by Joseph Ngwawi – SANF 07 No 25
Southern Africa has embarked on an initiative to assist the Democratic Republic of Congo (DRC) to reconstruct its economy and build a strong infrastructural base to attract investment into one of the continent’s richest countries.
Business and political leaders from the Southern African Development Community (SADC) converged on Kinshasa on 23-24 April for a regional conference on trade and investment for the reconstruction and development of the DRC.
SADC executive secretary, Tomaz Augusto Salomao, said the regional grouping is working on “new initiatives that will encourage investors to locate in the relatively disadvantaged parts of the region”.
The country has not exploited its full economic potential due to the political instability caused by civil war.
Besides having some of the world’s largest deposits of diamonds, copper and cobalt, the DRC has vast untapped agricultural capacity which could easily transform the country into the next food-basket of Africa.
“It is therefore, our belief that with the stabilisation of the political situation which we are witnessing in the DRC the country is ready for increased intra and inter-regional flows of trade and investment,” noted Salomao.
SADC will be hoping to build on an economic stabilisation programme initiated by President Joseph Kabila in May 2001 – a few months after coming to power – which has seen the DRC achieve relative economic success over the past few years.
The stabilisation programme has reduced inflation, renewed mining activity and increased foreign direct investment.
The International Monetary Fund (IMF)-backed reforms included liberalisation of petroleum prices and exchange rates and adoption of fiscal and monetary policy discipline. The country’s annualised inflation rate, once one of the highest in the world, declined from more than 500 percent in 2000 to around seven percent in 2003.
The country has since June 2002 been able to access credit from the IMF and the World Bank, while other bilateral donors have pledged to fund development and reconstruction projects.
The Paris Club also granted the DRC Highly Indebted Poor Country status in July 2003, a development that has helped alleviate Kinshasa’s external debt burden and freed funds for economic development.
Gross Domestic Product (GDP) growth was over five percent in 2005, with an estimated total GDP of US$7.2 billion and per capita GDP of US$120.
Economic management and control of the country’s mineral resources have been the main causes of internal conflicts in the DRC.
“In this context, we encourage investors small and medium and entrepreneurs from the SADC region and other parts of the world to invest and trade with DRC, taking into account the market enhancement brought about by peace, the DRC membership in SADC and the prospects of the SADC Free Trade Area,” said the SADC executive secretary.
SADC has set 2008 as the target for creating a free trade zone within this region of more than 230 million people and with a combined GDP of approximately US$230 billion.
The region’s leaders approved a Finance and Investment Protocol in August 2006, which is aimed at strengthening cooperation and integration in the areas of macroeconomic convergence, taxation, development finance, central banks, as well as financial system reform and development.
Salomao said SADC is focusing attention on increasing its competitive advantage as an attractive destination of foreign direct investment in Sub Saharan Africa through deeper regional cooperation and taking advantage of its market size.
He noted that infrastructure constraints were usually cited as increasing transaction costs and therefore contributing to making the region uncompetitive.
“The development of efficient and reliable infrastructure, especially in transport, communications and energy, is therefore a key initiative that has the potential to attract investment and thereby unlock the opportunities for growth in the region,” he said.
The DRC investment conference comes against the backdrop of the March 2007 SADC Extraordinary Summit that focused on the political and economic situation in the DRC, Lesotho and Zimbabwe.
The extraordinary summit, held in Tanzania on 29 March, expressed its support to the “ongoing efforts for the economic reconstruction of the DRC”.
