Congo, Democratic Republic of the
1. Openness To, and Restrictions Upon, Foreign Investment
Policies toward Foreign Direct Investment
The DRC remains an extremely challenging environment in which to conduct business. At the same time, the GDRC sporadically takes steps to improve economic governance and its business climate, while the DRC’s rich endowment of natural resources, large population and generally open trading system provide significant potential opportunities for U.S. investors. The GDRC’s investment agency, the National Agency for Investment Promotion (ANAPI), provides investment facilitation services for initial investments over USD 200,000 and is mandated to simplify the investment process, make procedures more transparent, assist new foreign investors and improve the image of the DRC as an investment destination. Current investment regulations prohibit foreign investors from engaging in informal small retail commerce, referred to locally as petit commerce, and ban foreign majority-ownership of agricultural concerns. Visas for foreign workers are limited to six consecutive months and cost between USD 300 (single entry) and USD 400 (multiple-entry).
Following approval of an initial “temporary” work visa, which, normally, is not difficult to procure, a foreign worker may qualify for a more expensive “establishment visa” with at least a one year validity. Salaries paid to expatriates are taxed at a higher rate than those of locals to encourage local employment.
Limits on Foreign Control and Right to Private Ownership and Establishment
The DRC Constitution stipulates entitlement to own and establish a business enterprise, and to engage in all forms of remunerative activity, noting minimal restrictions related to small commerce (as described in Section 1.1) and a prohibition of foreign shareholder ownership of more than 49 percent of an agri-business. The government has drafted foreign ownership legislation, but parliamentary debate is still pending. Although it may not be based in law, many investors note that in practice the GDRC requires foreign investors to both hire local agents and participate in a joint venture with the government or local partners.
A new law on subcontracting in the private sector, which was enacted in January 2017, restricts foreign investors’ participation in subcontracting in almost all sectors and is considered by U.S. companies operating in DRC as discriminatory to their interests. The law restricts subcontracting activity to majority Congolese-owned and capitalized-companies whose head offices are located in the national territory. The only exception is in the case of unavailability of expertise in a specific subcontracting area. In that case, proof of lack of expertise must be provided to the competent authority to enable a non-Congolese company to be used as a subcontractor, but the activity may not exceed six months.
The law also forbids the subcontracting of more than 40 percent of the overall value of a contract; voids clauses, stipulations and contractual arrangements that violate the provisions of this law; and carries penalties of up to USD 150,000 and the risk of closure of operations for six months if certain provisions are violated. As of April 2017, the Federations of Enterprises of the Congo (FEC), the American Chamber of Commerce DRC, and other business organizations were lobbying to review and revise the law. Currently foreign businesses had a 12-month grace period, which ended in January 2018, to comply with the new law. As the government has yet to issue implementing regulations, however, the law has yet to come into force.
On March 9, 2018, the government promulgated a new mining code which increased royalty rates by two to ten percent, raised tax rates on “strategic” metals, and imposed a surcharge on “super profits” of mining companies. Of particular concern to mining companies, the government unilaterally removed a stability clause contained in the mining code of 2002. The stability clause protects investors from any new fees or taxes for ten years. Overall, the 2002 Mining Code sought to re-vitalize the mining sector by attracting foreign investors to DRC, which was then considered to be an extremely high-risk investment destination. With no coherent and transparent legal and fiscal framework to alleviate investors’ concerns, the stability clause offered a significant inducement to the major mining companies. Removal of the stability clause may deter future investment in the mining sector.
Other Investment Policy Reviews
The DRC has not undergone an OECD (Organization for Economic Co-operation and Development ) or UNCTAD ( United Nations Conference on Trade and Development )Investment Policy Review in the last 10 years, although in 2010, in collaboration with the World Bank and the European Union, the GDRC published a Diagnostic Study on Commercial Integration – a trade survey that identifies commercial hurdles and provides recommendations. The report highlighted four key points, which for the most part remain valid:
- The GDRC’s customs procedures are outdated and fail to comply with international standards as recommended by the World Customs Organization (WCO) in the Revised Kyoto Agenda;
- Trade information and management systems are inadequately computerized; Where they are computerized, computerization is often ignored in favor of manual records;
- Exporters face indiscriminate fees imposed by government agencies along with informal facilitation costs for record handling;
- Onerous regulations and administrative hurdles lead to average administrative wait times of four to five days at port, costing on average more than USD 1,020.
The GDRC has recently computerized the customs offices in Kinshasa, Matadi, and Haut Katanga, which generate 70 percent of customs revenue, but the transition from manual to computerized systems has been poorly managed, leading to extended delays in clearing customs.
Since 2013, the GDRC has operated a “one-stop shop” (https://www.guichetunique.cd/ ) that brings together all the government entities involved in the registration of a company in the DRC. The registration process now officially takes three days, but in practice it can take much longer. However, some businesses have reported that the Guichet Unique has considerably shortened and simplified the overall process of business registration.
Local sourcing requirements for foreign investors in the new subcontracting law (discussed in Section 1.2) will hinder foreign business activity if the law is implemented as written.
The GDRC does not provide any specific provision for equitable treatment of women or underrepresented minorities in the economy, although women and underrepresented minorities are accorded all citizen rights within the law.
The GDRC does not prohibit outward investment, nor does it particularly promote it. There are no current government restrictions preventing domestic investors from investing abroad, and there are no current blacklisted countries with which domestic investors are precluded from doing business.
2. Bilateral Investment Agreements and Taxation Treaties
The U.S.-DRC Bilateral Investment Treaty (BIT) was signed in 1984 and entered into force in 1989. The BIT guarantees reciprocal rights and privileges to each country’s investors and provides that, should a claim arise under the treaty, it can be submitted to a dispute resolution mechanism through international arbitration.
Germany, France, Belgium, Italy, South Korea, and China have also signed bilateral investment treaties with the DRC, while South Africa and Kenya are currently negotiating BITs with the DRC. Lebanon, Ivory Coast, and Burkina Faso have negotiated, but not signed, bilateral investment treaties with the DRC.
In October 2016, the DRC and Rwanda signed an agreement on a simplified trade regime covering only small-scale commerce between the countries.
There is no bilateral taxation treaty between the United States and the DRC.
In August 2015, Zambia and the DRC signed a bilateral taxation treaty that abolished customs taxes across their common border.