Democratic Republic of the Congo

Introduction

This trade proposal gives an overview of the current market and future trends in the Infrastructure Development and maintenance market in the Democratic Republic of the Congo. The organization this briefing document has been prepared for is Opus a New Zealand infrastructure consulting company.

The Democratic Republic of the Congo has a vast potential for economic growth. After decades of brutal internal conflict and an invasion by its neighbors, the most deadly conflict since the Second World War with deaths estimated at 5.2 million, all over the control of its natural resources. The political situation however has improved considerably over the past several years, most of the foreign soldiers previously fighting in the country have left and civil disorder is settling down.

However the Democratic Republic of the Congo's economic and social recovery is being hampered by its lack of infrastructure, an example being only 2000km of paved highways and ongoing conflict in its eastern and north-eastern border provinces.

An organisation that would be willing to provide low cost, quality infrastructure solutions in the areas of road construction, railways, bridge building, water purification and distribution, Information and Communication technology, electricity generation and distribution, architecture and construction, will find many contracts available.

Although immediate profits may be small the long term maintenance contracts and new developments as the countries economy eventually expands, as well as the knowledge that you are helping some of the poorest communities on earth improve their quality of life, should more than compensate.

The Organisation

Opus is a New Zealand based firm that specialises in design, management and consultation for infrastructure development in sectors as diverse as the Transport, Construction, Water Resources, Information and Communications Technology and Electricity generation and distribution.

Some of its previous work includes the Britomart transport centre in Auckland, Lead design and architect for an infrastructure upgrade of the London undergrounds Piccadilly line, design and management of the Wellington Inner City Bypass, manages highway maintenance in New Zealand, Australia and Canada, has developed water and wastewater asset management plans for the Redland Shire Council of Queensland, developed a flood protection scheme for the Otago regional council and provided geotechnical expertise, risk assessment and design for access roads and power cabling for the Te Apiti wind farm near Palmerston North

Opus currently also has offices in Australia, the UK and Canada,

The Country

The Democratic Republic of the Congo or the Republique Democratique du Congo as it is known locally is located in Central Africa and has a total land area of 2,344,858 km2 making it the largest country in Africa by land size. The population of the Democratic Republic of the Congo is 68,692,542, with only 34% of the population living in urban centres.

The official language of the Democratic Republic of the Congo is French, this being chosen as an ethnically neutral language that is widely spoken due to the Democratic Republic of the Congo being a former Belgian colony. Other languages spoken are Lingala, Kikongo, Tshiluba and Swhili, although it is estimated there are around 700 local languages or dialects spoken. The religions practiced in the Democratic Republic of the Congo by order of followers are Roman Catholic 50%, Protestant 20%, Kimbanguist (A Christian sect) 10%, Muslim 10%, and 10% follow indigenous beliefs or syncretic sects that merge Christianity with traditional indigenous beliefs.

Ethnically the population of the Democratic Republic of the Congo comprises over 200 ethnic African groups, although the four largest groups the Mongo, Luba and Kongo which are all part of the Bantu people, and the Mangbetu-Azande make up around 45% of the total population.

Economically the Democratic Republic of the Congo rates 119 in the world with a GDP (Purchasing Power Parity) of USD $20.05 billion according to the CIA world Fact book (2009), although it has a growth rate of 8% placing it 19 in terms of growth. The Democratic Republic of the Congo's GDP per capita (PPP) is USD $300 placing it 228 in world rankings, making it one of the poorest nations on earth. The currency of the Democratic Republic of the Congo is the Congolese Franc which is a floating currency. The Congolese Franc to US dollar exchange rate as stated on XE.com on August 24 is currently around 775:1

The Democratic Republic of the Congo currently owes USD $10 billion in external debt, and has a current account balance of USD -$402 million although exports currently outweigh imports.

Global Trade Patterns

The Democratic Republic of the Congo currently exports 6.1 billion dollars worth of goods, with its main exports being Cobalt ore, of which it is the world's largest producer; other exports include diamonds, gold, copper, wood products crude oil and coffee. The Democratic Republic of the Congo's main export destinations are Belgium, China, USA, Finland, Brazil, France and Zambia.

The Democratic Republic of the Congo also exports around 1.8 billion Kilowatt hours per year, an export which, with infrastructural upgrades and the development of passive hydroelectricity generation systems, could be greatly increased and prove to be a lucrative export. The Democratic Republic of the Congo has 180 million bbl of crude oil reserves and 991 million m3 of natural gas deposits.

The Democratic Republic of the Congo main imports are food, mining equipment, transport equipment and fuel which amount to 5.2billion. Its imports come from South Africa, Zambia, Zimbabwe, France, Kenya, USA and Cote d'Ivoire.

The Market

The Democratic Republic of the Congo's infrastructure has been allowed to deteriorate during the twenty years of conflict to the point where a country of over 2million m2 only has an estimated 2000 km of paved highway in good repair. Most transport in the Democratic Republic of the Congo is done either on the 15,000km of navigable waterways, or by air.

The Democratic Republic of the Congo's telecommunications infrastructure consists of a state owned land line operator which has less than 10,000 connections. Cellular subscription is around 6.6 million due to the inadequate land lines.

The Democratic Republic of the Congo has an estimated 230,400 internet users.

The Democratic Republic of the Congo has the potential of producing up to 100,000 MW of hydropower. In fact the Inga site located 300km from Kinshasa, which holds 40,000 - 45,000 MW of generation potential, and currently has 3,600 MW of generation capacity installed. However the National Electric Company can no longer maintain the site to a sufficient standard and the site only produces 1750 MW. There are currently plans to develop a common energy market amongst the SADC countries, and this will lead to extensive development of generation and distribution capacity in The Democratic Republic of the Congo.

Trade structure: Opportunities and threats

The Democratic Republic of the Congo is a capitalist market economy, although presently business laws are rather insufficient, work is being done by the Kabila government to straighten out and strengthen the legal framework in the country in an effort to attract overseas investment.

Trade agreements with New Zealand

New Zealand currently has no significant trade agreements with the Democratic Republic of the Congo.

New Zealand also currently does not have any diplomatic representation in the Democratic Republic of the Congo, nor does the Democratic Republic of the Congo have any representation in New Zealand.

Other international trade agreements

The Democratic Republic of the Congo is a member of the Southern African Development Community (SADC) and is also in the process of becoming a member of Organisation for the Harmonisation of Business Law in Africa (OHADA).

Risk Factors

The political situation in the Democratic Republic of the Congo has only recently stabilised after two decades of civil war. The first democratic elections in over 40 years occurred in 2006, and several militias still remain active in the eastern provinces. Also the Lord's Resistance Army lead by Joseph Kony is currently basing themselves in the Democratic Republic of the Congo's Garamba National Park. The current President of the Democratic Republic of the Congo, Joseph Kabila, replaced his father, Laurent-Desire Kabila, as president when he was assassinated in 2001. Kabila's main political rival, Jean-Pierre Bemba, was the former warlord head of the Ugandan backed Movement for the Liberation of Congo (MLC). Due to the violent nature of the past power struggles in the Democratic Republic of the Congo, the ongoing conflict in the eastern parts of the country, the UN's MONUC peacekeeping mission being unable to effectively contain it, and the high level of corruption in the country, there is a chance that the new democracy may fall violently in the future.

The New Zealand Ministry of Foreign Affairs and Trade warns against any non essential travel to the Democratic Republic of the Congo stating there is a “high risk to your security due to continuing instability and violent criminal activity” and also warns there is an “extreme risk to your security in the eastern and north-eastern regions of the Democratic Republic of the Congo due to military activity”. Safetravel.Govt.nz (2009)

Operational factors

The Corruption Perception Index published by Transparency International ranks the Democratic Republic of the Congo 171 out of 180 countries for corruption, making it the ninth most corrupt country in the world. To place this in context New Zealand, Denmark and Sweden tie for 1st place, making them the least corrupt. The rampant corruption may impact on Opus's business practices, as bribes may be expected for contracts to be awarded or for necessary documents to be filed. Opus's management will need to decide whether they will adapt their business practices to the situation in the Democratic Republic of the Congo or if they will set an example of incorruptness but possibly lose contracts and suffer delays.

If Opus needs to send staff to the Democratic Republic of the Congo to set up their operations or for on the ground consultation, they will need to ensure their staff have been issued a pre-notification letter issued by the Direction Generale de Migration as visas cannot be gained before departure due to New Zealand having no diplomatic representation in the Democratic Republic of the Congo or vice versa. Also upon entry travellers need to have a valid passport, a yellow fever vaccination certification, documentation and tickets for return or onward travel and proof of financial support during the length of stay.

Opus should also ensure that their staff are covered by comprehensive travel and health insurance, in case staff need to be emergency evacuated from the Democratic Republic of the Congo. New Zealanders travelling to the Democratic Republic of the Congo are also advised to register themselves with the Ministry of Foreign Affairs and Trade.

Conclusions

The Democratic Republic of the Congo has only recently begun to move forward on the road to civility, and as such there is still a great deal of risk perceived in doing business in the country. However this perceived risk is keeping companies from investing time or money into the Democratic Republic of the Congo.

As an infrastructure design, development and management organisation Opus will be well positioned to garner more work, if it makes a reputation for delivering innovative and cost effective infrastructure solution in the difficult terrain and climate of the Democratic Republic of the Congo now, before major investment begins.

The Democratic Republic of the Congo desperately needs infrastructure, without a developed highway and rail system, with bridges crossing the Congo and the many rivers that feed it, transporting goods can take months. Without ICT networks communication outside the urban areas is reliant on postage, word of mouth or short wave radio. Without sewerage disposal or treatment systems effluent is leached into rivers. Without water pumping stations, water purification plants and storage facilities millions of people are reliant on disease laden river water. Without an effective electricity generation and distribution network that reaches even the most remote communities none of these other infrastructures will even be able to function.

As well as developing their reputation in the Democratic Republic of the Congo and the wider developing world for providing quality innovative long term solutions at a cost effective price Opus will also develop a reputation amongst clients and potential clients in the developed world as an organisation that is using its intellectual capital to solve some of the problems effecting developing nations and raising the standard of living of some of the poorest people on the planet, a brand image enhancing factor that should not be underestimated, in a world where all businesses speak of helping the disadvantaged but where few act on their words.

International businesses may employ workers from poor countries in their factories, but this only helps those that live near the factories, and a few dollars a day more, even though it is an incredible sum of money to the worker, does not put clean water in a community or allow communication with the family that was left behind. These things can only be accomplished with infrastructure.

Recommendation: An entry into the Democratic Republic of the Congo marketplace may be a risk, but Opus will be investing intellectual capital, rather than large amounts of financial capital. By moving now Opus can capitalise on any early successes to develop its reputation for providing solutions in the Democratic Republic of the Congo. With its large mineral resources, overseas investors are going to be investing large sums into mining operations in the Democratic Republic of the Congo, which will require consultancy firms like Opus to provide infrastructural design solutions.

References

Central Intelligence Agency (2009) CIA world Factbook: Congo, Democratic Republic of the. Retrieved August 16, 2009 from https://www.cia.gov/library/publications/the-world-factbook/geos/cg.html

Ministry of Foreign Affairs and Trade (2009). Democratic Republic of Congo. Retrieved August 18, 2009 from http://www.safetravel.govt.nz/destinations/drcongo.shtml

Transparency international. (2009). Corruption Perception Index 2008. Retrieved August 17, 2009 from http://www.transparency.org/policy_research/surveys_indices/cpi/2008
Wikipedia (2009). Democratic Republic of the Congo. Retrieved August 15, 2009 from http://en.wikipedia.org/wiki/Democratic_Republic_of_the_Congo

Wikipedia (2009). Transport in the Democratic Republic of the Congo. Retrieved August 17, 2009 from
http://en.wikipedia.org/wiki/Transport_in_the_Democratic_Republic_of_the_Congo

Wordtravels (2009). Democratic Republic of Congo Passport & Visa Requirements. Retrieved August 19, 2009 from http://www.wordtravels.com/Travelguide/Countries/Democratic+Republic+of+the+Congo/Visa

World Bank. (2009) DR Congo Power Plant Holds Promise for Energy Supply to Millions across Africa. Retrieved August 19, 2009 from
http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/AFRICAEXT/CONGODEMOCRATICEXTN/0,,contentMDK:22132713~menuPK:349472~pagePK:2865066~piPK:2865079~theSitePK:349466,00.html

XE.com (2009) universal currency convertertm results. Retrieved, August 24, 2009 from
http://www.xe.com/ucc/convert.cgi?Amount=1&From=USD&To=CDF&image.x=42&image.y=17

Please be aware that the free essay that you were just reading was not written by us. This essay, and all of the others available to view on the website, were provided to us by students in exchange for services that we offer. This relationship helps our students to get an even better deal while also contributing to the biggest free essay resource in the UK!