have to prepare reports on what we pay to government and it does the same with the information about what it receives. Every contract to be signed has to be published, and they are. And when things are not done, rest assured, civil society is not giving anyone a pass.

in infrastructure, in electricity, put a lot of resources into education, and strongly develop agriculture, tourism and services. Look at the example of Mauritius. The goal is real growth that serves the country’s development. What are some of the biggest challenges for the future? We absolutely must invest in education. That is a huge challenge. We had the opportunity to learn in good schools, but that is not the case for the younger generations. [...] In agriculture, we have the largest reserves of arable land in Africa. […] We absolutely have to change the ideas that we have about our economy and diversify it. Interview by Frédéric Maury and JeanPierre Boris for Jeune Afrique and RFI

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A DV E RTO R I A L

BCDC: THE BENCHMARK FOR BANKING

IN THE DEMOCRATIC REPUBLIC OF CONGO

BCDC has been supporting the Congolese economy and people since 1909. Stable and reliable in a highly challenging market, with its deep understanding of the Congolese economy and its exacting standards of management, BCDC has always known how to take advantage of its structural strengths and of cyclical opportunities. Its profitability, the best in the market, tells its own success story. Like the elephant that stamps its logo, BCDC is a robust institution. With a 100-year track record, it inspires respect in the DRC and beyond. The long-term banking partner of all the major players in the Congolese economy, public and private (including mining and energy), BCDC has, over time, been successful in adding three other lines of business. Over the years, the Financial Institutions & Banks (FIB) line has carved out a reputation for quality with national and international institutions operating in the DRC. The SME market has been expanding for several years, while the Retail and Private Banking line has focused on the retail market, ranging from VIPs to employees, the self-employed and professionals.

UNFAILING CORPORATE BANKING EXPERTISE Across and in addition to these lines of business, what sets the trading room apart is its professionalism and its unique, innovative position in the Congolese banking sector, primarily for corporate and institutional customers. The rollout of these additional activities combines with the bank’s comprehensive network across the DRC

to deliver a service made all the more effective by the bank’s governing principle of optimisation of resources, both human and financial.

HIGH-QUALITY FINANCIAL INFORMATION, PRODUCED IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) As part of this requirement of good governance, BCDC has published its financial statements in accordance with IFRS Standards since 2014. One of the first to do so in the DRC, this has enabled the bank to achieve a level of accuracy and integrity without equal, in particular for loans, provisions, the long-term benefits granted to staff, and for fixed assets, which are assessed at their appraised value and not on historical cost.

IN 2016, DESPITE A 30% DEVALUATION OF THE CONGOLESE FRANC, NET PROFIT REACHED RECORD LEVELS This combination of best practice and expertise is reflected in levels of profitability all the more exceptional that they have been on target for the last ten years, despite the fact that regulatory constraints and economic situations can vary greatly. In 2016, despite

the devaluation of the Congolese franc by more than 30% against the dollar, net profits hit a record $11.2 million. And these profits have never been achieved at the expense of fixed capital, which stood at $81.9 million in 2016 (compared to $73.2 million in 2015) after distribution of dividends amounting to $5.7 million. The same goes for net banking income, which was $80.2 million in 2015, rising to $93.6 million in 2016.

EVOLUTION OF THE NET RESULT Net profit in USD millions

In short, BCDC is the bank that inspires confidence, the bank in which investors and major corporations place their trust.

“BCDC: THE BANK YOU CAN TRUST IN THE DEMOCRATIC REPUBLIC OF CONGO” www.bcdc.cd

70 COUNTRY FOCUS | DEMOCRATIC REPUBLIC OF CONGO

Corneille Nangaa Organiser of delays

Spy boss Kalev Mutond is a key player in the DRC government’s repressive tactics, and as a result he is under sanctions by the governments of the United States and the European Union. With a direct line to President Kabila and an eye on his enemies and allies, Agence Nationale de Renseignements director Mutond has some tricky tasks ahead of him in the country’s tangled political transition. Oppositionists say they see the government’s hands in the recent fighting in Kasaï and in attempts to stymie independent investigations into the violence.

The president of the Commission Electorale Nationale Indépendante (CENI) has been at the centre of angry debates about elections that are now planned for December 2018. The CENI quickly backtracked from its plans to hold the vote in 2019 after Washington said the DRC would lose international support at the end of 2018 if no vote is held. The opposition does not trust Nangaa, saying that he will do almost anything to delay the vote and keep Kabila in power. A protegé of the late former CENI president Apollinaire Malumalu, Nangaa is close to powerful religious leader Pierre Marini Bodho.

CENI

Kalev Mutond Slippery spy

Politics people to watch Tensions in the transition There is now a date for the long-delayed presidential elections, but few are happy about it and a resolution to the political crisis is still far from clear

Bruno Tshibala Prime minister in a predicament

V.FOURNIER/JEUNE AFRIQUE-REA

Richard Muyej Copper-plated governor The former interior minister was elected governor of Lualaba, in the heartland of the DRC’s copper-mining sector, in 2016. He is a key ally of President Joseph Kabila and faces high expectations, as the creation of new provinces has allowed Lualaba’s capital Kolwezi – a city of some 500,000 people – to get out of the shadow of former Katanga Province capital Lubumbashi. Since Muyej’s election, the provincial authorities have been building new infrastructure, floating ideas for economic diversification and modernising the city’s main hospital. Plans are in the works for a rail link to Angola, but it first needs approval from the authorities in Kinshasa. He told local media in November: “We need time to build up the province and make up for lost time.”

VIRGINIE LEFOUR/BELGA/AFP

Distrusted by the supporters of Kabila that he must work with and hated by the opposition groups that he left behind to head a government of national unity in 2017, Prime Minister Tshibala is between a rock and a hard place. In November, he was due to face a grilling in parliament, which is controlled by Kabila’s allies, over delays in presenting the national budget. His government must assure parliament that it will provide the funds for the 2018 national vote. While other oppositionists say that CENI is not impartial, Tshibala said in October that it is “preparing the best elections in our country’s recent history”. A former ally of the late Etienne Tshisekedi, he was an early member of the opposition Union pour la Démocratie et le Progrès Social (UDPS).

Félix Tshisekedi Hardline opponent Taking over the leadership of the UDPS from his late father Etienne Tshisekedi, Félix is amongst the hardliners seeking to check Kabila’s administration every step of the way. He is opposed to the December 2018 election date and says it must be held before June 2018. He organised protests in October where dozens were arrested. Félix wants to keep the pressure up on the streets and says a transitional government without Kabila should be the country’s next move.

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Recently, a South American investment fund trusted us for a transaction in the rehabilitation of more than 40,000 ha of the former agricultural concession of Unilever. CIC is a Partner Institute for the World Economic Forum since 2015 and realizes the Global Competitiveness

Email: Web: Phone number: Address:

Survey which addresses more than 200 private companies from all over Congo. Thanks to its participation in international forums such as Africa CEO Forum or InvestAfrica, CIC expands its network to better meet the needs of investors. CIC also promotes its corporate social responsability towards the youngest entrepreneurs: by participating in a Seedstars World selection with the mission to find the best tech startups in emerging markets or by supporting start-ups to seek responses from state institutions or a local bank, CIC is mentoring the next entrepreneur generation. Today everyone is talking about the electric car: behind every clean electric car there is cobalt, and behind cobalt is the DRC which holds 60% of the world’s reserves. It is therefore important to prepare the DRC and the business community to better deal with this new technological revolution and CIC is ready for that.

Info@congo-Invest.com www.congo-Invest.com +243 810 810 985 Immeuble crown tower, 7ième/suite 703 Av. Batetela n°3098, Commune de la Gombe Kinshasa, DRC

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hen one is asked where is a good place to invest in Africa, the Democratic Republic of Congo does not come first in his mind. Despite all the negative and sensational news, CIC strives to change this narrative by offering the best information on the country. Through sectoral studies, facilitation in making contact with the appropriate decision makers and institutions of the public and private sector, and by seeking funds for Congolese SMEs, CIC asserts itself as a gateway for local and foreign investors eager to find new business opportunities in the DRC.

72 COUNTRY FOCUS | DEMOCRATIC REPUBLIC OF CONGO

IG LL R

HTS

RES

ERV

Faced with difficult economic circumstances due to the recent drop in commodities prices – causing a fall in government revenue and rapidly rising inflation – central bank governor Deogratias Mutombo has been looking to get to the root causes of problems. In September, he pointed the finger at the government for the 2016 collapse of the Banque Internationale pour l’Afrique au Congo. To get liquidity to the struggling economy, Mutombo reminded banks of their obligation to repatriate 40% of their export revenue back into the local economy. The Université de Kinshasa-trained economist has been governor at the Banque du Congo since 2013 and his team is now investigating a claim by the United States-based non-governmental organisation the Enough Project, which said a Congolese bank has been involved in activities that finance international terrorism.

VINCENT FOURNIER/JA

Deogratias Mutombo Critical central bank governor

Albert Yuma Chairman in conflict Powerful businessman Albert Yuma, the chairman of state-owned copper miner Gécamines and head of the Fédération des Entreprises du Congo, is having a taxing time. In November, the Carter Center think tank reported that some $750m due to Gécamines had gone missing between 2011 and 2014. Several companies are also taking Gécamines to international abritration. It faces a case brought by United Arab Emirates-based Pan Global over a trade dispute, and another brought by Shamrock Global about a conflict over a slag heap in Lubumbashi.

Louis Watum Knight in copper armour in a mining romance

Business people to watch Tough times for moneymakers

South Africa’s Ivanhoe Mining is developing its huge Kamoa copper and cobalt mine, and Congolese mining executive Louis Watum is leading the firm’s DRC team. The Université de Lubumbashi-trained chemical engineer is a bridge between the Central African giant and the continent’s most advanced economy, both of which have large natural resource sectors. Watum has worked for a series of big miners with South African links, from Anglo American to Randgold. Watum has worked with the government on its planned changes to the mining code and said that Kinshasa needs to try harder on building infrastructure and fighting corruption and inertia in the bureaucracy.

It takes grit to keep pushing projects in turbulent times. Meet miners with big projects, a young startupper and a central banker looking to create stability

Kinshasa does not have the same density of startups as, say, Lagos or Nairobi, but local entrepreneurs are trying their hands at new ventures. Winner of the Anzisha Prize for young African entrepreneurs at only 20, Bénédicte Kuvuna launched Surprise Tropicale in 2013. Her e-commerce business delivers fresh Congolese fruit, vegetables and juices all over Kinshasa. She works with local producers and is looking to form partnerships with farmers in eastern DRC. Kuvuna helps run a leadership foundation and is curator of the World Economic Forum’s Global Shapers hub in Kinshasa.

Bénédicte Kuvuna Launching a tropical surprise

Kalaa Mpinga Cash in the dirt In September, the mining boss and investor made his first big investment since falling out in 2015 with Chinese investors at Mwana Africa, a mining company that he had founded. Mpinga and US-based private equity fund Kuramo Capital Management put $17.5m into the DRC’s Feronia, an agribusiness firm with oil palm plantations. Mpinga says he is looking for other investments in mining, agribusiness and infrastructure. THE AFRICA REPORT

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Randgold’s Kibali Gold Mine joint venture produced around 600,000oz in 2017

GOLD

that its production from the mine in the third quarter reached 18,533oz, which was down 34% on the same period of the previous year. Meanwhile, production at Twagiza was up 20% to 30,297oz in The gold sector is in full swing, with several the third quarter of 2017. exploration projects and large production hubs Randgold created three joint ventures in 2016 with junior Canadian concentrated in the east of the country miners in the north-east of the DRC: Kilo Goldmines (which has six permits here may be political uncercovering 361km² in Ngayu); Loncor overshadow the economy due to the Resources (which has 13 permits tainty and there may be security delayed presidential elections. concerns, but the Democratic covering 2,087km² in Ngayu); and a The leaders of the pack are the Republic of Congo (DRC)’s miners partnership with Deveron Resources, Canadian miners Kilo Goldmines and a subsidiary of Greencastle Resources. have shrugged these off. Perhaps their Banro Corporation – which has four minds have been concentrated by a rise Industrial-scale mining is only part of subsidiaries operating in the counin the gold price, which has drifted up the DRC’s gold sector. There are no relitry – South Africa’s AngloGold Ashanti, from $1,100 per oz to $1,300 over the able statistics on artisanal and UK-listed Randgold past 12 months. gold mining. There are Resources. In their wake there are several Australian many informal miners and Exploration in the Congolese gold juniors and operators from some sources say they prosector has been in expansion mode Mauritius and China, as duce an estimated 300kg of over five years. While production has well as local actors. fallen slightly, going from 25.8tn in 2015 gold per year, while others say that it is nearly 20tn. to 22.6tn in 2016, this drop is expected to be just a passing phase, essentially EASTERN PROMISE The government has taklinked to the operational difficulties en several measures to atMuchoftheminingisdone in joint ventures in the east. tempt to regulate artisanal encountered by the Kibali mine, one Kibali Gold Mine – made mining and bring it into of the country’s principal producers. Gold production up of AngloGold Ashanti, the formal economy. One The consultants BMI Research prein tonnes in 2016 dict an uptick in Congolese production Randgold Resources and example is the Initiative by the four main until 2021. They attribute this to a hike Sokimo – has developed pour la Traçabilité de l’Or mining companies, in the gold price, alongside various the Kibali deposit in HautArtisanal launched on 19 a slight drop from investment projects being carried out Uélé; Mongbwalu Gold the 25.8 tonnes June. The initiative uses produced in 2015 by the mining companies. Mines, a joint venture tamper-proof ‘smart bags’ The greatest concentrations of gold between Congo’s Fimosa with bar codes to improve Capital and Sokimo, operates in Ituri; and in the Congolese substrata are to be the tracking of informally mined gold found in the eastern part of the country Banro’s Twangiza Mining is in Sud-Kivu – from extraction to export – and to tax – from Haut-Uélé to Lualaba, passing and its Namoya Mining is in Maniema. the activity. It remains to be seen how via Ituri, Sud-Kivu and Maniema. A Banro had to shut down its Namoya gold diggers, who work in difficult and dozen or so companies are carrying out minetwicein2017duetomilitiaviolence. dangerous conditions, will welcome industrial-scale production, despite the The last time was in late September and these new measures. Muriel Devey Malu-Malu insecurity that reigns in certain areas the mine remained closed as The Africa for Jeune Afrique and the uncertainty that continues to Report went to press. Banro reported

The gold bug bites again

22.6

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BLOOMBERG VIA GETTY IMAGES

COUNTRY FOCUS

SOURCE: BMI RESEARCH

76 COUNTRY FOCUS | DEMOCRATIC REPUBLIC OF CONGO

MINING

Betting on the boom

Government revenue from mining is rising as prices and production go up, but campaigners point to troubles in the management of funds from the sector

SOURCE: DRC GOVERNMENT

ineral commodity prices are 831,000tn. Cobalt and gold production ticking up once more, and the rose, 18% and 5.7%, respectively. The cash-strapped Congolese govnet effect was a hefty 60% increase in ernment is increasingly betting on rising commodity export receipts from the DRC mining revenues to come to its fiscal during the first half of 2017 compared to rescue. Because of the budget deficit the first half of 2016, to more than $6bn. and a shortage of foreign exchange, the ABSENT DONOR FUNDING central bank has been putting pressure And the tax take is rising, too. The govon mining companies to repatriate 40% of their export earnings pursuant to ernment raked in just under $200m in a 2007 government decision. That, mineral export taxes in the first half of 2017, 29% higher than during the first half and a proposed reform to the mining code, have caused tensions between the of 2017, and the figure edged to just over $200m during the second half of 2017. Kinshasa government and the country’s mining companies. But with the rest of the economy in the On the production and price fronts, doldrums, the overall tax take for the first eight months of 2017 was $1.9bn, 23% things are looking up now. Copper lower than during the same periprices currently hover around $7,000/tn, sharply up from $4,500 od of 2016. Figures for the fourth just a year ago. And, improving quarter of 2017 should be healthier though, and the government is matters further, the country’s betting that 2018 will be better still. recorded copper exports were That will help it to weather yet 15% higher during the first half another year of near absent donor of 2017 than during the same funding. The country’s traditional period of 2016. donors are continuing to sit on The cobalt price is rising too, their hands, hoping to push the buoyed by recent announceCongolese government to proceed ments by governments around more swiftly towards a political the world, including the UK transition after President Joseph and China, of their plans to Kabila failed to hold elecswitch from petrol and tions in 2016. diesel vehicles to electric The International cars. The London Metal Monetar y Fund (IMF) Exchange cobalt price conducted its first formal was $27/lb in October The overall tax take mission to the DRC in two 2017, up from $13/lb a for the first eight years in November, but is year earlier. Cobalt is an months of 2017 still a long way from agreeimportant component was 23% lower than ing any new loans. One of of vehicle batteries, with during the same period of 2016. the main conditions of any each battery containing fresh lending from the IMF an estimated 5-15kg of the metal. By 2030, global cobalt demand is a clear indication that the government is anticipated to be nearly 50 times is committed to elections, but despite higher than what it currently is, and the the publication of an electoral calendar just ahead of the IMF visit, promising Democratic Republic of Congo (DRC) is home to more than 60% of the world’s a presidential poll in December 2018, cobalt reserves. there remains considerable scepticism that this will be respected. As a result, Congolese miners have Nicholas Staines, the IMF resident been busy. The central bank reported that copper production jumped 9.3% in representative in the DRC, explains: the first nine months of the year, hitting “It is true that there has been a big

$1.9bn

improvement in export receipts and this is already translating into higher tax revenues. It is also true that there will be big increases in both next year.” But he cautions that the government cannot fix its fiscal problems with mineral export receipts alone. The government should not bank too much on that because non-mining tax revenues look set to remain depressed, so the overall picture will probably be much less impressive. Shortly before the beginning of the national assembly’s final session of the year, President Joseph Kabila urged deputies to approve a revised mining code, something the assembly has been trying – and failing – to do since 2015. The revised code envisages higher mining royalties for the state and a change in the stability clause – meaning the period after which contracts can be amended by the state – from the current 10 years to between three and five years. The country’s Chambre des Mines, a body representing mining companies, is strongly opposed to the changes,

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DEMOCRATIC REPUBLIC OF CONGO | COUNTRY FOCUS 77

Copper

Prod (in 1000 tonnes, left scale) Average price ($/t, right scale) 1,250

1,022

1,000

10,000

750

7,500

500

5,000

4,871

250 0

12,500

2007 2009 2011 2013 2015

2,500 0

Cobalt

Prod (in 1000 tonnes, left scale) Average price ($/t, right scale) 80 70 60 50 40 30 20 10 0

64 120,000 100,000 80,000

25,463

60,000 40,000 20,000

2007 2009 2011 2013 2015

arguing they will shake investor confidence and render some mines unprofitable at a time when sentiment has already been undermined by continuing political uncertainty. John Kanyoni, the vice-president of the Chambre des Mines, says: “It is not just the mining royalties […] it is all the taxes and fees we have to pay. When you add them all up, it comes to over 15% of our exports. And meanwhile, in Zambia it is just 6%. So we are not competitive.” ‘SERIOUS CONSEQUENCES’

The main issue for Kanyoni, though, is the stability clause: “We simply cannot accept a stability clause of three to five years. We want it to remain where it is, at 10 years. How can anyone make a serious investment here with the possibility that in just three years the terms of the deal could change?” There is no indication that the government has any appetite for revisiting its proposed revisions, raising the prospect of the mining code being pushed THE AFRICA REPORT

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N° 96

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Much of the $1bn generated by parastatal Gécamines in mining deals ‘cannot be reliably tracked’

through the national assembly despite the objections of the Chambre des Mines. Kanyoni, however, says he is confident that this could not happen. “They cannot bring this code in without us. If they do that, the consequences will be serious. Mining companies may pull out.” Discussion of the revised mining code will shine the spotlight once again on mining companies’ payments to the state’s revenue authorities. Yet just as important, if not more so, are the massive payments that Katanga-based copper and cobalt miners continue to make to state-owned mining companies, and particularly the parastatal Gécamines. In early November, The Carter Center, a US-based non-profit human rights group founded by former US president Jimmy Carter, released a detailed report based on five years of research entitled ‘A State Affair: Privatising Congo’s Copper Sector’.

D E C E M B E R 2 017- J A N UA R Y 2 018

30 25 20 15 10 5 0

2,000 1,600 1,200

1,249

800 400

2007 2009 2011 2013 2015

The report concludes that joint ventures between state-owned mining company Gécamines and international mining houses entitle Gécamines to $262m in payments annually. Yet 75% of the $1bn Gécamines was contractually entitled to between 2011 and 2014 “cannot be reliably tracked to Gécamines’ accounts,” the report explains. It does not say where the money has gone, but Gécamines insiders claim that most of the money never reached the company. Daniel Mulé, who advises The Carter Center, adds that the government needs to look into other areas in order to be sure that revenue goes where it is supposed to: “The DRC is eager to revise the mining code’s fiscal regime to mobilise more state revenues […] Yet little attention has been focused on revenues to the state’s mining companies. These revenues largely escape public or parliamentary oversight, and Gécamines returns less than $750,000 per year to its sole shareholder, the DRC state.” Gregory Mthembu-Salter in Kinshasa

SOURCE: CHAMBRE DES MINES

GWENN DUBOURTHOUMIEU POUR JA

Gold

Prod (in 1000 tonnes, left scale) Average price ($/t, right scale)

MINISTRY OF MINES

Promines , a major

sector in the Demo

ince 2010, the PROMINES, under World Bank’s funding has been continuously supporting the DRC’s Ministry of Mines in improving the overall governance of the mining sector and increasing its contribution to the DRC’s national economy.

His Excellency Martin Kabwelulu, Minister of Mines, DR Congo

“

Through the PROMINES Project, with the support of the World Bank, the Democratic Republic of Congo (DRC) has put in place a development programme for the mining sector. The good governance of an active and prosperous mining sector is a determining factor for the socio-economic development and stability of the country.”

ADVERTORIAL

Designed to tie in the vision and expectations of the M inistr y of Mines, PROMINES aims to help “developing the mining sector, making it competitive, sustainable and be the foundation upon which the DRC can step up its march towards emergence for the well-being of its population”.

The project is structured around four main components, which are: 1) access to resources; 2) strengthening mining sector management capacity; 3) enhancing transparency and accountability; 4) building up sustainable development in the mining sector. In its first component, concerning access to resources, PROMINES is involved, on one hand, in improving the institutional and legal framework by assisting in drafting regulatory texts such as the mining code, supporting the creation of a Congolese National Geological Service and on the other hand, the construction of Geo-data infrastructure. Among the activities carried out, for example: one can highlight the production of a new geological map (the last one dates back in 1972), therefore, updated the country’s mineral resources inventory; ensured that topographic data updates are collected using satellite imager y prior to major airborne geophysical campaign, conducted Geo-chemical researches in several territories selected by the Government - covering an area of nearly 5% of DRC surface and the future establishment of a National Geo-science Data Bank (BNDG) that

will be hosted in the new National Geological Service of DRC which is currently under development. On the second component, which focuses on strengthening mining sector management capacity, PROMINES initiated an institutional and organizational audit, which unfolded in a strategic Development Plan of the Mining Sector for 2017 – 2021 (French acronym: PSDM 20172021), of which the main pillars are: 1) institutional capacity building, 2 ) i n te n s i f y i n g g e o l o gi c a l a n d mining research; 3) developing a competitive mining industry that provides jobs and meets the expectations of sustainable development; 4) improving the attractiveness of the DRC for investors in this sector; 5) developing mining sector support infrastructure incorporating environmental requirements. Furthermore, PROMINES is also accompanying the Ministry of Mines and the Ministry of Public Service in a vast program of reforms that target both the Mining Administration as well as the Specialized Services of the Ministry of Mines. This reform program is supplemented with a several years continuous training plan for the Mining Administration staffs. This program aims to reinforce the competencies and skills of the staffs in charge of the mining sector. Regarding the Specialized Services, PROMINES helped the Mining Cadaster (CAMI) to establish local mining cadasters in the hinterlands that enabled it to be more effective in provision of better services to the mining sector stakeholders. PROMINES also helped to better structure the artisanal mining by providing support to the SAEMAPE, whose is in charge of regulating and overseeing artisanal and small scale

©WINGEDWOLF - STOCK.ADOBE.COM

player in support of the mining cratic Republic of Congo mining operations, development of a National Strategy for artisanal and small-scale mining operations and their corresponding action plans.

In this component, PROMINES had lean over the question of mining sector revenue collection and administration. Accordingly, PROMINES funded a study on current tax collection mechanisms to support the DRC government in maximizing tax revenues. An additional support was also provided to establish traceability and a mineral certification system; that guarantee transparency in the DRC’s mining sector management.

Francisco Igualada, Senior Mining Specialist, World Bank

“

PROMINES is a World Bank-funded project to support the Congolese government in the development of the mining sector.”

In the last component which focuses on building up sustainable development in the mining sector, PROMINES has integrated and took into consideration different aspects of populations vulnerability, including that of women and children by supporting on one hand the creation of National Network of Women in Mines (RENAFEM) with two objectives: that of helping them to better organize themselves to carr y out common actions and, that of stimulating the creation of income-generating activities, on the other hand, the setting up of school reintegration programs. Finally, to respond to the challenges raised by artisanal mining and the scale of these activities across the national territory, PROMINES has initiated a registration programs for artisanal and small-scale mining operators and provides direct technical support to mining cooperatives.

Gaby K. Mansanga, Executive Director, Mining Sector Support Project (PROMINES) DR Congo

Yenga Mabolia, National Coordinator, Mining Sector Support Project (PROMINES) DR Congo

The PROMINES project is a human, organisational and technical ambition for socio-economic development and improvement of the DRC mining sector, which corresponds to a shared vision between the Congolese government and the World Bank.”

Good governance of the mining sector is based on the principles of transparency, efficiency, accountability, control and monitoring. In this way, it contributes greatly to the economic growth of the country and to the creation of a climate conducive to the development of economic activities. These principles are the basis of the partnership between the DRC government and the World Bank for the implementation of this major project for the improvement of mining sector governance, PROMINES.”

“

www.prominesrdc.cd E-mail: info@prominesrdc.cd Tel: +243 97 432 500 1 / +243 (0) 810 25 12 57 https://twitter.com/prominesrdc/ https://www.facebook.com/PROMINESRDC

“

DIFCOM/DF- © PHOTOS : DR AND AS MENTIONED

The third component, which focuses on enhancing transparency and accountability, has resulted in activities that aim to consolidate statistics on mining production and on export of mining products on a quarterly or annual basis.

JUNIOR DIDI KANNAH POUR JA

Bracongo, a subsidiary of a Frenchowned company, has survived the lean years of deindustrialisation

INDUSTRY

The ideas factory

The speed with which Ethiopia has built industrial parks shows what could be done, but industrial players in the DRC complain of all talk but no action to go beyond this diagnosis or tried to examine his government’s industrialisation policies. Instead, he stuck to statements that ring hollow. “Every time I’ve followed the President, His Excellency Joseph Kabila Kabange, he has always spoken of his desire to see the DRC become an emerging country by KABILA HAS A DREAM 2030,” he said. But he could not elaborate Interviewed by The Africa Report’s sison the measures that will be put in place ter magazine Jeune Afrique, industry to make this dream a reality. In 2016, the govern minister Marcel Ilunga ment adopted 26 ‘urgent Leu outlined the country’s recent trajectory: “We measures’, some of which experienced a complete were directly linked to deindustrialisation.” He the country’s industrisaid that this was mainly alisation. Some related as a result of the departure to the establishment of of manufacturers with the SEZs, even though a law DRC’s independence and had already been passed the looting of the early to support their development in 2013. And to add 1990s. This trend was furSize of the Bukanga to the lack of progress, ther exacerbated by presLonzo Agribusiness feasibility studies on the ident Mobutu Sese Seko’s Park, a pilot project and ‘Zairianisation’ policies, first of these pilot zones the first of a series of under which private comhave been completed 22 the government says panies were nationalised, since 2009. The first it will build. $80m has and a succession of wars. SEZ is due to be built at already been invested But Ilunga Leu avoided Maluku, in the northern in its agricultural and all questions that sought suburbs of Kinshasa. human infrastructure.

capacity to produce 25,000tn of fertiliser products per year. Many of the DRC’s major industrial units are in the mining sector, and state-owned Société Minière de Kilo-Moto is due to launch operations at a new gold refinery in Nizi in early 2018.

75,000ha

SOURCE: DRC GOVERNMENT

pecial economic zones (SEZs) lie neglected, the manufacturing base is weakening, and the 2030 target to make the Democratic Republic of Congo (DRC) an emerging-market economy is increasingly unlikely. But despite the tough political climate in the DRC, Congolese entrepreneurs are betting on a post-crisis economic turnaround. Far from the political wrangling over the holding of long-delayed national elections, the topic of industrialisation in the mineral-rich Central African country was at the heart of discussions at the annual Sultani Makutano business meeting, held in September in Kinshasa. The DRC has strong economic potential but it is struggling to reindustrialise. The latest figures provided by the Congolese industry ministry show a significant downward trend in industrial activity in the country, from nearly 5,000 manufacturing companies before its independence in 1960 to only 460 today. There has been some recent positive news for the manufacturing sector. In April, South African fertiliser company Triomf opened the DRC’s first fertiliser plant. The operation in the Kongo Central city of Boma has the

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DEMOCRATIC REPUBLIC OF CONGO | COUNTRY FOCUS 81

STARTUPS

DRC’s deindustrialisation curve

Joining forces

4,277

4,000 3,000

2,538

2,000 1,000 0

460 1939

1947

Trésor Kibangula for Jeune Afrique •

N° 96

group of young people is sitting at a table chatting away with Biko Mungala, a Congolese consultant based in West Africa who now wants to bring his experience back to his home country. On the terraces of the new shopping malls in Gombe in downtown Kinshasa, foreign and local diplomats, officials, ministers, managers, geeks, expatriate workers and businessmen mingle together. Those with Mungala are talking about creating a think tank. The project is still in its infancy but they have already defined the objectives: “Make the country both respected and worthy of respect, and create the conditions that will ensure a better tomorrow.” Gradually, those words are resonating with companies and digital initiatives that are working to change the lives of Congolese people. The country does not have a clearly

2017

After nearly a decade, it “has still not started”, laments economist Daniel Mukoko, a former deputy prime minister who calls on Ilunga Leu to “turn the talk into action”. This is necessary because, as he points out, in 2012 the government promised to launch five pilot SEZs that are yet to see the light of day. In Ethiopia, for example, it only took some nine months to develop the 300ha Hawassa Industrial Park, which is focused on textiles and garments, in the south of the country. Industrialisation “is first and foremost a question for the government,” says Jean Bakole, a United Nations Industrial Development Organisation (UNIDO) representative for West and Central Africa who has studied the ‘Ethiopian model’. But, in the DRC, “it is difficult to a find a strong-willed policy to guide the country’s reindustrialisation,” says Albert Yuma, the president of the Fédération des Entreprises du Congo. “The DRC is deindustrialising due to a lack of political will,” adds Yuma, who is also chairman of the Congolese stateowned mining company Gécamines. He stresses the need to establish “incentive policies for industrial development” while criticising the government’s recent launch of the Bukanga Lonzo Agribusiness Park 260km south-east of Kinshasa (see left). It’s a “white elephant,” he says. Experts say that industrialisation in the DRC will only become a reality if the state learns from economic models that have worked elsewhere. “It’s also important to support existing companies,” says Bakole, the representative for UNIDO. According to him, the emphasis should also be placed on local entrepreneurs whose skills need to be “reinforced” to allow them to “form partnerships with foreign investors”. THE AFRICA REPORT

Like disruptors everywhere, Congo’s tech innovators are finding their own solutions to everyday problems

•

DOM

5,000

SOURCES: STUDIES AND ASSESSMENT OF BELGIAN CONGO & MINISTRY OF INTERIOR

(number of industries)

D E C E M B E R 2 017- J A N UA R Y 2 018

defined policy in favour of digital entrepreneurship, which makes the work even more difficult. But despite this somewhat discouraging environment, there are many who want to meet the challenge to offer consumers innovative services. Toto Madradu, 35, created Lemeilleur.cd, a website mainly, though not exclusively, for holidaymakers. It compares a selection of hotels, banking services, TV subscriptions and car rental services –“basically sectors where data can be measured,” he says. INNOVATIVE ENTREPRENEURS

Alain Tshibanda Ngoy, a 36-year-old communication specialist, launched Kilist, a startup aimed at the education sector. Since June 2016, he has been working with lawyers, psychologists, computer engineers and experts from various fields to developandmarketCongo’s first teaching tablet in the four national languages Kikongo, Lingala, Swahili and Tshiluba (whose first letters give Kilist its name), as well as French. Other innovative digital tools are already available to consumers. But, due to a lack of funds and of proper coaching and mentoring, many brilliant ideas lie dormant. That is why Filip Kabeya has made it his personal mission to see more projects come to fruition. Founder of a digital laboratory known as Lumumba Lab, this 30 year old is well-known in Congo 2.0 circles. He has created several initiatives, including running a weekly meet-up for the digitally minded in Kinshasa and offering coding lessons for kids. And on 30 June and 1 July, Kabeya organised Kinshasa’s first hackathon to get people to meet up and think up solutions to everyday problems. Trésor Kibangula for Jeune Afrique

84 COUNTRY FOCUS | DEMOCRATIC REPUBLIC OF CONGO

Since 2015 the DRC’s ProCredit Bank has been a subsidiary of Kenya’s Equity Bank

to operate in the DRC. For decades, the government was hostile to foreign insurers, and Sonas held a monopoly. But in March last year, the government amended the insurance laws to allow foreign insurers to operate. Insurers must have a minimum capital base of $10m to be granted a licence. THE BRAZIL OF AFRICA

JOHN BOMPENGO FOR TAR

“Jubilee has been expanding regionally before anyone else even thought about it,” Satchu says. “They’re quite clever. They become a provider to big organisations like the United Nations so they have demand that they can build on.” These East African investors say they see the long-term potential and INVESTMENT can tolerate some short-term dips. Growth in the DRC’s economy has slowed due to political uncertainty and the downturn in commodity prices. Gross domestic product grew by 2.4% Kenya’s financial giants are boosting their presence last year, a sharp decline from 6.9% in the Democratic Republic of Congo with the hope growth in 2015. Inflation also surged to 12% last year, up from 1% in 2015. of raking in profits when the economy booms These factors have encouraged the government in Kinshasa to pursue enyan banks and financial policies to attract fresh investment. Other East African banks are also services firms are positioning According to Emmanuel Ali Nasibu, eyeing the DRC as a place for growth. Kenya Commercial Bank, the region’s themselves to capture more of the DRC’s deputy ambassador in largest lender with assets totalling Kenya, East Africa is one of the regions the Democratic Republic of Congo’s that is best suited to investment. “The $5.7bn, has said it would like to launch (DRC) massive market of 78 million operations in the DRC by 2020. DRC economy has become very small. people. Kinshasa is relaxing investment laws and making it easier for foreign We are working towards ensuring Aly-Khan Satchu, a financial analyst companies to set up businesses. The that doing business in this country based in Nairobi, says: “The DRC obviously has an enormous country is also trying to attract new becomes much easier,” banks by rolling out cashless payments Nasibu told reporters. population, and banks for civil servants and significantly reThe DRC’s political have been looking at it ducing the capital required by banks to impasse – caused by as a growth opportunity President Joseph Kabila’s support lending. Kenyan lenders hope for some time.” He adds: to ride the investment wave. refusal to hold elections “Equity has a strategy of that were due in 2016 – Equity Bank is one of the most active regional expansion that Kenyan financial firms in the DRC. has also got East Africans uses a mobile-banking In 2015 it acquired a 79% stake in the worried. Equity Bank’s model so you don’t need Sigwart says the political expensive branches. This DRC’s ProCredit Bank for KSh4.5bn is a good model to take situation is “challenging”, ($43m). “We’re the largest African Foreign direct but he encourages investhere, and I expect this investor in DRC,” says Philip Sigwart, investment in the DRC tors to see the country’s Equity Bank’s director of small and to be worthwhile in the in 2016, down potential. “In the longmedium-sized enterprise banking and medium-term.” from $1.7bn in 2015 a director of ProCredit Bank Congo. term, the DRC could Meanwhile, East In 2016, Equity posted profits of become the Brazil of Africa,” Sigwart Africa’s largest insurer, Jubilee $4.83m from its DRC operations, maksays. “It has literally everything: it has Insurance, partnered in 2015 with land, it has potential for agriculture, it ing this the bank’s third most profitable DRC’s state-owned insurance comhas mining industry, it has water for country after Kenya and Uganda. The pany Société Nationale d’Assurances electricity production, so in a way, it’s bank has announced plans to roll out (Sonas) to provide medical and life very similar to Brazil.” mobile-money services and expand insurance products. Jubilee is in the Mark Anderson in Nairobi its footprint in the DRC. process of acquiring its own licence

Frontier finance

SOURCE: UNCTAD

$1.2bn

THE AFRICA REPORT

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86 COUNTRY FOCUS | DEMOCRATIC REPUBLIC OF CONGO

COMPANIES

A once glorious fabric now threadbare Recovering from decades of successive shocks to the DRC’s financial institutions and two wars, the country’s private sector is still having difficulty finding its place

ot so long ago, the Democratic Republic knew a different industrial rhythm. Gécamines was pumping out 480,000 tonnes of copper a year, earning three-quarters of the nation’s foreign exchange at its peak in the mid-1980s. Factories hummed in industrial areas around major cities. But the rot set in earlier. The oil shock, the collapse of the copper price and the closure of the Benguela railway through Angola undercut the edifice – as did the thorough looting of the coffers by former president Mobutu and his acolytes. A World Bank document from 1994 surveys the damage. “The overall size of the economy has declined to the level of 1958, albeit with a population 2.9 times larger. The State is insolvent; most state-owned enterprises and financial institutions are de facto bankrupt.” Then came two wars. It is from under this rubble that the country is trying to extricate itself, and a new private sector is struggling to assert itself. While some consumer-facing industries like telecoms, banking and beverages are seeing success, they remain beholden to the iron laws of Congolese landmass – Africa’s third largest – the low population density, and the very poor state of the roads: everything costs more to transport. Nevertheless, a push to surface more than 1,500km of major transport arteries has helped bring that down. The travel time between Kalemie and Bendera, for example, is now just three hours, where before the journey could take two days in heavy rain. Many politicians now point to the fact that while the diamond, cobalt and copper mines are still operational, the value has yet to been seen in the average Congolese pocket. Local content initiatives to insert Congolese companies into the value chains have yet to bear fruit. Nicholas Norbrook

Top 10 Banks

COMPANY

NET NET PROFIT BANKING INCOME ($m) ($m)

ACTIVITY

YEAR OF RESULTS

Rawbank

Banking

1,095,576

877

2016

Banque Comm. du Congo

Banking

641,540

10,648

2016

Trust Merchant Bank

Banking

564,793

507

2016

BGFIBank DRC

Banking

374,985

5,251

2016

FBN Bank

Banking

367,370

3,868

2015

Ecobank DRC

Banking

364,457

(596)

2016

ProCredit Bank Congo

Banking

312,030

2016

Bank of Africa – DRC

Banking

182,562

1,359

2016

Société Financière de Banque Banking

171,611

8,611

2016

58,837

419

2016

Access Bank DRC

Banking

Top 15 Companies NET TURNOVER PROFIT ($m) ($m)

YEAR OF RESULTS

COMPANY

ACTIVITY

Vodacom DRC

Telecoms

415,593

(57,411)

2016

Kibali Gold Mine

Mining

319,217 130,995

2016

Gécamines

Mining

295,585

(82,866)

2014

Airtel DRC

Telecoms

265,140 330,721

2016

Engen DRC

Energy

261,017

7,697

2016

Aden Services DRC

Public utilities

200,000

2012

Shalina Resources

Mines

186,070

27,290

2010

Les Brasseries du Congo

Agribusiness

134,037

2016

Groupe CFAO DRC

Diversified

123,568

2013

SAFRICAS

Construction

71,180

3,313

2012

Société Nat. d'Assurances

Financial services

56,499

2015

GECOTRANS

Transport

2,241

527

2013

Gras Savoye DRC

Financial services

651

2010

MePharTech

Health

632

2014

Pay Network

Public utilities

519

2014

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ADVERTORIAL

MD SERVICES Sarl

The staff management focused on the result

n order to fight the scourge of unemployment shared by all our companies, experts are looking for solutions. If the magic recipe has obviously not yet been elaborated, here and there, miles away from the official circles, we nevertheless notice significant advance in terms of social progress through the implementation of certain organisational structures that engage in activities that can make a difference. The best way to change the course of things is to take a problem head-on and make the necessary effort to solve it. “ A well-posed problem is a problem half solved ” said the mathematician Henri Poincaré.

It is in this context that MD SERVICES Sarl wrought its battle by posing the equation in these terms: how to ensure that the mass of workers in the DRC accesses stable and sustainable jobs? In other words: how to put the companies in adequacy with the human resources, the multiple needs of the economic world with the proper obligation to each one to improve humankind? MD SERVICES Sarl was created for this purpose in 2005 under the guidance of its founder Mr Didi MUDOGO, specializing in in the outsourcing and management of human resources. Since then MD SERVICES Sarl has built a solid reputation and has become the key player to a growing number of companies active in the mining, agriculture, cement, oil, logistics and other sectors.

MD SERVICES Sarl also offers its unique expertise and knowledge of the business sector, through its advisory and investor support activities. With representative offices in Kampala (Uganda) and in Johannesburg (South Africa), the company operates throughout the Democratic Republic of Congo, valuing local know-how, to create and sustain employment in disadvantaged areas of the country. Mr Didi Mudogo and MD SERVICES team awarded as “Best outsourcing company and HR Manager of the Year 2015 - 2016” at the DRC Mining Week 2016.

MD SERVICES Sarl doesn’t rely on this “connection” between companies and the population. Its mission is to target the needs and specificities of a given sector, develop profiles, select skills and train staff accordingly. For this purpose, MD SERVICES Sarl has wrought partnerships with world-renowned companies specialized in training and building staff capacity to act as a powerful tool for its clients.

MD SERVICES Sarl stands out, for all these reasons, as “the” privileged patner to investors wishing to set up business in the DRC and tomorrow in other countries of the continent. Beyond its solid expertise and its vast database, credibility as well as the reliability of its services, all this ensures the smooth running of business processes and negotiations. As a result of the innovative nature of the strategy and the effectiveness of its approach methods, MD SERVICES Sarl was awarded as “Best Outsourcing Company and HR Manager of the Year 2015 - 2016” during the DRC Mining Week.

MD SERVICES Sarl focuses on respect for gender and encourages women starting from the principle: “Equal skills, equal work”.

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Due to the high quality of its services, MD SERVICES Sarl has a proven track record in recruiting and managing local, national and expatriate staff to the satisfaction of its clients as well as its multiple employees. This allows the company to be trusted by its rigorous and demanding clients, promoters of large-scale projects in the various sectors mentioned above.

Immeuble Future Tower 11ème niveau, Local 1101 KINSHASA – Gombe République Démocratique du Congo Tel: (+243) 82 61 80 700 E-mail : info@md-drc.com

DIFCOM/DF - PHOTOS: DR.

MD SERVICES Sarl has extended its fields of work and expertise from the mining to the cement and oil sectors.

“SAFETY FIRST”. Safety in the workplace is one of the major concerns of MD SERVICES Sarl.

MD SERVICES Sarl has participated for several years in major international conferences on the mining sector.

MD SERVICES Sarl :

In addition to local and national staff, MD SERVICES Sarl now successfully manages expatriates working in the DRC.

The practical and customized solution for staff management with focus on the RESULT.

Corporate

health check How are Africa’s leading companies handling today’s tough macroeconomic conditions? The Africa Report examines the business prospects of a cross-section of major companies in 2018 By Mark Anderson in Cape Town and Nairobi

he year ahead looks to be a strong improvement on 2017 for some of Africa’s biggest companies. A recovery in export commodity prices is being welcomed in many corners of the continent. Plummeting prices of oil and minerals cut sharply into profits of companies in those sectors, and sub-Saharan Africa registered only 1.4% growth in gross domestic product in 2016 – the slowest pace in more than two decades. Some major companies in the continent’s biggest economies

have been hurting from poor growth. They will be encouraged by signs of better market conditions. South Africa’s recession pushed many of the country’s biggest finance firms to look abroad for new opportunities. But now, financial services companies like Discovery Limited are encouraged by better prospects at home. In Nigeria, a push to diversify the economy away from oil will drive the growth of other sectors. Dangote Group’s cement and agribusiness units look set to benefit, while oil and gas companies will continue to struggle with low

COMPANIES & MARKETS 89

There is speculation that Safaricom will enter the Ethiopian market

Safaricom East African ambition A change in Safaricom’s ownership structure has made the telecoms behemoth free to venture out of Kenya for the first time

prices. But local player Seplat Petroleum is positioning itself to makeacquisitionsinthenearterm. The telecoms sector is a particular bright spot. Rising demand for services will drive growth, and Kenya’s Safaricom looks poised to begin its long-awaited expansion strategy in East Africa. Airlines are scouting for new partners as competition heats up. While South African Airways is waiting for government bailouts, Ethiopian Airlines, the continent’s most profitable carrier, is looking to beef up its West and Central African routes.

ANGLO AMERICAN

ntil recently, Safaricom – East Africa’s biggest company by turnover – had been unable to expand outside of its home turf. Under the company’s previous ownership structure, it was seen as a Kenyan company focused on the Kenyan market. But with the sale of parent company Vodafone’s stake in Safaricom in August, the company is now free to move into other countries. Safaricom is on the cusp of an expansion drive into as many as five African markets by 2021, according to Bob Collymore, the company’s chief executive officer. “We want to go into white space […] space that no one is in at the moment, and no one is in e-commerce,” Collymore told the Financial Times in September before he went on medical leave. Collymore’s vision for Safaricom is to push its new Masoko e-commerce platform as well as its M-Pesa mobile-payment products into neighbouring countries. The company will be trying to replicate the strong growth in mobile banking products it has fostered in Kenya. Mobile-money services earned Safaricom $530m last year in Kenya. Safaricom’s financials are strong overall. In March, the company recorded a 27% year-on-year increase in pre-tax profits, reaching $685m. In August, Safaricom’s parent company, UK-based telecoms firm Vodafone, transferred almost all of its 35% stake in the company to Vodacom, its South Africa-based subsidiary. Talk of an expansion drive in the wake of Vodafone’s share sale drove Safaricom’s share price up to a record high of $0.26, giving the company a market capitalisation of $10.5bn. The share sale was an important milestone. In November, Nicholas Ng’ang’a, the chairman of Safaricom’s board of directors, told reporters: “For Safaricom, this reorganisation has given us an expanded mandate to explore opportunities outside Kenya […]. We are currently looking at [the East African] market.” The most attractive telecoms market among Kenya’s neighbours is certainly Ethiopia, which has a population of around 100 million people. Safaricom has denied rumours that it is in advanced talks with the Ethiopian government to buy a significant stake in state-owned monopoly Ethio Telecom, which was recently named Africa’s largest telecom company by subscriptions. Ethiopia recently launched mobile-money services, leading many to speculate that Safaricom’s M-Pesa could also be coming to town. Sateesh Kamath, Safaricom’s chief financial officer, will become its acting chief executive officer while Collymore is on leave. “Asset-light” partnerships will form the basis of the company’s expansion strategy, Kamath told local media: “We do not [want to] go and invest millions and millions. It will be partner-based and platform-based.” M.A. in Nairobi

Not so painful when the premiums go down

Discovery Limited Every good boy deserves favour, even from a bank With the success of its data and rewards-based Vitality programme, South Africa’s third-largest insurer is now taking aim at the retail banking sector

iscovery Limited is known as a disruptor in the insurance world thanks to its app-based Vitality programme, which tracks and rewards positive client behaviour. Now, seeking to diversify its business, the South African insurance and financial services group wants to apply Vitality’s model, driven by technology and data, to the world of retail banking. The Johannesburg-based company plans to launch Discovery Bank by mid-2018 after receiving authorisation from South Africa’s banking regulator – subject to a few conditions – in October. Adrian Gore, Discovery’s founder and chief executive, tells The Africa Report: “We believe that our shared-value model has strong application in banking, given the

way it monetises better client behaviour for the benefit of the client and Discovery.” The Vitality model works by tracking behaviour, including visits to the gym and food purchases, and rewarding healthy choices with incentives such as free coffee and discounts on movie tickets and flights. Gore says the Discovery credit card is a jumping-off point into retail banking. The card is profitable for the company, generating an average profit of more than R350m ($25m) per year. “We know, for instance, that the level of bad debts on the Discovery Card is materially lower than the industry average,” Gore says. “We attribute this to a conservative approach to risk

FRANK TRIMBOS/REDUX-REA

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management and the excellent quality of the client base.” But the new Discovery Bank will not be the only new entrant into the market next year. TymeDigital, which is 90% owned by the Commonwealth Bank of Australia and 10% by Patrice Motsepe’s African Rainbow Capital, received a licence from regulators in late September. Discovery’s Gore is tight-lipped about Discovery Bank’s planned products. Last year, Discovery said it would spend R2.1bn to set up the bank. Analysts expect it will target the higher end of the market, as with its Vitality programme. Discovery also plans to continue expanding Vitality to a global client base. The company currently operates in 16 countries, serving 10 million clients, with wholly owned businesses in South Africa and the UK along with partnerships with insurers in North America, Europe, Asia and Australia. Gore says the expansion will continue in the new year. “We’ll be introducing a new partner group next year in Japan with Sumitomo and have announced a strategic model in partnership with Hannover Re to deliver a cloud-hosted Vitality solution with potential to reach another 150 countries,” he says. China’s Ping An Health Insurance, in which Discovery has a 25% stake, has seen “phenomenal growth”, which Gore expects to continue. He anticipates that the venture will reach profitability in the next financial year. With sluggish economic growth in South Africa, Gore says he remains optimistic, despite the country’s challenges. “Historically, we have invested in the country in the midst of tumultuous times, and often these are actually the best times to build,”

“The level of bad debts on the Discovery Card is materially lower than the industry average” he adds. Gore founded Discovery in 1992 during South Africa’s volatile transition to democracy, and in a market dominated by big players. Discovery is now South Africa’s third-largest life insurer by market value.

THE AFRICA REPORT

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SULTANI MAKUTANO, THE FAIR BUSINESS NETWORK FOR CONGO EMPOWERMENT For more than two years now, a new business network experiment existsinRDC,theSultaniMakutano. Clustering more than four hundreds congolese economic actors, the «fair business network» has definitely established its name after its third annual forum from last September.

feel free to say what he has to say, and it was important to build it!» Nicole Sulu, the Network founder, declared. The fact is that, in this « giant » country of central Africa where everything has to be done, foreigners still share the lion’s part. Thus, the ambition of the Makutano network is to renew the dialog between Congolese economic actors with the aim of exploring new hints of solutions, to know better each other, and to create an a-political think tank, able to design a step by step progression to Congolese economy re-appropriation. « This does not mean that foreigners investors, and especially African ones, are not welcome, and inversely, we are sure that they will enjoy this casual business meeting and make good deals with Congolese !» added Nicole Sulu.

«We really missed a true space of exchange earmarked for the sole Congolese, nationals or living abroad, where everyone would

The fourth edition will take place in Kinshasa, from September 14th to 16th 2018. To know more about Sultani Makutano : www.makutano-network.org

92 BUSINESS | COMPANIES & MARKETS

Dangote Cement and sugar bring sweet returns Dangote Group has been one of the few companies to outrun Nigeria’s recession and is expected to expand into more African territories next year exploit government tax breaks. Since 2009 Dangote Cement has claimed ‘pioneer status’ 10 times over three plants. With the considerable tax savings this has brought the group’s cement business has grown and it should begin exporting in 2018. In 2017 the government announced cement would be ‘phased out’ from the scheme.

social responsibility hasn’t translated into business gains yet, but it will when they finish construction because then they can move products quicker from plants and have easier access to the plants. […] The government also sees [Dangote] as a partner […] who has benefited from their policies.” With government support largely assured, Dangote

With government support largely assured, Dangote Group could launch an assault on foreign markets The conglomerate is also due to begin work on the rehabilitation of the expressway to the Apapa port in Lagos. Contradicting reports that it would be getting a tax holiday as a sweetener, Dangote Group said it would be bankrolling the project but deducting its cost from tax. Nairametrics’ Obi-Chukwu tells The Africa Report: “Their corporate

Group could launch an assault on foreign markets and sell off some of its stakes in Nigerian operations. In September, Dangote made an offer for South African cement manufacturer PPC before withdrawing it in October. Manji Cheto, Teneo Intelligence senior vicepresident for Africa, says: “The company is already

operating in some challenging markets […], although you could argue that its decision to spread its footprint across the African continent, and possibly beyond, as well as across sectors, is precisely to hedge to better manage these risks.” Analysts point out that Dangote likes to be a dominant player in a sector. “He divests in businesses in sectors that are more inclined to have more competition,” says Obi-Chukwu. “He did so with the flour mills, but bought it back. […] I expect expansion into more African territories next year. In some countries there are plants under construction. In some others, he just got licences. However, Nigeria remains the largest market for the group and will remain so next year.” Dangote’s recent conflicts with the authorities in both Ethiopia and Tanzania suggest he is still tweaking his pan-African plan.

Eromo Egbejule in Lagos

BENEDICTE KURZEN/NOOR/REA

or the first two quarters of 2017, Nigeria endured its worst recession in 25 years as the government struggled to help the economy to diversify away from oil. At the same time, Dangote Group, owned by billionaire Aliko Dangote, has been expanding its operations into oil refining and agribusiness. In August, Dangote Group signed an agreement with Niger State to establish a $450m sugar complex that, when completed, should create more than 15,000 jobs. Over the next three years, it plans to spend a further $3.8bn on sugar projects and $800m on dairy projects. Analyst Ugo Obi-Chukwu of Nairametrics says: “It was a stellar year for the Dangote Group, considering this was a year with strong economic issues. Revenues are up by 36%, earnings per share up by 39%. It was a stellar year.” Part of the group’s strategy has been to aggressively

Dangote’s sugar refinery at Apapa Wharf, Lagos, will benefit from a new expressway, also built by the group THE AFRICA REPORT

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SPEED

SERVICE SECURITY

94 BUSINESS | COMPANIES & MARKETS

Seplat

Ethiopian Airlines Competitors scramble for partnerships

are available. But we still model our business to stay focused on what we are doing. And once there are opportunities, we simply fit them in rather than disrupt what we’re doing.

Austin Avuru

Chief executive officer, Seplat Petroleum Development Company

Opportunities are dropping in our laps TAR: What major trends do you see in Africa’s oil sector over the next year? AUSTIN AVURU: I think we will see a lot of discussion about domestic energy security, which means things like gas to power, gas to industry domestically in Africa. We have always recognised that from 2012 [onwards], and you can see that as being the core of our gas business expansion, fitting into a space that the multinationals have left for us. In the same way, there are assets, especially onshore shallow water. There will also be space that will continue to be left for us to play.

Are you looking to raise fresh capital now? No, not in the immediate horizon. But the next year in particular will be spent completely repairing our balance sheet and getting us ready for things like acquisitions. We’ll keep looking at opportunities, and we have the capability to immediately model whatever is available and see whatever fits into our model. So if we have an opportunity, wherever it is, we’ll run the evaluation comparatively because then we have opportunities everywhere else. And if we see an asset not far from where we are that returns a lot more economic value than something else that might even look attractive – say in East Africa – it will be easy to make that choice.

African airlines are queuing up to partner with the continent’s best-run carrier

thiopian Airlines has surpassed major rivals to become the most profitable airline on the continent. “Having the right strategy, massive investments in the future, well-crafted corporate governance and strong support from the host government are the main recipes for our major successes,” Esayas WoldeMariam, the airline's head of international services, tells The Africa Report. After carrying out massive upgrades at its hub in Addis Ababa, the airline is now setting its sights on other operators across Africa. Though it recently rejected claims that it is negotiating to manage Arik Air, the airline says it is interested in acquiring stakes in at least half a dozen other airlines. Airlines in Botswana, Mozambique, Uganda, Tanzania, Zambia and Zimbabwe have expressed an interest in partnering with Ethiopian, according to officials. “This is because we have a success story with Asky Airlines in Togo and Malawian Airlines in Malawi, where we have a majority share,” Esayas says. Ethiopian generated revenue of close to $3bn in 2017. It will soon add another 50 aircraft to its fleet of 87. The government also plans to build a new airport that can handle up to 100 million travellers per year.

Are you considering expanding your gas projects? Our gas business has remained within the remit of what we described four years ago, which means our target was to have something like a 70/30 mix of oil and gas, and we’re just about there. So we’ll continue to expand our gas business as we expand our oil business. We like that mix. It provides us with the flexibility that we like. So, yes, we’ll expand both simultaneously. There are a number of countries across the continent that are trying to start oil and gas production, like Kenya, Uganda and Tanzania. What advice would you give?

“Smart countries will remember to stay focused to manage their economies as if oil wasn’t there”

Can you tell us about your growth strategy over the next year? When we started our gas business, it wasn’t an issue for discussion. Nobody saw it. But the things we needed to do we did then, and the opportunities for gas expansion have been dropping in our laps. We are building a very strong business development team this year so that at any point in time we can have a bird’s eye view of what opportunities

These are modest production volumes, really. We’re not seeing anything that would tip the scale. There might be some substantial gas production in the East when they finally find a market, but overall they are modest, which means that countries that are smart will remember to stay focused to manage their economies as if that oil wasn’t there. Once they turn their attention to oil as the solution to their problems, they will run into problems. Interview by M.A. in Cape Town THE AFRICA REPORT

Elias Meseret in Addis Ababa

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Transforming agriculture from grass roots to ingredients

From rice farming in Nigeria to cocoa and cashews in Côte d’Ivoire, Olam has been committed to Africa for nearly 30 years. We have invested S$1.89 billion and built a network of 2.5 million smallholders across 25 countries who supply us with products like cotton, sesame and coffee. Our 31 processing sites are spread across the continent and allow us to transform our crops into key ingredients used in both local and international products. We provide commercial bakers with flour and have our own well-known food brands such as Tasty Tom, Royal Aroma rice, King Crackers, Mama Gold, BUA pasta and Dona palm oil. 21,000 full-time employees and 26,000 seasonal, contract or temporary workers help us to deliver our goals. They are the catalyst for our success and keep us believing in Africa’s potential.

Olam – born in Africa, believing in Africa. @Olam @olam_international olamgroup.com

96 BUSINESS | LEADERS

Akinwumi Adesina

President, African Development Bank

Africa needs visionary leaders

northern Mali – high levels of rural unemployment among youths, extreme rural poverty, climate and environmental degradation,” says Adesina. “Getting agriculture to work there is vital.” To do that, he has launched an initiative that aims to provide 25m jobs over the next decade. “Last year alone the AfDB invested $800m in eight countries to get young people into agriculture. And over the next 10 years we will be spending on average $1.5bn a year on this programme,” adds Adesina. That spending programme – alongside other commitments such as $15.5bn in infrastructure projects over the next five years, especially electrification – comes at a cost. In December 2016 the AfDB board validated the bank’s borrowing programme for 2017, with the institution authorised to raise $9.4bn, an increase of $900m compared to the previous year.

The AfDB president talks to The Africa Report about how results matter more than ideology and how the continent needs to support its farmers to face off competitors

economic activity should be frican Development Bank (AfDB) located. Of the $100bn world PresidentAkinwumi market for chocolate, Africa Adesina is not inter makes just 2% on revenue, while it ested in the ortho provides 75% of the cocoa beans. doxies that have defined the “It’s not difficult,” says Adesina. “Where is the brain surgery in development bankers of recent decades. Take, for example, the making chocolate?” And while he wants open mar usual technocratic reverence kets, he points out that Western for not interfering in markets. countries use escalating tariffs Rather than bemoan the way that start at zero for raw materials the United States and Europe and increase incrementally as the distort agricultural markets by heavily subsidising their farmers, exported product gets processed. he argues that African countries There are no tariffs on sending a should do the same. raw cocoa bean to Europe, but turn it into cocoa butter and you “Ever ywhere around the face a 15% levy. world agriculture is supported,” Adesina tells The Africa Report. “What “It’s not difficult. Where I don’t find acceptable is the brain surgery is a situation where farmers in Africa are in making chocolate?” the least supported of anywhere in the world. We can Though it’s no surprise to those not abandon farmers. We must familiar with his career, Adesina thinks that agriculture – in par provide financing for them, access to technology, mechanisation, ticular his mantra of agriculture market access, rural infrastruc as a business – is as close as we are going to get to a silver bullet for the ture, all the things they need to continent’s developmental woes. help transform their lives.” Likewise, he is keen to empha This is important, in particular, for the vicious cycle of poverty and sise the need for African countries actively to start processing their violence that allows extremism to own raw materials rather than prosper in rural areas such as the Sahel. “Take the Lake Chad area, allowing the ‘invisible hand’ of northern Nigeria, northern Kenya, markets to determine where

BANKING ON DEVELOPMENT 6 February 1960 Born in Nigeria 1988 Earned a doctorate in agricultural economics from Purdue University in the US

CONVINCING THE BOARD

1990 Joined the West African Rice Development Association as a senior economist

Buttoreachhisgoal,Adesinawants to raise the capital base, which currently sits at around $94bn. Sources within the bank suggest he has yet to win over the entire board, with regional members – non-African shareholders like Germany and Norway – still not sold on the investment strategy. “We are having conversations about the appropriate time [for a capital increase], but we have very strong shareholder support,” insists Adesina, pointing to the way the AfDB’s fortunes have been turned around in recent years. “When I started, we [had] declining net income. We’ve put that back on a positive trajectory, from about $400m two years ago to over $700m so far this year. And I think we will be able to reach $1bn by the end of the year.”

2010 Named agriculture minister of Nigeria 1 September 2015 Replaced Donald Kaberuka as president of the AfDB

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LEADERS | BUSINESS 97

are multinational companies.” He says that transparency, accounta bility and fairness on how Africa’s natural resources are managed is key: “We want the resources that belong to African countries to be used for Africa’s development, not misappropriated. Resources don’t belong to individuals. They don’t belong to companies. They belong to countries, and they must be used in the countries’ interests.”

VINCENT FOURNIER/JEUNE AFRIQUE-REA

GETTING BETTER DEALS

What about more aggressive attempts to close the financing gaps of the continent, including the nearly $100bn needed yearly to fund roads and power stations? In Tanzania, President John Magufuli accused Acacia Mining of under reporting its tax liabilities and sought a fine of $190bn this year. For some, like Nigeria’s billion aire businessman Aliko Dangote, this is economic suicide. “Once an THE AFRICA REPORT

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investor complains, the rest will run away. They don’t even want to hear the details.” But Adesina’s response is more nuanced. “It’s a balancing act. I don’t see any thing wrong in renegotiating a bad deal,” he says. “Don’t forget that a lot of the challenges that we have in Africa when people talk about illegal capital flows actually come out of the fact that a number of companies involved

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Adesina adds that some of the larger global resource companies hiremorelawyersandaccountants than entire African countries do. “Many countries got into deals that were not well structured in terms of their taxes and royalties […]. It’s a lopsided situation.” Progress is being made. The AfDB’s Legal Support Facility, for example, “has been highly successful in helping many, many countries to renegotiate deals,” he says. But Adesina disputes the idea that East Africa has seen an uptick in what might be called ‘author itarian developmental’ regimes, despite the tougher stances that governments in Rwanda, Ethiopia and Tanzania are taking towards both civil society and the private sector. “Africa needs to have stable governments, visionary leaders and fast-paced development. And I think what I see in East Africa encourages me more than any thing else,” says Adesina. The man who put Ethiopia on its current trajectory, the late prime minister Meles Zenawi, was also not interested in the development orthodoxies of the ‘Washington consensus’. Adesina says: “There is noparticularroutetogettingthings done, no cookie-cutter approach […]. But leaders must have vision. Everybody used to criticise China, but look at China today.” Perhaps Adesina is echoing the ideological pragmatism of China’s former leader Deng Xiaoping. He aimed to use the most useful elements from both planned and market economies. It does not matter whether a cat is white or black, Deng said, as long as it catches mice. Interview by Nicholas Norbrook

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INNOVATION

Africa’s technology test grounds Necessity is still the mother of invention, and African companies are leading the way with game-changing fintech, aerospace and energy projects born from local problems

rom leapfrogs in the renewable-energy market to fresh ideas in financial technology, Africa is uprooting the idea that the continent is forever catching up. Just as India and China created a clutch of innovations based on lean processes, African markets where infrastructure and skills constraints have hampered growth are fertile grounds for invention. In renewable energy, this is often driven by falling costs, with solar in particular far cheaper than it was even a few years ago. The International Energy Agency estimates that Africa added nearly 4.5GW of power to its grids from renewable sources in 2016. But sometimes it is an absence of red tape that encourages risk taking. Indeed, some companies have found a lighter regulatory environment has allowed for breakthroughs in mobile payments and drone delivery platforms. This is not to say that Africa should be a guinea pig for all and sundry to test potentially harmful business processes. The failure to enforce environmental regulations properly in the Niger Delta gives a quick perspective on how that story ends. But the fast growth of M-Pesa – which has made East Africa a world leader in money-transfer technologies – shows the potential benefits of nimble innovation.

Energy A throwaway idea

$1.4m Amount (R20m) raised by South African insurtech startup Naked Insurance in a funding round from Hollard, South Africa’s largest privatelyowned insurance group SOURCE: DISRUPT AFRICA

ozens of scavengers move slowly through the Reppie rubbish dump in Addis Ababa’s Koshe District, scouring mounds of garbage for metal, plastic and other valuable goods to sell. But this landfill site, which has been the city’s main dump for half a century and was the site of a deadly avalanche that killed 113 people in their homes in March 2017, will soon be generating more positive headlines. It is here, just a few miles down the road from the African Union’s headquarters, that one of the continent’s first waste-to-energy power plants will start producing electricity next year. The plant will consume 420,000tn of waste – about 80% of the city’s total rubbish output – by burning it in accordance with European environmental standards. The plant’s turbines will generate 185GWh of electricity every year – enough to power about 30% of the city’s households. “To us, it’s no longer garbage when it comes in. It’s fuel,” says THE AFRICA REPORT

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Samuel Alemayehu, managing director for Africa at Cambridge Industries, one of the companies behind the project. “We take the garbage, convert it into heat, convert the heat into steam, pressurise the steam and that moves the turbine that generates electricity,” he says. The plant is attracting visitors from around the world. On one day in November, Norwegian royalty visited the plant in the morning and South Korean executives toured it after lunch. Cambridge Industries, a London-based renewable energy company, and its partner China National Electric Engineering Company, say the plant is a blueprint for future waste management and electricity generation on the continent. EASILY REPLICABLE

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Drones Far-flung flying machines

necessitated a custom-designed plant. “We have identified cities in Africa with populations ranging from three million to seven million where we could build the same exact facility that we’ve built in Addis,” says Samuel. Target cities are Dakar, Douala, Kampala, Nairobi and Lagos, where power shortages are so severe they want to build two plants. In such cities diesel generators pollute the environment while levying huge operating costs on businesses. Similiar projects to the one in Addis are taking off. South Africa’s Johannessburg launched a 3MW landfill gas-to-power project in December 2016. Meanwhile in Kenya, the Gorge Farm Energy Park runs a 2.8MW anaerobic digestion plant that generates electricity from organic waste from a vegetable farm. Samuel says West Africa’s Ebola outbreak demonstrated the desperate need to improve sanitation in Africa’s biggest cities. Urbanisation has dramatically increased the amount of waste that the continent’s cities are producing. The Reppi landslide, too, was a wake-up call to address the problems of landfill. Mark Anderson in Addis Ababa

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CYRIL NDEGEYA/AFP

if greatly scaled up, set-up launched in early2018.Withfourlaunchsitesandmore than 2,000 drone flights a day, it will be able to reach 10 million Tanzanians living in remote areas where medical supplies easily spoil during long truck journeys. And after a recent executive order by United States President Donald Trump, which allows cities to take back control of their airspace under the commercial aviation floor of 500ft, Zipline is planning to take drone delivery to the US. Nicholas Norbrook

JUBILO-HAKU/FLICKR CC

The Reppie waste-toenergy plant is a first in sub-Saharan Africa

ivil aviation regulations in much of the world were written before the age of the flying robots. Those regulations are remarkably tough in many parts of the world – as befits the rules that govern defying gravity at 900km an hour with passengers on board. But for drones to really start to deliver on their promise, they will need to be integratedintoregulatoryframeworks. Zipline, a company that has been delivering blood for health centres via fixed-wing drones in Rwanda since October 2016, hopes to convince regulators worldwide about the need to integrate drone operations. Key to the more than 2,000 successful blood deliveries Zipline has made in Rwanda were efforts to get in sync with Rwanda’s air traffic control system. “They basically monitor us like they monitor RwandAir,” says Zipline’s head of global operations, Maggie Jim. “The best way for us to integrate was to minimise the amount of change.” The company has already impressed Tanzanian officials, who will see a similar,

Fintech Not just a luxury

he Mauritian financial services regulator has introduced a ‘regulatory sandbox’ licence, following hot on the heels of London and Singapore, as it tries to stay at the front of the financial technology (fintech) pack.Aregulatorysandbox allows companies to test

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innovations in real markets. The island’s authorities, who hope to make the country a financial hub that attracts investors who wish to enter African markets, want to attract companies that are experimenting with Bitcoin and other distributed-ledgerstyle fintech services.

“Banks haven’t proven to be great service providers for the mass customer”, says Mauritius-based Bank One chief executive Ravneet Chowdhury, who spots a gap in the market for companies that can marry telecoms-style customer experiences with the deep pockets of financial institutions. And while it may be tempting to think that something like Bitcoin is a rich-world luxury pursuit, Zimbabweans are already provingithasareadyhome in Southern Africa. The return of galloping inflation, last seen in 2008, has had many in Harare running to shelter their cash any place they can. Bitcoin prices have shot up at the Harare Bitcoin exchange known as Golix. Reuters reports the exchange traded more than $1m in the month of October alone. N.N.

100 BUSINESS | COMPANIES & MARKETS

Amy Jadesimi Managing Director, Ladol, Nigeria

Optimism for Nigeria

igeria is starting to support its real economy, and that is going to have tangible results. One of the reasons that the halving of the oil price didn’t result in an 8% fall in our gross domestic product, as it did in the 1980s, is because of the strength of the agricultural sector and manufacturing sector – things that have quietly been happening over time. Nigeria is an unsung success story because we have managed to weather the storm so much better, which shows you what is going to happen when we come out of it. One of the pro-business things this government has done is the executive orders. In April this year, President Muhammadu Buhari came out with a directive that was anti-monopoly. It said any policy that favoured a monopoly should be struck down, which went largely unreported, but this is earth-shattering. It’s the government of Nigeria, a country that is famous for rent seeking and monopolies, and sabotaging the economy for decades. Likewise, another directive for the ease of doing business was aimed at the civil service. If you are a government official, a request for action cannot sit on your desk for more than a week and if it sits on your desk for more than a week it will be deemed to have been approved. It really breaks up a lot of the power that the more unscrupulous people in government were using.

Looking into the corporate crystal ball

The Africa Report speaks to leaders in banking, agribusiness and services to find out their views on what the year ahead may hold in their particular sector Interviews by Nicholas Norbrook

BUSINESS IN 2018

Venkataramani Srivathsan Managing Director for Africa and Middle East, Olam, Singapore

Putting the farmer first

Ravneet Chowdhury Chief Executive, Bank One, Mauritius

Opportunity in financial services

lobally, I think Africa still represents a great opportunity because there’s still a lot of pentup demand and growth in Africa. Clearly, there is a great opportunity in the financial institution space, which a lot of global players don’t get into because they don’t understand Africa. But there is a lack of momentum. The heavy growth East Africa has been having has slowed down, for example. South Africa has its own problems. The oil-producing countries have their own problems with the oil price. With regard to banking, the collapsing walls between telecoms and banks, and the growth of big data, I think the storm is coming and it will take us all along with it if we don’t prepare ourselves and reposition to adapt. Banks haven’t proven to be great service providers for the mass customer. Banks today don’t seem to have the information on a customer to be able to know what a customer needs, and along with regulations it’s making it extremely difficult for the customer to get a really great experience because we will still block a customer’s card if he travels out of the country and doesn’t tell us.

s with other parts of the world, in Africa extreme weather conditions impact the availability of food for many. And given that 2017 is set to be one of the hottest years on record, better managing climate-change impacts is going to be a continuing imperative. Together with governments, we need to support the small-scale farmer with as much as we can so they get the best bang for their buck in these challenging times. To do this, they need to be recognised as the primary food producers for Africa. This is not to say that we shouldn’t be optimistic about 2018. Certainly, there is increasing recognition among companies and governments that current food and agricultural systems are working neither for farmers nor our planet. We are going to have to reimagine the way agriculture works, which is no mean feat.

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POEM BY DAMI AJAYI

From A Woman’s Body is a Country (Ouida Books)

HOME Homebound crowd, saddled with miserly experiences & the misery of sore feet: pray, carry word home for me, tell my parents I am well. Ambition sent me on an errand like flung stone in flight, sailing through the air, assailed by foreign tongues. At night, I lie on my side & I hear the distant folk songs from home, carried in the winds. My heart aches. I stall tears with machismo when my feet ache from journeys untold, when my body shivers from the ecstasy of virgin roads. Days have climbed upon themselves like complacent lovers. Nights have dried out like vigil oil lamps. Feet have kissed earth’s dirt for too long. Home is the gurgling of familiar streams, the clarity of laughter, a soft knock rapping on the door of memories. Home is red mangoes on corrugated iron roofs. Home is a visiting dream, a vanishing apparition, a piquant tune. Home is retreat, return.

THE AFRICA REPORT

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N° 96

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D E C E M B E R 2 017- J A N UA R Y 2 018

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