DRC Suffers from Violence and Waning Copper Production
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A report from the Chamber of Mines highlights that copper production in the Democratic Republic of Congo dropped to its lowest level in six years in 2015, and, according to Reuters, 2016 could yield lackluster results. The Central African country relies on mining for 20 percent of GDP, with such minerals as cobalt and copper comprising over 70 percent of exports alone. The government expects the economy to improve in the coming years as new mining operations come online.
A report from the Chamber of Mines highlights that copper production in the Democratic Republic of Congo dropped to its lowest level in six years in 2015, and, according to Reuters, 2016 could yield lackluster results. The Central African country relies on mining for 20 percent of GDP, with such minerals as cobalt and copper comprising over 70 percent of exports alone. The government expects the economy to improve in the coming years as new mining operations come online.
DRC officials remain optimistic when it comes to economic growth, believing the economy will recover this year with a 9.0-percent expansion, but the International Monetary Fund pegs growth at 7.3 percent. DRC has new projects in the form of the Ivanhoe Mines’ Kamoa, which is thought to be the world’s largest untapped premium copper reserve, but operations will not begin until 2018, and the mining sector in the African nation has a track record of mixed results.
Production for 2015 succumbed to inefficient management, which could carry over to future operations. Regardless of management, the government has to deal with the long-lasting effects of lower commodity prices, and copper pricing could reach its lowest level in over a decade due to supply outpacing demand.
Electricity Problems
The government is also increasing copper production because of the vast power outages occurring across the country, especially in the southeast. The electricity shortfall forces miners to import energy from neighboring countries, increasing production costs in the process. Such a burden has already forced a Swiss mining firm to postpone operations for over a year, and shutdowns could continue if the government fails to develop the necessary infrastructure.
The electricity downturn expanded from 542 megawatts in 2014 to 950 megawatts in 2015, notes Bloomberg Business. Officials have sent a wave of uncertainty within the mining community by proposing tax and royalty increases, only to later retract the proposals upon fierce opposition from mining companies.
Rising Instability
Low commodity prices and mismanagement are bad enough, but political conflict and escalating violence could tank the economy. Over 20 people were murdered throughout the weekend, stemming from conflicts between the Hutu and Nande throughout various parts of the country, and the United Nations fears ethnic strife could lead to a refugee crisis and more killings.
The opposition is furious over President Joseph Kabila’s decision to postpone November elections, with many accusing him of trying to stay in power beyond his term limit. Kabila did not mention plans of holding onto power, but his lack of clarity causes many to suspect that he intends to subvert the nation’s constitution. Such violence and political uncertainty prevents future investment, which leads to a disruption in mining production if the government fails to maintain stability.
