As political unrest rattles one of the world’s biggest minerals producers, foreign investors in the Democratic Republic Congo (DRC) are in a quandary – to stay or pull out?
Peter Leon is a Johannesburg-based mining specialist who helps clients with mine development agreements and resources regulatory issues in Africa.
“It is now clear that President (Joseph) Kabila is stalling in terms of the next presidential and parliamentary elections, now only scheduled for April 2018. Given the concern this has created locally, foreign investors in the DRC obviously have to see how this develops. It is unclear what will happen next and what pressure the EU and the US will bring to bear on the Kabila administration given that the election will be 14 months late. There is growing dissatisfaction, in particular in Kinshasa, as to what is happening, as seen in the recent opposition protests. Uncertainty is never good for investment in any country,” says Leon, a lawyer at Herbert Smith Freehills.
“A lot of South African businesses are involved in various activities in the DRC. A lot of minerals in DRC are exported through South African ports so logistics are a key business for South African companies. The current situation is obviously challenging, but it doesn’t surprise me companies are still there and continue to do business as long as they are able to do so. Obviously if the situation becomes untenable, they will review their position. The fact remains that the DRC is still a good place to do business,” he says.
Thierry Naweji, the chairman of the DRC Chamber of Commerce in South Africa, maintains there’s no threat to business.
“Every country has its own dynamics… we are going through challenges in the DRC based on election organization. I have to advise people to remain in the DRC because it going to be difficult to go back. Do your investment very wisely. This challenge is going to be behind us,” says Naweji.
“There was a budget allocation of $250 million per year for elections, put aside since 2011, so that they can reach a budget of $1 billion after five years. We had a war in the east region of the country. Here we are, looking for a political solution how to get out of the situation,” he says.
According to Naweji, the head of electoral commission, Corneile Nangaa, has said there will be no election in November due to a lack of money. The election is more likely to be held in December 2018, he says.
“The general feeling is not that good for the business at all. They are concerned because we haven’t seen a clear direction yet, whether we are going to have elections in November or not,” says Naweji.
Naweji admits business stability has been shaken; the markets reacted negatively to violence last year. As a result, many investors have not allocated budgets for their operations in the DRC next year, he says.
“Many South African companies on our list don’t know what will happen next year in DRC, so they can’t put in money into DRC. Mining is the biggest concern; we had Glencore suspending mining concessions late last year.”
Naweji is hopeful this too shall pass.
Nqubeko Sibiya, the spokesman for KPMG in South Africa, says companies are not suspending operations, they are monitoring security issues, especially for expatriates. He said feedback from their senior partner in the DRC, Jean-Yves Parant, confirmed smooth operations.
Siobhan McCarthy, of PPC Cement, says the companying is building a million-ton–per-year plant in Kinshasa.
“The plant remains on track to be commissioned by the end of 2016, with cement ready for sale early in 2017,” she says.
Simon Malone is a DRC veteran and retired founder of Metorex, a mining consortium founded in 1975 in South Africa. In 2004, Metorex entered into a joint venture to develop the Ruashi copper mine site in the DRC, and made substantial investments.
“It will be sad day for business if something happens, because the DRC has the world’s best copper deposits but doing business there is so difficult that proposed tax hikes for mining companies will stifle new investments,” he says.
Malone says besides exorbitant taxes, he is confident of the work ethic and the good faith of trade unions.
For now, it’s over to the legislatures to set a date for the elections.

The Angry  Wait

In Nigeria, citizens, businesses and investors are struggling to come to terms with the absence of a cabinet to run Africa’s largest economy. When President Muhammadu Buhari took office, from Goodluck Jonathan on May 29, few would have imagined that there wouldn’t be a cabinet in place, or awaiting parliamentary approval, by the end of June.
Buhari himself hasn’t said much, leaving the explaining to his aides. At the beginning of July, Spokesman Femi Adesina said that “at the fullness of time, the ministers will be appointed.”
There has been speculation that there won’t be a cabinet in place until September. If that is true, it will mean that the new ministers will spend the last quarter of the year coming up to speed with their new assignments, and real work will not start until 2016.
The only presidential staff appointments made by the second week of July were three spokespersons (two for the president; one for the vice president), a State Chief of Protocol, and his principal security aides – one of which was replaced weeks later, for undisclosed reasons.
On July 13, six weeks after the inauguration, the President replaced all the military chiefs and the National Security Adviser (NSA). The key positions of presidential Chief of Staff and a Secretary to the Federal Government, who serves as Secretary to the Cabinet, as well as a liaison between the presidency and the sprawling government bureaucracy, however, remain unfilled.
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Team Austerity
Amid the uncertainty about the president’s team, there are, however, things one can bet on. One is that it will be a smaller cabinet than his predecessor’s, which had 42 ministers. But, the degree to which it will be smaller is constrained by a constitutional provision that says there must be at least one minister from each of Nigeria’s 36 states.
The Transition Committee that Buhari set up in May, to liaise with the outgoing government and prepare a smooth handover for the new government, recommended a reduction in the number of ministries from 28 to 19. Going by that proposal, only nine of the existing ministries will not be merged or scrapped: Defence, Federal Capital Territory, Education, Trade and Investment, Finance, National Planning, Labour, Justice, and Foreign Affairs.
Ambitious as the plan might seem, it’s not unfamiliar territory for Buhari. As Head of State 30 years ago, he presided over a wide-ranging regime of cuts: laying off thousands of civil servants and freezing wages, abolishing hundreds of local government areas, and rolling out an austerity budget that slashed government spending by 15%.
Considering that the economy he is inheriting is in straits just as dire as then, chances of another austerity-inflected outing are high. Indeed there’s a cost-saving element to a delay in the appointment of a cabinet and advisers, who will have to be paid generously in housing and travel allowances, and armored convoys.
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Speculation, Inc.
In the weeks following Buhari’s unprecedented electoral victory, the rumour mills were running with news of expected appointments. Documents regularly circulated on social media, purporting to list the persons who had been nominated for appointments. All of them turned out to be false. Early into the new administration, it was reported that Chief Ogbonnaya Onu had been named Secretary to the Government of the Federation, Nigeria’s designation for Cabinet Secretary. Weeks later, the speculations shifted to the still-vacant position of Chief of Staff. News filtered out that retired Colonel Hammed Ali, Buhari’s long-time personal Chief of Staff, had been appointed. Again, it turned out to be false.
The two men have been close to the president since he joined partisan politics in the early 2000s and are still very likely to bag important roles in his government. Other long-time associates tipped for important positions include Tam David-West, who served under Buhari as the petroleum minister when he was military head of state in 1984-85, and Abdulrahman Dambazau, a former army chief and head of security for the presidential campaign. Dambazau, widely expected to be named National Security Adviser, may now be in the running for Defence Minister.
Former state governors, Kayode Fayemi (Ekiti), Babatunde Fashola (Lagos) and Rotimi Amaechi (Rivers) are also expected to be named to cabinet or presidential staff positions. The trio played prominent roles in the Buhari presidential campaign – Amaechi as campaign director-general, Fayemi policy director, while Fashola oversaw fundraising.
Party leaders, like former Governor of Lagos State, Bola Ahmed Tinubu, and former Vice President Atiku Abubakar, are also expected to nominate candidates for presidential consideration, but there is no doubt where the final decisions lie.
Policy Direction
Apart from the 800-page report of the Transition Committee, the new government can also count on another 73-page one; the outcome of a two-day summit that the ruling party’s policy directorate, under Fayemi, convened in May; bringing together technocrats, politicians and public officials.
With the support of the United Nations Development Programme (UNDP) and management consulting firm, Bain &amp; Company Nigeria, the summit produced detailed recommendations on several sectors of the government: oil and gas, education, healthcare, security, agriculture and foreign affairs, among others. The reports outlined specific plans for the incoming ministers to implement in the short term, medium term  and long term. As things stand, it’ll be more than 100 days from May 29 before a cabinet is in place, and the incoming ministers will have some recalibrating to do.
For business executives and investors, the reassessing will be an unending obligation. As soon as the cabinet is named, the next round of tea-leaf reading – this time for policy direction – begins.

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The Angry Wait

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