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.
4. Industrial Policies
Investment incentives for companies entering the DRC are generally negotiated during a streamlined period of approximately 30 days. Negotiated incentives can range from tax breaks to duty exemptions, and are dependent upon the location and type of enterprise, the number of jobs created, the degree of training and promotion of local staff, and the export-producing potential of the operation. Investors who wish to take advantage of customs and tax incentives in the extant 2002 Investment Code must apply to the National Agency for Investment Promotion (ANAPI), which, in turn, submits applications to the Ministries of Finance and Planning for final approval.
Foreign Trade Zones/Free Ports/Trade Facilitation
The DRC does not have designated free trade areas or free port zones; however legislation is pending to create such zones. The DRC is a member of SADC and the Common Market of Eastern and Southern Africa (COMESA), but the country is still progressively implementing legislation to integrate into the COMESA and SADC Free Trade Areas. In 2015, the GDRC confirmed its commitment to work to enter the tripartite COMESA-SADC-EAC (Eastern African Community) Free Trade Area and the Continental Free Trade Area. Currently the implementation process is on hold, however, and there is no indication of when it will resume. However, the GDRC signed the agreement for the Continental Free Trade Area (Zone de libre-echange continentale or ZLEC) on March 21, 2018 in Kigali, under the aegis of the African Union. The GDRC has yet to take any steps to implement the agreement.
Performance and Data Localization Requirements
Although there are no specific performance requirements for foreign investors, they invariably must negotiate many of the conditions of their investments with ANAPI. Performance requirements agreed upon with ANAPI typically include a timeframe for the investment, use of OHADA accounting procedures and periodic authorized GDRC audits, protection of the environment, periodic progress reports to ANAPI, and the maintenance of international and local norms for the provision of goods and services. The investor must also agree that all imported equipment and capital will remain in country for at least five years.
The Ministry of Labor controls expatriate residence and work permits. For U.S. companies, the BIT assures the right to hire staff of their choice to fill some management positions, but companies agree to pay a special tax on expatriate salaries. Visa, residence or work permit requirements are not discriminatory or excessively onerous, and are not designed to prevent or discourage foreigners from investing in the DRC, though corruption and bureaucratic hurdles can create serious delays in obtaining the necessary permits and visas.
GDRC enacted a new law on subcontracting in January 2017, which requires foreign companies to use local subcontractors for subsidiary services (see section 2).
The DRC does not have specific legislation on data storage. However, it recognizes the need for appropriate regulation. As there is no obligatory legislation, in practice, few companies report on data storage.
6. Financial Sector
Capital Market and Portfolio Investment
The Congolese financial system has recovered from the 2009 crisis but is now at a crossroads. Although reforms have been launched, the system remains small, heavily dollarized, characterized by fragile balance sheets, and cumbersome to use. The GDRC backed away from its short-lived (2013-2016) de-dollarization program, and further reforms are needed to strengthen the financial system, support the expansion of the financial sector, and spur economic growth. Shock resilience is undermined by inadequate risk-based controls, weak enforcement of regulations, low profitability, and excessive reliance on demand deposits. The system is also characterized by a significant concentration of credit and exposure to systemic failure in the event of the insolvency of a large borrower.
Financial inclusion is increasing, but substantial progress is needed to develop payment systems, facilitate the use of financial services, and strengthen regulation of the non-banking sector. Consolidation and strengthening of microfinance along with reform of the insurance and pension sub-sector could facilitate the expansion of financial services and attract long-term investors.
The DRC’s capital market remains underdeveloped and consists mainly of the issuance of treasury bonds. There are no stock exchanges operating in the country, although a small number of private equity firms are actively investing in the mining industry.
The institutional investor base is poorly developed, with only an insurance company and a state pension fund as participants. The Central Bank of Congo (BCC), developed a market for short-term bonds, but most of these bonds are bought and held by local Congolese banks. In the absence of private debt securities, the fixed-rate market is limited to government-issued treasury bonds with maturities of up to 28 days traded through commercial banks.
Access to the primary market is limited to commercial banks holding securities accounts at the BCC and all investors, including institutional and individual investors, must submit bids through banks. Commercial banks, which dominate the investor base, may trade in treasury bills in the secondary market, but in order to do so bids and prices for which they agree to trade must be transparent and publicized. There is no market for derivatives in the country.
The DRC suffers from a weak and fragile financial infrastructure. National payment systems are not governed by central legislation, although the DRC’s National Payments and Settlement Committee is in the process of proposing legal reform through a draft bill that was proposed in 2016, has been adopted by the DRC Senate, and, as of the date of this report, is before the National Assembly for a second reading.
The Central Bank worked for a decade to implement reform on the national payment system via a gradual and interactive approach that identified and corrected deficiencies at each stage. This culminated with the Central Bank inaugurating in September 2017 an automated system that supports customer transfers, regulation of monetary policy operations, and the processing of transactions for the regional payment system-REPSS, set up by COMESA member countries. The system also includes an interbank automated clearing module for check payments, collections, and bills of exchange.
Borrowing options for small and medium enterprises (SME) are limited. Maturities for loans are usually limited to 3-6 months, and interest rates typically hover around 16-18 percent. The weakness of the legal system, the often cumbersome business climate and the difficulty in obtaining inter-bank financing discourages banks from providing long term loans. There are limited possibilities to finance major projects in the domestic currency, the Congolese franc (CDF). The Central Bank sets minimum capital requirements for local banks in CDF or its equivalent in USD . Prior to 2016, the average was roughly USD 12 million per bank, but the economic downturn prompted the Central Bank to mandate an increase to USD 30 million by January 2019. Foreign currency deposits account for almost 90 percent of bank holdings.
Portfolio investment is absent in the DRC. Cross-shareholding and stable shareholding arrangements are also not common. There are occasional complaints about unfair privileges extended to certain investors in profitable sectors such as mining and telecommunications.
Money and Banking system
The Congolese financial system is growing but remains fragile and operates primarily through the BCC. The financial sector is comprised of 17 licensed banks, a national insurance company (SONAS), the National Social Security Institute (INSS), one development bank, SOFIDE (Societe Financière de Development), a savings fund (CADECO), 102 micro finance institutions and cooperatives, 72 money transfer institutions which are concentrated in Kinshasa, Kongo Central, North and South Kivu and the former Katanga provinces, three electronic money institutions, and 23 foreign exchange offices. There is no secondary equity or debt market.
The Congolese Central Bank currently works with three correspondent banks, namely, Commerzbank, Credit Suisse and the Bank for International Settlements-BIS. All foreign banks accredited by the Congolese Central Bank are considered Congolese banks with foreign capital and fall under provisions and regulations covering the credit institutions’ activities in the DRC.
The financial system is mostly bank-based with aggregate holdings of banks estimated at USD 5.1 billion, about 95 percent of the overall holdings of the financial system. Bank deposits account for about 90 percent of total deposits, with the balance held by microfinance institutions. Among the five largest banks, four are local and one is controlled by foreign holdings. The five largest banks hold almost 65 percent of bank deposits and more than 60 percent of total bank assets.
Bank financing is dominated by the collection of deposits, nearly 90 percent of which are denominated in U.S. dollars and held in demand accounts. Bank operations are highly dollarized and financed largely by demand deposits. Nearly 95 percent of loans are in dollars, and clients are mainly companies seeking working capital primarily for daily operations and import/export activities. National and local government entities have significant balances in some banks (deposits in dollars used for investments) and also borrow funds from a few banks to finance administrative expenses. Statistics on non-performing loans do not seem reliable. According to the BCC’s regulatory framework many banks only record the balance due rather than the total amount of the non-performing loan.
Transactions involving correspondence with associated foreign banks represent a significant part of the activities of DRC banks. Correspondent accounts represent more than 30 percent of bank assets and more than 95 percent of interbank market activity. They allow banks to settle transactions denominated in dollars, reflecting efforts to limit risks. The profitability of the banks is fragile and has deteriorated over the last year, reflecting high operating costs and exchange rates. Fees charged by banks are a major source of their revenues.
The DRC has roughly USD 3.7 billion in deposits in the banking system, up slightly from 2016. An estimated USD 10 billion of savings exist outside of banks. Most deposits in the formal system are U.S. dollar-denominated. A slight increase in bank penetration occurred after 2011 as the GDRC switched public employee payments from cash to bank transfers.
Bank penetration is roughly 6 percent or about 3.9 million accounts, which places the country among the most under-banked nations in the world. Based on its strategic plan, the BCC seeks to reach more than 20 million bank accounts by 2030. Banks are increasingly offering savings accounts that pay approximately 3 percent interest, but few Congolese hold savings in banks. According to the Banking Association of Congo (ACB), of an estimated 65 percent of the population that saves, only 4.7 percent do so through a bank.
The overall balance sheet of the banks amounted to roughly USD 5.3 billion in 2017. Credit volume is estimated at roughly USD 1.9 billion in comparison to USD 2.3 billion reached in 2016, a decline of 18 percent. Credit remains scarce, short-term, and highly concentrated. From 2012 to 2016, credit volume was only 13 percent of GDP. Domestic credit granted by banks declined from USD 2.4 billion in 2016 to USD 1.9 billion in 2017. Microfinance institutions also experienced a decline during the same period, from USD 136 million to USD 126 million. The largest depositors in the banking system are private enterprises and households with 46 and 43 percent of deposits, respectively. Public enterprises, central administration and local administration deposits are estimated at seven percent, four percent and one percent respectively.
Foreign Exchange and Remittances
As part of broad economic reforms begun in 2001, the DRC adopted a free-floating exchange rate policy and lifted various restrictions on business transactions, including in the mining sector. The international transfer of funds takes place freely when channeled through local commercial banks. On average, bank declaration requirements and payments for international transfers take less than one week to complete.
The BCC is responsible for regulating foreign exchange and trade. The only currency restriction imposed on travelers is a USD 10,000 limit on the amount an individual can carry when entering or leaving the DRC. The GDRC requires that the BCC license exporters and importers. The DRC’s informal foreign exchange market is large and unregulated and has tended to offer exchange rates not widely dissimilar from the official rate. In practice, the nation’s economy remains highly dollarized.
On September 25, 2014, new foreign exchange regulations were put into place by the BCC. Among other things, these regulations declared the Congolese franc (CDF) as the main currency in all transactions within the DRC. Payment of fees related to education, medical care, water and electricity consumption, residential rents, and national taxes were mandated to be paid in CDF. In the last several years, this requirement has been relaxed and where the parties involved and the appropriate monetary officials agree, exceptions may, and routinely are, made.
Any payments exceeding USD 10,000 must be executed within the banking system, unless there is no presence of banking entities. The largest, albeit rare, banknote in circulation is the CDF 20,000 note (approximately USD 12.36). Far more common are the CDF 500 and CDF 1,000 notes worth approximately USD 0.30 and USD 0.61 respectively. U.S. banknotes printed after 2008 are readily accepted in virtually all transactions, with the exception of one-dollar bills. Banks provide accounts denominated in either currency. In September 2013, the GDRC embarked on a process of “de-dollarizing” the economy by requiring that tax records be kept in CDF and tax payments from mining companies be paid in CDF. In March 2016, however, as a result of a dollar shortage, the GDRC began requiring mining and oil companies to pay their customs fees and taxes in U.S. dollars.
The value of the Congolese franc remained stable at approximately 920 francs to the US dollar between 2012 and 2015, but depreciated against the US dollar by 23.7 percent in 2016 and 23.6 percent in 2017. Similarly, the annualized inflation rate, which was stable at an average 1.4 percent from 2013 through 2015, increased to 23.6 percent in 2016 and 54.7 percent 2017. The economic forecast calls for continuing inflation and currency depreciation over the long term, but the currency has remained stable since August 2017. As of April 2018, foreign exchange reserves totaled USD 1 billion or 4.2 weeks of import cover in comparison to the 2017 level of USD 859 million 2.9 weeks of cover). If government revenues from the extractive sectors continue to increase, the Central Bank will again have the option to support the CDF and maintain currency stability. (Note: Macroeconomic data for the DRC often vary according to the source. This document sources inflation, foreign exchange reserve, GDP growth, and currency exchange rate data from Central Bank of Congo data bases. End Note)
Although there is no legal restriction on converting or transferring funds related to investment, new exchange regulations will increase the time for in-country foreigners to repatriate export and re-export income from 30 to 60 days. The BCC is the legal authority controlling and providing the legal framework on foreign exchange in the DRC. Foreign investors may remit through parallel markets when they are legally established and recognized by the BCC.
Sovereign Wealth Funds
The DRC has no reported Sovereign Wealth Funds.
7. State-Owned Enterprises
Generally speaking, the DRC state owned enterprises (SOEs) are a burden on the nation’s economy. SOEs stifle competition and are unable to provide reliable electricity, transportation, and other important services over which they have monopolies. SOEs and other Congolese parastatal organizations are in a poor financial and operational state due primarily to indebtedness, mismanagement of resources and employees, and bad service delivery.
Reporting on the assets of SOEs and other parastatal enterprises is limited, making valuation difficult. According to State law N° 08/007 of July 7, 2008 (related to business transformation), any firm of which the state owns 50 percent plus one share is considered to be an SOE. DRC law does not grant SOEs advantage over private companies in bidding for government contracts, however, in practice, SOEs are favored over private companies, often using questionable practices and arguably unsupportable legal actions. The list of SOEs can be found at: http://www.leganet.cd/Legislation/Droit%20Public/EPub/d.09.12.24.04.09.htm .
SOE accounts are not audited. While the Supreme Audit Institution (Cour des Comptes) is authorized to audit SOEs and to publish findings, a lack of resources devoted to the organization has resulted in no or partial SOE audits. In addition, the Conseil Superieur du Portefeuille – an oversight body under the Ministry of Portfolio – is mandated with assessing SOE financial performance in terms of growth, profitability, and solvency. Their reports are for internal use and are not publicly available.
There is no official provision requiring preferential access to land and raw materials for SOEs; in a situation where both an SOE and private enterprise show interest to the same land or material, preferential access shall be granted to the first applicant.
The DRC is not a party to the WTO’s procurement agreement (GPA) but nominally adheres to the OECD guidelines on Corporate Governance for SOEs. The DRC is a Participating Country in the Southern Africa SOE network, with the Ministry of Portfolio and the Steering Committee for SOE reforms designated as Regularly Participating Institutions.
In addition to being poorly run, some SOEs also serve as conduits for the illicit diversion of funds. U.S. NGO the Carter Center issued a study in November 2017 (A State Affair: Privatizing Congo’s Copper Sector) stating that roughly USD 750 million earned by the DRC’s state-owned mining company Gecamines between 2011 and 2014 cannot be reliably accounted for. More recently, Gecamines has aggressively audited some of its joint venture partners, threatening to dissolve partnerships, and ultimately expropriate private mine holdings, unless partners transferred more revenue to GDRC and Gecamines accounts.
The DRC has no official privatization program, though, with support of the World Bank, the GDRC established a Steering Committee in 2010 for the Reform of Public Enterprises (COPIREP), which attempts to address the performance of SOEs. To date, only a handful of SOEs have undergone reform, with mixed results.
12. OPIC and Other Investment Insurance Programs
The U.S. Overseas Private Investment Corporation (OPIC), which provides political risk insurance and project financing to U.S. investors and non-governmental organizations, has granted political risk insurance for projects in the DRC in the past and is open to working on future projects in the DRC.
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
Table 2: Key Macroeconomic Data
|Host Country Statistical Source||USG or International Statistical Source||USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
|Host Country Gross Domestic Product (GDP) (M USD)||N/A||2017||USD 49,100||https://www.imf.org/en/Countries/COD|
|Foreign Direct Investment||Host Country Statistical Source||USG or International Statistical Source||USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
|U.S. FDI in Partner Country (M USD, stock positions)||N/A||N/A||BEA data available at
|Host Country’s FDI in the United States (M USD, stock positions)||N/A||N/A||BEA data available at
|Total Inbound Stock of FDI as % host GDP||N/A||N/A||World Bank data available at
Table 3: Sources and Destination of FDI
Data not available.
Table 4: Sources of Portfolio Investment
Data not available.
14. Contact for More Information
Points of contact for inquiries from the public:
Econ Section’s email address: KinshasaEcon@State.gov.