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Archive pour le 26 March, 2015

Trends in Multinational Corporations and the DRC Violent Economy

Introduction

After the Congo second war (1998-2001), the country has thereafter been recovering from a series of conflicts that broke out in the 1990s. This long period had several effects on the economy and it led to a social slump. According to KPMG, (2014, p. 4) the Congo is slowly recovering from decades of decline caused by systemic corruption since independence in 1960 and the conflict that began in May 1997. These factors have dramatically reduced the national output and the government revenue; it has increased external debt and resulted in the deaths of more than 5 million people from violence, famine, and diseases.

In fact, these experiences influenced the collapsed economic sector. More and more, the government and other existing international organizations are working on normalizing the economy including restructuring the chain of investments by targeting specific economic actors and sectors.

Since the country is dependent on natural resources, the restructuration targets specifically companies working in the mining sectors. The main focus is on how to integrate the existing mechanisms which govern the mining companies’ behavior such as their linkage to the corrupted economic sound of the country. It is from these factors that various authors conclude that the causes of the conflict are directly linked to the natural resources curse. Beyond of this lays a controversial debate on the contribution of the mining sectors in the Congolese development.

This paper critically assesses the positive as well as the negative role of conflict finances downplayed by some extractives industries in the socioeconomic development of Congo.

In the next pages, we will present the Democratic Republic of Congo (DRC) country profile, the role that multinational corporations can play or are playing in the socio-economic development. We will present some “rogue” mining companies and “responsible” companies.

1.      Quick Outlook of the Congolese Economy

DRC is a low income country, ranging 186 out 187 in the Human Development Indicator (2013). She has a population size of around 68 million and covers an area of 2. 344. 858 km2 with a GNI per capita of US$160. In 2012 the per capita income was rated around US$220. DRC remains among the most potential rich countries and she is a goop supplier for precious metal for the global market. The major exports are crude oil, diamonds, cobalt, copper, gold, coffee, tobacco, sugar, and wood products. It imports maize, wheat, food stuffs, transport equipment, and fuel (FAO, 2012). According to the World Bank (2014), “DRC has the potential to be one of the richest countries on the African continent and a driver for the African economic growth with 1,100 minerals and precious metals”.

Since 2010, the Congolese economy has performed well with an amazing economic growth of 8.5% in 2013. It is ranked the 4th country after Sierra Leone, Chad, and Ivory Coast in the economic performance (Africa Outlook, 2014). This result is due to the normalization within the mining sectors, the implementation of prudent fiscal and monetary policies, and the investment in infrastructure. Robust extractive industries have played an important role in this economic performance and the terms of trade of have been favorable to DRC due to stable trends in the commodity prices.

However, the Congolese financial system is shallow and underdeveloped (IMF Country Report No. 14/315, 2014) and it has contributed to the non-performance of the country in the business climate. The Business Climate Index 2014 ranked the Congolese environment 183 out of 189. This factor has a negative impact of attracting external investors.

The Congolese political economy is “a violent economy” surrounded by a history of wars. The presence of several actors in the conflict trade including the conflict entrepreneurs (predatory elites – looters, organized criminals, military manager, and political entrepreneurs), the conflict opportunists, and conflicts dependents cannot to sustain the stability of the Congolese economy.

In the political context, DRC is a fragile country due to weak institutions and the tense security situation in the eastern provinces. However, peacebuilding and economic recovery efforts are being carried out. As noted by the HDI (2014), the poverty rate is higher even though it fell from 71% in 2005 to 63% in 2012. Despite the eastern Congo crisis, DRC is a reconciled society expressed by the mutual acceptance of the different ethnic groups.

Despite the nature of its violent economy, DRC receives several investors, specifically in the mining sector. Some of these investors are working in the conflicting zones controlled by rebel groups and others in the zones under the state control. In the opinion of majority of Congolese, most of the multinational corporations working in the conflict zones sponsor the rebel groups in order to create a scenario without the control of the government where they can freely make profit from the resources. The next sections will provide a critical analysis of the role of multinational corporations, addressing the case of DRC.

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