Top 4 Investment Opportunities in the DRC
Two businessmen on their iPhones argue over Congolese economic policy at Le Café Conc, an expensive French restaurant in the middle of Kinshasa, the capital of the Democratic Republic of Congo (DRC) The businessmen – Joseph and Patrice – are small-scale investors from the city. They are sending emails to their brothers in France and Belgium, one of whom responds: “Dude, I am not coming back to the D-R-C until the news changes on this side of the world…lol.” These two businessmen are childhood friends who remain skeptical about their future in the central African country. But their optimism for its potential, and investment opportunities, overshadows any calls from their brothers to leave.
Thousands of Congolese die every year due to disease, political violence and poverty. The international news is rightfully not slow in getting this out to the public. But some often fail to capture the changing investment environment. The government wants to change the country’s image, says Patrice. He tells me it is mostly a peaceful place, despite a few locations. “But it is only businessmen like us and foreign investors”, he adds, “that will change that image. “
In Africa’s third most populous country, jobs are at a minimum along with capital. Local businessmen are making money – but desperately need more capital to grow. The business environment requires some zeal and determination. But returns are to be made and risk is definitely overstated. Here’s a look at some of the top investment opportunities DRC:
Given the DRC’s sizeable land mass – 227 million hectares – the Congolese still endure a system that provides an insufficient amount of crops. The main agricultural exports in terms of value – unmanufactured tobacco, green coffee, sugar, wheat and dry rubber – still have great potential, as commercial agriculture is limited. Most farmers are still subsistence or small-scale. A lack of manufacturing and packaging infrastructure hinders the country’s ability to move the value chain further on shore and capture greater profits and rewards for the farmers.
The livestock and fishery sectors have the highest potential. Imported frozen chicken and fish are the norm in the DRC. The cost of chicken and eggs in Kinshasa is approximately twice the price you would pay in South Africa. The same story applies to milk and cheese. Both poultry and dairy suffer from a lack of capital and outdated equipment. Boosting production and lowering costs is the name of the game. Most of the DRC’s urbanized population are seeing gains in income but are still waiting for lower prices in order to meet their greater consumption needs. The cost of eating anything in the city is high, says Joseph and Patrice, but we need a lot more capital and advanced equipment and technology to change the situation.
Mining in the DRC is full of returns. The first step is understanding the regional politics and operating costs. Transparency has vastly improved. Licenses and tariffs are not left to chance. Investors must still address human capital issues and management. But an anxious and interested labor force is ready to learn. Equipment, expertise and capital are the inside track for investors. Copper grabs the news spotlight but value opportunities exist in diamonds, gold and manganese.
Telecom and ICT
Telecom is always a virtual gold mine in a country of more than 75 million people. But the gold mine has not been tapped. Estimates have mobile penetration rate slightly above 25 percent. News circulation is limited outside the main cities of Kinshasa and Lubumbashi. Internet penetration is all but nonexistent outside internet cafes. Mobile phones provide an opportunity for accessing a vastly growing consumer base, especially with a large amount of Congolese outside its urban areas.
President Joseph Kabila is focused on increasing mining and oil production in the country. Ramping up such efforts require investment in regions far from Kinshasa. North and South Kivu, flooded with gold and other metals, are still fairly disconnected. Oil potential in the regions is unknown but thought to be high. An improvement in the telecom industry is essential to these sectors. Accessing untapped resources is more than getting past economic mismanagement, says a Rand Merchant Bank (RMB) executive, it also includes connecting one side of the country to the other. Nigerian telecom managers created the ideal situation by packaging a growing oil & gas industry with emerging mining companies and a huge population to generate great returns. The DRC has similar potential as Nigeria, says the RMB executive, granted on a smaller scale with half the population.
Logistics & Warehousing
The DRC’s transport infrastructure is vastly underdeveloped. Previously built infrastructure is now decrepit after years of mismanagement and war. Given these conditions, reliable and capable transport and warehousing is in high demand. Margins are high, says a private equity executive looking at the county, but challenges still remain. Cement imports and mineral exports require a change in the sector. Dependent on the current infrastructure, both heavy construction and mining struggle to reach full potential. Transport and warehousing are necessary to access the most volatile or remote parts of the country. This does mean that you are in danger zones, adds the executive, but it does mean that the infrastructure you encounter is extremely subpar. With Kinshasa and Lubumbashi at opposite ends, a lot still must happen throughout the country.
Water Sector :
The main objective is to increase the access to running water by rebuilding the existing water network and constructing new ones. The specific projects in the water sector include the completion of the water processing plant in Lukaya, improvement of the water supply network and supply of water inputs (water treatment).
Education & Health Sector :
There is an opportunity for private sector to help in the growth of secondary and higher technical education. There is also a requirement for private sector to enter into building private clinics and improve the health facilities of the country.
Stories of war and poverty have plagued the DRC for years. Yet one stop in Kinshasa tells you a different story is unfolding there.