Financial Crime World

Congo’s Corrosive Business Environment: A Battle Against Financial Crime and Ethics

The Democratic Republic of the Congo (DRC), situated in the heart of Central Africa, possesses an abundance of natural resources and a vast market. Yet, its business climate is amongst the least competitive in the world, plagued by endemic corruption at all levels of government and sectors of the economy.

Corruption in the DRC: Forms and Effects

Corruption in the DRC manifests in various forms such as clientelism, rent-seeking, and patronage. It is most pervasive in:

  1. Public procurement
  2. Extractive industries

Companies in these sectors often face the challenge of securing licenses and contracts by paying bribes or offering other forms of favors.

Lack of Transparency and Inconsistent Enforcement

The lack of transparency in the public sector extends to the country’s judicial institutions. Approximately one-third of surveyed companies identified the judiciary as a constraint to starting a business in the DRC. The legal framework, including international conventions, remains inconsistently enforced.

Corruption in Police Force and Public Services

Corruption is also deeply ingrained in the country’s police force, which poses a significant obstacle to doing business. A survey by the Bertelsmann Foundation revealed that almost half of all surveyed firms operating in the DRC reported paying for security due to crime. High levels of corruption in public services further discourage both local and foreign enterprises, with business licenses, permits, and tax procedures all posing challenges.

  1. State Administration and the Emergence of Informal Sectors

The state administration, particularly outside major cities, is almost non-existent. In the absence of a functional public administration, large, informal sectors have emerged, entrenching corruption and hindering overall economic development.

Inadequate Enforcement against Corruption

Despite ratifying international conventions against corruption, the DRC’s enforcement efforts remain inadequate. Whistleblowers who attempt to expose corrupt practices often face reprisals with impunity. The lack of transparency in government appointments and contracts further fuels the cycle of corruption.

Corruption in the Natural Resources Sector

The natural resources sector, a critical contributor to the DRC economy, is also plagued by corruption. State-owned companies dominate the extractive industries, leading to arbitrary decision-making and a lack of transparency in allocation of exploration and exploitation licenses. Revenue derived from the sector is often siphoned off by the ruling elite, diverting resources from investment in public services and infrastructure.

International Efforts to Protect Foreign Investors and Dispute Resolution

The International Centre for Settlement of Investment Disputes (ICSID) and the New York Convention 1958 are in place to protect foreign investors and facilitate dispute resolution between countries. However, the weakness of the DRC’s institutions and the prevalence of corruption hinder effective implementation of these agreements.

Anti-Corruption Initiatives

In an attempt to combat corruption, the DRC government established the “Zero Tolerance against Corruption” program and the “Mining Sector Free of Corruption” initiative. Although these programs have provided funds to the government, their impact on actual anti-corruption measures remains limited.

Steps Towards Overcoming Corruption

Addressing corruption in the DRC will require significant political will and targeted reforms to build institutional capacity and promote transparency and accountability.

Sources:

  • World Bank & IFC: Doing Business 2016
  • Bertelsmann Foundation: Transformation Index - The Democratic Republic of the Congo 2016
  • US Department of State: Investment Climate Statement - Democratic Republic of the Congo 2016, 2015
  • US Department of State: Human Rights Practices Report - Democratic Republic of the Congo 2015
  • Freedom House: Freedom in the World - The Democratic Republic of the Congo 2015
  • Freedom House: Freedom of the Press - The Democratic Republic of the Congo 2015
  • Transparency International: Overview of Corruption and Anti-Corruption in the Democratic Republic of the Congo (DRC), 11 March 2014
  • Transparency International: Global Corruption Barometer 2013
  • World Bank Group: Enterprise Surveys - Democratic Republic of the Congo 2013
  • Freedom House: Countries at the Crossroads - Democratic Republic of the Congo 2012
  • U4 Anti-Corruption Resource Center: National-level corruption risks and mitigation strategies in the implementation of REDD+ in the Democratic Republic of the Congo: An overview of the current situation, April 2015
  • US Department of State: Human Rights Practices Report - Democratic Republic of the Congo 2014.