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Economy and Business in the Republic of Congo

The economy of the Republic of Congo has undergone major changes since independence in 1960, when the country began to extract oil. Particularly from the 1980s, this has led to large revenues, but also considerable uncertainty, due to the large fluctuations in the price of the world market. At the same time as the importance of agriculture has been declining, Congo has thus become heavily dependent on oil revenues, and thus the price of the international markets. At the same time as the development of the oil and service sector, Congo has had a greater degree of urbanization than most African countries, with lower employment and agricultural production as a result. Congo has large forest areas, and timber was the most important export item until 1973; when petroleum took over the position.

Business of Republic of the Congo

According to COUNTRYAAH, Congo has long been one of the most economically disadvantaged countries in tropical Africa, but a civil war in the 1990s caused great havoc, especially in Brazzaville and on infrastructure, but the war affected the vital oil sector to a small extent. As a result of the war, Congo, which normally had a surplus on the trade balance, has accumulated considerable foreign debt, but has received special loans and credits from the International Monetary Fund. Despite the large government revenues, the fall in oil prices in the 1980s and the late 1990s, as well as the civil war in the second half of the 1990s, contributed to major social problems, with about 70 percent of the population living below the poverty line. In the 1980s, Congo was ranked as a middle-income country.

Since independence, Congo has undergone major political and ideological changes, which have also influenced economic development. From strong state participation in economic activity in the 1960s, increased private sector participation was encouraged from the late 1970s, which particularly benefited the oil sector. A major economic restructuring took place in 1994 as a result of a 50 percent devaluation of the CFA franc, linked to the French franc. Privatization of state enterprises was part of this policy, but the restructuring programs were halted as a result of the civil war that broke out in 1997.

With Congo's geographical location in Central Africa, and Brazzaville's former position as the capital of French Equatorial Africa, the country is also a transport hub with a lot of transit trade, especially to and from Central African Republic and Chad. Destruction of infrastructure during the war also affected this sector. The petroleum sector normally accounts for well over half of gross national income (GNI), varying with the price of crude oil. More than a third of the population is employed in agriculture, which, however, contributes only slightly to GNI.

Agriculture

The importance of agriculture to the economy of the Republic of Congo has decreased significantly as petroleum exports increased in the 1970s and following the rapid urbanization of recent years. Nor has a policy been implemented that has promoted agriculture and food production. Only 2 per cent of the country's area is cultivated, and about a quarter of the cultivated area is occupied by plantations and state farms, where lesser quantities of coffee, cocoa, peanuts, tobacco, sugar cane and oil palm are grown.

However, exports of agricultural products are minimal, and Congo is almost self-sufficient in food. Sugar cane and tobacco have traditionally been the most important export products from agriculture; smaller quantities of cocoa, coffee and palm oil are also exported. In 2003, the authorities announced a ten-year plan to reduce the dependence on food imports, in which rebuilding market opportunities and access to rural inputs, which were destroyed during the war, are central. Animal husbandry is limited by the tsetse fly. The most important food crop is cassava.

About 55 percent of Congo's land area is covered by forests and still represents significant economic potential, although inaccessibility and inadequate infrastructure limit the potential for harvesting - which also helps preserve forests, which are part of the largest remaining tropical forest area in Africa., and the world's second largest rainforest. In 2005, the leaders of ten countries in the Congo Basin signed an agreement in Brazzaville to protect this forest area.

For forestry reasons, forestry is concentrated in the southern part of the country. The sector was the country's main source of income until the mid-1970s, accounting for around 60 percent of export revenue; petroleum then took over the position. One third of the forest consists of viable deposits of limba, okoumé and sapele, which for the most part are exported as round timber. Congo is the world's largest exporter of limba, and the second largest of okumé. Since 1979, eucalyptus has been planted on several plantations; eucalyptus is also exported. Exports of timber increased significantly in the 1990s, but this business was also severely affected by the civil war.

Fishing is conducted in all major rivers, and offshore waters - which are cooled by the Benguela Stream - have rich fishing banks.

Mining, energy

Congo has deposits of several minerals, but recovery is limited, not least due to poor availability. Mineral exports accounted for less than 5 per cent of export value until 1970, after which the value of crude oil exports rose sharply. In the mid-1980s, mineral exports accounted for about 90 percent of total export revenues, mostly from oil. Oil was first detected onshore at Pointe-India in 1957, and extraction there began in 1960. Offshore fields were put into production in the 1970s, and production was at 340,000 barrels per day in 2018. With estimated reserves of 1, 6 billion barrels (2018), Congo is the fifth largest oil producer in sub-Saharan Africa. Nkossa is the country's largest field, with reserves of approximately 500,000 barrels.

Congo also has significant reserves of natural gas; mainly related to the oil deposits and is estimated at 90.6 billion cubic meters (2018). An important operating company in particular is the French Elf (later merged with Total and Fina), through its subsidiary Elf-Congo, together with the state Société Nationale des Pétroles du Congo (SNPC). Italian, American and South African interests are also involved in oil recovery.

In addition, lead, zinc, copper, diamonds and gold are mined in smaller quantities. Occurrences of bauxite, phosphate, iron ore, tin, titanium, uranium and manganese have been detected. An agreement has been signed with neighboring Gabon on joint utilization of the iron ore rents, which will require significant investments. Congo also has large deposits of potash (calcium carbonate).

Congo has a total hydropower potential estimated at approximately 3900 megawatts (MW). In 2017, only 213 MW of this was developed, divided into three hydropower plants. The country's largest hydropower plant, Imobulou, is located on the Lefini River, centrally located in the country. The power plant came into operation in 2011 and has an installed capacity of 120 MW. In addition, the power plants Moukoukoulou provide 74 MW and Djoué 19 MW. A pre-study is currently underway with a view to implementing the large Sounda Gorge project, which will provide a new production capacity of between 600 and 1200 MW.

Industry

Congo has a small, but relatively well-developed industry, which, however, was also hit by the civil war in the 1990s. The main industrial activity is related to the oil sector, and a Pointe-Noire oil refinery was put into operation in 1976, with the production of, among other things, heating oils, kerosene and gasoline. In addition, the industry is linked to the processing of agricultural products and the production of consumer goods. A small local market and reliance on foreign investment are limiting factors for industrial development.

Most of the industry is located in Brazzaville, Pointe-Noire, Kayes, Loubomo and Niari Valley. A cement factory was established in Loutété in 1968, where the Norwegian-Swedish (later German) Scancem company bought into the state company Cimcongo in 1987, but discontinued production during the civil war. After the war, Chinese interests entered into a joint venture with Congo authorities with a view to restarting production. In 1999, Scancem re-entered the Congo and in 2002 modernized the Pointe-Noire cement terminal.

Foreign Trade

Oil exports, particularly from the beginning of the 1980s, generated substantial profits from foreign trade in Congo, although revenues have varied in line with world price fluctuations. The civil war in the second half of the 1990s caused major material damage, and both the costs of lost income during the war and the rebuilding after it contributed to considerable foreign debt. Due to its substantial currency revenues, Congo does not receive much development assistance.

Apart from oil, which normally accounts for about 90 per cent of export revenue, considerable quantities of timber are exported. Furthermore, there is a large transit trade in smuggled diamonds from neighboring DR Congo (formerly Zaire). In particular, imports consist of food and inputs for industry and mining. Main trading partners are France, China, USA and Italy.

Transport and Communications

The main trunk of the country's transport system is the Congo-Océan railway between Brazzaville and Pointe-Noire (515 kilometers), owned by the state. A private siding to M'Binda is used for transporting manganese from Gabon. The country's road network is poorly developed - outside the major cities there are few roads with a fixed tire; much of the country, especially in the north, is without a road connection. Road construction in these parts of the country is costly and conflicts with environmental considerations. In 2017, Congo had approximately 23,324 kilometers of road, of which only about 7 per cent with a fixed tire. Poor infrastructure is a major cause of poor development in large parts of the country. The Congo River and the navigable parts of the Oubangi and Sanga tributaries are important transport routes not only for the Congo, but also for the Central African Republic.

Domestic aviation is relatively modest; International airports can be found at Brazzaville (Maya-Maya) and Pointe-Noire. Pointe-Noire is the country's most important port city, with deep water ports, and also serves several of neighboring countries, including Gabon, Chad and the Central African Republic. The port of Brazzaville has a significant transit trade with several Central African states.

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