Economic Sectors in Democratic Republic of the Congo

Economic Sectors in Democratic Republic of the Congo

The economy of the Democratic Republic of the Congo is growing only slowly. The value added tax introduced in 2012 and a restrictive monetary policy by the central bank offer good conditions for economic growth, but corruption and one-sided dependence on the extraction of raw materials have a destabilizing effect.

Telecommunications have developed particularly quickly in recent years. Almost all cities and larger towns are connected to the cellular network.

The financial situation deteriorated significantly in 2017. The inflation rate rose to an annual average of 47%.

The basic conditions for economic growth are still given by the good raw material prices. The open question is whether it will be possible to integrate the broader population into the economic process and reduce poverty and underdevelopment.

The urban population, especially the people in the ten million city of Kinshasa, live almost exclusively from the informal sector. Micro businesses, small traders, and local transportation ensure people’s livelihoods.

The Congolese government offers many perks to foreign investors; it aims to stabilize economic growth at 5% in the medium term.

Democratic Republic of the Congo Economy

Democratic Republic of the Congo Economy

Mining and related industries

The mining determines the economic activities in the DRC. 40% of GDP is generated directly or indirectly from mining, which is concentrated in the east and south-east of the country. The province of Katanga is still the central mining area, even if intensive mining (including gold, diamonds) is carried out in the east (Kivu and Maniema) and Mbuji Mayi (Kasai Oriental).

The DR Congo has deposits of diamonds, coltan, copper, cobalt, gold, tantalum, zinc, silver, tin, germanium, tungsten and coal, the value of which is estimated at several hundred billion US dollars.

The worldwide raw material reserves in the DR Congo are remarkable: 10% for copper, 50% for coltan and 80% for colombo tantalite.

The small-scale mining is a major industry in the DRC. An estimated 500,000 people make a living from activities in this unregulated, informal area. Mining often takes place under dangerous transport conditions, there is a lack of an efficient infrastructure. Unfortunately, fatal accidents often occur in unsecured mines; in the dangerous tunnels and primitive processing plants. The living conditions of the miners are unacceptable – corrupt officials and security forces also enrich themselves from the modest mining results.

The conflict in the east of the Democratic Republic that has been dragging on for years has various causes, with the focus on the fight for raw materials. Corruption and the incapable of acting state block all attempts to change this.

The DR Congo is also known for its rich coltan deposits. Coltan contains two of the most sought-after metal ores (columbite and tantalite) that include niobium and tantalum. Tantalum is of great importance for the production of various consumer electronics devices (cell phones, computer chips, video cameras). Niobium is used to manufacture heat-resistant components for rockets, jet planes and space capsules.

The DR Congo is a major gold producer, but only part of this “treasure” is used by the local economy. Corruption and smuggling determine what is happening. The local population hardly benefits from gold mining. One speaks of up to 1 million people, mostly young men, who earn a modest living as gold miners of one to two US $ per day. Gold still occupies an important position on the international precious metals market.

Other mineral resources that are extracted are crude oil, silver, manganese, zinc, tin, cadmium, germanium and beryllium.

Copper is one of the most important raw materials on the world market. In 2017 copper production was around 19.7 million tons worldwide. The Democratic Republic of the Congo is an important producer after Chile, Peru and China with 850,000 tons. Demand is increasing and the DR Congo is benefiting from this situation. A further price increase is expected. In 2017, the copper price rose by almost 30% to an annual average of US $ 6,600. It is staying at a high level, but at the same time there are fears that speculators are keeping the price artificially high. A raw material crash would have devastating effects on the Congolese mining industry and the affected population.

After copper, cobalt is the raw material with the greatest demand on the world market. Both raw materials are often found and mined in the same deposits. The demand is exceptionally strong, because up to 10 kg of cobalt are required per vehicle for the batteries in electric cars alone. In the past two years the cobalt price has risen from US $ 23,000 per ton to US $ 93,000.

As a major country in African continent according to thesciencetutor, the DR Congo is the market leader with over 50% of world cobalt production. Production is dominated by 17 international mines that are state-of-the-art and therefore require hardly any labor. On the other hand, there are hundreds of thousands of workers and children who carry out small-scale mining under inhumane conditions.

Much of the profits from mining go into private pockets. For example, the multinational raw materials company Glencore reported a profit of US $ 6.9 billion in 2017 – this is more than the state budget of the Democratic Republic of the Congo.