The first of August is a public holiday in the
DRC. On that day, we honor our parents, both alive and dead… But today is also
a special day as one of DRC main opponents is coming back home after spending
10 years in Scheveningen prison, just six months before the elections due on
December the 23rd. It
promises many interesting months to come…
However, let’s try not to digress into the
political space although we have demonstrated at several occasion its impact on
the local economy…
When we look at the principal economic indicators,
they have all improved since the beginning of the year! The inflation stands at
12% as of July the 27th after closing the year 2017 at almost 60%! As
a result, the Central Bank has decreased its prime rate to 14% from 20% maintaining
a positive real interest rate for the first time in many months.
At the end of June, the public finances have
registered a small surplus of $ 2,2 million compared to a deficit of $ 23 million
for the same period in 2017 according to the Central Bank data.
The Congolese Franc remained relatively stable
and the foreign exchanges increased by approximately 40% since January to reach
$ 1,2 billion. This is still low by international standards but still an
improvement. The country has benefited from an increase in production of its
major commodities as well as the increase of their prices, notably cobalt that
climbed up to $ 98 000 a ton in April before going down to $ 69 750 this
week due to oversupply according to Reuters
The GDP growth is expected at 4,2% for 2018 compared
to 3,7% the previous year. This is an improvement, but it is still too small
when compared to the population growth.
The biggest event of the semester is without
any doubt the adoption of the new Mining Code. Some important changes were made
in the new Code and they include increased royalties from 2 to 3% for copper
and cobalt and up to 10% for any commodity designated “strategic substances”.
It is a safe bet to say that both cobalt and coltan could qualify as “strategic
substances”. Additionally, a new 50%
windfall tax or tax on super profits has been introduced. Super profits are
defined as income realized when commodity prices rise 25% above levels in the
project’s bankable feasibility study. The state’s free share in mining also
increases, from 5 to 10%...
Obviously, major mining companies were not happy
about those changes but according to expert, this Mining Code, despite the
increase in royalties, remains one of the most competitive in the world.
Personally, I argue that any initiative that
will improve public finances without discouraging investments should be encouraged.
Let’s just hope that those additional revenues
will be spent wisely…
You can find the new Mining Code here (in French)
