On The Western Front
U.S. foreign policy has long aided the government of the Democratic Republic of Congo (DRC) in its efforts to foster peace and political stability, combat corruption and establish democratic processes. However, in December 2018, a new page was turned in U.S.-DRC bilateral relations through the first peaceful transition of power to President Félix Tshisekedi. Four months later, the two countries established the ‘Privileged Partnership for Peace and Prosperity’ (PP4PP), a joint commitment to enhanced economic collaboration between the DRC and the U.S., the latter of which serves as a major investor and trading partner. In November 2019, the U.S. Agency for International Development (USAID) signed an agreement to provide $600 million in U.S. development assistance to the DRC to support the growth of key domestic sectors.
A critical component of the PP4PP framework targets the introduction of U.S. private sector companies, goods and foreign direct investment (FDI) to the DRC market. In 2017, U.S. FDI in the DRC totaled $76 million, representing a 1.3% increase from the previous year. The most promising opportunity for U.S. and global investors alike remains the country’s extensive hydrocarbon, mineral wealth and renewable potential. Serving as the leading cobalt ore producer globally, the DRC is rich in diamonds, copper, cobalt, gold and uranium, along with 180 million barrels of proven oil reserves and 30 billion cubic meters of estimated methane and natural gas reserves. In terms of renewable resources, the DRC currently contains 13% of total hydropower potential globally, with the ability to produce over 5,000 MW of electricity per year.
Development of the DRC’s natural resources remains directly proportional to its establishment of a clear, transparent economic and political framework. For example, oil and gas exploration is set to increase due to the implementation of a competitive bidding process and more attractive fiscal incentives for foreign operators. While U.S. companies are not currently active in the country’s oil and gas space, the framework exists for feasible market entry, which will be demonstrated by the country’s upcoming licensing round that aims to attract leading International Oil Companies to its onshore acreage.
Signed in 1984, the U.S. and the DRC share a Bilateral Investment Treaty. The DRC is also a member of the Common Market for Eastern and Southern Africa, with which the U.S. has a Trade and Investment Framework Agreement. In 2018, direct bilateral trade between the two countries totaled $129 million, with $79 million in U.S. goods exports and $50 million in U.S. goods imports, creating a goods trade surplus of $29 million.
Primary U.S. exports to the DRC include pharmaceutical products, poultry, machinery, textiles and wheat. U.S. exports of agricultural products to the country totaled $14 million in 2018. Conversely, the leading U.S. import from the DRC is copper, which comprises over 50% of total exports to the Western ally. Other top DRC exports to the U.S. include antiques, diamonds, coffee and coffee beans, propane and tantalum. In 2018, U.S. total imports of agricultural products from the DRC totaled $9 million.
With one of the lowest electricity access rates globally and less than 2% of the rural population connected to the national grid, the DRC is in severe need of mini-grid and off-grid systems and technologies. Due to its vast territory that spans 2.3 million km2, increasing electricity access through national grid expansion is considered to be too costly and time-intensive. As a result, the market for decentralized energy in the DRC is valued at one billion dollars per year.
Coordinated by USAID, the U.S. Government-led partnership Power Africa has been actively involved in the development of power sectors across Africa. Working closely with the government of the DRC, Power Africa has helped establish an autonomous regulatory agency and rural electrification agency, supported generation, transmission and distribution concessions to attract private capital, and increased mini-grid investments and Solar Home Systems (SHS). The driving principle behind these efforts, specifically the creation of government agencies, is that an enhanced legal and regulatory framework will boost public and private investment into the country’s power sector.
In 2018, Power Africa conducted studies for the creation of four mini-grids in North and South Kivu provinces and the expansion of grid access in the Kwilu, Kasai, Kasai Central, and Kasai Oriental provinces. The U.S. initiative is seeking to partner with private investors to bring the mini-grids online, as well as assisting SHS companies that are entering the market, especially in the eastern region (North and South Kivu). Additionally, Power Africa is working closely with provincial authorities in North and South Kivu to develop of rural electrification and augment private investment using the new concession model, which transfers activity to a private operator with supervision from the public authority.
Africa Oil & Power welcomes the participation of U.S. companies and partners in the first-ever Democratic Republic of Congo (DRC) Energy & Infrastructure Investment Summit. Hosted in Kinshasa on September 8-9, 2021, the Summit aims to attract FDI to the DRC and facilitate the plans of the African Development Bank, the World Bank, Power Africa and other lending institutions to increase electricity access, spur job creation in the energy industry and promote cross-sector collaboration within the country.
For more information visit www.drc2021.com.