Are we ready to profit from DRC? Not by a long chalk

On March 19, the East African Community Heads of State Summit officially admitted Democratic Republic of Congo (DRC) to the bloc as its seventh member state. The decision follows a fast-tracked process, which was launched by the DRC’s application to join the EAC in June 2019.

The DRC’s admission to the EAC has often been described as a game-changer. This is due to what the DRC is, and is expected to bring to the EAC.

The DRC is gigantic whichever way one looks at it. In terms of size, it is the biggest nation in sub-Saharan Africa, with an area of 2.4 million square kilometres. That includes 80 million hectares of arable land, of which almost 90 percent is still uncultivated. If it were, it could feed the whole of Africa.

DRC lies within the drainage basin of the mighty Congo River, the world’s deepest, and Africa’s second longest river. The river provides the DRC with hydroelectric power potential that was once said to be enough to power the whole of Africa. Many of the DRC’s 100 million or so people live along the banks of the Congo, and its tributaries.

By virtue of its natural resources, the DRC is one of the world’s richest countries. Its untapped mineral reserves are estimated at $24 trillion – dwarfing anything that is available anywhere in Africa. This has been a source of much instability in the DRC, leaving over two thirds of its people languishing in poverty.

Despite two decades of the United Nations’ peacekeeping mission, peace still eludes the people of the DRC. Today, there are still more than 100 armed rebel groups operating in the DRC, 5 million people are internally displaced, and 25 million face starvation. Instability has made what was the second most industrialised nation in Africa in 1960, after South Africa, to be heavily dependent on imports.

The DRC’s GDP is a paltry $50 billion. However, a nation with such potential can be transformed dramatically in only a generation. Think of China. And this is the nation which has just joined the EAC – a rose between the thorns. On one side, it presents a gargantuan opportunity, but on the other side it requires lots of work to realise the potential.

So, how is Tanzania positioned to capitalise on the DRC opportunity? In one word – dreadfully. According to figures by COMTRADE and others, in 2010 Tanzania’s exports to Congo stood at $156 million, while Rwanda only managed $18 million. Almost a decade later, while Rwanda has increased its exports 20 times over, Tanzania is still exactly where it was at the beginning. That performance is unfortunate.

It should be noted that even for goods which the EAC should be competitive, the region contributes only one fifth of what the DRC imports from the rest of the world, mainly from China and South Africa. That means that while EAC can hardly be considered competitive, Tanzania is less competitive still.

Tanzania’s top exports to the DRC are cigarettes, cement, soap, wheat, iron, and steel products. However, Tanzania has a huge comparative advantage in cereals, edible oils, sugar, textiles, and meat products. Unfortunately, the nation has largely retreated from competing in those areas. It is a marvel how a nation like Rwanda, only a third of the size of Ruvuma Region, can outsell Tanzania in cereal exports 20 times over!

This suggests that the nation has had neither strategic foresight nor execution discipline to ensure its advantage from its proximity to its illustrious but downtrodden neighbour. If Tanzanians expect any change, this trend must change.

There are things which the whole bloc needs to address to ensure the successful integration of the DRC into the EAC, but there are challenges that individual nations ought to address if they are to be competitive in trade with the DRC.

For Tanzania, the first challenge is logistics. Much of eastern DRC depends on Dar es Salaam Port, but Dar has a vessel turnaround time of up to 10 days against the world average of less than a day, among many other issues. Apparently, those responsible either have no idea what efficiency is, how to achieve it, or both. As a result, business goes to Durban, Beira, or Mombasa.

Logistics is key to winning the DRC. Therefore, from Dar es Salaam Port, SGR, Lake Tanganyika ports and ships, to the building of connecting infrastructure in the DRC’s Katanga and Kivu provinces, that is what it takes to level the playing ground against those who have a natural competitive advantage by virtue of their proximity to the DRC.

Secondly, security. Eastern DRC is unstable. Without stability, there can be no growth. In North Kivu, Uganda has recently proposed to build over 200 kilometres of roads to the DRC, which will be protected by Uganda’s armed forces. That’s the sort of thing that might work to a nation’s advantage.

A contingent of Tanzania’s army is in South Kivu as part of the UN’s SADC stabilisation mission to the DRC since 2013. While the troops did a good job to capture Goma in 2019, lately, activities by M23, FDLR, and ADF suggest that there is a degree of passivity there.

It is in all the DRC neighbours’ interests to see that the country is stable. Like what China did in Asia, when the DRC awakens, it will pull the rest of sub-Saharan Africa forward with it.

Having laid that groundwork, Tanzania needs to be competitive commercially to win business. While agriculture will produce significant gains, efforts must be made to add value to products to compete with alternatives from the EAC. The holy grail though will be in carving out a portion of the 80 percent market share that the rest of the world possesses by moving from primary or commodity goods to manufactured goods.

That will be the true test of its competitive positioning.