Ten months of provisional output data show a two-speed economy, and the slow lane employs most Congolese.

By Kanisa Magazine · November 2020

In the first ten months of 2020 the Democratic Republic of the Congo produced 1,319,622 tonnes of copper, against 1,172,746 tonnes in the same months of 2019. That is a rise of 12.5 per cent in the year the pandemic closed borders and cut global demand. Cobalt rose 10 per cent to 71,694 tonnes.

The same table in the Banque Centrale du Congo digest reports cement down 18 per cent, soft drinks down 16 per cent, beer down 9 per cent and wheat flour down 7 per cent. The headline GDP estimate for the year is minus 1.7 per cent. The mining line and the national line are telling different stories because they describe different economies.

Ten months, two economies

Industrial mining grew while the goods Congolese households buy shrank.

Set the cumulative provisional figures side by side and a pattern emerges. Crude oil rose 7 per cent to 7.2 million barrels. Electricity use rose 9 per cent to 10.4 million megawatt hours, and goods handled at the ports of Kinshasa, Matadi and Boma rose 6.5 per cent. Those are lines connected to large installations, many of them serving mines.

On the other side of the ledger, cement fell from 1.09 million tonnes to 895,000. Timber logs fell 56 per cent to 43,003 cubic metres. Gold fell 34 per cent to 18,182 kilograms and diamonds 55 per cent to 4.96 million carats, of which the artisanal share dropped from 8.87 million carats to 2.70 million. The BCC labels these as provisional, and its column headings do not spell out the period, so the comparison is best read as direction rather than decimal.

Why mining does not carry the rest

A capital-intensive sector adds export dollars but few household incomes.

The mechanism is old but sharper this year. Large copper and cobalt operations in Haut-Katanga and Lualaba run on imported equipment, expatriate contracts and dollar payrolls that are small relative to the national workforce. Their output feeds the export line and, through royalties and taxes, the Treasury. It does not feed Kinshasa’s bakeries, Kikwit’s building sites or the artisanal diggers in Kasai.

When Covid-19 closed transport and informal trade, the segments of the economy that depend on small cash transactions fell first and furthest. The BCC’s per-head GDP estimate shows it: US$559.6 in current dollars in 2020, down from US$583.0 in 2019, and a fall of 4.7 per cent at constant prices. Population growth of 3.2 per cent means that even a flat national economy leaves each person poorer.

The second wave arrives

Late November added a health shock to an economy already running on one engine.

On 30 November Dr Jean-Jacques Muyembe confirmed a second wave of Covid-19 in the country, at the point when daily cases were climbing from single digits to between 39 and 55. Any new restrictions would fall on exactly the sectors the digest shows are already weak. The IMF’s April disbursement of US$363 million, documented in its staff paper on the rapid-credit request, was sized for a shock with mineral prices low and the economy closed. Prices have since turned for copper, but the health risk has returned.

The contrast with mineral prices helps explain why activity indicators and fiscal indicators diverge. Copper in London reached US$7,028 a tonne on 20 November, so mining revenue to the Treasury is improving. The consumer is not.

What this means for a business plan

Plan for the slow lane, and price the mining spillover separately.

A company serving mines, such as an equipment dealer, a catering firm in Kolwezi or a logistics operator on the Lubumbashi corridor, can plan on volume growth of around 10 per cent. A company serving households or construction cannot, and should assume that 2021 begins from a lower base than 2019.

The practical implications are specific. Suppliers should split receivables between mining-linked and consumer-linked customers and apply different credit limits to each. Consumer goods firms with dollar-denominated inputs should expect pressure to hold prices in francs while costs track the dollar. And any investor reading the headline copper numbers as a proxy for the national economy should halve the enthusiasm, then look at cement, beer and electricity instead.