You think 2016 was bad? 2017 was not better…

Happy New Year to all my readers! I wish you all the best for 2018!

Weak GDP growth, high inflation, depreciation of the Congolese Franc (CDF), decrease of the country international reserves, etc characterized 2016.

                 

Well, from those indicators perspectives, 2017 was not better than 2016. Not only the CDF depreciated by another 32% against the USD but also the inflation skyrocketed in 2017 (+54,71% in 2017 against +23,6% the previous year). (There is a strong relation between the depreciation of the local currency and the inflation as most goods consumed in the DRC are imported).

The international reserves remained very low at USD 858,7 millions representing only 3,77 weeks of imports. It only grew by USD 13,3m in one year. It is difficult to support your currency with such a weak foreign exchange position.

This year, the government can’t blame the World Economic Outlook as the world grew faster in 2017 than it did in 2016.  The DRC also enjoyed higher commodity prices with the price of cobalt increasing by more than 130% and the copper by 31% in 2017. Those commodities represent more than 90% of our exports and their production actually increased in 2017 despite the electricity challenges.

The direct impact of this is an expected growth of 3,5% in 2017 compared to 2,4% in 2016. However, with a population growing at an average rate of 3,3% over the last five years, this growth is simply insufficient to impact the population standards of leaving.

In 2017, we have witnessed the weirdest monetary policy measure ever applied by our government when trying to stabilize the CDF. It consisted in forbidding Bureau de Change displaying their exchange rates outside their building! Apparently it was the source of the depreciation! One lady was even jailed for displaying the rates…

Nestlé has decided to close its Congolese plant in 2017 leaving more than 120 people out of jobs (thousands of people will be indirectly impacted by this measure). The official reason are the poor purchasing power of the Congolese, the inflation and the products entering fraudulently from Angola without paying taxes.

Heineken closed two of its plants in the country with the same social consequences for its staff. Consumption of beer in the country has always been a useful indicator of how the real economy is performing. Indeed, when everything goes bad, beer is one of the last items on the shopping list…

Mining companies are still waiting to be paid back by the government their VAT for almost a billion of USD! For example, the government owes to Rangold Resources USD 192 million in unpaid VAT rebates!!!

As I am typing this text, Internet has been shut down by the government for the third consecutive day and no one knows when it will be back. One can imagine the loss made not only by the Telco companies but also by all organizations depending on their services.

The sad reality is that doing business in the DRC is more complicated than ever despite the government being happy that the country jumped two places in World Bank doing business report. We are still one of the worst performers in the world.

Not only, we are not able to attract fresh significant investments but we are also losing some of the key players that were already operating here.

Can we expect 2018 to be better? With all the political uncertainty surrounding the country presidential election one cannot be sure…