2014 GDP growth – the mining (non) effect

2014 GDP growth – the mining effect

The Central Bank of Congo (BCC) has recently released a very interesting report named “report on the monetary policy 2014”.

According to the BCC report, the economy grew by 9.5% in 2014 compared to 8.5% in 2013. This is 4.8% higher than the average of the SSA region.

Source: Central Bank of Congo

The primary sector remains the most important contributor to the GDP as one could expect for a mining country like the DRC. However, it is worth noting that 5 years ago it was not the mining but the agriculture sector the main contributor to the country’s growth. In 2014, the mining sector has contributed up to 50% to the country's growth while its contribution was “only” 28% in 2013 according to that same report.

This report is clearly demonstrating the tendency for the economy to heavily rely on its extractive sector with the risk of been negatively impacted by a downturn in commodity prices (the copper price has significantly dropped recently). The data show that the country should work more on diversifying its economy.

According to the BCC, the total production of copper was 1 million tons in 2014 compared to only 0.3 million tons 5 years earlier. The total value of copper exported in 2014 was USD 7.4 billion while the cobalt value was USD 2.2 billion.

On the paper, this looks good but when you are travelling in the Katanga province, you don’t really notice the positive impact those numbers have on the population unless you are working in one of the mining “value chain” companies.

The debate is open between the mining companies claiming they are paying taxes therefore it is the role of the government to provide the basic services and the government that claims the mining companies are not paying enough taxes thanks to a mining code too “favorable” to them. I am sure this debate with continue for some times.

I am not a mining nor a taxes expert but a couple of paragraph later in the report the BCC is mentioning a study done by a Belgian professor Dr Marysse on Tenke Fungurume as well as an IMF comparative study showing that the fiscal charges supported by the mining companies in the DRC is approximately 13% of their turnover compared to 45 to 65% in the rest of the world.

If those data are correct, I argue that there is something wrong that the government would have to address in the new version of the mining code they are working on.

The impact of the mining industry growth on the population is yet to be felt and the government, in my opinion, should do anything within its power to make sure the population starts benefiting from this mining cycle before it is too late.

When I say everything in its power, I am not talking about harassing the private sector obviously…