Poor governance hindering Congo growth: World Bank

1887

Democratic Republic of Congo’s fragile post-war economic growth is being slowed by poor governance, a lack of transparency and heavy informal taxes on companies, the World Bank said.

The vast central African country is the continent’s second largest copper producer and has large resources of arable land, but remains mired in poverty after decades of dictatorship and back-to-back wars that left several million people dead.

Despite showing positive growth since the official end of fighting in 2003, continuing political instability and a lack of institutional reforms are a drag on economic expansion, the World Bank reported in the first detailed study of the Democratic Republic of Congo in 25 years, Reuters reports.
“The analysis suggests that poor governance stifles the performance of small- and medium-sized enterprises in the formal sector,” said the report, which used data up to 2010. “(This) enables public agencies and officials to impose myriad taxes and levies, both formal and informal, on the private sector.”

Although the impact on companies was across the board, larger enterprises were better able to protect themselves against such problems, while smaller and medium enterprises bore the brunt of the charges, the report added.

President Joseph Kabila was re-elected last November in polls which were widely criticised as fraudulent by international observers and foreign governments, and rejected by the opposition.

He has pledged to improve the business climate – which remains one of the worst in the world – but his government is accused by rights groups and other critics of failing to deliver on promises to crack down on widespread corruption.
“Renewed emphasis on governance is a critical element of the country’s upcoming projects to spur growth and improve the business climate,” the World Bank said.

Nevertheless, the multilateral lender praised the government’s increasing use of public-private partnerships to drive economic growth in the country, where an estimated 71 percent of the population live in poverty and many regions remain virtually cut off from the outside world.

Congo’s economy grew 5.3 percent on average from 2006 to 2010, with local wholesale and retail sales to consumers accounting for 40 percent of expansion, according to the Bank.

POTENTIAL BREADBASKET, LAND UNDERUSED

Agriculture, which contracted sharply during the war years, when millions of people were forced to flee their homes, has also rallied in the same period, accounting for 24 percent of GDP growth.

Congo is seen by many as a potential breadbasket for Africa but is only exploiting 10 percent of its cultivable land.

A controversial new law insisting all agricultural projects must be majority Congolese-owned has been widely criticised by international investors as a perceived step towards nationalisation, a charge denied by the government.

Congo’s mining sector, largely focused on copper and cobalt deposits in the southern province of Katanga, has played a vital role in growth, the World Bank found.
“The mining sector in Katanga contributed more than 50 percent to GDP in 2010, and the contribution to growth during 2006-10 was even larger.”

But “lagging reforms” in state-owned enterprises were having mounting economic and social costs, the report added.

It said that widespread reforms of the civil service and a decentralisation of power away from Kinshasa to the provinces would probably stimulate growth.