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Doing Business In Africa: Republic of Congo

Doing Business In Africa: Republic of Congo

orijinculture.com
orijinculture.com

The cost to export goods improves, however, as Congo requires 11 documents to be inspected by customs’ officials, while the total cost (excluding taxes) is $3,818 per container, with delivery taking up to 50 days from point of origin. Compared to global averages this nets Congo a ranking of 180th out of 183 on ease of engaging in cross-border trade.

Congo’s ranking improves however when it comes to contract enforcement, where it ranks 158th out of 183 countries ranked on this issue by the Bank.

On average, reports World Bank analysts, it takes a total of 44 legal procedures to take a contract from dispute to resolution, at the cost of 560 days spent in court or otherwise attending to legal issues. The financial cost of pursing a contract claim, says the Bank, typically accounts for 53.2-percent of the value of the claim.

Finally, in terms of closing or liquidating a business Congo ranks 128th out of 183 countries. Here it takes 3.3 years to close an estate or enterprise at a total cost of 25-percent of its value with an average recovery rate of 17.8 cents on the dollar.

Table 1 presents a summary of these rankings as well as Congo’s overall ease-of-doing business rating.  As can be seen, the numbers indicate the country is one of the worst in the world in terms of doing business.  On nearly every measure it ranks well below the median—indeed near the bottom—on these measures.  If there is any category it does well in, however, it is in the area of construction permits where it does the least poorly.


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Table 1:

World Bank Ease of Doing Business

Assessment and Rankings: Congo

 Table 1 Rep of Congo Ease of Business

Prospects

The Republic of the Congo, like much of sub-Saharan Africa, has the typical economic bifurcation seen in most developing states.  On the one hand most of the country’s population is dependent upon smallholder agriculture and handicraft production while, on the other, a rich resource extraction industry pumps out the country’s wealth while enriching the country’s elites.

In this case said resource is oil and gas, mostly located offshore, which accounts for around 87-percent of the country’s export revenue in a given year.

A relatively minor producer, Congo on average produces around 310,000 barrels of oil per day and about 1.1 Billion cubic meters of gas.  The French super-major Total SA dominates the country’s industry and, as might be expected, has major influence in the country’s political circles.  Other oil firms represented in the country include Chevron, rival ExxonMobil, as well as a host of smaller players.

In addition to oil, Congo also has a great deal of mineral wealth that has only been partially tapped over the years—mostly due to political instability and the country’s long association with the Soviet Bloc during the Cold War.  Gold is mined in some quantities and of late Western companies have begun prospecting for copper, which is now exported, in addition to zinc, iron ore, and other industrial metals.

Other minerals of note include potash—a vital component of fertilizer—and rare earths, which are believed to be present in the country in some quantity. Diamonds, too, are also found in some quantity.

Finally, another resource of note is timber.  The country’s tropical forests retain some of the largest stands of desired hardwoods left in the developing world and as a result harvesting of the country’s stands of timber is another major economic activity.  Here, logs are exported to China, which has become a major importer of Africa lumber, as well as Portugal, Spain, France, and Italy.

 

Figure 3:

 Congo Economic Growth,

Percent Increase, 2003 – 2013

 Rep of Congo GDP Growth

Outside the natural resource extraction industry, however, opportunities for investment would seem to be dim.  The country’s terrible business conditions make starting a business, expanding such a business, and carrying out the day-to-day activities of a business extremely difficult.

If, that is, one adheres to the rules by not engaging in bribery of officialdom—which is an endemic practice in what is one of the most corrupt countries on the continent.  Given the overall lack of political accountability, press freedom, and the stultifying rule of a kleptocratic president-for-life, opportunities in Congo are hard to come by for average people an politically unconnected Westerners.

Still, not all is hopeless.  The country’s rich rain forests can be a source of eco-tourism dollars as well as timber sales, while consumer products and services that cater to the country’s rich elite are also sources of potential business.

Likewise, continued oil exploration and mineral prospecting will mean that firms and services associated with those industries will continue to do well.  Finally, there is even the chance that large-scale commercial agriculture could take off if land reform and infrastructure improvements are made.

On the whole though, Congo is a place that needs much more reform before investors looking beyond resource extraction should begin considering the country a place to sink their money into.  There are far better prospects, even within francophone Africa, than Congo.

 

Jeffrey Cavanaugh holds a Ph.D. in political science with a specialization in international relations from the University of Illinois at Urbana-Champaign. Formerly an assistant professor of political science and public administration at Mississippi State University, he writes on global affairs and international economics for AFK Insider, Mint Press News and BAM South.