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DRCPaperECON6341draft1.docxIntroduction – The Democratic Republic of Congo at the Present
The Democratic Republic of Congo (DRC) is the largest of the French speaking countries in Africa. French is the dominant language of discourse for official and business matters as a direct result of their colonial past as a colony of Belgium in the late 19th century. Other local and tribal languages are widely used. It has a population of nearly 77 million with only 40 percent in urban areas. Because of the immense land mass of 80 million hectares and over 1100 minerals and precious metals, the DRC could become an economic powerhouse if the country is able to develop political stability.
The DRC is still wrestling with creating a stable government and is trying to recover from a series of conflicts both internal and with neighboring countries during the 1990’s and the better part of the 2000’s. Joseph Kabila is the current head of state since 2006 and there has been a dialog in conjunction with the African Union and Congolese episcopate to install an electoral system and parliamentary government with an election that was scheduled for November 27, 2016. This never occurred. The bishops of the Congolese episcopate withdrew from talks seeing that Kabila was not likely to follow through with free elections even though Kabila mentioned that he was not seeking a 3rd term as President and that the Constitution would not be modified until elections were held. Essentially to date, these efforts have failed, and the DRC remains in a state of political flux which has been their legacy since gaining independence in 1960.
In the economic context, the DRC has experienced an almost exaggerated level of volatility with GDP growing a rate of 9 percent in the 2013-14-time frame and decelerating to a rate of 2.5% in 2016 due to the reduced demand for raw materials for this period. During 2016 the DRC’s budget performance of 0.1% GDP surplus deteriorated to a deficit of 1.5% along with inflationary pressure at 5.7% currently. The government has initiated reforms to strengthen governance and transparency particularly in industries that extract raw materials with the intent to improve the business climate. Contracts given out by the government are made public, but there is still governmental effort needed regarding the competitive processes in the awarding of contracts (World Bank, 2017).
Source: World Bank 1
The DRC, despite reducing its poverty rate from 71% to 64% is one of the poorest countries in the world ranking 176 out 187 currently on the United Nations Human Development Index. It is estimated that there 2.3 million displaced persons via conflict within the DRC and 323,000 refugees living outside of the DRC. With this profile, there are several questions that come to mind. Why is the DRC poor despite its wealth in natural resources? How are oil and other raw material revenues managed? What are the social and economic impacts induced by the abundance of raw materials? Is there a resource curse? These questions will be addressed in part as a lesson in history and in part as a discussion of socio-economic dynamics created by despotic governments and greedy foreign interlopers in the form of international corporations from around the globe who continue to exploit the DRC for its natural resources.
Why the DRC is poor and how did the problem originate?
The DRC is poor from the inception of it as a country due to the influence of European colonization by King Leopold II of Belgium. It is believed that Henry Morgan Stanley, an American explorer, was commissioned to explore African areas for possible colonization by Belgian Commercial Interests. Although, the mission was under the guise of finding the source of the Nile and the missionary Dr. Livingston, Stanley was instructed to procure land and setup trading stations along his route to establish the “Free State of the Congo” for King Leopold II. The “Free State of the Congo” was Leopold’s personal possession and not that of the Belgian State in the beginning. Leopold then created franchises for different sorts of businesses who would exploit the many natural resources that were native and resident in the Congo. The industrial age among developed European countries was in full swing and the need for raw materials of one sort or another for the production of modern contrivances. He created a private mercenary army to enforce his trade policies and to procure “cheap” labor to assist with the procurement of raw materials, chiefly rubber, from the rubber plant in the beginning. The reality of Leopold, his franchisees and the “Force Publique”, was that the Force Publique conscripted forced labor to harvest rubber for the various firms and quotas were imposed on the forced labor. Their enforcement of their quotas is among the worst cases of atrocities and genocide recorded in the relatively modern era and were a precursor to worse things to come in the Twentieth Century. Leopold formed the Abir Congo Rubber which controlled much of the world supply of rubber necessary for industrial machinery and soon thereafter, automobiles. King Leopold ceded his ownership of the “Free State of the Congo” to Belgium in 1908 for a hefty sum which became the basis of the first and only legal trust in Belgium set up for the Belgian Royal Family and is under their control to this day. Belgium acquired enormous wealth through the exploitation of the native inhabitants and natural resources.
Nothing really changed in terms of the operation of businesses which were principally Belgian entities within the Belgian Congo. The remaining firms not directly aligned with Leopold who died in 1909 continued with the exploitation of natural resources. The post-Leopold era had curtailed the severing of hands and the shooting of village hostages for the greater part, but the use of the “chicote” or bullwhip was ubiquitous until Belgium granted it independence in 1960 after many years of internal revolutionary and separatist strife during the 1950’s. The new “Democratic Republic of Congo” was an independent nation on the surface and according to the United Nations recognized as a member state in 1960. President Mobutu was the first in the soon to be long line of banana republic dictators or “Presidents for Life” or least until they themselves were ousted by a coup d’état of one sort or another. European companies both Belgian and others have been busy extracting the seemingly limitless natural resources available in the DRC. Rubber is just one of many of the plentiful natural resources that were being extracted with the use of what could be considered indentured servants in the post-independence period. Companies since exploited the local population to later extract volumes of Coltan, a necessary compound necessary to produce cell phones, as well as diamonds, oil, copper, cobalt, tin, gold and Uranium. Working conditions for the labor force were and are abysmal and harsh with little to no concern of the health and safety of the workers who extracted these resources (Conrad, 1899; Hochschild, 1998; Snow, 2013).
The Management of Oil and other Natural Resources
The management of natural resources in the DRC is a classic case of resource grabbing by multi-national corporations with little to no fore thought on the impact of the national economy or how the extraction and sale of these raw materials benefit society at large. The DRC like several other African have enormous untapped reserves of many natural resources up to and including oil. However as a result of weak governance and extreme crony capitalism the trickle down benefits to the population are nearly absent and the attraction to invest by foreign is minimal because of the perceived risk-reward in doing so. Multi-nationals that choose to have a business operations footprint in the DRC are heavily guarded and secured by para-military security forces in most cases do the level corruption and misbehavior by local and regional mid-level officials and other rogue groups operating in the DRC.
Oil Production is at minimal levels and foreign based multi-nationals are more interested in the rare earth minerals that are plentiful and have a higher payoff for effort. The actual oil reserves are huge and the government is working to reform its trade practices to entice more exploration and drilling. It is anticipated that the possibility of a strong uptick in the production of oil for export. This will be largely influenced by the price of crude on the world market. Currently, the price levels are moderately low making the cost-benefit of increasing oil production less beneficial for the time being. Likewise, border disputes with neighboring countries such as Uganda and Rwanda make the risk-reward less attractive as businesses to do not wish to make the large upfront investment when conflict over minerals between these nations is high.
Social and Economic Impacts of Natural Resources on the DRC
Source: World Bank 2
Q4. Social and Economic Impacts of Nat. Resources on DRC. History to Present. International Rubber, cell phone tanzanite, uranium, etc. Exploitation by world powers key.
Q5. Is the DRC subject to the natural resource curse. Definitely as history to present has shown. Efforts being made to create a Fair Trade atmosphere. However, Many of the same early players are still present albeit in a less menacing guise. (Snow, 2013).
REFERENCES:
Snow, D. (Oct. 2013). DR Congo: Cursed by its natural wealth. BBC News Magazine. Retrieved 11-04-2017 from: http://www.bbc.com/news/magazine-24396390
Kaswala, J. (Oct. 2013). Poorest Country in the World: Democratic Republic of Congo. Retrieved 11-03-2017 from: https://borgenproject.org/poorest-country-world-democratic-republic-congo/
Conrad, J. (1899). Heart of Darkness. Blackwood’s Magazine. London.
Hochschild, A. (Sep. 1998). King Leopold’s Ghost: A Story of Greed, Terror, and Heroism in Colonial Africa. Mariner Books. USA.
Harford, T & Klein, M. (Apr. 2005). Aid and the Resource Curse. Public Policy for the Private Sector. The World Bank Group: Private Sector Development Vice Presidency. Retrieved 11-06-2017 from: http://siteresources.worldbank.org/EXTFINANCIALSECTOR/Resources/282884-1303327122200/291harford_klein.pdf
Report no.59631-ZR. (Mar 2017). Democratic Republic of Congo Boosting Growth and Employment Volume II: Historical and Macroeconomic Context. World Bank: Poverty Reduction and Economic Management 3 Country Department AFCCD Africa Region. Retrieved 11-07-2017 from: http://siteresources.worldbank.org/INTDEBTDEPT/Resources/468980-1316457581843/CaseStudy_DRC_2_V2.pdf
World Bank. (Apr. 2017). Democratic Republic of Congo Overview. Retrieved 11-02-2017 from: http://www.worldbank.org/en/country/drc/overview
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