Mining runs at more than a third above last year while grid electricity is flat, and the gap shapes who gains from the boom.

By Kanisa Magazine · August 2022

The Banque Centrale du Congo’s copper production index reached 235.3 in June, against 173.4 a year earlier, a rise of 36 per cent. Over the same first half, the grid delivered 6,545 thousand megawatt-hours of electricity, slightly below the 6,598 thousand of the first half of 2021. Mining is growing at more than a third a year while the power that factories and shops share is not growing at all.

That is the gap behind the headline. Congo’s economy is expanding at about 6 per cent, but the growth is lopsided, and the August digest shows where the imbalance sits.

The index that runs ahead

Copper and oil are up, gold is down, and the average hides who is winning.

The BCC digest of 29 August reports provisional first-half output. Crude oil came to 4,384 thousand barrels, 6 per cent above the 4,123 thousand of a year earlier. Gold fell 19 per cent, to 12,476 kilograms from 15,479. Potable water supplied rose 6 per cent, to 151.4 million cubic metres. Copper is the outlier, and the index series shows it accelerating: 192.2 in January, 224.1 in March, 235.3 in June.

A national figure that mixes these moves obscures the point. One commodity, helped by new capacity, is setting the pace, and the rest of the table looks like a normal developing economy.

Two growth rates in one country

Extractive output is expanding at about 10 per cent; everything else at 4 per cent.

The IMF’s staff report on the second review separates the two. For 2021 it shows real GDP growth of 6.2 per cent, built from 10.1 per cent in the extractive sector and 4.5 per cent in the rest. For 2022 it projects total growth of 6.1 per cent, with 10.6 per cent from extractive output and 4.1 per cent from everything else. It also reports that 72.5 per cent of the population lives in poverty.

Non-mining activity is therefore slowing in the same year that mining speeds up. The IMF revised its end-2022 inflation forecast to 11 per cent, so a household income rising at 4 per cent is losing ground against a basket whose cost, by the BCC’s weekly index, was up 10 per cent in the year to August.

How the windfall travels

The state is the channel, and its wage bill is running ahead of the calendar.

Mining money reaches the wider economy mainly through the budget. By 26 August the Treasury had booked CDF 14,294 billion of revenue, already above the CDF 13,513 billion collected in all of 2021. Of that, the tax directorate had raised CDF 8,023 billion, customs CDF 2,376 billion and the non-tax directorate CDF 1,909 billion. Spending of CDF 13,874 billion left a surplus of CDF 420 billion.

The largest outlay is pay. Remuneration reached CDF 4,629 billion, which is 82 per cent of the 2021 total after 65 per cent of the year, or on a straight-line reading about a quarter higher than last year. Teachers, soldiers, police officers and nurses are the households most directly fed by mining revenue. The World Bank is adding to the non-mining side in kind: its 28 June approval includes US$500 million to upgrade 440 kilometres of road in Kasai and North Kivu and to lay fibre along them.

What a business should do with the gap

Sell to the state’s payroll, and do not plan growth on extra grid power.

A firm selling to Congolese consumers is exposed to the 4 per cent economy, not the 36 per cent one. The most reliable customers are those whose income follows the wage bill and the revenue line: civil servants, the army and the contractors paid from the budget. Lenders that want exposure to non-mining demand can find it in payroll-linked consumer credit and supplier finance to state contractors.

For manufacturers, the electricity line is the warning. A year of flat grid output against a third more copper means any plant that needs more power must plan to produce its own or wait for new capacity. In early June the World Bank signed US$900 million of agreements with the government that it said include better access to water and electricity in Kasai and the east, but those projects are years from delivery. The test of the September digest is whether power and water numbers begin to rise alongside the mining index. Until they do, the economy beneath the headline is growing as slowly as its infrastructure allows.