REPUBLIC OF CONGO
COUNTRY ECONOMIC MEMORANDUM
MARCH 2023
REPUBLIC OF
CONGO’S ROAD
TO PROSPERITY
Building Foundations for
Economic Diversification
REPUBLIC OF CONGO
COUNTRY ECONOMIC MEMORANDUM
MARCH 2023
REPUBLIC OF
CONGO’S ROAD
TO PROSPERITY
Building Foundations for
Economic Diversification
© 2023 International Bank for Reconstruction and Development / The World Bank
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REPUBLIC OF CONGO
COUNTRY ECONOMIC MEMORANDUM
MARCH 2023
REPUBLIC OF
CONGO’S ROAD
TO PROSPERITY
Building Foundations for
Economic Diversification
Acknowledgements
The Republic of Congo Country Economic Memorandum (CEM) was prepared between January
and June 2022 by a team led by Vincent Tsoungui Belinga (Senior Economist) and Jose Luis Diaz
Sanchez (Senior Economist) under the overall guidance of Abdoulaye Seck (Country Director),
Korotoumou Ouattara (Resident Representative), Francisco Carneiro (Practice Manager),
Raju Singh (Lead Economist), and Clelia Rontoyanni (Program leader). Other members of the
team include: Samia Melhem (Lead Digital Development Specialist), Alberto Portugal (Senior
Economist), Olivier Hartmann (Senior Private Sector Specialist), Daniel Camos Daurella (Senior
Energy Specialist), Steven Clarke (Energy Specialist), Besart Avdiu (Economist), Marilyne Youbi
(Economist), Joana Monteiro Da Mota (Extended Term Consultant), Paul Viet-Minh Nguyen
(Digital Development Specialist), Mamadou Tanou Balde (Consultant), Dukken Gaphi Ossouna
(Consultant) Delgermaa Enkhtsogt (Consultant), Laurent Andiazabal (Consultant), Adam
Winship (Consultant), Goncalo Coelho (Consultant), Amevi Rocard Kouwoaye (Consultant) and
Yuri Horowitz (Consultant). The team also benefited from guidance and feedback from Henri
Fortin (Lead Financial Management Specialist), Georgiana Pop (Senior Economist, Global Lead
for Competition Policy), Heriniaina Mikaela Andrianasy (Senior Public Sector Specialist), Karim
Ouled Belayachi (Senior Private Sector Specialist) and Cesar Borja Galan Santos (Consultant).
The team is grateful for the support from the following: Pinar Baydar (Operation Analyst), Irene
Sitienei (Program Assistant), and Josiane Maloueki Louzolo (Program Assistant). The team
would like to thank Erika Jorgensen (Consultant) for her editorial support.
The team is thankful to the peer reviewers Souleymane Coulibaly (Program Leader), Tim
Kelly (Lead Digital Development Specialist), Claire Honore Hollweg (Senior Economist) and
Guilherme De Aguiar Falco (Economist) for their contributions.
The team is especially grateful for the collaboration with Congolese authorities in the
preparation of this report and for sharing the data. Preliminary results were discussed with
several stakeholders in Congo (government counterparts, private sector actors, development
partners, academia) through virtual meetings.
Report design, layout & graphics:
Kane Chong
Cover image source:
© Parfait Iloki
Ministry of Land Management, Infrastructure and Road Maintenance, Republic of Congo.
4 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
Table of Contents
Acknowledgements 4
List of Figures 8
List of Tables 10
List of Boxes 10
Abbreviations and Acronymns 11
Executive Summary 13
Overview 13
Key findings 17
Policy options 23
CHAPTER 1 Balancing Assets to Boost Long-Term Growth 27
1.1 The Republic of Congo is at a critical juncture in its development history 28
1.2 Sustainable development will require dramatic action to diversify assets 34
1.2.1 Natural resources have been central for Congo’s growth, but they go beyond oil and must be
managed better 36
1.2.2 Insufficient, volatile, and inefficient investment in produced capital has left Congo with both
low human capital and gaps in infrastructure 40
1.2.3 Institutional capital must be bolstered to support the government’s ability to transform
natural resources into physical and human capital 46
CHAPTER 2 Labor Productivity 51
2.1 Productivity growth is the key driver of sustainable income growth and poverty reduction 52
2.2 Inadequate productivity in the Republic of Congo 54
2.2.1 Cross-country analysis reveals a severe productivity problem in the Republic of Congo 54
2.2.2 Sub-national analysis reveals significant variation in productivity 56
2.3 Misallocation drags down Congolese productivity 59
2.4 Policy implications 64
CHAPTER 3 Boosting Productivity through Competition 67
3.1 Congo’s competitive environment lags behind peers 68
3.2 Congolese SOEs benefit from an uneven playing field 70
3.2.1 Blurring of commercial and non-commercial activities for SOEs may confer an unfair
advantage 72
3.2.2 SOEs receive some preferential treatment relative to private sector firms 74
3.3 Regulatory restrictions to competition distort markets in key areas 75
3.3.1 Electricity sector has not attracted needed private participants 76
3.3.2 Mobile telecommunications suffer from a lack of competition 78
3.4 Current competition rules and competition enforcement are not enough to combat cartels and
other anticompetitive practices 83
3.5 Policy options to foster competition 85
3.5.1 Enhance private sector entry and ensure a level playing field for private and public operators 85
3.5.2 Promote pro-competitive regulation in selected sectors: electricity and telecommunications 85
3.5.3 Strengthen the competition legislative and institutional framework 86
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 5
Table of Contents
CHAPTER 4 Boosting Productivity through Digital Technology and Improved Access to Electricity 89
4.1 Accelerating productivity through digital transformation 90
4.1.1 Digital technologies and why they matter for Congo’s productivity and economic growth 90
4.1.2 Digital infrastructure in Congo 92
4.1.3 Investing in people: foundational and digital skills 94
4.1.4 Adoption of productivity technologies by Congo’s firms 97
4.1.5 Policy options: how Congo can drive technological transformation for better productivity? 101
4.2 Accelerating productivity through improved access to electricity 104
4.2.1 How much access to electricity do Congolese firms have? 104
4.2.2 The current context of the electricity sector explains the difficulties faced by firms 107
4.2.3 Potential avenues of reform in the electricity sector to improve firm-level productivity 109
CHAPTER 5 Trade Competitiveness and Diversification 113
5.1 Why greater trade integration matters 114
5.2 Congo’s trade dynamics: a tale of a commodity exporter 114
5.2.1 Congo’s export basket remains highly concentrated 115
5.2.2 Low export survival rates limit export growth and diversification 119
5.2.3 Services exports, especially tourism, have untapped potential for growth and diversification 120
5.2.4 Congo participates in Global Value Chains (GVCs) as an exporter of commodities but
transitioning to more sophisticated GVC participation would bring significant gains 121
5.3 Trade policy 123
5.3.1 High tariffs are hindering trade development 123
5.3.2 The implementation of the African Continental Free Trade Area (AfCFTA) presents a
significant opportunity to increase and diversify exports 124
5.3.3 Detailed official Information on non-tariff measures is lacking in Congo 125
5.3.4 Trade development can have detrimental distributional impacts that need to be mitigated 126
5.4 Policy options to support export diversification 127
5.4.1 Further reduce tariffs and enhance regulatory transparency 127
5.4.2 Collect data on NTMs 127
5.4.3 Improve collection of customs data 127
5.4.4 Accelerating the implementation of AfCFTA 128
5.4.5 Policies for greater GVC participation 128
5.4.6 Policies to mitigate the negative impacts of trade 128
CHAPTER 6 Logistics and Eco-tourism to Support Diversification 131
6.1 Trade facilitation: bottlenecks and opportunities 132
6.1.1 The logistics in Congo are facing widespread challenges 132
6.1.2 Trade costs are high across the board: freight rates, port costs, land transport, and
documentation 136
6.1.3 Public-private dialogue is aiming to craft solutions but fails at implementation 138
6.1.4 Policy recommendations to decrease costs and increase efficiency of the logistics system 138
6 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
Table of Contents
6.2 Ecotourism: diagnostic and roadmap 140
6.2.1 Tourism demand is on the decline, suffering from weak brand identity 142
6.2.2 Tourism supply, with difficult and expensive access and a dearth of skilled staff, could
benefit from a different model of development 143
6.2.3 Tourism governance, essential to ecotourism growth, has been unstable, understaffed,
outdated, and unable to provide quality control to the sector 145
6.2.4 Roadmap for Congo’s tourism sector development demands broad improvements to
deliver on ecotourism’s promise 146
Annex 154
Annex 1. Implementation of a State Aid Framework 155
Annex 2. Government Presence in Network Industries 156
Annex 3. Framework for the Competition Analysis of Electricity Sectors 157
Annex 4. Framework for the Competition Analysis of Mobile Telecommunication Sectors 158
Annex 5. Additional Figures and Tables 159
References 166
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 7
Table of Contents
List of Figures
Figure ES1 Analytical outline of the CEM 16
Figure 1 Gains in income per capita during the last oil boom have been lost 28
The hydrocarbon sector plays a dominant role in the economy but offers fewer
Figure 2 31
employment opportunities
Figure 3 The oil sector remains the major driver of economic growth in Congo 32
Falling output per employee drives Congo’s loss in income per capita, especially in
Figure 4 32
industry and services
Figure 5 Framework of Asset Diversification 35
Figure 6 Natural capital remains Congo’s greatest asset 35
Figure 7 Congo has been depleting its natural capital endowments without adding to its wealth 35
Figure 8 Congo’s oil production and oil exports are significant 36
Figure 9 Oil dominates Congo’s government revenues 38
Figure 10 Congo’s share of oil rents could be higher and lags that of peers 39
Inadequate human capital outcomes are accompanied by low and inefficient social
Figure 11 41
sector spending
Despite high historical investment rates, access and coverage to basic infrastructure
Figure 12 43
remains low
Deteriorating quality of Congo’s policies and institutions leaves it farther behind SSA
Figure 13 46
averages
The end of the oil boom led to plummeting capital spending, sustained current spending
Figure 14 49
(except for maintenance), and soaring public debt
Figure 15 Labor productivity levels are low and decreasing 54
Labor productivity growth is weak and declining across sectors and over time compared
Figure 16 55
to peers
Figure 17 Productivity and productivity growth vary substantially across regions 56
Figure 18 Productivity and productivity growth vary across subsectors 57
Figure 19 Productivity and productivity growth differ by firm characteristics 58
Figure 20 More productive firms pay higher wages but employ fewer people on average 59
Employment has not grown in high productivity sectors, dragging down aggregate
Figure 21 60
productivity
Figure 22 Productivity is not growing in sectors with employment growth and vice-versa 60
The high degree of productivity dispersion implies that misallocation is an issue,
Figure 23 61
especially in certain services, such as the financial sector
Figure 24 Improving the allocation of resources could greatly increase productivity levels 62
Older firms are larger and more productive, implying some efficiency of dynamic market
Figure 25 63
forces, including exits
Figure 26 Congo fares inadequately in competition related indicators 69
Figure 27 Transfers and subsidies to SOEs CORAF & CEC are substantial 75
Figure 28 Mobile telecommunication market is concentrated among two operators 78
Figure 29 Early mobile market competition with four competitors 79
8 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
Table of Contents
Figure 30 Mobile telephony penetration has faded after a decade sharp increase 79
Figure 31 Congo lags in terms of internet users 80
Figure 32 The uptake of mobile internet services in Congo remains hampered by high prices 80
Figure 33 Digital transformation as a key driver for productivity, economic growth and job creation 92
Insufficient supply of digital education and graduate with STEM background is a setback
Figure 34 95
for digital skills development
Figure 35 Congo’s digital literacy gap is a barrier for digital adoption 96
Figure 36 Firms’ financing constraints is the main barrier to digital adoption 99
Figure 37 Access to electricity is relatively low in Congo 104
Figure 38 Congo had one of the highest staff costs as a percentage of operational expenditures 109
Figure 39 Congo’s trade openness is high for its per capita income, but it has been declining 115
Figure 40 Trade in goods is bigger than trade in services 115
Figure 41 Congo’s exports are highly concentrated on oil and minerals 115
Figure 42 Congo’s REER has remained broadly unchanged 116
Figure 43 Congo’s export basket is highly concentrated 117
Figure 44 Congo’s imports are less concentrated than exports 118
Figure 45 Congo export survival relationships lags peers and do not last long 119
Exports of Congolese services have been volatile and dominated by commercial and
Figure 46 120
business services
Figure 47 A Taxonomy of GVC participation 121
Figure 48 Transitioning to more sophisticated participation in GVCs: examples of national policy 122
Figure 49 Most of CET bands are on the 10 or 30 percent tariff category 123
Congo’s applied MFN tariff is lower than CEMAC and African peers, but higher than non-
Figure 50 123
African peers
Figure 51 Congo’s logistics performance has been improving but lags against peers 132
Figure 52 Most of Congo’s port traffic is linked to transshipment 133
Figure 53 Trade Procedures and Systems in Congo 134
Figure 54 Container handling costs in Pointe-Noire are higher than in other West African ports 136
Figure 55 Map of Republic of Congo with key protected areas 141
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 9
Table of Contents
List of Tables
Table ES1 Summary of policy options 23
Table 1 Preliminary competitive neutrality gap analysis for Congo 71
Table 2 Detailed Recommendations to Foster Competition 86
Table 3 Distribution of electronic money transactions in CEMAC countries in 2020 93
Table 4 Participation in education and employment 94
Table 5 Detailed Recommendations to Accelerate Digital Transformation 102
Table 6 Getting a new electricity connection takes more time and costs more than in peer countries 105
Table 7 Congo has the least reliable supply and least transparent tariff among peers 106
Table 8 Detailed Policy Avenues to improve Access to a Reliable Electricity Service 111
Table 9 Detailed Policy Recommendations to Support Export Diversification 129
Table 10 Detailed Policy Recommendations to Improve the Efficiency of the Logistics System 139
Table 11 Detailed Policy Recommendations to Deliver on Ecotourism’s Promise 152
List of Boxes
Box 1 The economic impact of COVID-19 in Congo has been substantial: collapse in oil revenue,
29
shortages of imports and depressed domestic demand, and fiscal imbalances
Box 2 The impact of the war on Ukraine in Congo: more expensive food, high oil prices, and
30
potential debt pressures
Box 3 State oil company contribution to building human capital: Lessons from Malaysia 41
Box 4 A peer country case of successful public investment management: Botswana 44
Box 5 Productivity Data and Measures for the Republic of Congo 53
Box 6 Sources of Productivity Growth and Enabling Policy 64
Box 7 Ineffective Monitoring of SOEs – Congo Telecom 73
Box 8 Impact on growth of increased mobile broadband penetration 91
Box 9 Spotlight on Kenya’s Digital Literacy Program 97
Box 10 Firm Adoption of Technology (FAT) survey in Congo 98
Box 11 Development of digitalized productive value chain – spotlight on Botswana 100
Box 12 Export diversification and income 117
Box 13 A country peer case of successful development of ecotourism – Costa Rica 147
10 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
Table of Contents
Abbreviations and Acronyms
AfCFTA African Continental Free Trade Area GVCs Global value chains
ARPCE Regulatory Agency for Posts and Electronic HCI Human Capital Index
Communication ( Agence de Régulation des
Postes et des Communication Electroniques) DI Import declaration (déclaration d’importation)
ARSEL Regulatory Agency for the Electricity IPP Independent power producer
Sector ( Agence de Regulation du Secteur de ICT Information and communications technologies
l’Electricité )
INS National Institute for Statistics (Institut National
ASYCUDA Automated System for Customs Data de la Statistique)
BEAC Bank of Central African States (Banque des IT Information technology
États de l’Afrique Centrale)
ITU International Telecommunication Union
BTI Bertelsmann Transformation Index
LPI Logistics performance index
CCC Community Competition Council (Conseil
Communautaire de la Concurrence) MPTEN Ministry of Posts, Telecommunications and
Digital Economy (Ministère des Postes,
CEC Congo Power Plant (Centrale Électrique du des Télécommunications et de l’Economie
Congo) Numérique)
CEM Country Economic Memorandum MTL Ministry of Tourism and Leisure (Ministère du
CEMAC Central African Economic and Monetary Tourisme et des Loisirs)
Community NTA National tourism authority
CET Common external tariff NTBs Non-tariff barriers
CFAF African Financial Community Franc NTMs Non-tariff measures
(Communauté Financière Africaine Franc)
NNNP Nouabalé-Ndoki National Park
CNC National Audit Office (Commissariat National
aux Comptes) OHADA Organization for the Harmonization of Business
Law in Africa
CNEEPIP National Center for the Study and Evaluation
of Public Investment Projects (Centre ONPT National Office of Posts and
National d’étude et d’Evaluation des Projets Telecommunications (Office National des
d’Investissement Public) Postes et Telecommunications)
CORAF Congo Refinery (Congolaise de Raffinage) OPEX Operational Expenditures
CPIA Country Policy and Institutional Assessment OPIT Office for the Promotion of the Tourism
Industry (Office de Promotion de L’industrie
CST Supreme Tourism Council (Conseil Suprême du Touristique)
Tourisme)
P2G Person-to-Government
cu. m. standard cubic meters [of natural gas]
PND National Development Plan (Plan National de
DRC Democratic Republic of Congo Développement)
DMO Destination management organization PAs Protected Areas
DLP Digital Literacy Program PNDS National Health Development Plan (Plan
eCTN Electronic Cargo Tracking Note National de Développement Sanitaire)
EITI Extractive Industries Transparency Initiative PPP Public-private partnership
FAL Convention on Facilitation of International SOEs State-owned enterprises
Maritime Traffic SMEs Small and medium enterprises
FDA French Development Agency ( Agence française SNPC National Oil Company (Société Nationale des
de développement) Pétroles du Congo)
FASUCE Electronic Communications Universal Access SSA Sub-Saharan Africa
and Service Fund (Fonds pour l’Accès et
le Service Universels des Communications STEM Science, technology, engineering and math
Électroniques)
TEUs Twenty Equivalent Units
FAL Convention on Facilitation of International
TFA Trade facilitation agreement
Maritime Traffic
TRAINS Trade Analysis and Information System
FAT Firm adoption of technology
UNCTAD United Nations Conference on Trade and
DGPP General Directorate of Public Portfolio
Development
(Direction Générale du Portefeuille Public)
UNDP United Nations Development Program
G2G Government-to-Government
UNESCO United Nations Educational, Scientific and
G2P Government-to-People
Cultural Organization
GIZ Deutsche Gesellschaft für Internationale
USAID United States Agency for International
Zusammenarbeit
Development
GSMA Global System for Mobile Telecommunications
US$ United States of America dollars
GUOT One-Stop Shop for Cross-Border
USA United States of America
Operations (Guichet Unique des Operations
Transfrontalières) VFR Visiting friends and relatives
GUT One-Stop-Shop for Tourism (Guichet Unique du WDI World Development Indicators
Tourisme)
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 11
© Valdhy Mbemba/unsplash.com
12 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
Executive Summary
Overview
Congo is at a critical juncture in its development
history
The Republic of Congo’s seven-year recession has led to a dramatic drop in income per capita and put
the country at risk of falling back into low-income status. Following a period of conflict in the 1990s, Congo*
managed to secure significant income per capita gains during the early 2000s. However, economic activity in
the country (historically dependent on the oil sector) has been shrinking since 2015 when the last commodity
supercycle (circa 2002-2014) ended. The COVID-19 crisis was another setback for Congo’s recovery from the
ending of the last oil boom, prolonging the economic recession. While the significant growth in per capita
Gross National Income (GNI) during the oil boom era helped Congo reach lower-middle income status in 2005
and near upper middle income status in 2014, the end of the oil boom led to a drop in GNI per capita by more
than half between 2014 and 2020, reversing the country’s long-term progress in poverty reduction. Despite the
adoption of a “resilience plan” to mitigate the impact of the war on Ukraine on Congo, poverty could be further
exacerbated as a result of the effects of rising food prices on the most vulnerable.
Congo has made little progress in reducing the dominant role of
the oil sector in the economy and diversifying its productive base
Congo’s current
to industries with a higher labor content. In the past decade, the
oil sector has accounted for around 40 percent of GDP, 80 percent economic model
of total exports, and 60 percent of domestic revenues. The industry —dependent on
employs only a small fraction of the labor force. Not surprisingly,
the oil sector—is
the hydrocarbon sector, through its direct and indirect impact on
the economy, has been driving economic growth in Congo, but the unlikely to continue
dependence on the oil sector has also translated into high volatility of to deliver even the
growth, which undermines private investment and, thereby, long-term
volatile economic
economic growth prospects.
growth of the past,
The current development model is unlikely to deliver sustainable challenged by the
economic growth and productive jobs going forward. Congo’s
current uncertain
current economic model—dependent on the oil sector—is unlikely to
continue to deliver even the volatile economic growth of the past, global context,
challenged by the current uncertain global context, projected depletion projected depletion
of Congo's oil reserves, and the global transition to a low carbon
of Congo's oil
economy. In addition to the unsustainability of overall growth, Congo’s
oil-based economy has provided few opportunities for job creation reserves, and the
due to the low labor content of the hydrocarbon industry. Indeed, the global transition
great majority of the Congolese population cannot find a job in the
to a low carbon
formal economy, with about three quarters of the Congolese workforce
(including most youth) employed in the informal sector, either self- economy.
employed or in low productivity jobs.
Attaining sustainable development in Congo will require diversified national assets, focusing on
stronger institutions, vigorous human and physical capital, and more balanced exploitation of natural
capital. The World Bank flagship report “Diversified development: making the most of natural resources in
* Throughout this report, all mentions of "Congo" refer to the Republic of Congo, whereas the Democratic Republic of Congo will be referred to as "the Democratic
Republic of Congo" or "DRC".
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 13
Executive Summary
Eurasia” (World Bank, 2014) suggests that diversified exports and less concentrated economic structures are
not sufficient for countries to develop. Instead, countries should focus more on diversifying their national asset
portfolios—that is, to ensure a better balance between natural capital (natural resources), produced capital
(human and physical), and economic institutions (or intangible assets). Natural capital has historically been
Congo’s largest asset and source of wealth, while other forms of assets have not been growing. Moreover,
despite abundant natural resource wealth, both in renewables (forests, agricultural land) and non-renewables
(natural gas, mining), the exploitation of natural resources in Congo has been focused mostly on oil, while other
natural assets remain largely unexploited. Since Congo’s oil production is expected to decline in the medium
term due to the depletion of recoverable oil and reduced demand over the long-term from the global transition
to a low-carbon economy, there is an urgency to diversify Congo’s assets.
Sustainable development will require dramatic action
to diversify assets
Oil revenue is critical for government finances, but collection falls short. Despite the importance of
oil revenues in total revenue collection, the capacity of the government to collect revenues from oil is low,
dampened by weak governance and institutional capacity. Congo collects fewer revenues per dollar exported
compared to most peers. The country’s relatively inadequate performance in collecting revenue from the oil
sector suggests shortcomings in the negotiation of oil production deals and, most importantly, insufficient
enforcement of its Hydrocarbon Code.
The drawdown of Congo’s oil resources has not translated
to sufficient accumulation of human and physical capital. Fostering
Underinvestment in human capital limits the productivity of the
workforce. Health and education expenditures in Congo are relatively
human capital
low compared to peers and often below budget targets. As a result, development
Congo’s score in the human capital index lags those of peer countries and enhancing
and has registered very limited progress since 2010. The low quality
of education, reflected in a learning gap of 3.6 years for Congolese
the quantity and
students, limits workers’ productivity growth and, thereby, the country’s quality of strategic
ability to take full advantage of its labor force. High private and public infrastructure
investment spending over recent years has contributed to a steady
accumulation of physical capital in Congo, but investment has been
would enable
volatile and driven by developments in the oil sector. Consequently, productivity
Congo’s coverage of basic infrastructure remains insufficient. Moreover, gains, supporting
low public investment efficiency has limited the economic and social
benefits of public spending. Fostering human capital development and
diversification
enhancing the quantity and quality of strategic infrastructure would efforts.
enable productivity gains, supporting diversification efforts.
The decades-long exploitation of natural resources has not been accompanied by the establishment of
strong institutions in Congo, which are essential to support the capacity of the government to transform
natural resources into physical and human capital assets. The World Bank’s Country Policy and Institutional
Assessment (CPIA) provides a snapshot of the country’s quality of institutions. In 2020, Congo’s overall score
was lower than the Sub-Saharan Africa average and had deteriorated compared to 2015. This reflects, in part,
weaker economic management, which resulted in debt distress and lack of fiscal space. Pro-cyclical fiscal
policies, tightly linked to oil price fluctuations, have amplified economic cycles in Congo and impacted long-
term growth. Further, structural policies for the business regulatory environment have been generally weak
and getting worse compared to peers. As a result, Congo’s business environment is not conducive to private
sector investment. The quality of policies and institutions to boost health, education, and social protection has
remained mostly unchanged since the mid-2000s, with a need to strengthen service delivery and increase the
coverage of social protection. Finally, despite recent progress in transparency and the fight against corruption,
Congo’s performance in public sector governance remains low.
14 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
Executive Summary
The government is taking steps for a transition to a
more sustainable economic development model
Since the presidential elections of March 2021, reform momentum has accelerated. Following his election
in March 2021, the President appointed a new government with a strong mandate to undertake reforms to turn
around the country’s economy. Congo’s reform impetus is also driven by the country’s leadership of the Central
African Economic and Monetary Community (CEMAC) Program of Economic and Financial Reforms (PREF-
CEMAC II, 2021-25). In August 2021, the Heads of State of the CEMAC endorsed a declaration committing the
member states to a strong program of ‘second generation’ reforms to restore the region’s macroeconomic
sustainability, support a strong and diversified recovery from the crisis, develop the region’s connectivity
infrastructure, and accelerate human capital development. Congo’s reform commitment is anchored by the new
three-year IMF program approved in January 2022 and the ongoing Development Policy Financing program
with the World Bank. Significant participation of government counterparts from several ministries in workshops
for the preparation of this report is another sign of the government’s commitment to a new economic model.
The Congolese government’s new National Development Plan
(Plan National de Développement, PND) lays out steps for a
more diversified and inclusive growth model. To reverse flagging The Congolese
GDP growth and translate its vision for a new development model, government’s new
Congo adopted early this year a new PND for 2022-26. The PND aims
National Development
to build a strong, resilient, and diversified economy for sustainable
and inclusive development. It is articulated around six strategic Plan aims to build a
areas: the development of agriculture and agroforestry, industry, strong, resilient, and
tourism, digital economy, real estate, and special economic zones. It
diversified economy
also identifies peace and political stability, governance, the business
environment, and environmental protection as four cross-cutting for sustainable and
areas that will support successful economic development. The PND inclusive development.
offers a good opportunity to transform Congo’s economy and boost
inclusive and sustainable development
© Erwan Morand/World Bank
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 15
Executive Summary
This Country Economic Memorandum (CEM) contributes to the Government’s diversification agenda
by identifying and advocating key policies and reforms to build the foundations for more “diversified
development” in Congo that will support long-term economic growth and prospects for a better life
for the Congolese people. The report comprises six chapters. The first chapter discusses Congo’s economic
developments during the last 15 years and analyzes in detail the factors that prevented the country from
diversifying its assets. Since rising labor productivity is required to boost the growth of Congo’s income
per capita, the second chapter analyzes labor productivity using firm level data, a first attempt in Congo.
Because removing barriers to competition enhances productivity, the third chapter undertakes a diagnostic of
competition practices, including the role of state-owned enterprises (SOEs), and provides a detailed analysis
of the electricity and telecommunication competition environments. The fourth chapter explores the extent
to which digital transformation and access to reliable electricity services can spur productivity and economic
growth. As greater trade integration is a driver of structural transformation, the fifth chapter discusses trade
patterns and explores the opportunities for Congo to diversify its exports. The sixth chapter looks over two key
trade-related topics, logistics and ecotourism, that have the potential to contribute significantly to export and
economic diversification in Congo. The chart below (Figure ES 1) portrays the linkages between each of the
four thematic chapters and the different types of assets in the diversified development framework, and their
contributions to productivity growth.
FIGURE ES1
Analytical outline of the CEM
PHYSICAL
CAPITAL
NATURAL PRODUCED
CAPITAL CAPITAL
HUMAN
CAPITAL
INSTITUTIONS
TYPE OF ASSETS PRIMARILY
THEMATIC CHAPTERS
BEING STRENGTHENED
Competition
Digital Technology
and Electricity
PRODUCTIVITY
Trade
Competitiveness
Logistics and
Ecotourism
Note: The “Diversified Development” framework suggests that countries should focus on diversifying their national asset portfolios to ensure a better balance
between natural resources, produced capital, and economic institutions (enabler of such diversification). The color and icon of each small circle indicates which
type of asset is primarily being strengthened in each thematic chapter.
16 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
Executive Summary
Key findings
1 Congo needs to reverse declining labor
productivity
Congo faces low and declining labor productivity compared to peers, thereby limiting economic
growth and preventing convergence with comparator economies. An average worker in Congo needs to
work 2.6 times longer to produce the same output as one working in an aspirational peer country and 2.2 times
as long compared to structural peers.** Across sectors, labor productivity levels in Congo generally lag those
in peers, even in the industrial sector, which is Congo’s most productive sector. Congo’s productivity levels
in agriculture and services are the lowest across all comparison groups of countries. At the sub-sector level,
there is significant variation, ranging from the extractives sector with over CFAF 20 million per worker to other
industrial subsectors (finance, utilities, transport) around CFAF 8 million per worker to service subsectors at
CFAF 2 to 3 million per worker. A particular cause for concern is the very low productivity of manufacturing,
with value added per worker below CFAF 2 million. Regional disparities in labor productivity, excluding
extractives, are very large, with the most productive region (Cuvette) registering more than four times the
value added per worker of the least productive region (Likouala). As expected, larger, formal, foreign, and older
firms tend to have higher labor productivity. In recent years, labor productivity growth has been volatile and
increasingly negative, mirroring volatile and declining GDP growth. From 2014, a consistent downward trend
can be observed, and by 2019, value added per worker was falling at a rate of nine percent per year in services
and 2.6 percent in industry. These negative trends have recently been exacerbated by the impact of COVID-19.
Misallocation of labor partially represents a drag on productivity growth in Congo. Although more
productive firms pay higher wages in Congo, they tend to employ fewer people on average. This trend is seen
especially in the service sector and reflects a misallocation of labor as most workers should be employed by
more productive firms. Indeed, recent data shows that employment growth has not always been in the most
productive sectors or in those with the highest productivity growth, thereby dragging down Congo’s aggregate
productivity. SOEs tend to drag down aggregate productivity while employing more people and providing
higher wages, which exacerbates misallocation. On the positive side, older firms tend to be consistently larger
and more productive, indicating a relative efficiency of exit and dynamic market forces over time, as well as
positive learning effects.
2 Leveling the playing field, reducing market
distortions, and implementing an economy-wide
competition policy are essential to enhance
competition
According to perception-based indicators, domestic competition in Congo lags behind peers. The
Bertelsmann Transformation Index ranks Congo below peer countries on its economic transformation towards
a market economy, especially on institutional rules for market participation, competition policy, foreign trade
liberalization, and protection for private enterprise. According to the Economist Intelligence Unit, businesses
perceive risks related to cronyism, discrimination against foreign companies, and unfair competitive practices
to a greater extent than in comparator countries. Lack of competition is evident in the electricity and
telecommunications sectors, mostly related to the dominance of SOEs.
** Throughout this report, Congo’s regional peers are Angola, Cameroon, Ghana, and Nigeria; its structural peers are Azerbaijan, Iraq, Mauritania, and Timor-
Leste; and its aspirational peers are Indonesia, Malaysia, and Vietnam. Depending on data availability, sub-sets or alternate comparators are sometimes used.
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 17
Executive Summary
Congolese SOEs do not consistently compete on an even playing field with private-sector firms. The
absence of a clear separation between commercial and non-commercial activities of SOEs allows them to cross-
subsidize commercial activities in markets where they face private competition. Also, Congolese SOEs are not
systematically and transparently audited. Legal treatment of SOEs differs in practice even though Congolese
commercial law formally treats SOEs identically to private sector firms. For instance, there is evidence of SOEs
failing to pay taxes without repercussions. Finally, SOEs often receive advantages in the form of sovereign
debt guarantees and budget subsidies, which are not always available to the private sector and are granted
irrespective of the SOE’s efficiency. In some cases, transfers and subsidies have been substantial (e.g., to
energy-related SOEs during the last few years).
Congo does not presently have a comprehensive National Competition Law or a National Competition
Authority, although it has taken tentative steps in that direction. In 1994, Congo enacted a law on
competition, which prohibits anticompetitive agreements but addresses neither merger control nor abuse
of market dominance. This law does not appear to have been systematically applied to regulate competition
and does not allow for sufficient penalties to discourage the most serious anticompetitive practices. The
most promising steps in competition regulation have occurred at the regional level through CEMAC, with a
comprehensive regional law with significant penalties and its own enforcement agency. However, draft laws in
this area are being prepared.
Past efforts to liberalize the electricity sector and allow the entry of private-sector participants have not
yet fully yielded the expected results. The few reforms taken to open up the electricity market to private sector
participation have not been fully satisfactory, and there is currently no purely private sector actor competing
independently in the market.*** The regulatory environment of the electricity sector does not encourage private
sector participation. For instance, under the Electricity Code, private sector firms cannot enter the electricity
market without obtaining delegation contracts (equivalent to concessions) with the government. Also, the
market power of the electricity utility (Énergie Electrique du Congo, E²C), a state-owned monopoly in electricity
transmission, likely discourages any competition in the production and distribution of electricity in the absence
of vertical separation between these two sub-sectors. Retail tariffs are set at levels that appear to be far below
the cost of production, further dissuading any potential entrant. Finally, the extent and nature of government
subsidies to the electricity market are not transparent, deterring the entry of potentially more efficient private-
sector participants.
Despite recent progress, the market in mobile telecommunications remains highly concentrated,
leading to high prices. The liberalization of the telecommunications sector was successful in attracting
private-sector entrants, but over the last decade, key telecommunications markets have been reduced to
duopolies. The liberalization of the mobile telecommunications market allowed for the rapid growth of mobile
telephony. Growth in mobile internet, however, seems to have faltered, and prices in that market remain relatively
high compared to peer markets. Anticompetitive outcomes persist because: the regulatory structure, while
appropriate, has not been fully applied; the sector lacks mobile number portability that could put downward
pressure on prices; and the regulator’s price setting authority is overly broad.
3 Congo needs to accelerate digital
transformation to enhance productivity growth
While the Government of Congo has been committed to advancing digital transformation, the
information and communications technologies (ICT) sector is not yet at its full potential. Driven by the
five-year Digital Economy Strategy, “Vision Congo Digital 2025,” many reforms and projects have been launched
to reinforce digital infrastructure, strengthen the legal environment, and improve coverage. As a result, the ICT
sector is relatively well developed and contributes positively to Congo’s economic growth. The arrival of mobile
*** One of the key players in production is the Congo Power Plant (Centrale Électrique du Congo, CEC) which is an independent company jointly owned by the
State (80 percent) and ENI Congo (20 percent).
18 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
Executive Summary
money has also revolutionized the sector and greatly increased financial inclusion. Despite the recent progress
registered in the deployment of digital infrastructure, limited complementary policy actions have been taken so
far to accelerate the adoption of digital technologies and increase digital skills in the country.
Inadequate ICT infrastructure and high internet service prices are slowing down the adoption of digital
technology and the development of digital skills. While the geographical reach of mobile broadband
networks has significantly increased in recent years, uptake of mobile high-speed internet services remains
hampered by high prices. Availability of ICT infrastructure and equipment is also a recurring problem in Congo’s
education system, with most primary and secondary schools constrained by the lack of ICT equipment and the
high cost of internet services. This has resulted in a large digital literacy gap, slowing down digital adoption, with
only 11 percent of the population of Congo using computers. Digital skills courses are not included in the formal
education system, with the supply of advanced and specialized digital skills training covered by the private
sector, concentrated in Brazzaville and Pointe-Noire.
Low digital skills and the slow adoption of digital technologies constrain the productivity of Congo’s
firms. Congo’s labor market suffers from a mismatch between the digital skills acquired through formal
education and those sought by employers and firms, which often results in unfilled vacancies in the ICT sector.
From a small sample of firms surveyed for this report, most have adopted key technologies (mobile phones,
computers, smartphones, and the internet), but small firms lag in technology adoption. The adoption of ICT in
business is still low, except for standard software for back-office tasks. Marketing is still conducted primarily
face-to-face, while sales are predominantly conducted at the establishment’s premises or by phone. Lack of
financing is identified by firms as the main obstacle to adopting and using new digital technologies. However,
given the small sample, these findings cannot be generalized. Congo’s digital entrepreneurship ecosystem
remains nascent, and while investment in tech-based startups is on the rise, there is limited support for these
firms beyond an incubation stage.
4 Congo needs to invest more to improve access
to reliable electricity services to enhance
productivity
The lack of reliable electricity services undermines firms’ productivity. As in other African countries, firms
in Congo face challenges related to electricity service, with only half the population having access to electricity.
Electricity connections in Congo take longer than in peers and are costly both in urban and rural areas. The
quality of service is also unreliable, with power outages occurring near daily, forcing firms to resort to self-
generation. Self-generation is estimated to cost almost three times more than current tariff rates, eroding firms’
profits.
Despite past attempts at reform, the power sector remains constrained by limited coordination and
oversight, discouraging private investment. Planning within the sector has been uncoordinated. For instance,
a Generation and Transmission Master Plan was prepared in 2016 but was never fully implemented. Recent
reforms aiming at the unbundling of the sector and participation of the private sector have not been successful.
These reforms have included the creation of a sector regulator. However, the regulator is still subordinated to
the Ministry of Energy, likely impacting its ability to act in an impartial and objective manner.
The sector is financially unviable, preventing re-investment that could improve the quality of service
for firms. The national electricity company is heavily indebted, burdened by a high-cost structure due to high
salaries as well as high technical losses and low collection of bills. As a result of the limited financial flows within
the sector, there is little re-investment into its infrastructure to increase the number of connections or towards
operations and maintenance, which in turn results in poor quality of service.
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 19
Executive Summary
5 Congo needs to take advantage of the
opportunities offered by the African Continental
Free Trade Area (AfCFTA) to enhance trade
competitiveness and gradually transition to
participation in more sophisticated global value
chains (GVCs)
Congo’s trade openness is high, but its exports are highly concentrated. Congo’s exports are highly
concentrated in minerals, but, in addition, the number of products the country exports is lower than most
comparators. Congo’s survival rate in export markets is below those of most of its peers, which limits export
growth and diversification. Congolese exports of services have been volatile and dominated by commercial and
business services. Congo participates in GVCs mostly as an exporter of commodities.
High tariffs and non-tariff measures are hindering trade development. Congo applies the CEMAC common
external tariff on imports from outside the CEMAC region, which on average is high. Further, Congo’s applied
most-favored-nation tariff is on average lower than in CEMAC and African peers but higher than non-African peer
countries. Implementation of a free trade area within CEMAC has been challenging. For instance, determining
the origin for duty-free treatment under the application of rules of origin has been problematic. Beyond tariffs,
a range of non-tariff measures and procedural obstacles to trade are reported for Congo and add to trade costs.
Transparency of import and export regulations and procedures is lacking in Congo; detailed official information
on non-tariff measures is not readily available.
The implementation of the AfCFTA presents a significant opportunity for Congo to increase and diversify
its exports. The AfCFTA will provide opportunities to help African countries such as Congo to increase and
diversify exports, accelerate growth, and attract foreign direct investment. It will give Congo more opportunities
to trade with neighboring or regional countries. It has the potential to lift 30 million people out of extreme
poverty in the region, but achieving its full potential will depend on putting in place significant policy reforms
and trade facilitation measures.
6 Tackling logistics bottlenecks is an urgent priority
for trade facilitation
Logistics in Congo are facing widespread challenges, including lack of sufficient infrastructure
and complexity. Although Congo’s logistics performance has recently improved, it is weaker than in most
comparator countries, with the worst performance in logistics infrastructure. Despite automation, logistics
processes and trade procedures remain complex. Several institutions are involved in trade procedures, and
most have implemented information technology (IT) systems to manage their documentation processes.
Despite automation, users still report significant difficulties in obtaining different licenses and clearances.
Trade costs are high across the board: freight rates, port costs, land transport, and documentation.
Freight rates to and from Congo have been impacted by the global rise in shipping prices and congestion at the
container terminal. Port-related costs and land transport costs are high. Compared to West Africa, container
handling costs at the port and long-distance road transport costs in Congo are more expensive. In addition, the
documentation costs in Congo are far higher than elsewhere in Africa.
20 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
Executive Summary
7 Development of Congo’s tourism sector demands
broad improvements to deliver on ecotourism’s
promise
There is enormous potential for ecotourism in Congo, but several bottlenecks in the sector have resulted
in a decline in tourist arrivals in recent years. The government’s PND identifies over 20 tourism sites or zones
for tourism development, of which four have the strongest potential for ecotourism. Tourism demand, however,
remains low, and it has been declining since peaking in 2013, with most tourists consisting of business travelers
and friends and family visits. Many bottlenecks are stopping the development of the sector from the demand
side, including weak brand identity and a general lack of awareness of Congo as a tourism destination.
Tourism supply is characterized by difficult and expensive access and a dearth of skilled staff. Congo’s
primary ecotourism destinations include the nation’s Protected Areas, the Congo River and other waterways,
the wild coast and beaches, and nature sites not designated as protected areas such as waterfalls and other
natural landscapes. Access to tourism destinations in Congo both by air and land is difficult and expensive.
Moreover, customs and police staff lack an understanding of the benefits of tourism and often harass tourists.
Finally, the sector lacks adequate educational programs and training to supply qualified human resources to
staff hotels, protected areas, tour operators, restaurants, and other tourism services.
Tourism governance, essential to protect Congo’s natural heritage and enable the growth of ecotourism,
has been unstable, understaffed, and outdated. The national tourism authority has been plagued by
instability, having undergone 24 restructurings since its creation in 1963. Congo’s tourism authority also suffers
from insufficient financial and human resources to manage and coordinate the sector. The legislation and
regulations governing the tourism sector are outdated and do not reflect current national priorities.
© SURZ/bigstockphoto.com
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 21
© Elise Vanormelingen/World Bank
22 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
Executive Summary
Policy options
Building the foundations for more diversified development will
require the implementation of numerous policy options in the short
and medium term, most focused on building Congo’s intangible
capital—its economic institutions. Congo has committed itself to a
more diversified and inclusive growth model under its new PND, and
the key findings of this report identify the many challenges facing the
government in achieving this goal. A set of policy options to address
these challenges over the short to medium term are discussed in
The analysis
detail in each chapter and summarized in the table below (Table ES1). and the policy
The analysis and the policy recommendations are structured around recommendations
the major challenge to Congo’s long-term prosperity—diversifying its
national asset portfolio. Some areas of policy are almost entirely focused
are structured
on strengthening Congo’s institutions: removing barriers to competition, around the major
accelerating digital transformation, enhancing trade competitiveness challenge to
and diversification, and improving logistics. Some also aim to expand
key aspects of Congo’s physical capital: improving electricity supply,
Congo’s long-
transport and ICT infrastructure for trade competitiveness, and term prosperity
ecotourism development. A few areas of human capital (skills and labor — diversifying
market flexibility) are also the target of some policy recommendations,
in the areas of digital transformation, trade competitiveness, and
its national asset
ecotourism. Natural capital, Congo’s most important source of wealth portfolio.
to date, warrants attention to foster a shift away from oil towards other
largely unexploited natural assets, in particular, safeguarding natural
heritage assets for ecotourism. Together, these policy options, which are
equally distributed between short and medium term priorities, can help
ensure a better balance between natural capital (natural resources),
produced capital (human and physical), and economic institutions (or
intangible assets).
TABLE ES1
Summary of policy options
Removing barriers to competition by curbing SOE market power,
1 by encouraging private sector participation in electricity and
telecommunications, and by modernizing competition laws
PRIORITY
• Modernize the competition legislative and institutional framework by amending
Competition Law 6-94 to strengthen control of mergers and market power and by SHORT-TERM
supporting a national competition authority.
• Restrict creation of new SOEs, review the scope of existing SOEs, implement
competitive neutrality principles to eliminate preferential treatment and promote MEDIUM-TERM
transparency by requiring audits.
• Promote pro-competitive regulation in the electricity sector to support regular
tariff review and transparency of subsidies and in the telecommunications
MEDIUM-TERM
sector to support transparent third-party access and the ability to set minimum
consumer tariffs.
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 23
Executive Summary
Accelerating digital transformation by spurring private sector participation,
2 providing regulatory and legal support, and building skills
PRIORITY
• Enhance the availability of affordable broadband access by fostering competition
in the fiber optic wholesale market and the international submarine cable market, SHORT TO
encouraging infrastructure sharing, and adopting implementing decrees to the MEDIUM-TERM
new public-private partnership law.
• Increase use of digital financial services through new regulations for payment SHORT TO
infrastructure and user protection and by digitalizing government payments. MEDIUM-TERM
• Improve digital skills supply through integration into the formal education system,
SHORT TO
collaboration with and support from the private sector, skills gap analysis to MEDIUM-TERM
design training programs, and sustainable financing through partnerships.
• Improve the enabling environment for digital technology adoption and for high
growth technology-enabled businesses through implementation of the startup SHORT TO
act, tax relief and credit guarantees, harmonization to regional regulation, MEDIUM-TERM
digitalization of key public services, and targeted training programs.
Improving the supply of reliable electricity by restoring profitability,
3 invigorating regulation, and investing in transmission and distribution
PRIORITY
• Strengthen the legal and regulatory framework by reinforcing the capacity and
independence of the regulatory body, ARSEL, and clarifying the framework for SHORT-TERM
independent generation through IPPs and mini-grids.
• Improve the financial viability of the sector to allow for reinvestment and
improved quality of service by allowing power distribution company to charge SHORT TO
cost recovery tariffs, install meters, and cut off customers for non-payment while MEDIUM-TERM
protecting the most vulnerable customers.
• Improve reliability through investment in transmission and distribution
infrastructure financed by development partners and the private sector and MEDIUM-TERM
through rural initiatives such as mini-grids and solar home systems.
Enhancing trade competitiveness and diversification by cutting tariffs,
4 reviewing non-tariff measures, concluding AfCFTA negotiations, and
strengthening local markets
PRIORITY
• Further reduce tariffs and enhance regulatory transparency including simplifying
SHORT-TERM
rules of origin.
• Collect and publish detailed data on non-tariff measures and improve accuracy of
SHORT-TERM
customs data including through joint border control posts.
• Conclude remaining negotiations in the AfCFTA on issues such as rules of origin
SHORT TO
and ensure a swift implementation of the agreement, supporting greater GVC MEDIUM-TERM
participation.
• Mitigate negative impacts of trade by improving the business environment,
investing in transport and ICT hard and soft infrastructure, and speeding up labor MEDIUM-TERM
market adjustment through training, relocation support, and social protection.
24 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
Executive Summary
Improving the efficiency of the logistics system by scrutinizing public-
5 private partnership contracts and adopting unified IT for maritime trade
PRIORITY
• Reviewing public-private partnership contracts for trade procedures to determine
SHORT-TERM
if contract conditions can be revised to reduce costs.
• Move to a unified IT system in support of establishment of a Maritime Single
Window as required under the FAL Convention (Convention on Facilitation of MEDIUM-TERM
International Maritime Traffic).
Supporting ecotourism development by regulating and funding to protect
6 natural assets, by strengthening government agencies, and by expanding
transport infrastructure and marketing
PRIORITY
• Safeguard natural heritage assets: implement programs to reduce illegal hunting,
fund and support wildlife protection authorities, limit industrial commercial SHORT-TERM
forestry, and engage with local communities to reduce human-wildlife conflict.
• Improve tourism governance from the Ministry of Tourism and Leisure (Ministere
du Tourisme et des Loisirs) through improved leadership, sufficient resources, SHORT TO
better coordination with the private sector and donors, and deeper knowledge MEDIUM-TERM
of the sector.
• Strengthen infrastructure and marketing via better international air linkages,
SHORT TO
improved road access, and collaboration with the private sector for better skills MEDIUM-TERM
and building a brand identity.
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 25
26 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
© Highflierdolapo/Shutterstock.com
CHAPTER 1
Balancing
Assets to Boost
Long-Term
Growth
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 27
CHAPTER 1 Balancing Assets to Boost Long-Term Growth
1.1 The Republic of Congo is at a critical
juncture in its development history
The Republic of Congo’s seven-year recession led to a dramatic drop in income per capita and has
put the country at risk of falling back into low-income status. Following a period of high political instability
(including two civil wars in the 1990s), Congo managed to secure significant income per capita gains during
the early 2000s. However, economic activity in Congo (historically dependent on the oil sector) has been
shrinking since 2015 when the last commodity supercycle (2002-2014) ended. While the significantly growth
in per capita GNI during the oil boom helped Congo reach lower-middle income status in 2005 and near upper
middle income status in 2014 (Figure 1-a), the end of the oil boom drove a collapse in GNI per capita by more
than half between 2014 and 2020. Over that period, Congo experienced the second worst decline in real GDP
per capita among peer countries, after Equatorial Guinea (Figure 1-b).1 Congo’s real GDP per capita is now equal
to the levels of the early 1970s. Several countries, including commodity exporters such as Angola and Indonesia
that in the early 1990s had similar or lower GDP per capita (at purchasing power parity) than Congo, now have
substantially higher GDP per capita (Figure 1-c).
FIGURE 1
Gains in income per capita during the last oil boom have been lost
a. Congo GNI per capita (current US$), 1990-2020 b. Congo & Peers: Real GDP per capita growth (%),
average 2015-2020
5,000 6.0
4.0
4,000
2.0
0.0
3,000
-2.0
-4.0
2,000
-6.0
1,000 -8.0
-10.0
0 -12.0
1990 1995 2000 2005 2010 2015 2020
Eq. Guinea
Congo
Angola
Chad
Nigeria
Botswana
Azerbaijan
Gabon
Mauritania
Cameroon
Malaysia
Ghana
CAR
Georgia
Indonesia
Timor-Leste
Vietnam
GNI per capita, Atlas method (current US$)
Lower middle income threshold (lower bound)
Lower middle income threshold (upper bound)
c. Congo & Peers: GDP per capita, (purchasing power parity constant 2017 international $), 1990 & 2020
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
Angola Congo Mauritania Indonesia Nigeria Ghana Vietnam
1990 2020
Source: WDI. June 2022.
1
Throughout this report, Congo’s regional peers are Angola, Cameroon, Ghana, and Nigeria; its structural peers are Azerbaijan, Iraq, Mauritania, and Timor-Leste;
and its aspirational peers are Indonesia, Malaysia, and Vietnam. Depending on data availability, sub-sets or alternate comparators are sometimes used.
28 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 1 Balancing Assets to Boost Long-Term Growth
The COVID-19 crisis was another setback for Congo’s recovery from the
ending of the last oil boom, prolonging the economic recession that The protracted
started in 2015. Because of the COVID-19 pandemic, the Congolese economy economic
shrunk by 6.2 percent in 2020 (see Box 1). While most countries worldwide
recession has
partially recovered from the pandemic in 2021, Congo’s economy is estimated
to have further contracted by 2.2 percent despite the recovery in oil prices. 2 translated
This ongoing recession has translated into a reversal of long-term progress into a reversal
in poverty reduction, with poverty rates (using the international poverty line
of long-term
of $1.90 a day) estimated at 53.3 percent in 2021 compared to 39.6 percent
in 2011 (and approaching the 2005 poverty rate of 55.1 percent). Despite the progress
adoption of a “resilience plan” in June 2022 to mitigate the impact of the war in poverty
on Ukraine on Congo, poverty could be further exacerbated as a result of the
reduction.
effects of rising food prices on the most vulnerable (see Box 2).
BOX 1
The economic impact of COVID-19 in Congo has been
substantial: Collapse in oil revenue, shortages of
imports and depressed domestic demand, and fiscal
imbalances
The COVID-19 pandemic has impacted the Congolese economy through various channels. 3
First, growth was undermined by lower global demand for oil (in the initial phase of the pandemic),
lower oil production following the decision by OPEC members (which include Congo) to cut
production, and the disruption of Congolese oil production from COVID-19 containment measures.
Second, economic activity was harmed by global trade disruptions, which reduced availability of
products and pushed up food and transport prices in domestic markets. Third, the economy was
affected by local pandemic restrictions that led to a drop in domestic demand and labor supply.
The COVID -19 pandemic undercut the economy’s performance in 2020, resulting in a
contraction of 6.2 percent of GDP, the sharpest among Central African Economic and Monetary
Community (CEMAC) countries. Despite the gradual lifting of containment measures, economic
growth continued to shrink in 2021 driven by the underperformance of the oil sector. The pandemic-
related global crisis also had a strong negative impact on Congo’s fiscal balance in 2020. With the
plunge in oil prices and oil production and broadly unchanged public expenditure, the overall fiscal
balance recorded a deficit of 2.4 percent of GDP in 2020 (against a surplus of 3.4 percent in 2019).
The impact on businesses was also significant due to the sharp drop in domestic demand, with most
firms experiencing a decrease in sales revenue in 2020. Firms responded to the pandemic shock by
laying off workers, reducing working hours and cutting wages. The pandemic also delayed private
sector investment spending, with 40 percent of firms reporting canceling investment in equipment
in 2020.
2
Despite higher oil prices and increased global demand, oil production declined in 2021 due to postponed investments by oil companies, maturing oil fields, and
technical challenges.
3
As of May 2022, there were about 24 thousand confirmed cases, 385 deaths, and just under 12.4 percent of the population vaccinated.
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 29
CHAPTER 1 Balancing Assets to Boost Long-Term Growth
BOX 2
© Valdhy Mbemba/unsplash.com
The impact of the war on Ukraine in Congo: More
expensive food, high oil prices, and potential debt
pressures
The direct impact of a prolonged war on Ukraine is likely to be contained in Congo, but the indirect
impact through higher commodity prices would add to already existing high inflationary pressures.
Russia and Ukraine account for less than three percent of Congo’s total imports, but significant
shortages and supply chain disruptions of wheat are a possibility since close to 70 percent of Congo’s
wheat consumption is imported from Russia. Overall, the crisis is projected to continue rising further
international agricultural prices, which could result in higher domestic inflation, lower household
real incomes, and an increase in the poverty rate (since food accounts for about 30 percent of
Congo’s merchandise imports, and the country imports close to 70 percent of its domestic food
consumption).
On the other hand, oil prices are also expected to remain high, providing a windfall of fiscal and
export revenues and potentially strengthening the economic recovery. Strong energy prices will also
support a faster than anticipated decrease of the debt stock as debt repayments are tied to oil prices
owing to agreements with oil traders. However, higher oil prices would also lead to some additional
fiscal costs due to higher fuel subsidies.
Finally, risks related to stronger tightening of BEAC’s monetary policy to respond to rising inflationary
pressures, as well as higher risk premia in financial markets (owing to continuous tightening of
monetary policy in high income countries) could undermine economic recovery and possibly increase
debt vulnerabilities.
30 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 1 Balancing Assets to Boost Long-Term Growth
Congo has made little progress in reducing the dominant role of the hydrocarbon sector in the economy
and diversifying its productive base to industries with a higher labor content. For the last 15 years, the share
of the hydrocarbon sector in the economy has remained roughly unchanged (Figure 2-a), fluctuating around
an average of 42 percent of GDP. During the same period, agriculture, forestry, and fishing represented about
six percent of GDP, despite the sector’s large potential for development (see section 1.2.1). The manufacturing
sector, which is mostly small-scale, has broadly stayed unchanged, at an average of 6.5 percent of GDP over the
same period, while services remained the economy’s second largest sector of economic activity with 33 percent
of GDP. The industry sector, dominated by the hydrocarbon sector, employs only a very small percentage of the
labor force (Figure 2-b).
FIGURE 2
The hydrocarbon sector plays a dominant role in the economy but offers fewer employment
opportunities
a. Sectoral shares in total GDP (in % of GDP) b. Employment shares (average, % of total employment)
100 50
45
80
40
60
35
40
30
20 25
20
0
15
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
10
Other market services
Banks and Insurance 5
Hotels, bars and restaurants
0
Transport and Communications
Other Industry (excluding Construction and Extractives) Agriculture Industry Services
Extractives
Construction
Agriculture, Forestry, and Fishing 2006-2014 2015-2020
Source: Congolese authorities. June 2022. Source: WDI. June 2022.
Unsurprisingly, the hydrocarbon sector, through its direct and indirect impact on the economy, has
been the main driver of economic growth in Congo. 4 The extractive sector, specifically oil production, has
been a key contributor to Congo’s growth for at least the last 15 years (Figure 3-a). The service and construction
sectors also significantly contributed to growth; however, their performance is closely tied to the activity of the
hydrocarbon sector, directly and indirectly, financed by oil revenues. This tendency is evident during the post-
oil price boom period, when both sectors plummeted. More generally, the non-oil sector has been unable to
grow since the end of the last oil boom, exposing the high dependence of Congo’s economy on the oil sector.
The same tendency holds for the expenditure side, where growth has been driven by private investment mostly
directed to the oil sector and related services (e.g., professional services) and by public investment directed to
the construction sector, financed mostly by oil rents (Figure 3-b). Because of oil price volatility, dependency
on the oil sector has translated into high GDP growth volatility which, in turn, undermines long term economic
growth prospects and poverty reduction. 5
4
In the 1990s, large political shocks (including civil wars) were another driver of Congo economic performance. However, in recent years, these types of shocks
were limited (with perhaps the exception of the 2015 pool rebellion’s conflict).
5
The literature finds that high output volatility has negative effects on long-term growth as it can depress investment (and bias it towards short-term returns), and
it is also associated with lower investment in human capital (Hnatkovska, 2004; Calderón, 2009).
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 31
CHAPTER 1 Balancing Assets to Boost Long-Term Growth
FIGURE 3
The oil sector remains the major driver of economic growth in Congo
a. Sectoral contributions to GDP growth (% points), 2016-2020 b. Expenditures contributions to GDP growth (% points), 2015-2020
20 60
40
10
20
0 0
-20
-10
-40
-20 -60
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Services Final Consumption
Other Industry (excluding construction and extractives) Net Exports
Extractives Investment
Construction Real GDP Growth
Agriculture, forestry, and shing
Real GDP Growth
Source: Congolese authorities. June 2022.
Labor productivity has been falling, yet boosting the growth of income per capita requires rising labor
productivity. Despite some structural changes reflecting the movement of workers from low productivity
sectors (agriculture) to higher productivity sectors (industry and services), the country’s labor productivity has
decreased over the last 15 years, driving Congo’s loss in per capita income growth (Figure 4-a). The steepest
decline in overall labor productivity happened after the end of the previous oil boom due to a fall in labor
productivity in the services and industry sectors (Figure 4-b). Low productivity limits diversification since
industries with unproductive firms are less competitive and fail to develop (see Chapter 2).
FIGURE 4
Falling output per employee drives Congo’s loss in income per capita, especially in industry
and services
a. Congo & Peers: Annual contribution to growth of value added per capita (average 2005-2019)
Aspirational Peers
Structural Peers
Congo
-3 -2 -1 0 1 2 3 4 5
Productivity Employment rate Participation rate Demographic change
b. Congo: Change in labor productivity relative to 2005 (%)
120
110
32 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
100
90
Congo
CHAPTER 1 Balancing Assets to Boost Long-Term Growth
-3 -2 -1 0 1 2 3 4 5
Productivity Employment rate Participation rate Demographic change
b. Congo: Change in labor productivity relative to 2005 (%)
120
110
100
90
80
70
60
50
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Agriculture Industry Services Overall
Source: WDI and World Bank staff calculations. June 2022.
Congo’s current development model is unlikely to deliver sustainable economic growth and productive
jobs going forward. The government’s motivation to take on the bold structural reforms needed to push
Congo towards upper middle-income status has typically waned during times of oil windfalls. Importantly,
going forward, Congo’s current economic model—dependent on the oil sector—is unlikely to deliver even the
volatile economic growth of the past, challenged by the current uncertain global context, projected depletion
of Congo’s oil reserves, and the global transition to a low carbon economy (see Section 1.2.1). In addition to the
unsustainability of overall growth, an oil-based economy provides few opportunities for job creation due to the
low labor content of the hydrocarbon industry. Indeed, the great majority of the Congolese population cannot
find a job in the formal economy, with about three quarters of the Congolese workforce (including most youth)
employed in the informal sector, either self-employed or in low productivity jobs.6
The Congolese government’s new National Development Plan (Plan National de Développement, PND)
for 2022-26 lays out steps for a more diversified and inclusive growth model. To reverse flagging GDP
growth, Congo adopted early this year a new PND for 2022-26. The PND aims to build a strong, resilient, and
diversified economy for sustainable and inclusive development and is articulated around six strategic areas:
the development of agriculture and agroforestry, industry, tourism, digital economy, real estate, and special
economic zones. It also identifies peace and political stability, governance, the business environment, and
environmental protection as four cross-cutting areas that will support successful implementation. In addition,
the recent endorsement of the CEMAC Heads of State reform agenda focused on diversification offers a new
opportunity to push forward policies to transition to a more sustainable economic development model. Indeed,
at their most recent exceptional summit (August 2021), the CEMAC Heads of State endorsed an agenda of
structural reforms to address the root cause of the region’s vulnerability: the over-reliance on the hydrocarbon
sector.7
The success of the new PND will, however, depend on strong macro-fiscal management and commitment
to implement bold structural reforms. The PND offers a good opportunity to transform Congo’s economy
and boost inclusive and sustainable development. Its successful implementation is conditional, however, on the
ability of the government to mobilize financing (in a context of already high debt levels and strong uncertainty
about the country’s oil production and economic recovery), improve public finance management and efficiency
of public investment, 8 and implement effectively structural reforms to improve the business environment and
6
World Bank (2018).
7
Specific reforms were endorsed in the area of governance (including public financial management, public investment management, tax and customs administration,
and SOE management), business climate, financial sector development (including digital sector), and human capital and skills accumulation to support private
sector development.
8
Indeed, the large investment program of the early 2010s was not translated into economic growth, partly reflecting weaknesses in planning, selection, and
execution of projects.
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 33
CHAPTER 1 Balancing Assets to Boost Long-Term Growth
attract private investment (Section 1.2.3). Estimates suggest that the implementation of the new PND would
require a massive investment program of CFAF 8.9 trillion (about US$ 15.5 billion) where 45 percent of the
financing is hoped to come from the public sector and the remaining 55 percent from the private sector.
The next sections of this chapter follow the analytic framework of the “Diversified Development” report
(World Bank, 2014) to assess why Congo’s vast endowment of natural resources has not delivered
higher growth and to inform the implementation of the government’s PND. Diversification can be measured
in many ways, including through exports, products, and assets. The “Diversified Development” framework
argues that the diversification of an economy should be measured through three types of assets: natural
capital, produced capital (physical and human), and institutions. The rest of this chapter follows the “Diversified
Development” framework and takes stock of Congo’s current asset endowment base. It finds that Congo remains
dependent on non-renewable natural resources, but the country’s ability to manage natural resource rents is
limited (Section 1.2.1). Dependency on volatile oil rents limits the government’s capacity to manage public
investment in key public infrastructure (and infrastructure maintenance). As a result, Congo’s infrastructure
remains insufficient in coverage and quality and limits the country’s ability to crowd in private investment
and provide public services (Section 1.2.2). Human capital outcomes, which depend on the state’s effective
provision of social services, are low and a key constraint on productivity and the country’s ability to diversify
(Section 1.2.2). To achieve more diversified development, Congo needs to strengthen the quality of its policies
and institutions, or “intangible capital”, which have been deteriorating (Section 1.2.3). Indeed, the mechanisms
to manage volatile resource earnings, provide high quality social services, and administer public spending as
well as regulate the domestic market can only emerge from effective and enabling institutions. These, in turn,
support macroeconomic stability and resilience to shocks, expanded private investment, and the acceleration
of the country’s economic diversification.
1.2 Sustainable development will require
dramatic action to diversify assets
Congo remains far from achieving a diversified asset portfolio. A country’s assets can be classified into
three categories (Figure 5): first, natural resources, in the form of minerals, arable land, forests and water
resources; second, produced capital, which consists of both physical and human capital in the form of supporting
infrastructure and a healthy and skilled labor force; and third, intangible assets or institutions, which comprise
regulations and mechanisms that a country has to manage resource rents and provide social services. In the
case of Congo, natural capital has historically been the country’s largest asset and source of wealth, at about
40 percent of the total capital wealth since 1995 (Figure 6). This pattern suggests that other forms of assets—
including produced capital—have not been growing, a pattern quite different from Congo’s aspirational peers
such as Botswana and Malaysia (see Box 3 and 4).
Congo’s concentrated asset portfolio suggests that the country has been exploiting its natural capital
endowments without building other sources of wealth. Changes in country wealth can be illuminated by
adjusted net savings, measured as gross national savings (or gross investment, given the savings-investment
identity) minus depreciation of produced capital, depletion of subsoil assets (fossil fuels and minerals) and
timber resources, and air pollution damages to human health, plus a credit for expenditures on education. 9
Positive adjusted net savings indicates that savings/investment plus expenditures on education (a proxy for
human capital) are higher than the exploitation of natural resources, meaning that the country is accumulating
assets and wealth. In contrast, Congo’s adjusted net savings have been mostly negative over the past decades,
indicating that the country has been depleting its natural resources without converting enough of its natural
resource revenues into other forms of capital, thereby not adding to its wealth (see Figure 7-a). Congo’s adjusted
net savings was negative even during the previous oil boom, a very weak performance compared to peers (see
Figure 7-b).
9
See World Bank (2021), Changing of Wealth of Nations.
34 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 1 Balancing Assets to Boost Long-Term Growth
FIGURE 5
Framework of Asset Diversification
PHYSICAL
CAPITAL
NATURAL PRODUCED
CAPITAL CAPITAL
HUMAN
CAPITAL
INSTITUTIONS
FIGURE 6
Natural capital remains Congo’s greatest asset
Congo & Peers: Natural Capital Wealth (% of Total Capital Wealth)
45
40
35
30
25
20
15
10
5
0
1995 2000 2005 2010 2015 2018
Congo Botswana Malaysia Indonesia
Source: World Bank (2021), Changing of Wealth of Nations. June 2022.
FIGURE 7
Congo has been depleting its natural capital endowments without adding to its wealth
a. Congo: Adjusted net savings subcomponents (% of GNI) b. Congo & Peers: Adjusted net savings, including particulate
emission damage (% of GNI, average 2006-2016)
100 30
25
50
20
0
15
-50 10
5
-100
0
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
-5
Gross savings CFC
Botswana
Mauritania
Malaysia
Vietnam
Indonesia
Nigeria
Cameroon
Ghana
Angola
Congo
Particulate emission damage Carbon dioxide damage
Natural resources depletion Net national savings
Education expenditure
Note: CFC is consumption of fixed capital.
Source: World Bank (2021), Changing of Wealth of Nations. June 2022.
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 35
CHAPTER 1 Balancing Assets to Boost Long-Term Growth
1.2.1 Natural resources have been central for Congo’s
growth, but they go beyond oil and must be managed
better
Out of its great natural resource wealth, Congo has so far only exploited oil
Congo has a variety of natural resources. The country’s stock of natural wealth was estimated at US$14,670
per capita in 2018, which is larger than the average in Sub-Saharan Africa (SSA) (US$5,128 per capita) and the
average for lower-middle income countries (US$6,316 per capita).10
The exploitation of natural resources in Congo has been focused on oil and carried out by international
oil companies. Congo is the third largest oil producer in SSA behind Nigeria and Angola and ahead of Gabon
and Equatorial Guinea11 (Figure 8-a). Production is sourced from 18 offshore and onshore blocks, with proven
reserves reaching 2.9 billion barrels as of 2020, just behind Angola and Nigeria in SSA. Over the past three
years, Congo exported about 109 thousand barrels per day of crude oil on average. Most of its oil exports went
to the Asia-Pacific region, with China importing approximately 65 percent of total oil exports in 2020. The
National Oil Company of Congo (Société Nationale des Pétroles du Congo, SNPC) manages the government-
controlled shares of the country’s crude oil fields resulting from production sharing contracts, and its production
accounts for about ten percent of the country’s total over the past three years.12 Thus, the overwhelming
part of production is carried on by international oil companies, with Total Energies, a French company, alone
accounting for 60 percent of the country’s total oil production.13
FIGURE 8
Congo’s oil production and oil exports are significant
a. Congo & Peers: Oil Production (avg. 2015-2020; thousand b. Congo: Oil Exports (% of total exports)
barrels daily)
100
Nigeria
80
Angola
Congo 60
Gabon 40
Equatorial Guinea
20
Chad
0
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
0 500 1000 1500 2000 2500
Oil Exports Other Exports
Source: Statistical Review of World Energy - BP. June 2022.
10
The stock of natural wealth is calculated by the World Bank’s Changing Wealth of Nations flagship (along with the calculation of produced capital and human
capital) and includes the valuation of renewable and nonrenewable natural capital.
11
BP (2021), World Energy Statistics Report (70th edition).
12
SNPC is also active—directly or in partnership with other companies—in the exploration and exploitation of oil fields (World Bank, 2022).
13
A significant amount of Congo’s natural gas associated with oil production is flared with a flaring intensity of 17.31 cu m. per barrel (or 1,522 million cu m. flaring
volume per year), which is higher than that of Angola (at 4.07 cu m.), Nigeria (11.1 cu m.) and Equatorial Guinea (8.03 cu m.), and only below that of Gabon 23.16 cu
m (see World Bank’s Global Gas Flaring Tracker. https://www.worldbank.org/en/programs/gasflaringreduction/global-flaring-data). Congo could instead liquify
and store the gas, providing a complementary energy source to be used industrially or domestically, or export it, as prices and demand for liquefied natural gas
are likely to remain high (as natural gas is seen as a key part of the global transition to low carbon energy).
36 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 1 Balancing Assets to Boost Long-Term Growth
Congo’s oil production is expected to decline in the medium term due to local supply issues and face
likely falling demand over the long-term from the global transition to a low-carbon economy. After a
declining trend since 2011, oil production started to rise in 2016 thanks to the N’Kossa Marine offshore fields.
However, in the absence of new discoveries,14 Congo’s production is already set to peak in 2024 and then
decline and remain stable from 2040 at 60 percent of peak production as a result of field maturation and a
slowdown in upstream development.15 Besides, while oil will likely remain an important energy source for the
next few decades, the transition to a low-carbon economy is expected to reduce global oil demand permanently
from around 2040.
Congo also has a significant stock of other hydrocarbon resources
and strong mining potential, but these remain underdeveloped.
Congo has the fifth largest proven natural gas reserves in SSA with 284
billion standard cubic meters (cu. m.), but production is relatively modest
at 405 million cu. m. as of 2020).16 Scaling up gas production has been The efficient
hindered by the lack of supporting transport infrastructure. Further, the
sector suffers from an absence of a sufficient domestic market for gas
exploitation of
(both current and potential given the small domestic market size), and an natural renewable
appropriate legal, regulatory, and upstream contractual structure (e.g., capital would
concession agreements and production sharing agreements). As part of
Europe’s effort to decrease its dependency on Russian natural gas, Congo
require policies
signed an agreement in 2022 with an Italian hydrocarbon company which to enhance the
will scale up production capacity to as much as 4.5 billion cu. m. per year. productivity of
Developing liquefied natural gas facilities and floating platforms has the
potential to boost the production and export capacity of the country
the forestry and
significantly. There is also a substantial mining potential in Congo, with agriculture sector.
known reserves of iron (25 billion tons), potash (3.2 billion tons), copper
(2.2 million tons), and phosphate (532 million tons), but the sector remains
underdeveloped, with polymetallic ore constituting the bulk of mining
production and accounting for only 0.8 percent of GDP in 2019.17
Natural renewable capital, including forests and arable land for agriculture, are also abundant but
remain unexploited.18 Congo’s natural forests, which cover about 61 percent of the country’s surface or about 22
million hectares, represent Africa’s third largest forest area. The sector lacks transparency in revenue collection,
and illegal logging and unregulated forest exploration are significant, with informal production at about 20 to
30 percent of total timber production. Importantly, about one-quarter of Congo’s primary forest sits atop the
Congo peatlands, preservation of which is critical to avoid massive release of stored carbon. While the timber
and timber-related industry have doubled since 2000, the objectives of sustainable forest management and
preservation of peatlands limit the commercial potential of Congo’s forests. In addition to forestry, Congo has a
substantial food and cash crop potential, with an endowment of ten million hectares of arable land, equivalent
to 31 percent of the country’s land area, 90 percent of which is unexploited. Overall, the efficient exploitation
of natural renewable capital would require policies to enhance the productivity of the forestry and agriculture
sectors. These would likely include improving the business environment (including through stable electricity
and transport infrastructure, and easing import and export procedures), enhancing the skills of the labor force,
and supporting private sector initiatives.19
14
Current high oil prices are increasing oil investment profitability and may attract new investments in the field, which will increase the likelihood of new oil
discoveries.
15
IMF (2021).
16
By comparison, Nigeria produced 49,947 million cu. m., Angola 11,313, and Equatorial Guinea 6,023 in 2020 (2020 OPEC Annual Statistical Bulletin).
17
World Bank (2022).
18
World Bank (2018).
19
World Bank (2018).
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 37
CHAPTER 1 Balancing Assets to Boost Long-Term Growth
Oil revenue is critical for government finances, but collection falls short
Congo remains heavily dependent on oil revenues, which are highly volatile due to large swings in oil
prices and production (Figure 9). In the years before the end of the last oil boom (2009-2014), oil revenues
reached 71.9 percent of total government revenues. With the drop in oil prices, this percentage decreased but
remained substantial, averaging 60.4 percent of total government revenues during 2018-2020. Volatility in oil
revenues is driven not only by international oil price cycles (which have historically presented large swings) but
also by large variations in domestic oil production due to the interplay of maturing oil fields, new development,
and temporary factors, most recently restrictions on oil field access due to containment measures adopted to
limit the spread of the COVID-19 virus.
FIGURE 9
Oil dominates Congo’s government revenues
Congo: Oil and non-oil revenue (% of GDP), 2009-2020
40 120
35 105
30 90
Percent of GDP
25 75
USD
20 60
15 45
10 30
5 15
0 0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Oil revenue Non oil revenue Grants Oil price (rhs)
Source: Congolese authorities, IMF and World Bank staff estimates. June 2022.
Despite oil exports’ high contribution to total revenue collection, the capacity of the government to
collect oil revenues in Congo is low when compared to peers. Hydrocarbon revenues as a percentage of
oil rents are mostly below peers (see Figure 10-b). Also, Congo collects fewer revenues per dollar exported
compared to most peers. Indeed, Congo managed to collect only US$ 0.31 in 2019 compared, for instance,
to Cameroon which collected US$ 0.46 that same year (see Figure 10-a). Discrepancies in oil trade statistics
suggest that oil exports have been underreported, implying a revenue loss to the government. Indeed, trade
data from COMTRADE suggests irregular reporting of oil receipts, with differences in both value and volume of
exports between oil import data reported by Congo’s trading partners and Congo’s own export data. 20 These
discrepancies suggest under-reporting and under-valuation of Congo’s exports by oil companies to reduce
their reported profit and avoid taxes. 21 It may also partly originate from a lack of coordination and information
sharing across government units on export statistics. The past two Extractive Industries Transparency Initiative
(EITI) reports (2018 and 2019) identify significant potential revenue losses amounting to about one percent of
GDP per year.
20
World Bank (2022).
21
See Ferrantino et al. (2012), Chalendard et al. (2016) for examples from other countries.
38 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 1 Balancing Assets to Boost Long-Term Growth
Congo’s relatively weak performance in collecting oil revenue suggests that there is room to negotiate
better oil production sharing deals and, most importantly, that the new Hydrocarbon Code has not
been fully enforced. For instance, the decrease of the “Cost Stop” (maximum amount of oil produced that can
be allocated to cost recovery by the oil company) from 60 percent in the 1994 Hydrocarbon Code to 50 percent
in the 2016 Hydrocarbon Code, contrasts with the actual “Cost Stop” that several companies are practicing,
which stood at an average close to 70 percent of production during 2018-2021. Also, the threshold on the share
of the State’s “Profit Oil” (the part of the profit that goes to the government at no less than 35 percent in the
2016 Hydrocarbon Code) is not applied in most cases. 22
The government’s share of oil rent could also be increased through the implementation of key structural
and governance reforms as well as through capacity building. Policies aiming to improve the business
environment, reduce corruption, and lower political risks would decrease the risk for investors of exploiting oil
in Congo. This would allow the government to negotiate a larger share of the oil rent in future contracts. The
country would also benefit from an improvement in transparency and dissemination of oil revenue data, as well
as undertaking EITI corrective actions to ensure proper management of oil resources. 23 In addition, the practice
of borrowing against future oil production should be prohibited, as it results in substantial revenue losses
for the State. 24 Finally, improving Congolese contractual negotiation capabilities and market intelligence will
allow the authorities to reduce information asymmetry, have better investment and operating costs estimates,
and consequently negotiate and secure a fair government share. In particular, the improvement of oil market
knowledge—oil prices and costs—should allow the country to avoid selling oil at minimum market prices. 25
FIGURE 10
Congo’s share of oil rents could be higher and lags that of peers
a. Government revenues per dollar of oil exports (2019) b. Congo & Peers: Government share of the hydrocarbon rents
(2019), Hydrocarbon revenues (% rents)
0.50 100
0.45 90
0.40 80
0.35 70
0.30 60
0.25 50
0.20 40
0.15 30
0.10 20
0.05 10
0 0
Chad
Gabon
Congo
Angola
Nigeria
Equatorial Guinea
Cameroon
Chad
Gabon
Congo
Angola
Nigeria
Equatorial Guinea
Cameroon
Source: Congolese authorities, EITI, IMF and World Bank staff estimates. June 2022.
22
See World Bank (2022) for more details.
23
For instance, accelerate the publication of the implementing texts of the 2016-28 Hydrocarbons Code). See EITI (2019) for an extensive overview of the
recommendations and the monitoring of the implementation of the previous recommendations.
24
Instances of these types of contracts include the pre-financing agreement with the oil trade company Gunvor which led to a gain-loss to the government of
around $US 1.45 billion. The company obtained the right to exports oil worth $US 2.2 billion (without a bidding process) against six pre-financing of $US 125 million
each to the SNPC or a total of $US 750 million.
25
The national company sells the State’s share of oil months before production and must, therefore, accept a discount to cover the buyer’s risk.
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 39
CHAPTER 1 Balancing Assets to Boost Long-Term Growth
1.2.2 Insufficient, volatile, and inefficient investment in
produced capital has left Congo with both low human
capital and gaps in infrastructure
Underinvestment in human capital limits the productivity of the
workforce, constraining Congo’s economic growth
The drawdown of Congo’s oil resources has not supported the accumulation of human capital. While
Congo’s health expenditure grew from just over one percent of GDP in 2010 to two percent on average during
2016-20, its current public health spending lags that of SSA countries and peer countries (Figure 11-a). Unlike
health, education expenditure saw a decline since the end of the oil boom, with spending on education declining
from a peak of 3.6 percent of GDP in 2014 to 2.5 percent in 2019, reflecting cuts in education-related investment
and a hiring freeze for teachers during 2015-2019. Aggregate human capital expenditures also recorded the
lowest budget execution rates among spending categories in Congo, with public spending on education, health,
and social protection often under-executed (with an average execution rate of 83.3 percent over 2009-2014 and
80.0 percent after the end of the oil boom).
Congo lags behind on human capital, especially compared to aspirational peers such as Malaysia. The
2020 Human Capital Index (HCI), which classifies countries according to learning and health outcomes, gives
Congo a score of 0.42 (see Figure 11-b), reflecting minimal progress since 2010 when its score was 0.41. Such
a low score implies that Congolese children born today will only achieve about 42 percent of the productivity
that they could have achieved as future workers at the age of 18 had they benefitted from complete education
and full health. This outcome is low compared to both the SSA average (at 0.6 in 2020) and that of aspirational
peers. For example, Malaysia, with an HCI score of 0.6, appears to have been more efficient in converting its
natural resource rents into human capital by investing in its social sectors. In particular, the Malaysia state oil
company contributes directly to the building of human capital in the country through training and vocational
programs as well as direct funding to a national research and development fund (see the Malaysia country case
in Box 3).
Furthermore, Congo’s low quality of education limits the country’s ability to take full advantage of its
labor force, including in the development of the digital sector. When adjusted for the quality of learning,
the registered 8.9 years of school of Congolese students turns out to be only equivalent to 5.3 years, which
constitutes a learning gap of 3.6 years (Figure 11-b). The low percentage of graduates from science, technology,
engineering, and mathematics programs in tertiary education is likely one of the causes of the country’s low
adoption of information and communications technologies (ICT)(see Chapter 4 for more details). 26
© Elise Vanormelingen/World Bank
26
Blimpo and Owusu (2020) findings suggest that Africa’s ICT low performances are partly explained by the poor quality and quantity of math and science
education as well as the insufficient availability of scientists and engineers.
40 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 1 Balancing Assets to Boost Long-Term Growth
FIGURE 11
Inadequate human capital outcomes are accompanied by low and inefficient social sector
spending
a. Congo & Peers: Government spending on Education and Health b. Congo & Peers: HCI and Learning-Adjusted Years of School
(% of GDP, 2010-2019 average)
0.7 10
Congo 0.6
8
Botswana 0.5
0.4 6
Malaysia
0.3 4
Indonesia 0.2
2
Timor-Leste 0.1
0 0
Mauritania
Mauritania
Botswana
Congo
Timor-Leste
Indonesia
SSA
Malaysia
SSA
0 2 4 6 8 10
Public expenditure on education Human Capital Index 2020 (lhs)
Public expenditure on health Learning adjusted years of schooling (rhs)
Source: WDI and HCI (2020). June 2022.
BOX 3
State oil company contribution to building human
capital: Lessons from Malaysia
Malaysia’s state-owned oil company, Petronas, which has the exclusive rights to exploit the
country’s oil and gas resources, plays a significant role in the development of local skills.
In addition to including training requirements in production sharing agreements (signed between
Petronas and other operators), Petronas also directly provides world-class educational and training
services through various educational institutions (e.g., Universiti Teknologi Petronas). 27 Petronas also
established the Petronas Management training center, to provide a range of technical, management,
and competency development programs (e.g., Akademi Laut Malaysia maritime training center for
maritime-related activities).
Petronas’s contribution to building local skills and human capital is also accomplished through
direct support to schools and disadvantaged families. Petronas provides support to vocational
schools for selected courses on industry-related engineering programs (17 schools in 2018) as well
as other programs aiming at increase science, technology, engineering, and mathematics skills in
Malaysia. Sponsorships are awarded to students from underprivileged families pursuing education
in fields related to oil and gas at reputable institutions of higher learning in Malaysia as well as
underprivileged primary students in science and mathematics (6,515 Malaysian students in 2018).
Moreover, all operators in the oil and gas sector are required to pay 0.5 percent of the sum of cost oil
and the contractor’s share of profit oil every fiscal year to a research fund to support research and
development, with the fund collecting about US$345 million during 2007 to 2018.
27
The university is one of Malaysia’s leading institutions of higher learning, particularly in the fields of engineering, science, and technology. The university ranks
145th in the QS World University Rankings 2018 for engineering and technology.
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 41
CHAPTER 1 Balancing Assets to Boost Long-Term Growth
Volatile and inefficient investment in physical capital built insufficient
infrastructure to support productivity and diversification
High private and public investment spending over recent years contributed to a steady accumulation of
physical capital in Congo, but the investment was volatile and driven by developments in the oil sector. 28
For the past 20 years, total investment in Congo has been high and variable compared to the SSA average and
driven by private investment (in particular foreign direct investment) in the construction and maintenance
of oil wells (see Figure 12-a). Unfortunately, sectors not connected to the oil industry are barely attracting
foreign investors, which limits their productivity growth. 29 The new law on Public-Private Partnership adopted
by Parliament in December 2022 and enacted in January 2023 can facilitate investments in non-oil-related
sectors, the preparation of implementing decrees to this new law should be a priority. On the public investment
side, after decades of low investment rates, in 2009 the government introduced a vast public infrastructure
investment program including transport (roads and aviation), energy and water, financed by oil revenues and
rapid accumulation of debt. 30 The collapse of international oil prices in 2014 and the resulting decrease in fiscal
space, however, led to a significant drop in public investment, putting a brake on the government’s extensive
investment program with some projects remaining unfinished (see Figure 12-a). Notwithstanding, the long
period of investment before the oil price collapse allowed Congo to substantially increase its capital stock,
which is higher than the SSA average (as of 2017) yet below the CEMAC average.
Despite relatively high public investment, Congo’s coverage
and quality of infrastructure remain insufficient, in particular in
electricity and internet. Congo has the least reliable electric supply A significant
system compared to peer countries. Only about half of the total improvement in
population has access to electricity (well below the average for other
low-middle income countries of 88 percent), and only 14.8 percent of
telecom connectivity,
rural residents. Moreover, Congo experiences more power outages in in particular in
a typical month than other SSA countries and lower-middle income access to internet
developing countries, and suffers much larger losses of generated
electricity (40 percent compared to an average of 27 percent in other
services, is a
SSA countries). Availability of other infrastructure such as roads and critical element for
health facilities remains lower than the SSA average. 31 Indicators of successful economic
telecommunications development and water access show Congo to
be comparable to other SSA and lower-middle income countries. A
diversification and
significant improvement in telecom connectivity, in particular in access growth.
to internet services, is a critical element for successful economic
diversification and growth (see Figure 12-b) (see Chapter 4).
Low public investment efficiency has limited the economic and social benefits of public spending.
Despite significant progress in public investment spending efficiency following a series of public financial
management reforms in the last decade, 32 Congo’s public investment efficiency score is 70.8 (as of 2017),
which is low compared to peer countries (see Figure 12-c) (see Box 4 for the successful case of Botswana). 33
In addition, the recent contraction of the Congolese economy and the associated cuts in public investment
have likely led to a deterioration in the efficiency of capital spending. For instance, low public infrastructure
maintenance expenditures have been insufficient to meet the minimum level of routine maintenance, including
for roads and electricity. 34 More generally, because projects are not systematically subject to rigorous technical,
economic, financial as well as environmental and social appraisal, they may not necessarily have a significant
development impact and may have unclear and/or limited social value. 35 Indeed, urban-centered, ineffective
28
Infrastructure capital stock is only one component of an overall country’s physical capital stock, which also includes machinery and equipment.
29
Financial Times, fDi Markets data.
30
World Bank (2018).
31
For instance, only 13.0 percent of the road network is paved in Congo, compared to 18.3 percent for the SSA average.
32
The 2008-2010 reforms in public financial management consisted of adopting the Action Plan for Improving Public Investment Management (PAAGIP) in 2008 and
the public procurement code in 2009 and creating the Commission in charge of identification and selection of public investment projects in 2010.
33
Public Investment efficiency is calculated using standard non-parametric approaches (DEA and Partial frontier estimator). See World Bank (2022) for a detailed
description of the estimation.
34
World Bank (2022).
35
RGC, (2018) Melina, Selim, and Verdugo-Yepes (2019).
42 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 1 Balancing Assets to Boost Long-Term Growth
infrastructure and utility projects often fail to address the basic needs of the majority of the population, with
rural areas in particular constrained by the inadequate distribution of state resources. Weaknesses in planning
and selection of investment projects have led to white elephants such as airports in various rural localities and
high-budget prestige projects such as stadiums. 36 In recent years, in an attempt to strengthen public investment
management processes, the Government has adopted a law establishing the Center for Studies and Evaluation
of Investment Projects (Centre National d’étude et d’Evaluation des Projets d’Investissement Public, CNEEPIP)
in charge of investment project appraisal and evaluation in 2018, but its operationalization remains incomplete.
The steady accumulation of infrastructure capital stock would enable productivity gains, supporting
diversification efforts (see Chapters 3 and 6). Infrastructure reduces the cost of production and transportation
of goods and services, thus increasing the productivity of input factors. Additionally, infrastructure networks
expand access to markets (including online markets), thus further lowering production costs through
economies of scale. More availability of high-quality infrastructure in Congo would boost the productivity of
other production factors such as human capital and natural resources, supporting the development of these
assets and Congo’s diversification.
FIGURE 12
Despite high historical investment rates, access to basic infrastructure remains low
a. Congo: Investment total, public and private (% of GDP), 2000-2019 b. Congo & Peers: Indicators of access to Telecommunications
90 120
80
100
70
60 80
50
60
40
30 40
20
20
10
0 0
Internet users Mobile phone subscribers
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
(% of population) (per 100 people)
Total Congo Private Congo Congo Sub-Saharan Africa
Public Congo Total SSA average Low middle income Countries
c. Congo & Peers: Public Investment Ef ciency in 2017
100
95
90
Ef ciency scores
WAEMU
85
SSA
CEMAC
80
75 Congo
70
65
60
0 2 4 6 8 10 12 14
Public capital stock per capita in thousands of constant 2011 international dollars
Source: WDI, IMF PIMA (2020), AIDI (2020) and World Bank staff calculations. June 2022.
36
World Bank (2015), World Bank (2016).
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 43
CHAPTER 1 Balancing Assets to Boost Long-Term Growth
In particular, enhancing the quantity and quality of strategic infrastructure would support Congo’s
digital adoption and trade integration. The slow development of ICT infrastructure (e.g., digitalization,
electricity, and internet) remain a bottleneck for digital adoption in Congo, hindering the growth potential
impact of ICT (see Chapter 4). Indeed, Congo is not taking advantage of ICT’s spillover effects, for example,
through trade expansion by facilitating customs clearance and other aspects of the cross-border movement of
goods and people. The deficit of ICT, transport and logistics infrastructure remains a major bottleneck to trade
integration in Congo (see Chapter 5 and 6). 37 Specifically, weak road connectivity, insufficient storage, and
inadequate commercial infrastructure hinder market linkages. 38
BOX 4
A peer country case of successful public investment
management: Botswana39
Botswana’s growth model has been built on effective capacity to maximize revenue captured
from minerals and invested them efficiently in infrastructure. Public investment has been
consistently high at around 11 percent of GDP since 2000, which outpaces peer countries and
emerging market economies. Relatively high public investment spending has contributed to steady
accumulation of capital stock—almost three times more per capita than peers and emerging market
averages. In terms of public investment management, Botswana’s institutions for managing public
investment compare reasonably well to other emerging market economies, especially in terms of
national and sectoral planning and fiscal rules. For example, a comprehensive National Development
Plan is published along with the Public Investment Plan, which provides six-year projections for the
estimated total economic cost by project, which allows for an effective platform for investment
funding and implementation.40
Good progress in building physical capital was achieved also thanks to Botswana’s capacity
to maintain stable levels of public investment. Prudent management of public finances has
allowed enough fiscal space to maintain stable levels of public investment, avoiding large cuts in
infrastructure projects that usually follow a recession. Indeed, despite a high dependency on mineral
revenues, Botswana has managed to implement countercyclical fiscal policy successfully, while
keeping low public debt ratios. In particular, prudent fiscal policy combined with formal debt limits—
at 20 percent of GDP since 2006 for both domestic and external debt—has allowed the government
to build fiscal buffers during good times and spend them judiciously during bad times.
37
For example, the Logistics Performance Index (LPI) score for infrastructure has deteriorated despite significant investments, while the overall LPI score of 2.49 in
2018 was at the same level as in 2010.
38
In 2014, the country had barely five kilometers of roads per 100 square kilometers, concentrated in the two main cities, leading to high transport costs and
difficulties in accessing markets for agricultural goods (World Bank, 2018).
39
Lewin, Michael (2011), Rial et al. (2018).
40
IMF (2017).
44 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
© mtcurado/iStockphoto.com
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 45
CHAPTER 1 Balancing Assets to Boost Long-Term Growth
1.2.3 Institutional capital must be bolstered to support the
government’s ability to transform natural resources into
physical and human capital
The decades-long exploitation of natural resources has not been accompanied by the development
of strong institutions in Congo, which are needed to raise productivity across sectors. The World
Bank’s Country Policy and Institutional Assessment (CPIA) provides a review against standard criteria of
Congo’s economic management, structural policies, policies for social inclusion and equity, and public sector
management and institutions. Despite some recent progress in specific areas, Congo’s scores in most of these
institutional dimensions have deteriorated, while others remain unchanged (see Figure 13-a and b). Among the
16 areas grouped within the four broad clusters are some particularly important aspects of Congo’s policies and
institutions that will be discussed in the following sections.
FIGURE 13
Deteriorating quality of Congo’s policies and institutions leaves it farther behind SSA averages
a. Congo: CPIA score by clusters b. Congo & Peers: CPIA Overall Score (1=low; 6=high)
4.0 3.3
3.5 3.2
3.1
3.0
3.0
2.5
2.9
2.0
2.8
1.5
2.7
1.0
2.6
0.5 2.5
0 2.4
Economic Policies for Structural Public Sector 2015 2020
Management Social Inclusion Policies Management
and Equity and Institutions
2015 2020 Congo SSA
Source: WDI. June 2022.
Weak economic management has brought Congo into debt distress,
shrunk fiscal space, and failed to contain procyclical spending, together
undercutting long-term growth prospects
Weak debt policy and management have led to a sharp deterioration in debt sustainability, which
recent efforts are now correcting. During the first half of the 2010s, the government ramped up spending
on public infrastructure and public sector wages, financed by oil revenue windfalls and concessional external
borrowing. However, following the plunge in oil prices in 2014, the country resorted to non-concessional, oil-
backed external loans to continue its infrastructure projects. Short of cash, the government soon became unable
to meet its contractual obligations, leading to the accumulation of external arrears. By 2017, Congo was in debt
distress with an unsustainable debt level (Figure 14-d). These developments took place in a context of low debt
management capacity, including a lack of debt transparency and coordination between debt management
and other macroeconomic policies. While Congo is still in debt distress due to outstanding external arrears,
the country made substantial progress in debt restructuring, which enabled it to return to debt sustainability
in 2021. Recently, the government has adopted welcome measures on debt policy and management, which will
46 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 1 Balancing Assets to Boost Long-Term Growth
progressively relax the currently strong fiscal constraints. These measures include the publication of a medium-
term debt management strategy in December 2021 for the 2022-24 period, limiting external borrowing to
concessional terms, and negotiating debt restructuring agreements. On the latter, the government has reached
recently debt restructuring agreements with the three largest oil traders (Trafigura, Orion, and most recently in
January 2022 with Glencore), and continues to actively pursue negotiations on debt restructuring with China.
Procyclical fiscal policies, tightly linked to oil price fluctuations, have amplified the economic cycles in
Congo and impacted long-term growth. Congo has followed strong procyclical spending policies, i.e., a heavy
increase in spending during boom periods and fiscal consolidation during recessions. These policies have not
been contained by the CEMAC fiscal rule adopted in 2016 owing to non-compliance (see Figure 14-a).41,42 Indeed,
weak institutions in Congo were not capable of containing political pressure to spend in good times, leading to
fiscal profligacy and/or rent-seeking activities.43 The pro-cyclical fiscal policy during the last oil boom financed
large public infrastructure investments (which were often inefficient), the expansion of subsidies (especially in
energy), expansion in likely unproductive public-sector jobs, and higher public-sector wages. Following the end
of the oil boom in 2014, the government was forced to embark on a significant fiscal consolidation effort. The
sharp contraction in public spending amplified the economic recession, while the sudden cuts to infrastructure
projects froze capital accumulation and slashed maintenance spending, undercutting long-term growth (see
Figure 14 b and c). While the existing regional fiscal rule is a welcome initiative, its efficacy is also dependent on
bottom-up solutions which consist, for example, of improving transparency in the implementation of the budget
and fiscal rule, providing lawmakers, markets, and citizens with the information they need to hold governments
accountable. Effective sanctions by CEMAC institutions will also help with the actual implementation of this
regional fiscal rule.
Weak and worsening structural policies related to the business environment
are stunting growth
Congo’s business regulatory environment is not very attractive to private
sector investment. Despite having adopted regional commercial legislation
(sponsored by OHADA 44), Congo still needs to implement simplified,
transparent, and predictable processes when it comes to starting a new Congo still
business. The heavy regulatory process is reflected in the long period of time
needs to
required to start a business (50 days in 2019, compared, for example, to 14 days
in Cameroon). Other activities affecting business, such as registering property implement
are also time-consuming (54 days in 2019, compared to 12 in Malaysia), and simplified,
the arbitrary implementation of regulations on business operations remains a
transparent,
hurdle for companies. The time to enforce a contract is 560 days, unchanged
for the past 15 years. Congo does not have a Competition Authority and lacks and predictable
a comprehensive Competition Law, although related draft laws are under processes when
preparation. The existing legislation does not cover all relevant competition
it comes to
topics (e.g., does not allow for penalties nor address either merger control
or abuse of dominance) and is not systematically applied (see Chapter 3 for starting a new
additional details). As a result, Congo’s CPIA score for business regulatory business.
environment (which is part of the cluster of structural policies) is low and
shows deterioration in recent years (from 2.5 in 2015 to 2.0 in 2020, on a scale
of 1 (low) to 6 (high)).
41
CEMAC’s 2016 new reference fiscal criterion was adopted under the New Convergence Rules. The new reference fiscal balance (with a floor of -1.5 percent of
GDP) can be defined as the overall non-oil balance plus 80 percent of the average oil revenue-to-GDP ratio over the three previous years. It is, therefore, fully
disconnected from the current year’s oil revenue and does not allow governments to increase spending immediately when oil revenue increases.
42
The special topic section of the CEMAC Quarterly Economic Barometer (January 2022) looks into the cyclicality of government spending and finds that fiscal
policy in CEMAC countries has amplified economic cycles (even more than in other SSA countries), deepening economic downturns and adding heat to upturns.
The report also finds that improvements in institutions could considerably attenuate this effect.
43
Diallo (2009), Herrera et al. (2019).
44
OHADA, or the Organization for the Harmonization of Business Law in Africa, was created in 1993 and now has 17 members states. It aims to support economic
integration, growth, and investment through harmonized, simple, and modern business law.
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 47
CHAPTER 1 Balancing Assets to Boost Long-Term Growth
Social inclusion policies have fallen short of Congo’s rising needs for
strong human capital
Policies aiming to protect and develop human capital need to be strengthened. The quality of policies
and institutions to boost health, education, and social protection has remained mostly unchanged since the
mid-2000s, according to the World Bank’s CPIA and remains close to SSA averages. The implementation of
the National Health Development Plan (PNDS) (2018-2022) is under review, but there is a lack of up-to-date
data to provide a thorough evaluation of its performance. In the meantime, there is an urgency to strengthen
national and local capacities for service delivery, improve access and quality of primary health care, combat
prohibitive prices (particularly for medicines) that result in high out-of-pocket spending for patients, and address
weaknesses in resource management. In education policy, Congo has made progress, including implementing
the first phase of the revised education strategy (2021-2030), having developed an education information system
and the improved institutional capacity to collect, analyze and use data. However, the government’s capacity
to evaluate learning outcomes and to use evaluation findings to inform policy decisions remains weak. Finally,
social assistance has remained dependent on external financing, notably through the Lisungi Social Safety Net
project that was of the main instrument for the government’s emergency assistance to poor and vulnerable
households during the pandemic-related crisis. However, overall, coverage of social protection remains limited
in reach and effectiveness, and the Ministry of Social Affairs and Humanitarian Action needs additional human
and financial resources, as well as stronger institutional capacity for effective policy implementation.
Stagnation in public sector management, despite some recent progress in
transparency and control of corruption, leaves much to be done
Despite some recent progress, Congo’s performance in public sector management needs improvement.
Congo’s score in the CPIA cluster “public sector management and institutions” has remained unchanged in
the last 15 years. This performance results from insufficient enforcement of the rule of law, low government
efficiency in spending and revenue collection (see section 1.2.1), as well as low transparency in the public sector.
For instance, Congo ranks among the worst countries worldwide in terms of corruption control, 45 and the
country also ranks low in the resource governance index (a rank of 39 out of 100 in 2017).46 Notwithstanding,
some progress in transparency and control of corruption has been achieved, including through the publication
of Extractive Industries Transparency Initiative (EITI) reports and the creation of the High Authority for the Fight
Against Corruption in 2018. In 2019 Congo adopted a law that institutionalizes the monitoring and evaluation of
public policy, which is a welcome step in improving public sector management. However, this law has not been
implemented to date, as the relevant institutional arrangements and regulations are still pending. Also, a new
anti-corruption law was passed in Parliament in February and ratified in March 2022. The accompanying decree
on conflicts of interest rules and procedures is being developed.
Improving institutions in Congo would support the capacity of the government to transform natural
resources into physical and human capital assets, as have some of Congo’s aspirational peer countries.
Strengthening the country’s quality of institutions would be essential to better manage resource rents, including
better mobilizing oil revenues, and ensure macroeconomic and fiscal stability and resilience to shocks. Better
institutions and policies would allow Congo to be more effective in public service delivery (e.g., through better
public investment and social spending efficiency), improve human capital outcomes (through improved health
and education of its labor force), and provide an enabling environment for private sector development. Other
countries have achieved these goals: for instance, Botswana’s long-term success in extracting resource rents
and channeling them to productive activities can be attributed to key institutions. These include a democratic
government since independence in 1966, long-term economic planning and fiscal discipline (e.g., mineral
revenues can be spent only for capital projects included in the national development plan, and on education,
45
Worldwide Governance Indicators, 2021 update.
46
The Resource Governance Index assesses how resource-rich countries govern their oil, gas and mineral wealth using 54 indicators grouped into three dimensions:
value realization, revenue management and enabling environment. https://resourcegovernanceindex.org/country-profiles/COG/oil-gas?years=2017
48 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 1 Balancing Assets to Boost Long-Term Growth
training, and health), regulation and management of the mining sector, strong anticorruption institutions, and
a sovereign savings fund for future generations financed through mineral revenues. Botswana’s experience
provides key lessons for Congo as it aims to diversify its development and boost long-term growth.
FIGURE 14
The end of the oil boom led to plummeting capital spending, sustained current spending
(except for maintenance), and soaring public debt
a. Congo: Growth of public expenditures (% Growth Rate) b. Congo: Evolution of public spending (% of GDP)
30 40
25
35
20
30
15
10 25
5 20
0 15
-5
10
-10
5
-15
-20 0
Boom After the Boom
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
(2009-2014) (2015-2020)
Public expenditures (% of GDP) Capital Expenditures
Public expenditures (CFAF Billion) Interest Payments
Current Expenditures (excluding interests)
c. Congo: Allocation and execution of maintenance expenditures d. Congo: Evolution and composition of public debt
18 0.20 120
16 0.18
100
14 0.16
0.14
Billions of CFAF
12 80
% of GDP
0.12
10
0.10 60
8
0.08
6 40
0.06
4 0.04
20
2 0.02
0 0.00 0
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Allocation Execution Execution (in % of GDP) (rhs) External public debt Domestic public debt
Source: Congolese authorities and World Bank staff calculations. June 2022.
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 49
50 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
© Erwan Morand/World Bank
CHAPTER 2
Labor
Productivity
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 51
CHAPTER 2 Labor Productivity
2.1 Productivity growth is the key driver of
sustainable income growth and poverty
reduction
Increasing productivity is crucial for meeting the objectives of the Republic of Congo’s National
Development Plan 2022-26, including diversification and sustained growth. Labor productivity measures
the level of output per worker. It is a principal driver of economic growth, accounting for more than half of the
differences in GDP per capita across countries47 and poverty reduction. Firms with higher labor productivity
tend to grow faster and be more resilient (as evidenced during the COVID-19 crisis48) while industries with
less productive firms will be uncompetitive and fail to expand. In this context, it is especially important to
consider productivity at the firm level, which is the most fundamental level where production occurs. Removing
constraints to productivity, especially at the firm level, presents an important opportunity to reach the
government’s development plan goals of diversification away from oil and towards higher growth, particularly
in the non-oil economy.
Although productivity growth has multiple drivers, given limited data for firms in Congo, the focus of
this labor productivity analysis will be on the misallocation of labor between firms. Productivity growth
has three fundamental drivers. The first is productivity improvements within existing firms. This component
is most closely related to firm capabilities, including innovation, technology adoption, and good managerial
and business practices, as well as skills. The second driver is the reallocation of production factors, i.e., labor
and capital, between firms, shifting from less productive to more productive firms. Incentives such as higher
wages at more productive firms typically drive reallocation. Lastly, the dynamic component captures the overall
productivity growth when the least productive firms exit, while new firms that are more productive than average
enter. Due to data limitations, the analysis here will focus on misallocation, i.e., the between component, with a
brief discussion of the dynamic one. Note that Chapter 4 on electricity and digital technologies will offer some
insights into the within component.
This chapter analyzes firm-level labor productivity for the first time in Congo, with a focus on the non-
extractive sector. Microeconomic studies of firm level productivity in Congo have been lacking 49. Hence,
this study will be the first to investigate the country’s micro-foundations of productivity growth, subject to © Erwan Morand/World Bank
47
Cusolito and Maloney, 2018.
48
The global evidence shows that more productive firms were less likely to close during COVID-19 and more productive firms are recovering faster. This is because
more productive firms are, by definition, more efficient and can therefore absorb more shocks. Further, the evidence shows that they can adjust faster. Muzi et al.,
2021; Cirera et al. 2021.
49
World Bank, 2018.
52 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 2 Labor Productivity
data limitations (Box 5). Wherever possible, the analysis will focus on the non-extractive sector, given the
need for Congo’s economy to diversify away from oil. First, the analysis will discuss the overall recent trends
in productivity compared to other countries. Second, using firm level data for 2019 and 2020, it will analyze
productivity along different firm characteristics and identify where the main productivity gaps lie. Then, it will
aim to explain which factors serve as drags on productivity growth, focusing on misallocation, and assess the
potential productivity gains from reducing misallocation. Lastly, the chapter ends with policy considerations
that can boost productivity.
BOX 5
Productivity Data and Measures for the Republic of
Congo
The productivity analysis of this chapter relies on two main data sources. For the cross-country
comparisons, it uses data from the World Bank’s World Development Indicators (WDI), which is not
disaggregated by extractive and non-extractive industries. The subsequent analysis for Congo uses
firm-level data from the 2020 General Census of Firms by the Institute for Statistics (Institut National
de la Statistique, INS). The census contains information on sales, employment, wages, intermediate
consumption, value added, and firm demographics for 2019 and 2020, covering 75,118 firms. Firm-
level data for other years is not available. In the firm-level analysis, we consider all census firms, but
largely exclude extractives firms where possible in order to focus on the non-extractive economy.
Private sector employment in Congo is dominated by micro, small, and medium enterprises,
which provides an important context for the results. According to the firm census, 98 percent
of the 75,118 identified active firms in 2020 in Congo were micro or small. Brazzaville and Pointe-
Noire account for about 75 percent of firms, according to census. Further, about 94 percent firms
are counted as informal. Lastly, micro, small, and medium enterprises accounted for 83 percent of
persons engaged in businesses (informal and formal) and for 35 percent of global turnover in 2019.
Due to data constraints, labor productivity is used instead of total factor productivity. Total
factor productivity is generally measured as the residual component (or explainer) of output, after
accounting for inputs such as capital and labor. However, data on capital is unavailable for Congo
so total factor productivity cannot be estimated. Hence, the analysis must rely on labor productivity
measures. A caveat of doing so is that labor productivity does not capture the effects of capital
inputs. It, therefore, overstates the productivity of capital-intensive sectors such as extractives and
utilities.
This chapter uses two measures of labor productivity, with a focus on value added per worker.
There are two possible measures of labor productivity, (i) value added per worker and (ii) sales
per worker. Using value added removes intermediate inputs and can, therefore, be a more precise
measurement of productivity than using sales. This is because a firm’s sales confound the effect of
inputs and materials with its productivity. Furthermore, value added per worker may be less directly
affected by temporary sales reductions, e.g., due to COVID-19. Hence, value added per worker is
used as the main productivity measure. However, value added per worker could have also been
affected by the pandemic. Hence, where possible, results using sales per worker are also reported,
as a robustness check to further corroborate the results. To construct these measures, value added
and sales by are divided by the number of employees, all of which come directly from the 2020
enterprise census.
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 53
CHAPTER 2 Labor Productivity
2.2 Inadequate productivity in the Republic
of Congo
2.2.1 Cross-country analysis reveals a severe productivity
problem in the Republic of Congo
Congo faces low and declining labor productivity when
compared to peers, thereby limiting economic growth and An average worker
preventing catch-up with other economies. Figure 15-a shows labor
in Congo needs
productivity in 2019 and its average growth during 2016-19 measured
as value added per worker for Congo and peer countries. Congo has to work 2.6 times
a concerning combination of very low labor productivity and highly longer to produce
negative labor productivity growth rates. Only one peer, Angola,
the same output as
has a lower growth rate of labor productivity over this period, but it
registered almost double the productivity level, while peers with lower one in aspirational
levels all have higher growth rates. Hence, the country is backsliding, peer countries.
and the productivity frontier is becoming more distant.
An average worker in Congo needs to work 2.6 times longer to produce the same output as one in
aspirational peer countries and 2.2 times as long compared to structural peers. In 2019, Congo’s overall
labor productivity, measured as value-added per worker, was only US$4,500 (constant 2015), compared to an
average of US$11,800 among aspirational peers and US$10,000 among structural peers (Figure 15-b). Average
labor productivity is also higher among LMIs at US$6,000 and regional peers at US$6,200. The only comparison
group with lower labor productivity is the group of SSA countries (at US$4,300).
FIGURE 15
Labor productivity levels are low and decreasing
a. Value added per worker 2019 and average growth, 2016-2019 b. Value added per worker by sector, 2019
Vietnam 25
Value Added per Worker Growth 2016-2019
5
Ghana 20
Malaysia
Lower middle income
Indonesia
Timor-Leste
Azerbaijan 15
Cameroon
0 Mauritania
Sub-Saharan Africa Iraq 10
Nigeria
5
Congo
-5
Angola
0
5 10 15 20 25 Aspirational Congo LMIC Regional SSA Structural
Overall VA per Worker 2019 Agriculture Industry Services Overall
Source: Staff calculations based on WDI (2022). Value added expressed as thousands of 2015 constant US$. Regional peers are Angola, Cameroon, Ghana, Nigeria.
Structural peers are Azerbaijan, Iraq, Mauritania, Timor-Leste. Aspirational peers are Indonesia, Malaysia, Vietnam. Growth is in real terms. LMIC is lower-middle
income countries. June 2022.
54 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 2 Labor Productivity
Across sectors, labor productivity levels in Congo generally lag its peers, even in the sector which is
Congo’s most productive. The level of productivity in Congo’s industrial sector, including oil, is more than
double that of services and almost nine times as much as agriculture (Figure 15-b). 50 However, the industrial
sector’s productivity still underperforms compared to all peers, except lower-middle income countries. Further,
productivity levels in agriculture and services are the lowest across all comparison groups.
Recent labor productivity growth is strongly negative and much lower than peers across all broad
sectors. Average labor productivity growth during 2016-19 in Congo has been strongly negative (Figure 16-a).
While regional and SSA peers have also experienced negative productivity growth in this period, their average
was around -0.8 percent, almost seven times less than the average -5.5 percent in Congo. All other peer groups
saw positive average growth. This is especially concerning given Congo’s low level of productivity. The negative
growth was strongest in services, reaching -9.0 percent, compared to -2.6 in the industrial sector. However,
agriculture saw slight positive growth of 0.7 percent, which was below that of all peer groups, except for the
regional peer average of 0.6.
Labor productivity growth has been volatile and increasingly negative, mirroring volatile and declining
GDP growth. Figure 16-b shows the trend of three-year average labor productivity growth rates in Congo. 51 As
can be seen, productivity growth began falling in 2014 and progressively trended downward until 2019, when
it made a slight recovery. Between 2015-2019, the three-year growth rate has been consistently negative, 52
creating downward pressure on GDP growth. Furthermore, productivity growth has been volatile, which can
induce volatility in GDP. 53 Lastly, since 2015, the productivity growth rates in industry and services have both
been negative and no longer moving in opposite directions, thereby exacerbating the volatility and decline of
overall productivity, as they no longer cancel each other out.
FIGURE 16
Labor productivity growth is weak and declining across sectors and over time compared to
peers
a. Value added per worker growth, 2019, three-year average b. Value added per worker growth, three-year averages, 1994-2019
6 10
4 7
2 4
0
1
-2
-2
-4
-5
-6
-8
-8
-11
-10
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
Aspirational Congo LMIC Regional SSA Structural
Agriculture Industry Services Overall Agriculture Industry Services Overall
Source: Staff calculations based on WDI (2022). Regional peers are Angola, Cameroon, Ghana, Nigeria. Structural peers are Azerbaijan, Iraq, Mauritania, Timor-
Leste. Aspirational peers are Indonesia, Malaysia, Vietnam. Growth is in real terms. June 2022.
50
The subnational analysis using firm census data suggests that the high labor productivity of industry is especially driven by extractives, but also utilities and
construction.
51
Here, three-year averages help to smooth out temporary shocks or business cycle effects, in order to examine structural trends.
52
Note that the three-year average for 2015 is based on year-on-year growth rates from 2013-2015. Among these, the 2013 year-on-year average was also negative
at -2.0 percent, while the 2014 rate was positive at 3.7 percent. Since 2015, the year-on-year growth rates have been negative in each year.
53
High GDP volatility is concerning because it can reduce overall growth and investment while increasing the likelihood of a crisis (Perry, 2009).
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 55
CHAPTER 2 Labor Productivity
2.2.2 Sub-national analysis reveals significant variation in
productivity
Regional disparities in labor productivity, excluding extractives, are very large. Figure 17-a shows two
measures of labor productivity—value added and sales per worker—across regions in 2020. Given the need
for Congo’s economy to diversify away from oil and raise productivity elsewhere, the estimates exclude the
extractives sector. Both labor productivity measures show similar results. As expected, the most developed
regions of Brazzaville, Pointe-Noire and Cuvette have the highest productivity levels, with Cuvette in first place
at CFAF 4.7 million of value added per worker. This is almost four times higher than the least productive regions
(Likouala with CFAF 1.1 million of value added per worker and Pool with CFAF 1.3 million).
Labor productivity growth from 2019 to 2020, excluding extractives, has been negative in all regions
and has partially exacerbated regional disparities. As shown in Figure 17-b, according to both measures,
labor productivity has declined across all regions even when excluding extractives. Brazzaville’s value added
per worker contracted the least, at a rate of 15.5 percent. However, regions with lower productivity levels
experienced stronger contractions, reaching as much as 30.3 percent for sales and 33.7 percent for value added
per worker in Kouilou. As a result, some regional disparities in productivity levels have increased. At least part
of this trend is likely attributable to COVID-19. However, lack of data does not allow the pandemic effects to be
disentangled from broader structural trends, and earlier firm-level data is not available. 54
FIGURE 17
Productivity and productivity growth vary substantially across regions
a. Labor productivity (millions of current CFAF per year), 2020 b. Real labor productivity growth (millions of current CFAF per
year), 2019-2020
Cuvette Brazzaville
Brazzaville Cuvette-Ouest
Pointe-Noire Cuvette
Bouenza Sangha
Kouilou Likouala
Niari Pointe-Noire
Plateaux Pool
Lékoumou Lékoumou
Sangha Niari
Cuvette-Ouest Bouenza
Pool Plateaux
Likouala Kouilou
0 2 4 6 -40 -20 0
Value Added per Worker Sales per Worker Value Added per Worker Growth Sales per Worker Growth
Source: Staff calculations based on the 2020 firm census data from INS (2022). Labor productivity measures are expressed as millions of current CFAF per year.
Growth is in real terms. Estimates exclude the extractives sector. June 2022.
There is significant variation in labor productivity across sub-sectors. The extractives sub-sector has the
highest value added per worker at CFAF 20.8 million. Beyond extractives, labor productivity is highest in the
financial sector and utilities55 (Figure 18-a). Among other service sub-sectors, transportation and ICT have the
highest productivity, with a value added per worker of CFAF 7.1 million and 4.4 million respectively, while the
lowest productivity is in the education sector. A particular cause for concern is the very low productivity of
manufacturing, with value added per worker of just CFAF 1.55 million. Hence, the relatively high productivity
54
The same reasoning will hold for subsequent analysis when it comes to discuss productivity growth from 2019 to 2020.
55
Utilities are defined as the production and distribution of electricity and gas.
56 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 2 Labor Productivity
of the industrial sector overall (Figure 15-b) is driven by extractives, utilities, and construction. However, an
important caveat is that labor productivity severely overestimates total factor productivity for extractives and
utilities because these sectors are much more capital intensive.
Labor productivity growth between 2019-2020 exhibits considerable variability and has been negative
across all subsectors. Labor productivity growth, measured by value added per worker, ranged from -3.6
percent in the education sector to -36.2 percent in utilities (Figure 18-b). Using sales per worker also shows
a similar pattern, with a notably higher decline in extractives, most likely related to the fall in oil prices. Some
higher value-added sectors, such as ICT, transport, and construction, were relatively more resilient, with smaller
productivity contractions.
FIGURE 18
Productivity and productivity growth vary across subsectors
a. Labor productivity (millions of current CFAF per year), 2020 b. Real labor productivity growth (millions of current CFAF per
year), 2019-2020
Extractives Education
Finance & insurance Construction
Utilities Health
Transport & storage ICT
Construction Agriculture
ICT Transport & storage
Scienti c & technical Scienti c & technical
Agriculture Art, sport & recreation
Trade Manufacturing
Of ce & support Extractives
Real estate Finance & insurance
Accommodation & food Other services
Art, sport & recreation Accommodation & food
Sanitation Of ce & support
Health Trade
Manufacturing Real estate
Other services Sanitation
Education Utilities
0 10 20 30 -50 -40 -30 -20 -10 0
Value Added per Worker Sales per Worker Value Added per Worker Growth Sales per Worker Growth
Source: Staff calculations based on the 2020 firm census data from INS (2022). Labor productivity measures expressed as millions of current CFAF per year. Growth
is in real terms. June 2022.
Larger, formal, foreign, and older firms have higher labor productivity, encouragingly in line with
expected patterns. Figure 19-a shows that productivity is steadily increasing with firm size when excluding
extractives. Hence, on average, more productive firms seem able to grow, as would be expected in a well-
functioning market. Similarly, formal firms are much more productive than informal ones, as is the case for
most countries. This implies that highly productive firms may be partially self-selecting into formality in Congo,
due to the benefits of formality. 56 Further, foreign firms operating in the country outside of extractives are
more productive than domestic ones, indicating a relatively successful attraction of productive foreign direct
investment, which may have positive spillover effects. Lastly, older firms are more productive than younger
ones, 57 which can be a sign of positive learning effects and functioning market forces, whereby more productive
firms are likelier to survive.
Labor productivity contractions in 2019-2020 have been broad-based, declining most in small, informal,
foreign, and older firms. Labor productivity strongly declined among all firm types. The growth in value added
per worker among small firms was -32.3 percent, compared to -18.0 percent in micro, -24.4 percent in medium,
and -11.2 percent in large firms, excluding extractives (Figure 19-b). Further, more productive firms, such as older
and foreign ones, saw much stronger reductions in their labor productivity.
56
The benefits of formality for firms include easier access to finance, access to new (export) markets, certain legal protections, and enhanced government support,
while the costs can stem from entry fees, taxes, regulation, and reduced flexibility. LaPorta and Shleifer, 2014.
57
Young firms are five years old or less.
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 57
CHAPTER 2 Labor Productivity
FIGURE 19
Productivity and productivity growth differ by firm characteristics
a. Labor productivity (millions of current CFAF per year), 2020 b. Real labor productivity growth (millions of current CFAF per
year), 2019-2020
50
Domestic
Medium
Informal
Foreign
Formal
Young
Micro
Large
Small
Old
40
0
30
-10
20
-20
10
-30
0
Micro
Small
Medium
Large
Formal
Informal
Domestic
Foreign
Old
Young
-40
Value Added per Worker Sales per Worker Value Added per Worker Growth Sales per Worker Growth
Source: Staff calculations based on the 2020 firm census data from INS (2022). Labor productivity measures are expressed as millions of current CFAF per year.
Growth is in real terms. Estimates exclude the extractives sector. Young firms are aged 5 years or less. June 2022.
The recent decline in labor productivity may be partially related
to COVID-19 but likely mostly continues the longer structural
trend of negative growth. The multitude of shocks resulting from The diffusion of
the pandemic can have negative effects on productivity in general. 58 digital technology
Further, the measurement of labor productivity in 2020 may partially
capture short-term effects, as business activity ceased while firms still
and product
held onto workers. In particular, due to the rapid pandemic-induced innovation
sales reductions, sales per worker may overstate contractions in accelerated during
underlying labor productivity. Nevertheless, COVID-19 may affect
value added per worker slightly less through the reduced sales channel,
the pandemic, which
which indeed shows smaller but sizable reductions. 59 However, while will have positive
possible, it is unlikely that the productivity decline in 2019-2020 is productivity effects.
entirely due to COVID-19, given the consistently negative growth rates
since 2015 (Figure 16-b).
Global evidence suggests that the COVID-19 pandemic may have some positive effects on longer-
term productivity. Global evidence shows that the diffusion of digital technology and product innovation
accelerated during the pandemic, which will have positive productivity effects. 60 While data for Congo is
not available, it is likely to have experienced similar developments, as these trends are consistent among the
51 surveyed countries and across all income groups. Further, less productive firms were more likely to close
permanently during the crisis. 61 This, in turn, should increase aggregate productivity, as resources are freed
up for more productive firms. Again, such data for Congo is unavailable, but similar effects are likely given the
robust and broad global evidence.
58
Apedo-Amah, et. al. (2020).
59
World Bank (2021b) shows that sales did fall due to the pandemic in Congo. However, the added value for each remaining sale would not be affected. Further,
growth was still negative even when excluding firms that had no value added, for example, because no sales could be made. However, value-added per worker
could be affected by COVID-19 through other channels.
60
Cirera, et. al. (2021).
61
As Muzi, et. al. (2021) found across 31 economies.
58 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 2 Labor Productivity
2.3 Misallocation drags down Congolese
productivity
The efficient allocation of resources across firms is crucial for productivity growth. Productivity can
improve if the factors of production, particularly labor and capital, move from less to more efficient firms (which
is known as between-firm productivity growth). Hence, even if the productivity of each individual firm remains
the same, aggregate productivity can increase if the most productive firms grow more than the less productive
ones. Failure of more productive firms to grow can be a sign that resources are being misallocated and that
there are barriers to the growth of more productive firms.
Although more productive firms pay higher wages in Congo, they tend to employ fewer people on
average, thereby indicating a misallocation of labor, especially in services. Figure 20 shows average
firm employment and wages by labor productivity quintiles (excluding extractives) for the overall economy,
industry, and services. 62 As productivity increases, mean and median wages steadily increase as well. This
pattern illustrates why productivity growth is crucial for creating better jobs in Congo. However, the least
productive firms employ the most people, with average firm employment steadily decreasing in higher
productivity groups.63 Hence, there is a misallocation of labor, because most workers should ideally be allocated
to more productive firms. Therefore, aggregate productivity could be strongly increased by moving workers to
more productive firms, where they could create more value. This overall trend is particularly strong in services.
In the industrial sector, average employment is also decreasing in productivity between the first and fourth
quintile. However, there, the most productive firms are the largest, followed by the least productive ones.
FIGURE 20
More productive firms pay higher wages but employ fewer people on average
Average employment and wages by labor productivity quintile
4 200
3 150
Employment
Wages
2 100
1 50
0 0
1 2 3 4 5 1 2 3 4 5 1 2 3 4 5
Overall (excluding extractives) Industry (excluding extractives) Services
Firm Labor Productivity Quintiles, 1-5
Employment Average Wage Median Wage
Note: Labor productivity measured as value added per worker. Wages expressed as 10,000 of current CFAF per year. Estimates exclude the extractives sector. The
same pattern is observed when considering only formal firms with relatively higher employment sizes.
Source: Staff calculations based on the 2020 firm census data from INS (2022). June 2022.
Here and for the remainder of this analysis, labor productivity is measured as value added per worker because it is subject to less bias.
62
Total employment follows a similar trend. However, as shown in Figure 24, the unconditional correlation of employment and productivity is slightly positive.
63
Nevertheless, that way of cutting the data also points to misallocation.
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 59
CHAPTER 2 Labor Productivity
Employment growth is not always in the most productive sectors or in those with the highest productivity
growth, thereby dragging down aggregate productivity through the misallocation of labor. The sectors
with the most employment growth between 2019-2020 have mainly been those with lower productivity (Figure
21).64 This implies that labor has been flowing to less productive sectors, thereby exacerbating misallocation and
reducing aggregate productivity. A further concern about this trend is that since more productive firms tend to
pay higher wages, these labor movements will tend to depress wages. Similarly, there is a negative relationship
between employment growth and productivity growth (Figure 22). While these relationships can often be
FIGURE 21
Employment has not grown in high productivity sectors, dragging down aggregate productivity
Employment growth and labor productivity levels by subsector, 2019-2020
Finance & insurance
Labor productivity average, 2019-2020
11.5
Transport & storage 9.5
Construction
7.5
Scienti c & technical
Trade
ICT 5.5 Real estate
Agriculture Art, sport & recreation
Of ce & support Accommodation & food 3.5
Manufacturing Health
Education 1.5 Sanitation
Other services
-0.5
-6 -5 -4 -3 -2 -1 0 1 2 3
Employment growth, 2019-2020
Note: The size of the bubble represents employment in that subsector. Labor productivity measured as value added per worker, expressed as millions of current
CFAF per year. Estimates exclude the extractives sector.
Source: Staff calculations based on the 2020 firm census data from INS (2022). June 2022.
FIGURE 22
Productivity is not growing in sectors with employment growth and vice-versa
Employment growth and productivity growth by subsector, 2019-2020
3.0
Labor productivity growth, 2019-2020
-6 -5 -4 -3 -2 -1 0 1 2 3
Education
Construction -8.0
Health Agriculture
Transport & storage ICT
Art, sport & recreation
Manufacturing
Scienti c & technical -19.0
Finance & insurance
Trade
Of ce & support Accommodation & food
Other services Real estate
Sanitation
-30.0
Employment growth, 2019-2020
Note: The size of the bubble represents employment in that subsector. Labor productivity measured as value added per worker. Growth is in real terms. Estimates
exclude the extractives sector.
Source: Staff calculations based on the 2020 firm census data from INS (2022). June 2022.
64
In the figure, the size of the bubble represents employment in that subsector.
60 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 2 Labor Productivity
ambiguous in limited datasets,65 in an ideal case, more productive sectors should grow their employment more
than others, thereby increasing aggregate productivity and the share of better (higher wage) jobs. These results
in Congo are an indication of misallocation because, over time, more workers should be allocated to sectors
where they can work more productively. In that case, a strong positive relationship between employment and
productivity should be observed. Instead, in Congo, findings suggest a negative relationship.
Within sectors, there is considerable labor productivity dispersion, even when controlling for regional
differences, further corroborating high levels of misallocation. Figure 23 shows the ratio of labor productivity
between firms in the 80th and 20th percentile in 2020, with and without controlling for region. The 80-20 ratios
range from 7 to 34, implying huge differences in firm productivity within each industry. In advanced economies
like the United States of America (USA), top firms are only twice as productive as those in the bottom percentiles.
By contrast in Congo, firms with vastly different productivity levels co-exist within the same sector and even
the same region. Part of this dispersion can be explained by factors such as firm capabilities and markups. 66
However, the presence of both productive and unproductive firms can signal misallocation, as less productive
firms take up resources from more productive ones and should have been outcompeted. The magnitude of
dispersion indicates large potential gains from moving factors, particularly labor, to more productive firms. The
sectors with the most of this misallocation are finance and real estate, while education has the least.
FIGURE 23
The high degree of productivity dispersion implies that misallocation is an issue, especially in
certain services, such as the financial sector
Dispersion in rm labor productivity, ratio between 80th and 20th percentile, 2020
40
35
30
25
20
15
10
5
0
Accom. & food
Agriculture
Art, sport & recreation
Construction
Education
Finance & insurance
Health
ICT
Manufacturing
Of ce & support
Other services
Real estate
Sanitation
Scienti c & technical
Trade
Transport & storage
Utilities
Baseline Controlling for Region
Note: Labor productivity measured as value added per worker. Estimates exclude the extractives sector.
Source: Staff calculations based on the 2020 firm census data from INS (2022). June 2022.
State-owned enterprises (SOEs) tend to drag down aggregate productivity while employing more people
and providing higher wages, which exacerbates misallocation. Productivity is assessed by size group
between SOEs and private firms. Across all size groups, SOEs are less productive than privately owned firms.67
The difference is particularly notable among large firms, where SOEs had an average value added per worker
30 percent lower than that of private firms in 2020.68 Furthermore, labor hoarding by SOEs is one common
driver of low aggregate productivity. A typical medium-size SOE’s number of employees is more than double
65
The relationship can be negative when productivity rises because jobs have been cut, e.g., by shedding superfluous workers or switching to technologies that
require less labor; or it can be positive when more productive firms expand.
66
Cusolito and Maloney (2018).
67
SOEs here are defined as firms with over 50 percent public national participation in the capital of the company. Similar results emerge with other common
definitions, such as 20 percent or more public participation.
68
The same patterns of labor productivity and employment emerge in 2019 data.
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 61
CHAPTER 2 Labor Productivity
that of a private medium-size firm. Meanwhile the level of employment in a large SOE is on average about 20
percent higher than in a large private firm. SOEs also pay higher wages. The average wage in a medium-size
SOE is double the wage in a medium-size private firm while large SOE wages are about 15 percent higher than
the wage for a large private firm.
Since factor allocation contributes very little to labor productivity levels, Congo could attain large
potential gains from reducing misallocation, particularly in services. A static productivity decomposition
in levels, excluding extractives, provides further insights into misallocation. 69 This shows a very low contribution
of factor allocation (i.e., the between-firm component of productivity), accounting for four percent of the
overall labor productivity level, while the rest comes from the within component (Figure 24-a). This implies that
firm size and productivity are very weakly correlated. With low misallocation, the correlation should be high,
as the more productive firms should receive more resources (e.g., labor) and grow in size. With a correlation
of zero (i.e., a completely random allocation), Congo’s productivity would be four percent lower (Figure 24-
b). As a result, the country can make large productivity gains by reducing misallocation. The results imply
that reducing distortions to the level of the USA would increase aggregate labor productivity by 95 percent.70
Further, misallocation is larger in services. An allocation similar to the USA would increase productivity by 207
percent in services, vs. 65 percent in industry.
FIGURE 24
Improving the allocation of resources could greatly increase productivity levels
a. Factor allocation contribution to labor productivity, %, static b. Labor productivity under different factor allocations
Olley-Pakes decomposition
60 250
50
200
40
30 150
20
100
10
0
50
US ('93-'01)
Colombia ('12)
Netherlands ('93-'01)
Germany ('93-'01)
France ('93-'01)
Mexico ('12)
Hungary ('93-'01)
UK ('93-'01)
Slovenia ('93-'01)
Congo ('19-'20)
0
Total Industry Services
(excl. extractives) (excl. extractives)
Current Random Allocation US Allocation
Source: Staff calculations based on 2020 firm census data from INS (2022). Labor productivity measured as value added per worker. Estimates exclude the
extractives sector. Data for comparator countries comes from Trang and Iacovone (2015). June 2022.
However, older firms tend to be consistently larger and more productive, indicating a relative efficiency
of exits and dynamic market forces over time, as well as positive learning effects. Figure 25 shows the
average firm employment and productivity by age cohort, excluding extractives. As can be seen, firms that
have survived for a longer time are larger, meaning they were able to grow in terms of employment compared
to younger firms. Further, productivity is increasing with age. Hence, less productive firms have not been able
to survive very long on average, in contrast to more productive ones. Similarly, these results may indicate that
firms are able and incentivized to learn and increase their productivity over time. Hence, some overall market
forces, including entry and exit dynamics, appear to be working in general. Interestingly, this relationship
appears stronger in services than in industry (excluding extractives).
Following Olley and Pakes (1996) and Trang and Lacovone (2015).
69
In other words, increasing the between component contribution of productivity to the United States level. Similar data for peer countries is not available so the
70
United States, which is a frontier economy, is used for comparison.
62 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 2 Labor Productivity
FIGURE 25
Older firms are larger and more productive, implying some efficiency of dynamic market
forces, including exits
a. Employment by rm age, 2020 b. Labor productivity by rm age, 2020
5 500
Average Value Added per Worker
4 400
Average Employment
3 300
2 200
1 100
0 10 20 30 0 10 20 30 40
Age Age
Industry Services Industry Services
Note: Labor productivity measured as value added per worker, expressed as 10,000 current CFAF per year. Estimates exclude extractives sector.
Source: Staff calculations based on 2020 firm census data from INS (2022). June 2022.
© Erwan Morand/World Bank
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 63
CHAPTER 2 Labor Productivity
2.4 Policy implications
To raise productivity, policies should provide incentives to firms to upgrade their capabilities, allow
productive firms to grow, and remove constraints on entry and exit. Productivity can grow by firms becoming
more capable (within-firm productivity growth); by more resources being allocated to more productive firms
(reducing misallocation, which results in between-firm productivity growth); and by productive entry and exit
(dynamic growth). Box 6 summarizes the main policy directions that would directly promote each of these
channels. However, most policies are not exclusively associated with one component. For example, reforming
business regulations can facilitate both the entry of new firms (dynamic) and the growth of previously restricted
ones (between). Similarly, increasing competition can enable between-firm growth, while also providing
incentives to firms to upgrade their capabilities (within). Lastly, other aspects of the business environment such
as access to electricity affects all channels.
BOX 6
Sources of Productivity Growth and Enabling Policy
Within-firm Between-firm Dynamic
Firms increasing their Allocating resources to Entry of productive and
capabilities more productive firms exit of unproductive firms
Capabilities to be targeted Misallocation of resources Entry of highly productive, fast-
are innovation, technology indicates barriers that prevent growing firms and exit of firms
adoption, workforce skills, as movement of capital, labor, and that are not growing.
well as good management and other factors of production to
business practices. the most productive firms in
the economy.
Policy Levers: Policy Levers: Policy Levers:
Improving education and Removing distortions in Same as within-firm and
technical skills; encouraging product markets (competition between-firm productivity
entrepreneurship, good policy); addressing frictions in levers, but with emphasis on
management, technology land, capital, and labor markets; dismantling barriers to entry
adoption (digital), and improving the business and exit of domestic and foreign
innovation; reducing environment (incl. access to firms (e.g., licensing, asset
administrative burdens; electricity); increasing access to recovery)
improving the business finance; and opening markets
environment (including access to trade and investment.
to electricity); and increasing
access to finance.
Note: Adapted from Davies (2019).
The analytic results in this chapter indicate that Congo should prioritize policies to reduce distortions that
cause misallocation (between firms), i.e., by enabling production factors to flow to the most productive
firms. In Congo, there is substantial evidence for misallocation as the main drag on aggregate labor productivity.
The results show that the least productive firms employ the most workers. Further, growing sectors are not
always the most productive ones or those with the highest productivity growth. Similarly, there is considerable
productivity dispersion within the same sectors, which signals strong misallocation. Lastly, the results indicate
that labor allocation only contributes four percent to the overall level of labor productivity. These results
together imply that resources, particularly labor, are not always flowing to the firms that can use them most
efficiently. One reason for this misallocation may be frictions in matching employees to employers, including
skill mismatches. Policies that remove distortions in input and output markets can, therefore, be expected
64 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 2 Labor Productivity
to push up productivity. As a result, overall labor productivity could increase by as much as 95 percent if
distortions were to be reduced towards the level of a frontier economy such as the US.
Policies to reduce misallocation should particularly focus on services, as they appear to be most affected.
All the results indicating misallocation appears stronger among services than in industry (excluding extractives).
Service sector productivity would more than double under an allocation as efficient as the USA, compared to a
65 percent increase in industry. Furthermore, services-led development may also be particularly advantageous
for the future and help to diversify the economy away from oil, especially given the low productivity levels in
manufacturing. However, further analytics would be required before embarking on this path.
There are several policy options to reduce misallocation, including increasing competition, opening
markets to trade and investment, and removing distortions in product markets and access to inputs.
Competition pushes firms to become more efficient and facilitates the reallocation of inputs toward more
productive firms, as less efficient ones are outcompeted.71 Potential competition reforms may include updating
the competition legal framework, supporting an independent competition authority, and leveling the playing
field for public and private actors (see Chapter 3). Similarly, opening markets to trade and investment can
increase competition, provide productivity enhancing inputs, and induce productivity spillovers (see Chapter 5).
To this end, policymakers can also attempt to strengthen foreign investment promotion and related strategies.
Furthermore, burdensome product market regulations should be revised, as they can serve as a barrier to
competition and efficient resource allocation. Lastly, other regulations may also inhibit access to input factors,
such as land, capital, and labor.
While the very limited evidence suggests that dynamic market forces
have been functioning to some extent in Congo, productivity can be
further improved through supporting efficient firm entry and exits. There
A crucial part
is some evidence that, on average, more productive Congolese firms are
likelier to survive and grow, which is encouraging. However, the limited data of the business
cannot rule out this dynamic productivity channel as important. To increase environment in
dynamic productivity, policymakers need to reduce barriers to entry and exit.
the Republic of
For example, simplifying regulations for licenses or permits and supporting
e-licensing would facilitate firms’ entry. Another avenue could be simplifying Congo is access
and supporting insolvency procedures. This would help inefficient firms exit, to electricity.
thereby freeing scarce resources for more productive uses and enabling
struggling entrepreneurs to liquidate and quickly get back into the economy.
Supporting firm capabilities, including through digital transformation, can increase productivity. While the
limited data do not allow for a thorough investigation of firm capabilities, the results of Figure 24 do indicate that
they are important, accounting for most of the aggregate labor productivity levels. Better capabilities, which
include technology adoption, innovation capacity, good managerial practices, and workforce skills, improve
productivity and, therefore, growth within a firm.72 Firm capabilities can be directly supported through targeted
training programs, business development services, technology transfer and extension services, incubators,
accelerators, and technology centers. Similarly, improving the business environment, supporting access to
finance, and increasing competition can enable and incentivize the proper investments in capabilities by firms.73
Lastly, digital transformation has an especially strong potential to improve productivity (see Chapter 4).
Overall improvements to the business environment, including access to electricity, would also help raise
productivity. The business environment affects all channels of productivity. First, it enables productivity-
enhancing investments and provides incentives to improve capabilities within firms. Furthermore, it supports
aggregate productivity growth between firms, by ensuring that more productive firms can enter and grow
faster, while less productive firms shrink and exit as they are outcompeted. A crucial part of the business
environment in Congo is access to electricity (Chapter 4).
71
Aghion and Griffith, (2005).
72
Better technology and innovation lead to a more efficient use of resources, successful new products improve sales, and more skilled employees can do better
work in higher value-added sectors. Lastly, good management acts as a technology which improves productivity. See Bloom, et. al. (2013).
73
A general overview of the available policy options and implementation guidance can be found in World Bank (2021a) for micro, small, and medium enterprises
and in Cirera, et. al. (2020b) for innovation.
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 65
66 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
© Valdhy Mbemba/unsplash.com
CHAPTER 3
Boosting
Productivity
through
Competition
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 67
CHAPTER 3 Boosting Productivity through Competition
3.1 Congo’s competitive environment lags
behind peers
Competition constitutes an essential driving force for boosting long-term productivity and private sector
development. Competition leads to more efficient markets by incentivizing companies to reduce their costs and
innovate. As a result, more efficient companies will increase their market shares, while lower-productivity firms
will tend to leave the market in the long run. Theoretical and empirical studies demonstrate that competition leads
to more efficient markets,74 increased innovation,75 productivity,76 and economic growth.77 Moreover, empirical
evidence shows that the degree of competition in the domestic market is a key determinant of international
competitiveness.78 Lack of competition in key inputs for domestic production—such as energy, transport or
telecommunication services—can artificially increase firms’ costs, constraining international competitiveness
and GDP growth.
According to perception-based indicators, domestic competition in Congo appears to lag behind its
regional, structural and aspirational peers. The Bertelsmann Transformation Index (BTI) assesses competition
in Congo to be perceived as less robust than in most countries of the region: Congo ranks 117th out of 137
countries on the Economic Transformation component of the overall index.79 Within that component, Congo’s
index for ‘organization of the market and competition’ (assessing the extent to which “there are clear rules for
stable, market-based competition”)80 is significantly below its peers (Figure 26-a). Among competition-related
sub-indices, Congo also compares unfavorably to its peers, lagging behind in terms of: (i) ‘market organization’
(assessing the extent to which an institutional framework ensures unrestricted participation in the market and a
level playing field for all market participants) (Figure 26-b); (ii) ‘competition policy’ (i.e., assessing competition
laws and the extent to which they are enforced) (Figure 26-c); (iii) ‘liberalization of foreign trade’ (i.e., assessing
the degree of openness of the economy to foreign trade) (Figure 26-d); and (iv) ‘private enterprise’ (i.e.,
assessing privatization processes and the extent to which private companies permitted and protected) (Figure
26-e). 81
Businesses also perceive risks related to cronyism, discrimination against foreign companies, and unfair
competitive practices to a greater extent than in comparator countries. According to the Economist
Intelligence Unit’s Risk Tracker, government regulations and interventions in markets that increase business
risks and harm competition can adversely affect the ability of firms to compete in markets. 82 Risks are perceived
to be significantly higher than in comparator countries except from retail price controls which, while remaining
a significant source of risk, are on par with regional peers (Figure 26-f). These perceived risks may be limiting
the development of the private sector in Congo.
Previous assessments by the World Bank appear to confirm the existence of business risks related to
regulation. In the World Bank’s CPIA, Congo scored 2.0 out of a possible 6 in Business Regulatory Environment,
with a 2 out of 6 in all three subcategories (regulations affecting entry, exit, and competition; regulations of
ongoing business operations; and regulations of factor markets). This CPIA score is lower than regional peers:
Cameroon (3.0), Ghana (3.5), Nigeria (3.5).
74
Competition Policy: Encouraging Thriving Markets for Development, Kitzmuller and Licetti (WBG) (2013).
75
Labour Market Institutions, Product Market Regulation, and Innovation, Bassanini and Ernst (OECD Working Paper) (2002); Trade Induced Technical Change? The
Impact of Chinese Imports on Innovation, IT and Productivity, Bloom, Draca, & Von Reenen (NBER Working Paper) (2011).
76
Competition and Innovation: An Inverted-U Relationship, Aghion & Griffith, Q. J. of Econ., V. 120, No. 2 (May 2005); Technology, Information, and the
Decentralization of the Firm, Acemoglu et al., Q. J. of Econ., Vol. 122, No. 4 (Nov. 2007).
77
Competition Policy and Productivity Growth: An Empirical Assessment, Buccirossi et al., Rev. of Econ. & Stat., Vol. 95 No. 4 (Oct. 2009); The Effects of Competition
Policy on Development – Cross-Country Evidence Using Four New Indicators, Voigt, J. of Development Studies, Vol. 45, No. 8 (2009).
78
Export Competitiveness: Why Domestic Market Competition Matters, Goodwin & Pierola (WBG) (2015).
79
The BTI assesses transformation toward democracy and a market economy as well as the quality of governance, organized around three components: political
transformation, governance, and economic transformation. The Bertelsmann Transformation Index 2022 Country Report, Congo, Rep., available at https://bti-
project.org/fileadmin/api/content/en/downloads/reports/country_report_2022_COG.pdf.
80
‘Organization of the market and competition’ is one of seven criteria for the Economic Transformation index. BTI 2022 Codebook for Country Assessments ,
available at https://bti-project.org/fileadmin/api/content/en/downloads/codebooks/BTI2022_Codebook.pdf.
81
BTI 2022 Codebook for Country Assessments .
82
Economist Intelligence Unit Risk Tracker scores are assigned by analysts on both qualitative and quantitative factors.
68 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 3 Boosting Productivity through Competition
FIGURE 26
Congo fares inadequately in competition related indicators
a. Organization of the Market & Competition, BTI 2022 b. Market Organization Sub-index, BTI 2022
10 10
8 8
1-10 Scale (10 best)
1-10 Scale (10 best)
6 6
4 4
2 2
0 0
Congo
Mauritania
Iraq
Nigeria
Azerbaijan
Angola
Cameroon
Timor-Leste
Vietnam
Ghana
Indonesia
Malaysia
Botswana
Congo
Mauritania
Angola
Azerbaijan
Cameroon
Iraq
Nigeria
Timor-Leste
Vietnam
Ghana
Indonesia
Botswana
Malaysia
c. Competition Policy Sub-index, BTI 2022 d. Liberalization of Foreign Trade Sub-index, BTI 2022
10 10
8 8
1-10 Scale (10 best)
1-10 Scale (10 best)
6 6
4 4
2 2
0 0
Congo
Mauritania
Timor-Leste
Iraq
Nigeria
Angola
Azerbaijan
Cameroon
Ghana
Indonesia
Vietnam
Botswana
Malaysia
Congo
Azerbaijan
Cameroon
Mauritania
Nigeria
Angola
Iraq
Ghana
Indonesia
Malaysia
Botswana
Vietnam
Timor-Leste
e. Private Enterprise Sub-index, BTI 2022 f. Business Risks Related to Weak Competition Policies, EIU 2022
10 4
8
3
1-10 Scale (10 best)
1-4 Scale (4 worst)
6
2
4
1
2
0 0
Vested Discrimination Unfair Price
Congo
Cameroon
Iraq
Angola
Azerbaijan
Mauritania
Nigeria
Vietnam
Indonesia
Ghana
Malaysia
Timor-Leste
Botswana
interests/ against competitive controls
cronyism foreign practices
companies
Congo Regional Peers Structural Peers Aspirational Peers
Note: The BTI and EIU are perception indicators. BTI 2022 covers the period from February 1, 2019, to January 31, 2021. Angola, Cameroon, Ghana, and Nigeria are
included as regional peers. Azerbaijan, Iraq, Mauritania, and Timor-Leste are structural peers. Botswana, Indonesia, Malaysia, and Vietnam are aspirational peers.
EIU scores are updated by analysts quarterly on both qualitative and quantitative factors—this data is from May 2022.
Source: Bertelsmann Transformation Index (BTI) 2022; Economist Intelligence Unit (EIU) Risk Tracker, May 2022.
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 69
CHAPTER 3 Boosting Productivity through Competition
As is true elsewhere, competition in Congo is affected both by government policy in setting the regulatory
environment and market rules and by direct market involvement through SOEs. Competition in Congo is
hindered by government behavior in three important ways. First, market distortions arise due to the state’s
participation in markets through SOEs (Section 3.2), including in markets where competition is viable and where
private-sector competitors are present. Second, markets are distorted by government price controls (Section
3.3); and last, Congo lacks a functioning economy-wide competition policy (Section 3.4).
3.2 Congolese SOEs benefit from an uneven
playing field
Despite past divestment efforts, the government of Congo retains a prominent role in the economy through
SOEs.83 In the 1990s, Congo undertook a major move toward government divestment in an economy dominated
by SOEs. 84 The Congolese state still controls the key public services of electricity, water, and transport. Overall,
the Congolese government has an ownership stake in 55 companies, of which the government has a majority
share in 34. 85 The ten largest SOEs are in the areas of energy, transport, banking, and healthcare, 86 but there
are also SOEs in mining, agro-industry, 87 residential housing, gambling and insurance. 88 While many of these
SOEs are present in network industries with natural-monopoly segments (e.g., electricity, water supply, and
railways), they also operate in contestable markets (markets where no underlying economic factor precludes
private-sector participation 89 such as power generation) and in competitive markets (such as banking, 90
insurance, 91 residential housing, 92 and gambling93). SOE presence in industries with inherent barriers to entry,
such as network effects, is not in of itself a problem and is common internationally, but where private-sector
competition is feasible, it is important to ensure that preferential treatment of SOEs does not discourage the
participation of the private sector. On the other hand, the presence of SOEs in contestable and competitive
market segments can crowd out efficient private sector operators and limit competition.
A “competitive neutrality” gap analysis suggests that Congolese SOEs do not consistently compete on an
even playing field relative to private-sector firms. Competitive neutrality refers to the consistent application
of the same laws and regulations to SOEs as private firms—a key characteristic of a level playing field. 94 Table
1 summarizes the “competitive neutrality” gap analysis for Congo at the firm-level and at the level of cross-
cutting regulatory frameworks and sectoral policies.
83
SOEs in Congo comprise the public portfolio ( portefeuille public ). Companies in which the state has a majority share are called public enterprises (entreprises
publiques ), and those in which the state has a minority share are called holdings (participations). SOEs are organized both under a 1981 law as Etablissements
Publics à Caractère Industriel et Commercial for wholly state-owned entities) and under OHADA law as Sociétés Anonymes . See Zoom sur les Entreprises du
Portefeuille public avec Madame Lydie Oboa Oworo, Directrice générale, (Jan. 19, 2017) available at https://www.finances.gouv.cg/fr/articles/zoom-sur-les-
entreprises-du-portefeuille-public-avec-madame-lydie-oboa-oworo-directrice; Law No. 13-81 (Mar. 14, 1981) (State Enterprise Charter).
84
Law 24-94 (Aug. 10, 1994) (introducing a framework for privatization); and Law 10-95 (Apr. 17, 1995) (identifying specific sectors to be privatized). In the past five
years, no Congolese SOEs have been created. 2022 SOE Checklist Survey for Congo.
85
2022 SOE Checklist Survey for Congo. In 2021, the top ten SOEs (listed in note 82 below) had a total turnover (CFAF 577,670 million) that amounted to 8.3 percent
of GDP (CFAF 6,944,920.92 million per World Bank estimate). For a list of SOEs that existed at the end of 2016, see Cartographie des Entreprises Publiques, Ministère
de l’économie, de l’industrie et du portefeuille publique (last updated Dec. 31, 2016), https://economie.gouv.cg/fr/cartographie-des-entreprises-publiques.
86
The ten largest SOEs in order of largest to smallest in terms of turnover are: Société Nationale des Pétroles du Congo (SNPC), Energie électrique du Congo
(E2C), Centrale électrique du Congo (CEC), Port autonome de Pointe-Noire, Congo Télécom, Banque postale du Congo, La Congolaise des Eaux, Chemin de Fer
Congo-Océan, Port autonome de Brazzaville et des Ports secondaires, and Centrale d’achats des médicaments essentiels et des produits de santé. Rapport annuel
sur la dette publique, Caisse Congolese d’Amortissement (2021), p. 38, available at https://www.finances.gouv.cg/fr/rapport-annuel-sur-la-dette-publique-2021.
87
Government participation in agro-industry extends to inputs, cultivation, and processing. 2022 SOE Checklist Survey for Congo. The partially state-owned SOE,
Société Agricole pour le Raffinage du Sucre (Agricultural Company for Industrial Sugar Refining), produces crushed lime as a soil additive for cane fields, cultivates
cane, and refines sugar. See https://www.somdiaa.com/groupe/filiales/saris-congo/.
88
2022 SOE Checklist Survey for Congo.
89
Competitive sectors are characterized by small entry barriers; contestable sectors are characterized by moderate entry barriers, public goods, or externalities;
and natural monopoly sectors are those that exhibit high entry barriers, economies of scale, or sub-additivity cost structures.
90
Banque Congolaise de l’Habitat (BCH).
91
Assurances et Réassurances du Congo (ARC).
92
The state’s involvement in the residential housing markets through the SOE, La Société de Promotion Immobilière, includes but is by no means limited to low-
income housing. See, https://soprim.cg.
93
La Congolaise de Gestion et de Loterie.
94
Competitive neutrality is a principle according to which all enterprises, public or private, domestic or foreign, face the same set of rules and where government’s
contact, ownership or involvement in the marketplace, in fact or in law, does not confer an undue competitive advantage on any actual or potential market
participant. Roundtable on Competition Neutrality, Issues paper by the Secretariat, OECD (2015), p. 4.
70 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 3 Boosting Productivity through Competition
TABLE 1
Preliminary competitive neutrality gap analysis for Congo
Competitive neutrality gap analysis
Subsidiarity analysis: the role of the State in the economy analysis
Firm-level principles: Separation of SOE commercial and non-commercial activities
1 2 3 4
Streamlining the Achieving a
Identifying the costs of Accounting for public
operational form of commercial
any given function service obligations
government business rate of return
• No legal separation • No accounting • No formal requirement to • Lack of systematic,
between commercial and separation/cost allocation achieve a commercial rate transparent and objective
non-commercial activities requirement in the law. of return. criteria for SOEs in the
of SOEs. compensation of Public
• No formal obligation Service Obligations
Congo for SOEs to cover direct (PSOs).
costs using internally
generated revenues
and no private sector
benchmark for SOEs’
transactions.
• Legislation requires • Separate accounts for • SOEs commercial • Compensation paid
business separation of commercial and non- operations and to SOEs for the
SOEs. commercial activities of investments are required provision of PSOs is
SOEs. to have positive Net based on transparent
Present Value (NPV), accountability and
Benchmark • SOEs objectively market consistent objective criteria. Cross-
assessed based on rate of returns and to subsidization is avoided.
transparent performance be measured based
reports. on private sector
performance.
Principles embedded in cross-cutting regulatory frameworks and sectoral policies
5 6 7 8
Debt neutrality and
Regulatory neutrality Public procurement Tax neutrality
outright subsidies
• SOEs are not provided • SOEs are not provided • SOEs are not provided • The government
legal exceptions with legal exceptions with legal exceptions with has provided debt
respect to competition respect to public- respect to tax law. guarantees, but (with
law, regulatory procurement law. There is some evidence no formal legislative
requirements, or that SOEs are able to change) has ceased to do
insolvency. accumulate tax debt. so in recent years. The
government also provides
Congo state guarantees and land
transfers to some SOEs.
• The government is able to
and has provided outright
subsidies to struggling
SOEs.
• Companies compete • Market-based • Tax exemptions, subsidies, and debt guarantees granted
on a level-playing field competition in public following competitive neutrality principles.
with no trade protection procurement.
and market-based
competition for rights to • Bids/auctions designed
Benchmark invest in state assets. to reduce the risks of bid
rigging.
• Sectors where
competition is feasible
are open to private
investment.
State aid legal framework and implementation requires improvements to minimize room for
anticompetitive outcomes
Level playing field in the market between SOEs and privately owned operators
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 71
CHAPTER 3 Boosting Productivity through Competition
3.2.1 Blurring of commercial and non-commercial activities
for SOEs may confer an unfair advantage
The absence of a clear separation between commercial and
non-commercial activities of SOEs allows them to cross-subsidize
commercial activities in markets where they face private competition.
Currently, according to publicly available information, there seems to
be no formal requirement for SOEs to separate their commercial and Although
noncommercial activities and keep separated accounts. Moreover, it annual financial
appears that SOEs are not required to achieve a positive rate of return
statements are
or net present value. Compensation of public service obligations is not
systematically subject to transparent and objective criteria. Without such required for both
separation of commercial and non-commercial activities, there is the risk public and private
that compensation of public service obligations will allow an SOE to persist
companies, there
in commercial activities despite being less efficient than competitors or
to cross-subsidize between commercial and non-commercial activities, are generally
maintaining artificially low prices with respect to the SOE’s commercial no additional
activities to the disadvantage of any actual or potential private competitors.
reporting
Importantly, Congolese SOEs are not systematically and transparently requirements
audited in a manner that would allow the separation of commercial and regarding SOE
non-commercial activities. The General Directorate of Public Portfolio
performance or
(Direction Générale du Portefeuille Public, DGPP) is tasked with monitoring
the financial performance of SOEs. However, in practice, the DGPP lacks financial decisions.
adequate resources and seems to have a limited role. 95 Although annual
financial statements are required for both public and private companies, 96
there are generally no additional reporting requirements regarding SOE
© mtcurado/iStockphoto.com
95
Congolese SOEs have two forms of supervision: technical supervision provided by the relevant line ministry, and financial and administrative supervision
provided by the DGPP in the Ministry of Finance. Even since the creation of the DGPP in 2013, the line ministries play a preponderant role that the supervising
SOEs. Evaluation de la Gouvernance des Entreprises du Portefeuille Public, WBG, (2018), ¶ 16.
96
OHADA Uniform Act on Economic Companies and Public Interest Groups, art. 269.
72 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 3 Boosting Productivity through Competition
performance or financial decisions. 97 SOEs’ annual reports are subject to audit by the agency charged with
auditing public enterprises (Commissariat National aux Comptes, CNC), 98 but such audits have not consistently
occurred. 99 Congo Telecom, for example, had gone a decade without an audit as of 2018 (Box 7). Moreover,
to ensure independence, it is best practice to use external audits rather than to rely solely on a government
auditing authority.100 In the last few years, Congolese authorities have been making ongoing efforts to increase
transparency of SOEs with support from the World Bank and the IMF.101 These efforts have included external
audits by international audit firms of select SOEs, but such auditing is not required or applied to SOEs in
general. These efforts are also based on OHADA accounting law,102 which applies equally to SOEs and private
companies and does not provide for separation of commercial and non-commercial activities.103
BOX 7
Ineffective Monitoring of SOEs – Congo Telecom
The SOE, Congo Telecom, (and its predecessor)104 has struggled in the telecommunications
market since liberalization in 1997, requiring capital injections by the state, but accounting
practices were entirely inadequate to allow for effective monitoring. Congo Telecom’s competitive
struggles stand out in a sector of rapid growth, increased efficiency, and adaptation of innovations.
Its predecessor started as a monopoly and a good deal of the telecommunication infrastructure was
destroyed by the civil war in 1997.105 Congo Telecom focused on its fixed-line monopoly and failed to
capitalize on the initial rise of the mobile market. In 2007, the company had to suspend salary payments,
and in 2010, still overstaffed, Congo Telecom faced bankruptcy.106 It was able to survive (albeit with
direct capital infusion by the state)107 by shifting its focus towards fiber optics and relying on the use of
the fiber optics infrastructure which is managed by the Direction Générale des Grands Travaux.108 By
2015, Congo Telecom was no longer losing money.109 The true extent of its financial troubles and the
extent to which it was being outcompeted by the private sector were not fully apparent at the time,
however. The company’s accounting practices were entirely inadequate. As of 2018, Congo Telecom
operated without a budget for more than a decade and does not have certified financial statements
from that time.110 It changed management in 2020, however, and reforms are being considered that
would improve accounting practices, including the listing of Congo Telecom on the regional stock
exchange.111
97
2022 SOE Checklist Survey for Congo. An exception is the recent requirement that SOEs report their debt twice annually to the Caisse congolaise d’amortissement.
Rapport annuel sur la dette publique, (2021), p. 38, available at https://www.finances.gouv.cg/fr/rapport-annuel-sur-la-dette-publique-2021.
98
See CNC Website, https://cnc-congo.cg/.
99
Evaluation de la Gouvernance des Entreprises du Portefeuille Public, WBG (2018). SOEs can also be audited by the Cour des Comptes et de Discipline Budgétaire
(CCDB), see Law No. 022-1992 of Aug.t 20, 1992), but such audits are also not regularly conducted, See Loi des finances: contraindre les entreprises publiques
à reverser les taxes à l’Etat, Agence d’information d”Afrique Centrale (Dec. 11, 2021), available at https://www.adiac-congo.com/content/loi-des-finances-
contraindre-les-entreprises-publiques-reverser-les-taxes-letat-133085.
100
Corporate Governance of State-Owned Enterprises: A Toolkit, WBG (2014), pp. 35-36. Subjecting select SOEs to credit rating assessments can also be a powerful
tool in increasing financial transparency. See Vietnam Electricity (EVN) Achieves its First and Positive Credit Rating from Fitch Ratings, WBG (Jun. 7, 2018).
101
These efforts focus on addressing the limited coverage on SOE debt and financial performance and are supported by the performance and policy actions under
the World Bank’s Sustainable Development Finance Policy as well as by the IMF. There has also been recent movement toward listing Congolese on the regional
stock exchange. In 2020, Congo presented the regional Central Bank, BEAC, with a list of SOEs—Congo Telecom, E2C, CEC, and SNDE. Le Congo veut introduire
quatre entreprises à la BVMAC , African Markets (Jan. 15, 2021), available at https://www.african-markets.com/fr/actualite/afrique-centrale/congo-brazzaville/
le-congo-veut-introduire-quatre-entreprises-a-la-bvmac. The process of preparing for public listing could present the opportunity to increase accounting
transparency.
102
2022 SOE Checklist Survey for Congo. See also, e.g., Rapport des commissaires aux comptes sur les états financiers annuels et Spécial sur les conventions
réglementées de la SNPC - exercice clos 2020 (auditing the SOE SNPC using OHADA standards), available at https://www.finances.gouv.cg/fr/type/rapport.
103
OHADA Uniform Act on Accounting Law and Financial Reporting (2017).
104
Congo Telecom until 2009 was known as Société des Télécommunications du Congo (SOTELCO), which in turn derived from the telecommunications division of
Office National des Postes et Telecommunications (ONPT).
105
Public-Private Partnership in Telecommunications Infrastructure Projects: The Case of the Republic of Congo, WBG (2010), p. 10.
106
The Republic of Congo’s Infrastructure, WBG (2010), pp. 15–16.
107
Congo Telecom received a subsidy of CFAF 500 million in 2014. Evaluation de la Gouvernance des Entreprises du Portefeuille Public, WBG (2018).
108
Evaluation de la gouvernance des entreprises du portefeuille public, WBG (2018), ¶ 134.
109
Id. at ¶ 133.
110
Id. at ¶ 131.
111
Le Congo veut introduire quatre entreprises à la BVMAC , African Markets (Jan. 15, 2021).
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 73
CHAPTER 3 Boosting Productivity through Competition
3.2.2 SOEs receive some preferential treatment relative to
private sector firms
Although Congolese commercial law formally treats SOEs identically to private sector firms, the regulatory
treatment of SOEs differs in practice. SOEs are not provided legal exceptions related to competition, public
procurement, regulatory requirements, taxation, or insolvency laws.112 There is some evidence, however, of SOEs
failing to pay taxes without clear repercussions.113 In 2018, for example, Congo Telecom had accumulated tax
debt (both value added tax and corporate income tax) despite having operated at a profit.114 In 2020, SNPC
also had accumulated tax debts of about US$1,849,000 despite having operated at a profit for the previous
two years.115
SOEs receive certain advantages in the form of debt guarantees and outright subsidies that are not granted
to the private sector.116 Although the government has not guaranteed SOE debt recently,117 it had done so in a
substantial way until a few years ago. For example, the government guaranteed CFAF 184 billion in 2014 and 222
billion in 2016 for l’Assurance et Réassurance du Congo.118 There are no rules that provide criteria for granting
direct or indirect subsidies to public and private companies to minimize competition distortions, and the state
does occasionally inject funds into public enterprises without a clear process. As an example, the struggling
railway SOE, Chemin de Fer Congo-Océan, received CFAF 8.7 billion in 2012 and 5.6 billion in 2016 (about
US$17.4 million and 9.5 million respectively119).120 On the other hand, SOE subsidies are substantial enough to
undermine government fiscal health. For example, the large energy SOEs, Congolaise de Raffinage (CORAF, an
oil refinery)121 and Centrale Électrique du Congo (CEC, a natural-gas fired power plant), together received over
three percent of GDP in subsidies during 2018 and 2019 and over one percent in 2020 and 2021 (Figure 27). The
reduction of subsidies to CORAF after 2019 is the result of reform efforts that included regular auditing and a
performance contract.122 Energy subsidies are expected to further increase in 2022 as a consequence of the war
on Ukraine.
No process ensures that sovereign debt guarantees or budget subsidies are not propping up inefficient
firms. Subsidies can be granted without assessing the competitiveness of the SOE. In particular, the DGPP
manages state aid to public enterprises, and it is not subject to any rules requiring it to take into account
distortionary market effects.123 For an example of the implementation of a state-aid framework that requires
authorization of a competition authority, see Annex 1 describing the framework of Moldova.
Moreover, there is no pre-established procedure for assessing the advisability from a competition
standpoint of either creating an SOE or divesting from an SOE.124 The Congolese government is presently
considering the divestment from certain SOEs and may list four major SOEs on the regional stock exchange,
112
2022 SOE Checklist Survey for Congo; L’acte uniforme de l’OHADA portant organisation des procédures collectives d’apurement du passif (Sept., 2015), art. 1-1.
113
This is also true for private sector firms.
114
Evaluation de la Gouvernance des Entreprises du Portefeuille Public, WBG, (2018), ¶ 135. It is difficult to gauge whether and to what extent SOEs might be
privileged over private firms with respect to tax collection because of ineffectiveness in the collection of tax arrears from the private sector as well as from SOEs.
115
Rapport des commissaires aux comptes sur les états financiers annuels et Spécial sur les conventions réglementées de la SNPC - exercice clos 2020, pp. 7, 38,
available at https://www.finances.gouv.cg/fr/type/rapport.
116
There are instances of public money going to private competitors. For example, the government supports micro, small, and medium enterprises through the
Guarantee and Support Fund (Fonds d’Impulsion, de Garantie et d’Accompagnement, https://www.figa.cg/acceuil.html. However, it is important to note that any
differential treatment of SOE vis-à-vis private sector would require assessing whether SOE and private firms operate under similar market conditions.
117
2022 SOE Checklist survey for Congo. At present guarantees for SOEs are minimal. Evaluation de la Gouvernance des Entreprises du Portefeuille Public, WBG
(2018). For example, none of the ten largest SOEs presently hold guaranteed debt. Rapport annuel sur la dette publique, Caisse Congolaise d’Amortissement
(2021), p. 40, available at https://www.finances.gouv.cg/fr/rapport-annuel-sur-la-dette-publique-2021.
118
Evaluation de la Gouvernance des Entreprises du Portefeuille Public, WBG (2018).
119
Using an average exchange rate of 0.002 US$/CFAF in 2012 and 0.0017 US$/CFAF in 2016.
120
Evaluation de la Gouvernance des Entreprises du Portefeuille Public, WBG (2018).
121
CORAF is an oil refinery and subsidiary of wholly state-owned SNPC. CEC operates a gas power plant and is 80 percent state-owned. As a comparison, state aid
expenditure in the European Union member states with larger available public budgets remained below one percent of GDP at the Union level (2019). See: https://
ec.europa.eu/competition-policy/system/files/2021-06/state_aid_scoreboard_note_2020.pdf
122
Republic of Congo: Staff Report for the 2021 Article IV Consultation, IMF (Sept. 13, 2021); Republic of Congo: Request for a Three-Year Arrangement Under the
Extended Credit Facility, IMF (Jan. 10, 2022). Transfers to CEC were also conditioned on its realized earnings and expenses. Id.
123
2022 SOE Checklist survey for Congo. In theory, Congo’s subsidies of SOEs are subject to monitoring by CEMAC, which has exclusive jurisdiction to enforce
a law designed to prevent anti-competitive subsidies. Regulation No. 06/19‐UEAC‐639‐CM‐33, arts. 83-101 (Apr. 7, 2019), available at http://www.droit-afrique.
com/uploads/CEMAC-Reglement-2019-06-concurrence.pdf; Id. at art. 20(b) (exclusive CEMAC jurisdiction). On paper, this legislation resembles that of Moldova,
outlined in Annex 1 – subsidies and indirect state aid is to be disallowed where market distortions are not justified by countervailing public interest. Id . at art. 82. In
reality, this law seems not to have been enforced. The CEMAC Website, for example, shows no signs of monitoring SOE subsidies. https://www.cemac.int/Accueil,
at writing, only available at https://web.archive.org/web/20220327091126/https://www.cemac.int/Accueil.
124
2022 SOE Checklist Survey for Congo; 2021 Investment Climate Statements: Republic of the Congo, U.S. Department of State.
74 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 3 Boosting Productivity through Competition
which could result in government partial divestment.125 There does not, however, appear to be any systematic
process by which divestment decisions are evaluated with respect to their effect on the competitiveness of
markets.
FIGURE 27
Transfers and subsidies to CORAF and CEC SOEs are substantial
Transfers and subsidies to CORAF and CEC SOEs as % GDP, 2018-2021
5
Combined Combined
4
CFAF 264 billion CFAF 267 billion
3
2
Combined Combined
CFAF 66 billion CFAF 78 billion
1
0
2018 2019 2020 2021
CEC Operations (% of GDP) CORAF Transfers (% of GDP)
Source: National authorities. June 2022.
3.3 Regulatory restrictions to competition
distort markets in key areas
Many key sectors in Congo’s economy are dominated by SOEs and characterized by price controls. The
largest SOE, wholly owned by the state, the Société Nationale des Pétroles du Congo (SNPC), manages and
commercializes government shares of oil production, and its subsidiary, CORAF, refines most of the oil. The
water market is a monopoly of La Congolaise des Eaux, which is majority state-owned. SOEs also have a large
presence in transport, with the wholly state-owned Société Chemin de Fer Congo-Océan as a monopolist in
rail transport and government stakes in the company managing airports (Aéroports du Congo) and providing
road infrastructure (La Congolaise des Routes). Price controls are prevalent in key industries, with, for example,
the government regulating retail prices of petroleum products, water, electricity, and retail and wholesale
telecommunications tariffs.
This section further examines the telecommunications and electricity sectors. Because telecommunications
and electricity are network industries, typically subject to high entry barriers, entry is often difficult and can be
more difficult in the absence of effective regulations to facilitate entry and sanctions on exclusionary practices
of incumbents. Thus, both pro-competitive ex ante regulation and ex post enforcement of competition policy
are important (see Annex 2 for a summary of government holdings in telecommunications and electricity, as
well as the other network sectors of gas and water). Moreover, telecommunications and electricity are enabling
sectors—sectors necessary for the efficient function of other industries. In particular, both sectors are crucial
to the digital economy, which Congo has recognized as a priority for economic diversification and growth.
While in-depth competition assessments are warranted, the analysis below will provide several high-level entry
points to stimulate the discussion on the role of competition and regulation to enhance market outcomes
for consumers. (See Chapter 4: Boosting Productivity through Digital Technology and Improved Access to
Electricity for a more detailed analysis of access to electricity and the digital transformation).
125
See Marché financier d’Afrique centrale: 10 candidatures pour l’entrée en bourse, Jiongo (EcoMatin) (Apr. 28, 2022), available at https://ecomatin.net/marche-
financier-dafrique-centrale-10-candidatures-pour-lentree-en-bourse/.
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 75
CHAPTER 3 Boosting Productivity through Competition
3.3.1 Electricity sector has not attracted needed private
participants
Efforts to open the electricity sector to private-sector participants have largely failed. Electricity production,
transmission and distribution are all considered to be public services under the authority of the state and each
of these sectors is dominated by direct government participation in the market.126 The electricity sector was
theoretically opened up to private sector participation by reforms introduced in 2003 (with further reforms
in 2017),127 which allowed for private participants in the electricity industry and created a regulator, l’Agence
de Régulation du Secteur de l’Électricité (ARSEL), to oversee market dynamics and ensure regulation of the
sector.128 These reforms also attempted to make private sector participation feasible by requiring that private
sector competitors could access the existing grid by requiring operators to provide third-party access to
transport and distribution networks at prices regulated by ARSEL.129,130
These reforms were not sufficient to encourage private sector participation, and there are no private sector
companies that act as independent competitors in the electricity market. The SOE, Énergie Electrique du
Congo (E 2C), which evolved from the state electricity monopoly,131 remains the only player in transmission and
distribution.132 In production, E 2C accounts for 36.5 percent133 of the market in 2018 through its operation of
hydroelectric plants.134 The largest producer is Centrale Electrique du Congo (CEC) (484 MW installed capacity
of gas turbines), which is 80 percent state owned with the remaining 20 percent owned by the international
energy firm, ENI.135 Under the 2003 Electricity Code,136 the government can delegate public service activities in
the electricity sector to the private sector through a license or concession following a public tender.137 Hence,
there is no general authorization system allowing private operators to operate independently in potentially
competitive segments of the electricity sector.138 Furthermore, the nature of delegation contracts may be
unattractive to private-sector operators. The contracts may have a span of up to 30 years, but after its term, the
contract must be tendered-out again.139 More importantly, the government retains broad powers to revise the
terms of the contract creating uncertainty for investors.140
E2C’s monopoly in electricity transmission may discourage any future competition in production and
distribution. Despite Congo’s consideration of reforms in recent years,141 E 2C presently is an electricity producer
as well as holding monopolies in transmission and distribution. Lack of vertical separation between the
transmission sector—which is typically considered a natural monopoly—and production and distribution can
allow the transmission incumbent to foreclose market entry into production and distribution.142 Although in
smaller electricity markets such as Congo’s, complete vertical separation is not always desirable, options other
than “structural” separation or complete separation of ownership which can support more competition. Legal
126
Electricity Code, Law No. 14-2003 (Apr. 10, 2003), art. 7.
127
Id. Decree No. 2017-247 (Jul. 17, 2017) (setting delegation procedures); Decree No. 2017-248 (Jul. 17, 2017) (setting the conditions for independent electricity
production); Decree No. 2017-252 (Jul. 17, 2017) (setting pricing principles).
128
Law No. 16-2003 (Apr. 10, 2003).
129
Electricity Code, Law No. 14-2003 of (Apr. 2003), arts. 46–50; Decree No. 2017-248 (Jul. 17, 2017), art. 11.
130
For an overview of the typical framework for the competition analysis of electricity sectors, see Annex 3.
131
E2C was formed from the fully state-owned Société Nationale d’Electricité in 2018. Law No. 22-2018 (Jun. 13, 2018).
132
Le cadre legal et réglementaire du secteur de l’éctricitricité en République du Congo, Sancy Lenoble Matschinga, available at https://www.village-justice.com/
articles/cadre-legal-reglementaire-secteur-electricite-republique-congo,38981.html; 2022 Survey for Congo (following an abbreviated OECD PMR template).
133
Percentage calculated from United States Energy Information Administration data. Congo Brazzaville’s net electricity generation by fuel type, available at
https://www.eia.gov/international/analysis/country/COG.
134
These include Imboulou (120 MW), Moukoukoulou (74 MW), Djoué (14 MW), and Liouesso (19.2 MW). Centrales de Production de la Electricité, E2C, http://e2c.
cg/nos-metiers/production/. ENI also constructed the Centrale Électrique du Djeno (CED) plant (gas turbines; 170 MW). Congo-Brazzaville, U.S. Energy Information
Administration (May 12, 2021), https://www.eia.gov/international/analysis/country/COG.
135
Centrale Electrique du Congo (CEC) Pointe-Noire Power Plant, Republic of the Congo, Power Technology (Jan. 11, 2022), https://www.power-technology.com/
marketdata/centrale-electrique-du-congo-cec-pointe-noire-power-plant-republic-of-the-congo/.
136
While these contracts are termed “contrats de délégation,” they resemble concession contracts in that the law contemplates the delegation to a private-sector
participant of management of an entire enterprise, such as a hydroelectric plant.
137
Electricity Code, Law No. 14-2003 of (Apr. 2003), arts. 23–25; Decree No. 2017-247 (Jul. 17, 2017).
138
Id. at arts. 9, 23. Furthermore, the Electricity Code restricts the possibility of delegation to Congolese firms. In particular, the delegate must be “une ou plusieurs
personnes publiques ou privées de droit congolaise,” id. at art. 23. There is no prohibition of foreign ownership of delegates, but to the extent that incorporating
a subsidiary in Congo is a difficult step, this restriction might dissuade private sector participation.
139
Id. at art. 30; Decree No. 2017-247 (Jul. 17, 2017), art. 11.
140
Id. at arts. 31, 32.
141
Congo Republic plans to dissolve state power, water utilities, Elion (Reuters) (Feb. 2, 2018), available at https://www.reuters.com/article/us-congorepublic-
utilities/congo-republic-plans-to-dissolve-state-power-water-utilities-idUSKBN1FM2JP.
142
See Revu des réformes de sectuer de l’éctricité en Afrique, African Development Bank (2018), figure 5, available at https://www.afdb.org/sites/default/files/
documents/publications/power_reforms_report_french.pdf.
76 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 3 Boosting Productivity through Competition
© belinda_bw/bigstockphoto.com
separation (creating separate legal entities under the same ownership), functional separation (putting functions
of a single entity under separate management), and accounting separation (keeping distinct accounts for
different functions of a single firm)143 can be considered. Another approach is the effective enforcement of
third-party access obligations,144 which can serve to prevent the vertically integrated firm from leveraging its
market power to restrict a competitor’s access to infrastructure.
Retail tariffs on electricity are set at levels that are far below the cost of production, and the market
experiences shortages and poor quality of service. In addition to the large SOE foothold, the government
also intervenes in the energy market through price controls. Wholesale and retail tariffs are subject to price
controls, which prevent E 2C from covering its costs, leaving it without the resources to invest in the infrastructure
necessary to meet increasing demand. Demand has grown rapidly in recent decades. Electricity production
increased by 6.7 times (3.3 million MWh vs. 0.5 million MWh) between 1990 and 2017, but such an increase is
not enough to keep up with demand. In January of 2021, for example, electricity demand was at about 550MW,
and the supply from Congo’s main power stations was about 400MW. Because of this excess demand, E 2C
must practice load shedding—with resulting power outages—in its distribution practices. It is not surprising
that supply fails to keep up with demand, because both retail and wholesale tariffs are set by the government
at levels far below the cost of production (see Chapter 4 for more details). Below-cost prices can be expected
to lead not only to shortages but also to operators providing a far lower quality of service than they would if
incentivized by higher, market-based pricing.
The extent and nature of government subsidies to the electricity market are not readily apparent. Given
that retail tariffs are below cost, it seems clear that E 2C’s activities in the electricity sector are being subsidized,
but such subsidies are not transparent. Many countries provide subsidies to the electricity sector to foster
development or to benefit poorer customers.145 Subsidies, however, should be based on clearly defined public
service obligations and unit costs of service provision. Without such criteria and transparency, it is difficult
to know whether the subsidies are justified by their social objectives. It is especially important in attracting
the entry of efficient private-sector participants that subsidies (and performance requirements) are clearly
understood by potential entrants and can be relied upon to recoup investment.
143
See Restructuring Public Utilities for Competition, OECD (2001), pp. 18-19. Accounting separation, the weakest form of vertical separation, has no direct effect
on competitive behavior, but it may aid regulators in enforcing third-party access because the accounting of the vertically integrated firm may provide information
useful in setting access pricing. Id.
144
Third-party access is provided for in Decree No. 2017-248 (Jul. 17, 2017), arts. 11-12.
145
See, e.g., World Bank Group Support to Electricity Access, FY2000-2014, WBG (2014), available at https://ieg.worldbankgroup.org/sites/default/files/Data/
Evaluation/files/Electricity_Access.pdf.
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 77
CHAPTER 3 Boosting Productivity through Competition
3.3.2 Mobile telecommunications suffer from a lack of
competition
The mobile telecommunications market, both mobile and mobile internet along with the related market
of mobile money, is highly concentrated. Congo’s market is presently served by just two firms, MTN Congo
and Airtel. The largest telecommunications market is mobile telephony, with CFAF 130,903 million in revenue
for 2021. The markets for mobile internet and mobile money—while highly important markets as enablers
for other sectors of the economy—are small in comparison with CFAF 55,819 and 15,750 million in revenue
respectively for 2021.146 As can be seen in Figure 28, in each of these markets, MTN Congo dominates Airtel,
with more than two-thirds share of market revenue. Other end markets in telecommunications are small in
comparison to mobile telecommunications. The market for fixed-line telephone is a monopoly of Congo
Telecom—the state-owned descendant of the state-owned monopoly in telecommunications.147 But as of
2020, there were only 17,650 fixed-line subscribers. The internet is accessed almost exclusively through
mobile. Fixed broadband is available, but there were only about 28,900 subscribers as of the end of 2021.148
While high market concentration is not necessarily indicative of a lack of competition, other factors are
important to gauge the risks of market distortions, such as high structural and regulatory barriers to entry,
including technology features and associated investment costs. Highly concentrated markets can still be
competitive if they are contestable.149 In such markets, incumbent firms face a higher threat of entry, whether
the threat is actual or perceived (See Section 4.1 for extended discussion and Annex 4 for an overview of the
typical framework for competition analysis of mobile telecommunication sectors).
FIGURE 28
Mobile telecommunication market is concentrated among two operators
Revenue Market Share by Revenue: Mobile, Mobile Internet, Mobile Money, 2021
140,000
Airtel
120,000 MTN
29.4%
Millions of CFAF
100,000
80,000
60,000
70.6% 33.5%
40,000
20,000 66.5% 18.3%
81.7%
0
Mobile Mobile Internet Mobile Money
(HHI = 5,852) (HHI = 5,545) (HHI = 7,022)
Notes: HHI is the Herfindahl-Hirschman Index, a measure of market concentration calculated by adding the squares of percentage market share across all market
participants. The index is 10,000 for a complete monopoly and goes down toward zero with increased competition. Competition authorities in the United States consider
markets with an HHI over 2,500 to be highly concentrated. Horizontal Merger Guidelines 2010; U.S. Department of Justice and Federal Trade Commission (2010).
Source: WBG staff calculations based on data from arpce.cg. June 2022.
146
Data from Rapport 2021 du marché de l’internet mobile, ARPCE; Rapport 2021 du marché de la téléphonie mobile, ARPCE; La Grand’Actu du Régulateur
(Newsletter), ARPCE (Dec. 2021), available at https://www.arpce.cg/rapports; https://www.arpce.cg/bulletins-mensuels.
147
Congo Télécom, was born from the dissolution of SOTELCO (Société des Télécommunications du Congo), itself created after the break-up of the ONPT (Office
National des Postes et Télécommunications ).
148
Teleogeography Congo Report, Telegeography (Dec. 2021 and Apr. 2022).
149
Markets are contestable if there are no sunk costs such that barriers to entry and exit are low and potential entrants have equal access to the relevant technology
as incumbents.
78 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 3 Boosting Productivity through Competition
The liberalization of the telecommunications sector had initial
success in attracting private-sector entrants, and it is only over
the last decade that key telecommunications markets have been
reduced to duopolies. Congo introduced competition into the
telecommunications sector in 1997 (Law No. 14-97), and the national
operator Congo Telecom, wholly owned by the state, has been
surpassed by private operators. The present duopolists, MTN Congo Despite continued
and Airtel, were first to enter the liberalized market, but they were growth in the
joined by in 2008 by UAE-based Warid, and in 2010, Equateur Telecom
Congo (doing business as Azur) entered as well. As can be seen in
telecommunications
Figure 29, Azur never managed to capture much of the market, but market, Congo
Warid was rapidly gaining market share until it was acquired by Airtel has somewhat low
in 2014. Azur remained longer, but as of the end of 2017, Azur’s market
share had dwindled to about three percent, and by 2020, MTN and
mobile penetration,
Airtel were the only remaining market players.150 a relatively low rate
of internet access,
The promising initial results of liberalizing the telecommunication
market enabled the rapid growth of mobile use. By 2010, with three
and unusually high
firms in the mobile market, mobile telephony penetration was relatively tariffs for mobile
high in Congo. As measured by subscriptions per 100 people, the internet.
Congolese mobile market initially grew at a much higher rate than sub-
Saharan Africa as a whole (Figure 30). After 2010, however, the growth
of the Congolese market fared less well, and by 2020, subscriptions
had fallen to about the level of the sub-Saharan Africa average. After
the market became dominated by MTN and Airtel, there has been a
steady drop in voice subscriptions (Figure 30).
FIGURE 29 FIGURE 30
Early mobile market competition with four Mobile telephony penetration has faded
competitors after a decade sharp increase
Number of Subscribers by Companies, 2010-2017 Subscriptions per 100 People, 2000-2020
4,000 120
3,500
100
3,000
Subscribers (1,000s)
80
2,500
2,000 60
1,500
40
1,000
20
500
0 0
2010
2011
2012
2013
2014
2015
2016
2017
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
MTN Airtel Warid Azur Congo Sub-Saharan Africa
Source: arpce.cg. June 2022. Source: ITU/ICT Database. June 2022.
150
Warid launches third mobile operator in Congo, Reuters (Jan. 14, 2008), available at https://www.reuters.com/article/congo-telecoms/warid-launches-third-
mobile-operator-in-congo-idUSL147875420080114. Equateur Telecom Congo launches commercial services, Comms Update (Sept. 16, 2010). Airtel Congo finalizes
acquisition of Warid Congo, Comms Update (Jun. 4, 2014) available at https://www.commsupdate.com/articles/2014/06/04/airtel-congo-finalises-acquisition-of-
warid-congo/ Rapport 2017 du marché de la telephonie mobile, ARCPE, available at https://www.arpce.cg/upload/publications/Rapport-2017-du-Marche-de-la-
Telephoniet-Mobile.pdf.
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 79
CHAPTER 3 Boosting Productivity through Competition
Growth in mobile internet also seems to have faltered under the MTN-Airtel duopoly, and prices in that
market remain high. Growth in internet use in Congo initially kept pace with the rest of sub-Saharan Africa but
then fell behind after 2009 (Figure 31-a). Internet use in Congo remains somewhat low as of 2021 relative to
comparator countries, with Congo’s 25 percent of total population exceeding only Angola (Figure 31-b). Tariffs
for mobile internet (Figure 32) are high relative to comparator countries. The 2021 price of one GB of data in
terms of percentage monthly GNI per capita (3.7 percent) was well above structural peers (2.3 percent), more
than three times as high as regional peers (1.2 percent) and more than five times as high as aspirational peers
(0.72 percent).151
FIGURE 31
Congo lags in terms of internet users
a. Internet Users - Congo and Sub-Saharan Africa (% of population), b. Unique Mobile Internet Subscribers (% of population), 2021
1991-2017
25 100
20 80
15 60
10 40
5 20
0 0
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
Angola
Congo
Iraq
Cameroon
Mauritania
Nigeria
Ghana
Azerbaijan
Timor-Leste
Indonesia
Vietnam
Malaysia
Congo Sub-Saharan Africa
Source: ITU/ICT database. June 2022. Source: Global System for Mobile Telecommunications. June 2022.
FIGURE 32
The uptake of mobile internet services in Congo remains hampered by high prices
a. Mobile Broadband Price (% of monthly GNI per capita), 2021 b. Price of 1GB mobile data (% of monthly GNI per capita)
- A4AI 2020
35 6
30 5
25
4
20
3
15
2
10
5 1
0 0
Congo Regional Structural Aspirational
Congo
Timor-Leste
Angola
Cameroon
Nigeria
Ghana
Indonesia
Vietnam
Malaysia
Peers Peers Peers
100MB 500MB 1GB 2GB 5GB 10GB
Source: Alliance for Affordable Internet. a4ai.org/2021/mobile_broadband_pricing_usd. June 2022.
151
Mobile Broadband Pricing: Data for 2021, Alliance for Affordable Internet (A4AI), available at https://a4ai.org/extra/baskets/A4AI/2021/mobile_broadband_
pricing_gni. A comparison in terms of US$ yields similar results: the 2021 Congolese price of one GB of data (US$10.11) was more than three times the price average
of regional peers (US$2.65), and more than twice as high as structural peers (US$4.85) and aspirational peers (US$ 3.11).
80 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 3 Boosting Productivity through Competition
© unsplash.com
Competition in the mobile telecommunications market could be enhanced by more effective regulation.
Congo does have a regulatory structure that, if properly applied, could encourage more intense competition.
There are signs that the implementation of the third-party access provisions is not sufficiently credible to market
players. In 2009, legislation was passed with extensive procompetitive provisions, and with the provision for a
sector regulator, Regulatory Agency for Posts and Electronic Communication (Agence de Régulation des Postes
et Télécommunications Electroniques, ARPCE), to enforce those provisions. Mobile phone interconnection is
mandatory. Mobile virtual network operators are allowed, although currently there are none because of the
small size of the market. The tariffs for mobile telephony interconnection and rates for international roaming
are monitored by ARPCE to ensure firms charge one another at reasonable rates. Congo also requires the
operator with significant market power to share essential infrastructure such as fiber optic networks. ARPCE
does actively require third-party access to infrastructure, and such access is used by mobile operators. In
particular, both MTN and Airtel access the fiber-optic backbone controlled by Congo Telecom. There is some
indication, however, that MTN and Airtel are not able to rely on reasonable pricing and conditions for this access
because they have both chosen to develop their own lower-speed microwave backbones.152
152
Law 9-2009 (Nov. 25, 2009). 2022 Survey for Congo (following OECD template).
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 81
CHAPTER 3 Boosting Productivity through Competition
Congo does not provide for mobile number portability. Mobile number portability allows consumers to
switch providers while retaining their existing numbers. Portability potentially fosters competition by reducing
consumers’ switching costs and can thus lower prices. Such a reduction of switching costs could not only
increase competition between MTN and Airtel but also encourage the entry of new firms.153 It can be difficult to
implement a successful mobile number portability system, however, and procompetitive effects may be muted
in markets such as Congo where consumers are accustomed to using multiple numbers through multiple SIM
cards.154
While the ARPCE is empowered to enforce many pro-competitive provisions, it is also able to enact controls
on retail tariffs and has done so. ARCPE has the authority to regulate tariffs of operators with more than a 25
percent market share in the product at issue or if there is proof that the price charged does not arise from free
competition.155 ARCPE is able to set both minimum and maximum prices, with the stated purpose of preventing
cost-subsidization between services.156 In 2011, ARCPE fixed a minimum tariff for on-net mobile telephone calls
and for outgoing international telephone calls. As ARCPE explained it, the price floor resulted in a significant
improvement in the market, with profits to operators returning to normal levels.157 In 2018, with only MTN and
Airtel left in the market, ARPCE again set minimum tariffs: CFAF 4 for a megabyte of mobile internet and
CFAF 25 for a minute of a mobile voice call.158 The concern was that prevailing prices were lower than ARPCE’s
calculations of firms’ costs.159
There are instances where price setting in telecommunications markets is
appropriate, but ARPCE’s price-setting authority is overly broad. Setting Congo
maximum retail tariffs could be appropriate in telecommunications markets
where there is no competition to maintain efficient pricing. Regulating
does have a
access pricing where competitors provide each other with access to essential regulatory
infrastructure is also necessary to avoid exclusionary behavior. But setting structure that,
minimum retail tariffs can stifle incentives to compete. There are limited
instances in which a company’s decision to set a price too low is of competitive
if properly
concern. Under exceptional circumstances, a dominant company might set a applied, could
price below cost in order to drive a competitor out of the market. In the instance encourage
of ARPCE’s minimum retail tariffs, given the unlikelihood that either MTN or
Airtel (both with stable and significant market share) could lower prices with
more intense
the expectation of driving their competitor out of the market, the price floor is competition.
likely to result in higher tariffs for consumers with no off-setting benefits.
Because telecommunications are a complex, network industry, ex-ante regulation may not always be
enough to avoid anticompetitive outcomes. A robust national competition enforcement would help foster
a competitive environment. The 2014 merger between Airtel and Warid, for example, reduced the market
operators to two players and eliminated a competitor with a significant and growing market share (Figure 29).
But there is no indication that there was any regulatory oversight that systematically gauged the competitive
effects of the merger. An effective competition policy would require both an ex-ante merger review to prevent
mergers that would substantially lessen market competition and ex post enforcement against anticompetitive
agreements and abuse of dominance. In the absence of an effective competition law framework, sector-specific
competition laws could be enacted to be enforced by ARPCE. The Telecommunications Code presently does
not provide for ex ante review of the competition effects of a merger or ex-post control of anticompetitive
behavior.
153
The ARPCE is currently conducting a study on portability of mobile numbers. 2022 Survey for Congo (following an abbreviated OECD PMR template).
154
In Botswana, for example, recently abandoned plans to introduce mobile number portability after a study determined that it was not feasible. Mobile number
portability shelved in Botswana, Maramwidze (ITWeb Africa) (Apr. 12, 2021), available at https://itweb.africa/content/GxwQDM1ZXxAqlPVo. See also The Impact of
Telecommunication Regulatory Policy on Mobile Retail Price in Sub-Saharan African Countries, Mothobi, Economic Research Southern Africa working paper, (2017)
(finding no significant price effect from mobile number portability in sub-Saharan Africa). See also Assessment of Mobile Number Portability in Nigeria, Bakare &
Kukuchuku, Intn’l J. of Elect. Comm. and Computer Engineering, Vol. 9, No. 1 (Jan. 2018).
155
Decree no. 2015-242 (Feb. 4, 2015), art. 6.
156
Id.
157
Observatoires, ARCPE, available at https://www.arpce.cg/telephonie-mobile. The price floor was set by Decision No. 001/ARPCE-DG/DAJI/DEM/11 (Jan. 12,
2011).
158
Internet mobile: de nouvelles dispositions tarifaires au Congo, Agence d’information d’Afrique Centrale (Jun. 2, 2018), https://www.adiac-congo.com/content/
internet-mobile-de-nouvelles-dispositions-tarifaires-au-congo-84189. The price floor was set by Decision No. 048/ARPCE-DG/DAJI/DEM/2018 (Dec. 28, 2018).
159
Id.
82 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 3 Boosting Productivity through Competition
Market growth is potentially dampened by lack of entry. While liberalization of the telecommunications
market had initially promising results, market results under the MTN-Airtel duopoly are less impressive. Despite
continued growth in the telecommunications market, Congo has somewhat low mobile penetration, a relatively
low rate of internet access, and unusually high tariffs for mobile internet. Given the highly concentrated mobile
telecommunications markets, facilitation of entry could improve these market outcomes. Previous research has
found, for example, that in a sample of 40 African countries, the entry of an additional mobile operator led to a
57 percent increase in mobile subscriptions.160 It is critical then to ensure that regulatory practices, such as price
controls, do not soften the competition between the MTN and Airtel and that regulatory policy is designed and
enforced in a manner that encourages possible future entry.
3.4 Current competition rules and
competition enforcement are not enough to
combat cartels and other anticompetitive
practices
Congo does not presently have a comprehensive National Competition Law or a National Competition
Authority, although it has taken tentative steps in this direction. As part of a set of the economic reforms in
1994,161 Congo enacted a law on competition which prohibits anticompetitive agreements but addresses neither
merger control nor abuse of dominance.162 This law does not appear to have been systematically implemented
to regulate competition, and in any case does not set penalties sufficient to discourage the most serious
anticompetitive practices.163
The most promising steps in competition law have occurred at the regional level through CEMAC.164 Formed
in 1994, CEMAC enacted a competition law in 1999 and updated it in 2019.165 Unlike Congo’s 1994 law, CEMAC’s
competition law covers mergers166 and abuse of dominance,167 and allows for significant penalties.168 CEMAC
does have its own enforcement authority, the Conseil Communautaire de la Concurrence (CCC)169 but has not
yet shown signs of enforcement efforts other than merger control.170 Although as of 2020, none of the CEMAC
member states other than Cameroon had either a national competition authority or a national competition
law,171 the CEMAC framework envisions joint enforcement of CEMAC competition law between CCC and national
competition authorities. A national competition law would not be redundant, however, because CCC retains
exclusive jurisdiction over larger mergers and over abuse of dominance and anticompetitive agreements, where
trade between member states is affected.172
160
Getting Connected: Competition and Diffusion in African Mobile Telecommunications Markets, Gebreab (WBG working paper) (2002).
161
Law No. 6-94 (Jun. 1, 1994). In 2010, Congo also created the Direction Générale de la Concurrence et de la Répression des Fraudes Commerciales (DGCRFC), but
it does not function as a full-blown competition authority. Decree 2010-40 (Jan. 28, 2010).
162
Law 6-94 (Jun. 1, 1994). There have been recent efforts to reform law this law, but no new legislation has been enacted. Concurrence: le Congo veut se doter
d’un cadre juridique, Agence d’information d’Afrique Centrale, Dec. 13, 2021, available at https://www.adiac-congo.com/content/concurrence-le-congo-veut-se-
doter-dun-cadre-juridique-133136.
163
The maximum fine is CFAF 100 million. Law No. 6-94 (Jun. 1, 1994), art. 26.
164
Other than the regional competition law discussed here, possible future regional developments will affect competition and competition policy. The contemplated
CEMAC unification of services markets would, for the telecommunications market, for example, encourage entry by increasing the size of the market and bring
regulation under CEMAC jurisdiction. The African Continental Free Trade Agreement (AfCFTA) may also incorporate a competition protocol. See, e.g., African
Continental Free Trade Area Phase II Negotiations: A Space for a Competition Protocol?, Gachuiri (UNCTAD working paper) (2020).
165
Regulation No. 1/99/UEAC-CM-639 (Jun. 25, 1999), replaced by Règlement relatif à la concurrence, Regulation No. 06/19‐UEAC‐639‐CM‐33 (Apr. 7, 2019),
available at http://www.droit-afrique.com/uploads/CEMAC-Reglement-2019-06-concurrence.pdf.
166
Regulation No. 06/19‐UEAC‐639‐CM‐33 (Apr. 7, 2019), title 4.
167
Id. art. 33.
168
Fines are up to 10 percent of worldwide turnover or 20 percent within CEMAC during the previous year or of 75 percent of the profits gained from the prohibited
practice. Fines are doubled for repeat offences. Id., art. 50, 73.
169
Id. arts. 8–18.
170
CCC made no enforcement efforts at all until 2016, when it started to accept merger proposals. Merger Control Update, Mayer Brown (Oct. 2016), https://
www.mayerbrown.com/-/media/files/perspectives-events/publications/2016/10/merger-control-update/files/get-the-full-report/fileattachment/161004-update-
antitrust.pdf.
171
Africa: Harmonising competition policy under the AfCFTA , Dawar & Lipimile, Concurrences, No. 2 (2020), p. 244.
172
Regulation No. 06/19‐UEAC‐639‐CM‐33 (Apr. 7, 2019), art. 20.
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 83
© mtcurado/iStockphoto.com
84 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 3 Boosting Productivity through Competition
3.5 Policy options to foster competition
The following policy options will be essential to foster competition and spur productivity. Detailed policy
recommendations are provided in Table 2.
3.5.1 Enhance private sector entry and ensure a level
playing field for private and public operators
Provide a clear economic rationale for State intervention in the market and enhance SOE transparency.
Congolese SOEs do not consistently compete on an even playing field relative to private sector firms. A principle
of subsidiarity governing the creation and maintenance of SOEs in the market to limit direct State intervention
to the supply of essential goods and services that would not be provided by private agents and based on a clear
economic rationale is essential. Enhancing SOE transparency would require: (i) a systematic and transparent
approval process, with clear criteria for the granting of state support measures (direct subsidies, loans at below
market interest rates, and State guarantees) that takes into consideration any market distortions likely to be
caused by such measures, and (ii) a process by which SOE audits are systematically carried out by reputable
international auditing firms to minimize risks of cross-subsidization and market distortions.
Promote the implementation of the competitive neutrality principle in Congo’s legislation. Key reforms
would include: i) introducing an accounting separation between SOEs’ commercial and non-commercial
activities; ii) adopting clear compensation mechanisms for public service obligations carried out by SOEs; iii)
mandating that SOEs earn rates of return comparable to the private sector under similar market conditions;
v) ensuring that SOEs do not receive preferential treatment in the application of regulation or the granting of
procurement contracts; and iv) avoiding preferential treatment of SOEs through direct subsidies, preferential
loans, forgiveness of debts, or other privileges that are not available to the private sector.
3.5.2 Promote pro-competitive regulation in selected
sectors: electricity and telecommunications
Electricity. Undertake a regular review of tariff rates to ensure tariffs support the financial viability of participants
in the sector. Tariffs need to be set at levels that allow firms to cover their operating costs, reinvest, and maintain
or improve quality of service. Ensure transparency in subsidies granted to electricity sector participants and the
performance obligations required of them to attract private-sector participation in the production sector and,
possibly in the longer term, the distribution sector.
Telecommunication. Consider reducing the role of the State in the telecom sector by ensuring that all of
Congo Telecom’s activities are based on a strong economic rationale and subject to market discipline. This can
be achieved temporarily through management arrangements or permanently through divestment strategies.
Guarantee third-party access, in particular to Congo Telecom’s fiber optic backbone and submarine cable
access, at prices based on costs to ensure better market outcomes for consumers. Review regulation in the
telecom sector to deprive ARCPE of the competence to set minimum consumer tariffs.
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 85
CHAPTER 3 Boosting Productivity through Competition
3.5.3 Strengthen the competition legislative and institutional
framework
Modernize competition regulation and establish an independent national competition authority.
Amendments to the Competition Law 6-94 to introduce provisions on merger control and abuse of dominance, as
well as fully-fledged competition advocacy powers, with full application at the national level, will help modernize
the legal framework. A national competition authority will help strengthen the institutional framework. The
government should consider expanding the capacity of DGCRFC 173 to a fully functioning national competition
authority to allow for adequate enforcement of the CEMAC competition law and any national competition
law to be enacted. Alternatively, it could set up an independent national competition authority with sufficient
resources—including qualified staff, and the power to enforce the competition law. The authority could also
have an advocacy role to promote competition by influencing government policy and building public awareness
on competition issues.
TABLE 2
Detailed Recommendations to Foster Competition
POLICY OPTIONS RESPONSIBILITY PRIORITY
Enhance private sector entry and ensure a level playing field for private and
public operators
• Introduce a principle of subsidiarity governing the creation and
maintenance of SOEs in the market to limit direct State intervention
in the market to the supply of essential goods and services that
would not be provided by private agents and based on a clear DGPP MEDIUM-TERM
economic rationale. Consider charging the national competition
authority—if such an authority is created—with the task of review of
the creation of SOEs and of the scope of SOE economic activities.
• Institute a systematic and transparent approval process, with
clear criteria for state support measures (direct subsidies, loans
at below market interest rates, and sovereign debt guarantees),
that takes into consideration any market distortions likely to
DGPP MEDIUM-TERM
be caused by such measures. Consider charging the national
competition authority—if such an authority is created—with the
task of reviewing all significant grants of state aid. (See Annex 1 for
the example of Moldova.)
• Ensure that SOE audits are systematically carried out by reputable
international auditing firms to ensure transparency of SOE
DGPP, CNC SHORT-TERM
operations and minimize risks of cross-subsidization and market
distortions.
• Implement competitive neutrality principles in Congo’s legislation.
Key reforms would include:
» introducing an accounting separation between SOEs’
commercial and non-commercial activities;
» adopting clear compensation mechanisms for public service
obligations carried out by SOEs;
» mandating that SOEs earn rates of return comparable to the DGPP, CNC MEDIUM-TERM
private sector under similar market conditions;
» ensuring that SOEs do not receive preferential treatment in
the application of regulation or the granting of procurement
contracts and;
» avoiding preferential treatment of SOEs through direct
subsidies, preferential loans, forgiveness of debts that are not
available to private sector.
173
Stands for Directorate General for Competition and the Repression of Commercial Fraud (Direction Générale de la Concurrence et de la Répression des Fraudes
Commerciales, DGCRFC)
86 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 3 Boosting Productivity through Competition
POLICY OPTIONS RESPONSIBILITY PRIORITY
Promote pro-competitive regulation in selected sectors: electricity and
telecommunication
• Institute a regular review of tariff rates for electricity to ensure
market discipline, with a process that ensures tariffs are reflective
of the costs of efficient firms, and thus ensure financial viability of
participants in the sector. To the extent that increased consumer Ministry of Energy,
SHORT-TERM
tariff rates are contrary to social aims of the State, consider ARSEL
instituting focused social tariffs allowing reduced rates for the
poor and vulnerable rather than maintaining below-cost tariffs
for the entire market.
• Ensure clarity and transparency of subsidies granted to electricity
sector participants and the performance obligations required Ministry of
of them with the view to attracting private-sector participation Energy (through MEDIUM-TERM
in the production sector and, possibly in the longer term, the legislation)
distribution sector.
• Consider reducing the role of the state in the telecom sector
Ministry of
(either temporarily through management arrangements or
Telecommunications
permanently through divestment strategies) by ensuring that all MEDIUM-TERM
and Digital Economy,
of Congo Telecom’s activities are based on a strong economic
ARPCE
rationale and subject to market discipline.
• Ensure that third-party access, in particular to Congo Telecom’s
Ministry of
fiber optic backbone and submarine cable access, is regulated
Telecommunications
in a transparent manner with access prices being determined MEDIUM-TERM
and Digital Economy,
based on costs in order to ensure better market outcomes for
ARCPE
consumers.
• Review regulation in the telecom sector that provides ARCPE
with the ability to set minimum prices on consumer tariffs. In the
Ministry of
event that ARCPE retains the ability to set minimum prices on
Telecommunications SHORT-TERM
consumer tariffs, ensure that this ability is only used sparingly,
and Digital Economy
only in instances where below-cost pricing threatens to drive
competitors from the market.
Strengthen the competition legislative and institutional framework
• Amend the Competition Law 6-94 by including provisions on
merger control and abuse of dominance as well as fully-fledged DGCRFC, Ministry
SHORT-TERM
competition advocacy powers for any future national competition of Commerce
authority, with full application at the national level.
• Expand capacity of DGCRFC to a fully functioning national
competition authority to allow for adequate enforcement of
the CEMAC competition law and any national competition law DGCRFC, Ministry
SHORT-TERM
to be enacted. Alternatively, set up an independent national of Commerce
competition authority with sufficient resources—including
qualified staff.
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 87
88 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
© Ericky Boniphace/Shutterstock.com
CHAPTER 4
Boosting
Productivity
through Digital
Technology
and Improved
Access to
Electricity
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 89
CHAPTER 4 Boosting Productivity through Digital Technology and Improved Access to Electricity
Higher productivity, the basis for sustained job creation and stronger and more equally distributed
economic growth, can derive partly from an accelerated digital transformation and improved access
to reliable electricity service. Congo’s digital infrastructure, especially broadband internet and policies
to accelerate the availability of affordable broadband access as well as the supply of digital skills, is key to
unleashing the full potential of the digital economy in Congo. A second crucial element is improving access to
electricity, addressing issues with connections, reliability, and the cost of self-generation, as well as prospects
for private participation, to bolster the productivity of Congo’s firms.
4.1 Accelerating productivity through
digital transformation
4.1.1 Digital technologies and why they matter for Congo’s
productivity and economic growth
Digital technologies, from computers to smartphones, continue to reshape economies, permeating
virtually every sector and aspect of daily life. ‘Digital technology’ is a broad term that refers to all digital
or computerized devices. Those devices have now changed the way people learn, work, trade, socialize,
produce goods, access public services and access information. As highlighted in the World Bank’s 2016 World
Development Report on Digital Dividends174 and underscored by the 2020 and 2021 volumes of the WBG
Africa Pulse reports, digital transformation is an important lever for successful economic transformation that
generates higher quality jobs as well as productivity and income gains.
Broadband technology and digitalization are contributors to productivity, economic growth and income
gains at several levels. There is common agreement that: (i) there is a “critical mass” effect which means that
broadband will make a higher contribution to economic growth in countries that are already adopting this
technology; (ii) adoption of digital technologies by enterprises can improve the efficiency of business processes
(e.g., marketing, inventory optimization, and streamlining of supply chains) and reduce various types of costs
(e.g., search, replication, transport and monitoring costs as well as networking and organization costs), leading
to higher productivity and higher sales;175 (iii) ICT services exhibit high productivity compared to other services
subsectors, with the highest levels in software programming and consulting as well as telecommunications.176
They accelerate productivity gains by introducing new consumer applications and services (e.g., new forms
of commerce and financial intermediation, utility and tax payments).177 Indeed, countries and regions with
vibrant innovation ecosystems tend to increase firms’ capacity to acquire, manage, and apply new knowledge
to change or introduce new products and processes, resulting in higher productivity rates.
The Government of Congo is committed to advancing digital transformation. Digital transformation is a
priority area of intervention for Congo, whose vision is described in a 5-year Digital Economy Strategy (“Vision
Congo Digital 2025”) that is embedded in the new National Development Plan (PND 2022-2026). The Ministry
of Posts, Telecommunication, and Digital Economy (Ministère des Postes, des Télécommunications et de
l’Economie Numérique, MPTEN) is leading the implementation of the national digital transformation agenda,
which revolves around three main pillars: (i) people-centric digital services (e-citizen), (ii) support to the private
sector (e-business), and (iii) acceleration of digital government service uptake.
174
The World Bank’s “World Development Report 2016: The Digital Dividend” illustrates how the development of the Digital Economy is a powerful driver of global
growth while promoting social inclusion, better use of resources, and the development of innovation.
175
Goldfarb, Avi, and Catherine Tucker. 2019. “Digital Economics.” Journal of Economic Literature, 57 (1): 3-43.
176
Nayyar, Gaurav; Hallward-Driemeier, Mary; Davies, Elwyn. 2021. At Your Service? : The Promise of Services-Led Development . Washington, DC: World Bank.
©World Bank.
177
Cirera, Xavier; Maloney, William F. 2017. The Innovation Paradox : Developing-Country Capabilities and the Unrealized Promise of Technological Catch-Up.
Washington, DC: World Bank. © World Bank. https://openknowledge.worldbank.org/handle/10986/28341 License: CC BY 3.0 IGO
90 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 4 Boosting Productivity through Digital Technology and Improved Access to Electricity
Driven by the five-year Digital Economy Strategy “Vision Congo Digital 2025,” many reforms and programs
have been launched. These reforms aim to: (i) reinforce the digital infrastructure (including terrestrial fiber
links to connect to neighboring countries through the African Development Bank’s Central Africa Fiber-
Optic Backbone project, public data centers, the Google-Cloud project, and the 2Africa submarine cable);
(ii) strengthen the legal and regulatory environment to build trust and favor competition (e.g., concession
of the fiber optic network of the electricity company, new public-private partnership (PPP) law, adoption in
2019 of laws on personal data protection and electronic transactions and on cybersecurity in 2020); and (iii)
improve coverage (through the Electronic Communications Universal Access and Service Fund, Fonds pour
l’Accès et le Service Universels des Communications Électroniques, FASUCE) where no infrastructure exists)
and affordability (exemption from customs duties and taxes for a period of two years for cell phones, electronic
tablets, computers and electronic payment terminals).
As a result, the ICT sector is relatively well developed in Congo and already represents a significant part
of the economy, but it has not yet achieved its full potential (Box 8). According to the telecom regulatory
agency, ARPCE, the ICT sector (telecom, business management tech, logistics tech, e-commerce and FinTech)
contributed about three percent of Congo’s GDP in 2021.178 For instance, mobile operators generate a turnover of
US$337 million,179 and the sector represents at least six percent of private sector employees180 and a significant
number of indirect jobs in the informal sector (such as resellers of recharge cards, telephone booths, hardware
maintenance and repair staff, and electricians).
BOX 8
Impact on growth of increased mobile broadband
penetration
A recent study from the International Telecommunication Union (ITU) focused specifically on
Sub-Saharan Africa and measured the impact of broadband, digital transformation, and policy
and regulatory frameworks on growth in the continent. It analyzed the economic contribution
of broadband and digitization between 2010 and 2017 for 34 countries in the Sub-Saharan Africa
region, including Congo. This ITU study identified several levers that have direct or indirect impacts
on growth in African countries:
• Mobile broadband has a significant impact on GDP growth in Africa
» An increase of ten percent in mobile broadband penetration yields a 2.5 percent increase in
GDP per capita.
• Affordability remains a key enabler for the adoption of the mobile broadband technology
in Africa:
» A ten percent drop in prices will boost adoption by more than 3.1 percent.
» Increasing average disposable income (proxied by GDP per capita) by ten percent yields 2.1
percent more fixed broadband adoption.
When applied to Congo, increasing unique mobile broadband penetration by 20 points (from
25 percent to 45 percent) is estimated to increase GDP per capita by five percent, which is
equivalent to about US$509 million in additional GDP.
Source: ITU (2019), Economic contribution of broadband, digitization and ICT regulation: Econometric modelling for Africa. http://handle.itu.
int/11.1002/pub/8136517c-en
178
Reported by ARPCE, 2021.
179
GSMA, 2021.
180
Digital Economy Development Strategy (Congo Vision Digital 2025, April 2019).
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 91
CHAPTER 4 Boosting Productivity through Digital Technology and Improved Access to Electricity
Congo is marked by recent significant progress in the deployment of broadband connectivity, but limited
policy actions have been taken so far to accelerate the adoption of digital technologies and digital
inclusion in the country. Since its inception, several reforms and government programs have been launched and
produced results, notably in terms of digital infrastructure deployment and internet broadband affordability as
well as reinforced and more complete legal and regulatory environment to build a digital economy and improve
trust. While ICT seems to emerge as the fastest growing sub-sector in Congo, adoption of digital tools and
services among micro, small and medium enterprises in Congo has largely been muted, and their participation
in the digital economy is hampered by structural endogenous and exogenous issues (see analysis in Section
4.1.4). The potential gains of digital transformation will depend on Congo’s success, inter alia, in: (i) making
the internet universally accessible and affordable (boosting connectivity), (ii) strengthening skills that allow
individuals, entrepreneurs, and public servants to seize opportunities in the digital world; (iii) making regulations
that create a vibrant business climate and let firms (including informal ones) leverage digital technologies
to compete and innovate. This framework for analysis is captured in Figure 33, simplifying the process of
digital transformation into the improvement of digital infrastructure, the strengthening of digital skills, and the
promotion of technology adoption by firms.
FIGURE 33
Digital transformation as a key driver for productivity, economic growth and job creation
Digital
Infrastructure
Firm Drive Productivity,
Digital Skills Technology Economic Growth and
Adoption Job Creation in Congo
Source: World Bank staff.
4.1.2 Digital infrastructure in Congo
As in the rest of Africa, people in Congo access the internet mainly from their mobile phones. Mobile
coverage improved significantly in Congo over the past five years, placing Congo among the best countries in
the region. This has been made possible by its rapid urbanization, with 70 percent of the population living in
the urban areas of Brazzaville, Pointe-Noire and the small towns in between. 3G and 4G coverage reached 88
percent and 84 percent of the population respectively by January 2022.181
While the geographical reach of mobile broadband networks has significantly increased in recent years,
uptake of mobile high-speed internet services remains hampered by the level of prices. Even though mobile
broadband prices have significantly dropped over the past few years, mobile broadband remains expensive. In
2020, the average retail price of a 1GB data plan was 5.6 percent of the average monthly income of a Congolese,
far from the “1 for 2” measures for affordable internet (where the price of 1GB mobile data is at two percent
or less of average monthly income) and much more expensive than most of its peers (see Chapter 3, Figure
32). The Herfindahl-Hirschmann Index182 of the mobile market, which measures its competitiveness, scored at
181
According to Telegeography, in January 2022, MTN covered 93 percent of the population in 2G, 87 percent in 3G and 70 percent in 4G while Airtel covered 90
percent in 2G, 88 percent in 3G and 83 percent in 4G.
182
The Herfindahl-Hirschman Index (HHI) is used to determine market competitiveness. A market with an HHI of less than 1,500 is considered a competitive
marketplace, an HHI of 1,500 to 2,500 is moderately concentrated, and an HHI of 2,500 or greater is highly concentrated.
92 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 4 Boosting Productivity through Digital Technology and Improved Access to Electricity
5,104 in 2021 with a negative trend over the past ten years (and 3,344 in 2012).183 This weak competition in the
mobile market (with only two main mobile network operators: Airtel and MTN) combined with Congo Telecom’s
dominant position on the national fiber backbone translates to below average mobile adoption and usage, with
unique mobile users equal to just 48 percent of the population and unique mobile internet users equal to just 25
percent (see Chapter 3, Figure 31-b).
Congo fares far less well on fixed broadband, with a very low penetration rate of households. With 28,900
fixed broadband internet subscribers (as of December 2021 according to Telegeography), representing a
penetration rate of 2.2 percent of households (compared to 8.9 percent average across Sub-Saharan Africa),
Congo has low usage rates. Dominated by the state-owned incumbent Congo Telecom, the fixed broadband
market has been hampered by poor availability, prohibitive costs, and slow installation of fixed line services.
The arrival of mobile money offers by mobile operators, with the support of the Government of Congo and
the Bank of Central African States (Banque des États de l’Afrique Centrale, BEAC), has revolutionized the
sector and greatly increased financial inclusion in Congo. The bank account penetration rate in Congo
remains low (with the extended bank account penetration rate including microfinance networks estimated
at 33 percent of the 15+ population in 2018). The COVID-19 pandemic exerted strong positive effects on the
development of Mobile Money in Congo: the number of active mobile money accounts has increased from
912,000 in December 2018 to 2.7 million as of August 2021, representing a penetration rate of 50.2 percent
of the population. Usage is relatively high as well, with an average of 21 transactions per user per month and
an average monthly revenue per user of CFAF 527 (equivalent to US$ 0.9), but the average transaction value
remains very low at CFAF 4,303 (the lowest of all CEMAC countries) (Table 3). The take-off of mobile money
in Congo is expected to have a positive impact on growth, by facilitating trade and improving access to credit.
Today, mobile money has a significant positive impact on jobs in Congo, with 41,000 active mobile money agents
registered as of August 2021. Public entities, despite having a very strong potential for encouraging electronic
transactions, have little presence to date in the mobile money ecosystem. Between July and December 2020,
just 1,325 electronic payments were made to pay electricity bills in Congo, while 286,000 customers used
mobile money to pay for their monthly subscription to the cable channels of the Canal+ package.184
TABLE 3
Distribution of electronic money transactions in CEMAC countries in 2020
Central
Republic Equatorial
Cameroon African Gabon Chad
of Congo Guinea
Republic
Average transaction
15,075 24,140 4,303 11,206 62,745 10,830
value (CFAF)
Number of active
8,453,605 57,922 2,463,621 896,967 6,213 29,267
accounts
Number of active
accounts as % of 31.8% 1.2% 44.6% 40.3% 0.4% 0.2%
total population
Source: BEAC (Bank of Central African States) - Electronic money payment services in CEMAC in 2020. June 2022.
183
From GSMA.
184
ARPCE, 2020, White Paper on Posts, Telecommunications and the Digital Economy.
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 93
CHAPTER 4 Boosting Productivity through Digital Technology and Improved Access to Electricity
4.1.3 Investing in people: foundational and digital skills
Congo faces persistent human development challenges with rising unemployment. With unemployment
rising to 22.8 percent185 and youth unemployment even higher (with 31.7 percent aged 10-24 years), digital skills
become even more important, with the potential for creating and filling productive and sustainable jobs. Despite
its achievements in education, the country faces challenges linked to the quality of learning and educational
attainment, contributing to a high unemployment rate amongst youth (Table 4). Combined with the learning
gap, this educational shortfall impedes the acquisition of digital skills essential for the labor market. Finally, lack
of digital skills is identified as the biggest barrier for consumers in Sub-Saharan Africa to the adoption of mobile
internet services before affordability.186
TABLE 4
Participation in education and employment
Key human capital and employment indicators Republic of Congo
Literacy rate (% of people ages 15 and above) 80.3% (2018, UNESCO)
Unemployment (% of total labor force) 22.8% (2020, ILO)
Unemployment, youth total (% of total labor force ages 15-24)
42.6% (2020, ILO)
(modeled ILO estimate)
Source: ILO, UNESCO, UNDP. June 2022.
Congo needs to boost the supply of digital skills at all levels (basic,
intermediate, advanced, and highly specialized) through formal education
and equip youth with employable in- demand skills (Figure 34 - a).
Consultations with various stakeholders (i.e., digital incubators, consulting firms,
and entrepreneurship associations) reveal a mismatch between the digital skills
acquired through formal education and those sought by employers and firms, Most primary
which often result in unemployment in the ICT sector. There are no foundational
and secondary
digital skills-related courses in the curriculums at primary and secondary
levels, where acquiring such skills at an early age would build the foundations schools are
to develop more intermediate and advanced skills and later strengthen and constrained
specialize as a professional career. Accurate and timely data on existing digital
by the lack of
skills adoption amongst teachers and students, as well as in-demand skills by
industry is nonexistent. Such a data gap makes it difficult to ascertain the level, ICT equipment,
quality, and availability of skills in the labor market and address rising youth the high cost
unemployment, particularly in light of COVID-19 pushing many businesses to
of internet
go digital. Additionally, science, technology, engineering, and math (STEM)
education has a critical role to play in addressing unemployment amongst service, and
youth. In 2017, 15 percent of the total graduates in tertiary education were from energy.
STEM fields, compared to Rwanda (12.9 percent in 2019), Kenya (16 percent in
2016), and Ghana (16.4 percent in 2019) among others (Figure 34-b). However,
progress toward gender diversity and inclusion is lagging, with only 20.8 percent
of students enrolled in STEM fields being female compared to 79.2 percent of
male students in 2017.187
185
World Bank, 2020. World Bank Data: Unemployment, total (percent of total labor force) (modeled ILO estimate - Republic of Congo. https://data.worldbank.org/
indicator/SL.UEM.TOTL.ZS?locations=CG
186
GSMA, 2016. Connected Society: Consumer Barriers to Mobile Internet Adoption in Africa. https://www.gsma.com/mobilefordevelopment/wp-content/
uploads/2016/07/Consumer-Barriers-to-mobile-internet-adoption-in-Africa.pdf
187
UNDP, 2020. Human Development Reports. The Republic of Congo. https://hdr.undp.org/en/countries/profiles/COG
94 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 4 Boosting Productivity through Digital Technology and Improved Access to Electricity
FIGURE 34
Insufficient supply of digital education and graduates with STEM background is a constraint
for digital skills development
a. Digital Skills Framework for general workforce and population − 7 competencies and 4 pro ciency levels
Digital Skills
Digital Skills: Pro ciency Level
7 Domains The ability to access, manage,
understand, integrate, communicate, Highly specialized
1. Devices and software operation
evaluate and create information
safely and appropriately.
2. Information and data literacy
Advanced
3. Communication & collaboration
4. Digital content creation
Intermediate
5. Safety
6. Problem solving
Basic
7. Career related
Percent of workforce
Source: Bashir, S. (2020). Based on European e-Competence Framework 3.0 (2014), http://www.ecompetences.eu
b. Percentage of graduates from STEM programs in tertiary education between 2010-2019*
Malaysia
Vietnam
Cameroon
Indonesia
Kenya
Ghana
Congo
Rwanda
Angola
0 10 20 30 40
Source: Based on the UNESCO Institute of Statistics, 2019. Indicator: Percentage of graduates from tertiary education graduating from Science, Technology,
Engineering, and Mathematics programs in tertiary education, both sexes (percent). *2010-2019. Data refers to the most recent year available during the period
specified. June 2022.
A large basic digital literacy gap still prevents a sizable part of the population from adopting digital
technology. As of 2018, only 11.1 percent of the population of Congo reported using computers compared to
35.5 percent in Gabon (Figure 35).188 While the National Education Sector Strategy (2021-2030) acknowledges
the importance of utilizing ICT tools in learning, there is still no inclusion of digital skills courses in the formal
education system. Efforts to train trainers are fragmented and lack a structured nationwide initiative and
framework. Programs such as China Funds-in-Trust training 250 teachers in primary, secondary, and technical
and professional education with ICT and ICT for education189 would be a starting point for a nationwide
program, leveraging already an existing digital skills training framework (i.e., UNESCO’s commonly adopted
ICT Competency Framework as used in Nigeria190 and Tanzania191). Kenya provides a useful example of how to
promote digital literacy (Box 9).
188
OECD, 2021 based on ITU World Telecommunication / ICT indicators Database. CUA/OCDE (2021), Africa’s Development Dynamics: Digital Transformation for
Quality Jobs, CUA, Addis Ababa/Éditions OCDE, Paris.
189
UNESCO, 2017. UNESCO China Funds in Trust Project Phase II (2017-2018).
190
UNESCO, 2021. Nigeria identifies priority areas for Open Education Resources.
191
Ministry of Education and Vocational Training of Tanzania, 2015. ICT Competency Standards for Teachers in Tanzania.
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 95
CHAPTER 4 Boosting Productivity through Digital Technology and Improved Access to Electricity
FIGURE 35
Congo’s digital literacy gap is a barrier for digital adoption
Use of computer per 100 inhabitants (%), 2010-2018
40
35
30
25
20
15
10
5
0
Gabon Equatorial Guinea Cameroon Congo Burundi
2010 2018
Source: OECD, 2021. Africa’s Development Dynamics: Digital Transformation for Quality Jobs. June 2022.
Availability of ICT infrastructure and equipment is a recurring problem in Congo. Most primary and secondary
schools are constrained by the lack of ICT equipment, the high cost of internet service, and energy. In 2018,
the proportion of primary and secondary schools with access to computers for pedagogical purposes was only
12.2 and 25.3 percent, respectively.192 The Government is preparing to launch a program, “cartable numérique ”,
which aims to provide connectivity and ICT tools to all schools, a nationwide digital platform, and a set of
interactive and open-source pedagogical content to promote the use of ICT tools digital skills. Additionally,
16 secondary schools and high schools have been connected through the universal service fund (FASUCE) to
the internet and received fully equipped multimedia rooms. Only a handful of multimedia rooms are available
at the University Marien Ngouabi and the University Denis Sassou Nguesso. Connecting universities to high-
speed broadband was attempted in 2017 under the African Development Bank’s Central Africa Fiber-Optic
Backbone project, where 11 faculties of the University Marien Ngouabi have been connected. However, due to a
lack of annual funding and the absence of affordable service rates agreed upon with the service providers, the
connection to the internet has not been sustained, leaving the faculties yet again unconnected. Finally, there is
no National Research and Education Network dedicated to fulfilling the connectivity, research and development
needs of higher education institutions.
The supply of advanced and specialized digital skills training is driven by the private sector, concentrated
in Brazzaville and Pointe-Noire. Private sector actors play a key role in filling the void left by the formal
education system. Many incubators and non-governmental organizations (i.e., Yékolab, Start Lab, Kosala, Club
Congo France Numérique, PRATIC, PUITS/Osiane, CNEUF, BantuHub), located in Brazzaville and Pointe-Noire,
partner with the Government to support digital skills development, but are often overwhelmed by the number of
applicants and have limited capacity to fill the nationwide digital skills gap. There are too few highly specialized
degree programs in technology/ICT available in the public higher education system, while private sector actors
fill the gap with short-term training, boot camps, and mentorship programs. The University Marien Ngouabi
stands as the country’s main higher education institution, followed by Denis Sassou Nguesso University. The
latter hosts the first Center for Research in Artificial Intelligence in Africa and enrolls students in a bachelor’s
in computer science program. However, the challenge of reaching the critical mass of talents with in-demand
digital skills would persist without a strong grasp of foundational and advanced skills (including literacy, digital
fluency, numeracy).
192
UIS, 2022. UIS Statistics (unesco.org)
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CHAPTER 4 Boosting Productivity through Digital Technology and Improved Access to Electricity
BOX 9
Spotlight on Kenya’s Digital Literacy Program
© Montri Thipsorn/bigstockphoto.com
Led by the Ministry of ICT, Innovation and Youth Affairs, the Digital Literacy Program (DLP) (also
known as DigiSchool) is designed to introduce digital technologies to primary school children through
training programs for teachers and trainers, provision of ICT tools and broadband connectivity,
and digitized education content materials and curriculum. To date, the program has equipped over
20,000 primary schools. The impact of the Program has already started showing positive results, with
teachers reporting improvement in children’s engagement, reduced absenteeism, enhanced digital
skills amongst teachers, and raised Kenya’s global profile as an ICT hub.
The Presidential Digital Talent Program. The public and private partnership plays a key role in
Kenya in building a critical mass of highly specialized talent pool. The Ministry of ICT, Innovation, and
Youth Affairs launched a 12-month internship program with training, mentorship, and incubation for
graduates from ICT and engineering fields. Over 1,200 graduates have been trained and 400 trainees
have been selected contribute to the Digital Literacy Program to train 20,000 Kenyans in basic digital
skills.
Ajira. Launched by the Ministry of ICT, Innovation and Youth Affairs, the program offers basic training,
mentorship, and advisory services. The project targets youth with little to no experience in online
jobs and equips them with basic soft and digital skills across five implementation locations. Upon
successfully completing the training, the participants would transition to a mentorship program to
enhance their skills, exploring access to online jobs through its platform and resources.
4.1.4 Adoption of productivity technologies by Congo’s
firms
Most firms in Congo have adopted the key technologies (mobile phones, computers, smartphones, and
the internet), but small firms lag in adoption. Mobile phones, computers, and smartphones are widespread,
while access to the internet is somewhat more limited, because internet services costs are high in Congo,
reaching on average up to 20 percent of total expenses for the smallest firms (one to ten employees). According
to firms surveyed about their adoption of technology (Box 10), 18 percent of total revenues in 2021 (Figure 36-
b) were spent on investment in information and communication technologies (acquisition of ICT equipment,
software, and access to the Internet). 100 percent of the surveyed firms provide computers to at least half of
their employees, and 80 percent provided smartphones or tablets. The main connection type for the surveyed
firms is DSL (digital subscriber line) or fiber for 70 percent of them, and the rest use mobile internet or dial-up
internet connectivity. However, the quality of service provided by telecommunication operators is considered
unsatisfactory by firms. In particular, the poor quality of network deployment and operation, frequent outages,
and slow connections are to blame. The use of websites is, however, still limited, with only 50 percent of the
surveyed firms making use of them, while 80 percent of surveyed firms use social media (WhatsApp being the
most used, and then Facebook, Twitter, Instagram, and LinkedIn).
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CHAPTER 4 Boosting Productivity through Digital Technology and Improved Access to Electricity
BOX 10
Firm Adoption of Technology (FAT) survey in Congo
A simplified FAT survey was conducted in Congo during March-April 2022 by the World Bank in
collaboration with the Ministry of Digital Economy, INS-Congo, the Ministry of Finance, Chambre
de Commerce Pointe-Noire (CCIAM-PNR), UniCongo (Union Patronale et Interprofessionnelle du
Congo), UNOC, Kosala and DSI-Club Congo. This survey on technology adoption by firms collected
quantitative and qualitative data on a sample of just over 40 firms (across Brazzaville, Pointe-Noire,
Sangha, Lékoumou and Bouenza), to better understand the major constraints to technology adoption
and their current use of technologies. Only formal firms and those connected with internet were able
to respond to the survey.
The FAT survey (43 questions) was developed because despite widespread discussion about digital
and complementary technologies, information on the actual technologies used by firms is surprisingly
scarce, particularly for developing countries. The data for Congo aims to shed new light on where
Congolese firms lie on the technology adoption spectrum, the variation across firms, and the major
constraints to technology adoption.
The surveyed firms were: (i) 15 percent from the agriculture sector, 15 percent from the manufacturing
sector, and 70 percent from the services sector; (ii) two-fifths very small firms (1 to 10 employees),
one-fifth small firms (10 to 20 employees), one-fifth are medium size firms (21 to 99 employees), and
one-fifth large firms (over 100 employees).
For general business functions common to all types of firms, adoption of emerging technologies is still low,
except for standard software for back-office tasks. Except for a small share of firms, Congolese enterprises
still mostly use manual procedures and pre-digital technologies to perform general or sector-specific business
functions. Even though some firms are adopting more sophisticated technologies in a given business function
(e.g., digital payment methods, enterprise resource planning systems), these are not the most used technologies
by the firm or by its customers. Only about one-third of surveyed firms use specialized management software
tools such as inventory/point-of-sale software and advanced management tools such as enterprise resource
planning software systems). For most micro, small, and medium enterprises, methods for production planning
functions are by hand, and only a small share of them use standard computer software. The most common
method of payment is still cash or check, although 25 percent of surveyed firms report using online platforms
for sales and payments (e.g., online banking, mobile wallet, PayPal, or similar App-based payment service). Only
a few firms appear to be diversifying their payment methods using multiple sources, but a very low share of
transactions occur through these methods. Only a few Congolese firms have a digital transformation strategy
to drive a higher level of productivity and invest in more autonomous technologies (such as cloud computing,
robots, 3D-printers, artificial intelligence, or big data analytics), or customer relationship management tools.
Solutions related to cloud computing, mobility and enterprise social networks are still often marginal outside
the technology, media, and telecom sectors. During the COVID-19 pandemic, large firms report having invested
in new digital solutions (e.g., cloud services, video-conference systems, and various collaborative online tools)
in the initial months of the crisis while small firms did not do so.
Marketing is still conducted primarily face-to-face, while sales are predominantly conducted at the
establishment’s premises or by phone. Around 75 percent of surveyed firms report using the internet (e.g.,
Facebook, WhatsApp, or other social media) from time to time to better understand their customers for
marketing purposes and one-third of them to diversify their sales opportunities by reaching new markets. The
main methods for marketing reported remain face-to-face or by phone. Only 50 percent of the firms think that
a digital online presence makes them more competitive. Yet digital-oriented merchants have been far more
resilient in the COVID-19 pandemic, compared with firms that operate mainly offline businesses. Notably, the
98 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 4 Boosting Productivity through Digital Technology and Improved Access to Electricity
high cost of digital-related sales services and numerous digital security incidents prevent small entrepreneurs
from considering online platforms as an important sales channel. Whether small or large, very few companies
today receive orders placed online (via social networks, company websites, e-commerce platforms, mobile
applications, and other means). As a matter of fact, e-commerce has not taken off in Congo due to many
structural reasons (e.g., cost and reliability of logistics and customs services, the absence of a postal addressing
system, a deep-rooted culture of face-to-face interaction, low trust in electronic transactions, and the limited
number of internet exchange points between different access providers).
Most surveyed firms have a workforce with the necessary technological and technical skills to harness the
potential of digitalization for their productivity and growth. Half of the surveyed firms responded that the
use of the internet has enabled them to upgrade the skills of their employees. Surveyed firms (totaling about
4,500 permanent employees) reported that on average 50 percent of all employees (of whom 30 percent
are women) have basic digital skills. Yet nearly 60 percent of surveyed firms report that they have in-house
expertise (not necessarily certified) to develop, customize or significantly modify any computer hardware
or software. According to the data collected, firms report that 30 percent of their workers (only 20 percent
of whom are women) have advanced or specialized digital skills (most of them were trained overseas), but
their competencies are not fully utilized. The digital skills most in demand by surveyed firms improved basic
digital literacy (use of digitally controlled devices, use of the internet, communication through ICT, or use of
Microsoft Office software), as well as digital marketing, social network development, and content management.
Next in line are skills for technical information technology (IT) support and data storage techniques as well
as cybersecurity (management, organization and risk management, data protection). To some extent, skills in
data analysis, Big Data, artificial intelligence (Machine Learning), web and/or mobile application development
and design, or information systems development, ERP, are also desired, but are not the most in-demand by the
firms surveyed, except for firms specializing in ICT or in extractive activities (especially for the use of disruptive
technologies).
Firms report that difficulty in obtaining financing is the main obstacle to adopting and using new digital
technologies. The next greatest barriers (Figure 36-a) reported are equally distributed as follows: cost of
electricity and/or internet connection and lack of information about what technologies to adopt. Indeed, the
greatest barrier faced by firms of all size groups is financial, with around 70 percent of surveyed firms reporting
that this is a top obstacle, especially in times of crisis (such as the COVID-19 pandemic). The lack of equity,
capital, cash flow, or budget for investments is a real brake on firms and startups planning to invest in digital
technologies or take advantage of technology services.
FIGURE 36
Firms’ financing constraints are the main barrier to digital adoption
a. Perceived top barriers to adoption and usage of digital b. Percentage of revenue spent on ICT investments in 2021
technologies by rms
30
Financial constraints
25
Expensive energy or internet
Lack of information & knowledge 20
Cost or no economic bene t
15
Government regulations
10
Lack of technical skills
5
Uncertainty of demand
No consumer preference 0
Very small Small Medium Large
0% 20% 40% 60% 80% (<9) (10 to 20) (21 to 99) (>100)
Source: World Bank, findings from rapid Firm Adoption of Technology (FAT) survey among 44 firms in Congo, April 2022. June 2022.
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Like the wider private sector, Congo’s digital entrepreneurship ecosystem remains nascent, and while
investment in tech-based startups is on the rise, there is limited support for these firms beyond an incubation
stage. A limited number of tech startups have been pushing the envelope on innovation and generating
excitement around the sector. COVID-19 has increased the value of FinTech, e-logistics, e-commerce, and
e-health. Recent efforts by the government through a small and medium enterprise (SME) guarantee fund,
the Guarantee and Support Fund (Fonds d’impulsion de garantie et d’accompagnement), or local incubators
through participatory financing mechanisms to partially bridge the financing gap are positive trends, but there
remains a need to secure long-term business investors for important seed and follow-on fundings. Congolese
startups raised US$1 million in 2021 from investment funds and other venture capital firms, as opposed to
Senegalese startups, who reached US$353 million in 2021 (a large boom since their startup act adoption in
2019).193 Today, local incubators are concentrated in Brazzaville and do not have a sustainable strategy for
graduating enterprises from incubation and acceleration programs. Bottlenecks in the business enabling
environment and gaps in enabling inputs, such as the inaccessibility of appropriate growth-oriented financing
or the limited supply and pipeline of digitally skilled talent, present further hurdles to the expansion of digital
entrepreneurship. More specific to Congo, local digital businesses could explore developing software and other
technologies for the mining, agricultural, and tourism sectors (see Box 11 for examples in peer countries).
BOX 11
Development of digitalized productive value chain –
spotlight on Botswana
© THEGIFT777/iStockphoto.com
Digitalization can address the structural challenges of a country like Congo, particularly in the
productive sectors of mining, timber and cash crops (sugar cane, palm oil, coffee and cocoa,
rubber, among others). Mines are increasingly using advanced software and digital solutions, including
drones, to locate diamonds and optimize mining processes as well as grade diamonds. For instance,
Debswana Diamond Mining Company, the joint venture between the Government of Botswana and
De Beers, is an advanced IT user with 4IR integrated across its operations and supply chain to include
extensive digitalization of operations, where the use of advanced technology has made it possible
to operate a “no touch” mine, eliminating the need for any manual handling in the processing of the
diamonds. This involves the use of big data, real-time data capture, sensors, IoT, wearable devices for
maintenance and operator safety, integrated remote operating centers, blockchain technology, etc.
Debswana is already using e-commerce platforms to do business, including SAP, Ariba, and eTravel
and has significant experience and expertise in information security management. These advanced
technologies are behind what has made Botswana’s diamond mining industry a powerhouse in global
rough diamond production and Botswana’s largest foreign income earner with a relatively small
number of staff and safe working conditions.
Sources: United Nations Conference on Trade and Development (UNCTAD) (2021)
193
Partech (2021), 2021 Africa Tech Venture Capital Report. https://partechpartners.com/2021-africa-tech-venture-capital-report/#section1.
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CHAPTER 4 Boosting Productivity through Digital Technology and Improved Access to Electricity
4.1.5 Policy options: how Congo can drive technological
transformation for better productivity?
The following policy priorities would activate the levers identified above, thus removing constraints on
the development of the digital transformation in Congo and enabling the expected dividends of digital
technology to be realized. Detailed policy recommendations are provided in Table 5.
Multiple actions will help enhance the availability of affordable broadband access for firms. The government
should favor infrastructure sharing to lower costs of deployment and foster competition. Players with dominant
market position should be identified, and access to their key infrastructures should be regulated. Strengthening
competition in the digital sector, especially fiber optic wholesale market and the international submarine cable
will improve affordability of digital services (see Chapter 3). It is also essential to better regulate PPPs to benefit
from better cooperation between the public and private sectors. The recent creation of a Ministry and the
new law dedicated to PPPs are clearly significant progress, but it is essential to quickly prepare implementing
decrees to the new PPP law. Adequate legislation would not only allow for the identification of successful
projects, but also for the effective and transparent management of these projects, while ensuring that the
development objectives are met and that investors are satisfied. Finally, reviewing the fiscal and parafiscal
policy of the digital sector will help reconcile the revival of the sector (and its socio-economic impacts in terms
of socio-economic inclusion) with the constraints imposed by the balance of public finances.
Trust in digital payments and digitalization of public services are essential to increase usage of digital
financial services, which, in turn, can improve firms’ productivity. Digital payments help reduce operating
costs and time. It is therefore essential to strengthen trust and confidence in digital payments and financial
services by developing new regulations for better payment infrastructure development and user protection to
digital payment methods (aligned with CEMAC regulation). Specific actions include standardizing complaint
and dispute resolution procedures; and adopting mechanisms such as escrow accounts and trusted third party
labels. Digitalization of public services is another factor that reduce costs, time, and improve productivity of both
private and public sectors. Digitalization of G2P (Government-to-People), G2G (Government-to-Government)
and P2G (Person-to-Government) payments (e.g., public utility payments, tax payments, social transfers,
government wages) will accelerate productivity, financial inclusion, women’s economic empowerment, and
government fiscal savings.
A multi stakeholders’ approach will be necessary to improve the supply of digital skills to close the digital
skills supply-demand gap. The broader government objective should be to adopt and implement an education
sector ICT policy and framework following the internationally recognized global frameworks for digital skill
development (from basic to advanced). In this regard, integrating digital skills courses as cross-cutting subjects
in the formal education system would be instrumental in developing such skills from an early age, as well
as leveraging private sector involvement in technical and vocational education and training) and in tertiary
education. Fostering collaboration between research institutes, universities, and the private sector actors
through research and development centers focusing on digital solutions (particularly in data management,
user experience design, cloud computing, and emerging technologies) is equally important. Addressing the
existing skills supply and demand gap in the labor market would require a robust skills gap analysis, followed by
digital skills training programs with certifications, and digital platforms to boost employment (e.g., job matching
platforms, talent management boards, skills orientation services). Finally, it is essential to ensuring sustainable
financing for digital skills development training models (digital academies, bootcamps, digital labs, etc.) and
digital connectivity within training facilities and universities, in partnership with public institutions, the private
sector, and non-government actors.
A multi-level approach to policy is essential to improve the enabling environment for digital technology
adoption and for high growth technology-enabled businesses. The government needs to design and
enforce key policies and regulation for business climate improvement overall, for better access to finance and
public procurement for SMEs, and for start-up innovation. New policies include business-enabling regulation,
application of the startup act and anti-corruption framework, possible tax relief policies for ICT and for research
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CHAPTER 4 Boosting Productivity through Digital Technology and Improved Access to Electricity
and development, government-backed partial credit guarantees, crowdfunding platforms, and regional
harmonization to African Continental Free Trade Area (AfCFTA) and CEMAC regulations. Modernization of key
public services such as the postal sector, trade and customs, and business registration can improve the uptake of
digitalization initiatives, accelerate e-commerce development, and spur technology-enabled business creation.
Support for customized firms/worker training programs can improve adoption and use of digital technologies
(including collaborative digital platforms for local ecosystems, operational research and data analytics, digital
business and entrepreneurship support, reskilling and skills development programs, innovation contests, and
grants funding schemes) especially if targeted to smaller firms and productive sectors such as manufacturing
and agribusiness as well as technology-intensive sectors.
TABLE 5
Detailed Recommendations to Accelerate Digital Transformation
POLICY OPTIONS RESPONSIBILITY PRIORITY
Enhance the availability of affordable broadband access
• Strengthen competition in the fiber optic wholesale ARPCE (Telecoms
market and the international submarine cable market Regulator), Ministry of Posts, SHORT TO
(see Chapter 3) to improve affordability of digital Telecommunications and Digital MEDIUM-TERM
services. Economy (MPTEN)
• Favor infrastructure sharing to lower costs of
deployment. Players with dominant market position ARPCE, MPTEN, Ministry of
SHORT-TERM
should be identified, and access to their key Equipment and Public Works
infrastructures regulated.
• Prepare implementing decrees to the new PPP law
SHORT TO
to ensure its implementation and benefit from better Ministry of PPPs, MPTEN MEDIUM-TERM
cooperation between the public and private sectors.
• Review the fiscal and parafiscal policy of the digital
sector to reconcile the revival of the sector with MPTEN, Ministry of Finance, SHORT TO
the constraints imposed by the balance of public Ministry of Plan and Economy MEDIUM-TERM
finances.
Increase use of digital financial services
• Strengthen trust and confidence in digital payments BEAC, Ministry of Finance,
MPTEN, Commercial Banks,
and financial services by developing new regulations
Direction Générale de la SHORT TO
for better payment infrastructure development and MEDIUM-TERM
Concurrence et de la Répression
user protection to digital payment methods (aligned des Fraudes Commerciales
with CEMAC regulation). (DGCRF)
DGDEN, MPTEN, ARPCE, Ministry
• Digitalize G2P, G2G, and P2G payments (e.g., public
of Finance, Public Utilities SOEs
utility payments, tax payments, social transfers,
(E2C, SOPECO, SNDE, Congo MEDIUM-TERM
government wages and other expenses) to reduce Telecom, and others), mobile
costs and improve productivity. money operators
102 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 4 Boosting Productivity through Digital Technology and Improved Access to Electricity
POLICY OPTIONS RESPONSIBILITY PRIORITY
Improve digital skills supply through a multi stakeholders’ collaboration
• Implement an education sector ICT policy and
framework following the internationally recognized
global frameworks for digital skill development (from
basic to advanced) by: DGDEN, Ministry of Primary and
Secondary Education, Ministry of SHORT TO
» integrating digital skills courses as cross-cutting MEDIUM-TERM
TVET, Public and Private Training
subjects in the formal education system. Institutes
» leveraging private sector involvement in
technical and vocational education and training
and tertiary education.
DGDEN, Ministry of Higher
• Foster collaboration between research institutes,
Education, public universities,
universities, and the private sector actors through
private training providers, major MEDIUM-TERM
research and development centers focusing on industries, incubators, high tech
digital solutions. centers
MPTEN/DGDEN, Ministry of
• Conduct a robust skills gap analysis, followed by Higher Education, Congo Agency
SHORT TO
digital skills training programs with certifications, for Employment (ACPE), Ministry MEDIUM-TERM
and digital platforms to boost employment. of Industry, private sector
associations
• Ensure sustainable financing for digital skills MPTEN, DGDEN, Ministry of
d eve l o p m e n t t r a i n i n g m o d e l s a n d d i g i t a l Higher Education, Universities,
connectivity within training facilities and universities, Training Institutes, broadband MEDIUM-TERM
in partnership with public institutions, the private providers/ISPs, local telecoms
sector, and non-government actors. providers, ARPCE
Improve the enabling environment for digital technology and for high growth
technology-enabled businesses
• Design and enforce key policies and regulation for
business climate improvement, better access to
finance and public procurement for SMEs and for
start-up innovation. Key polices include for instance:
» application of the startup act and anti-corruption
framework; MPTEN, DGDEN, Ministry of
MEDIUM-TERM
» possible tax relief policies for ICT and for research Finance, Ministry of Plan, ARPCE
and development;
» government-backed partial credit guarantees,
crowdfunding platforms;
» regional harmonization to the AfCFTA and
CEMAC regulations.
MPTEN, DGDEN, Ministry of Civil
• Modernize and re-adapt key public services and Service, SOPECO, Ministry of
administration (e.g., cross-border trade and customs Finance, ACSI, BEAC, Ministry of
facilitation to accelerate e-commerce development, Plan, Ministry of Special Economic
SHORT-TERM
re-adaptation and digitization of key Government- Zones, Private Sector, Ministry
to-Business (G2B) administrative procedures for of Transport, Ministry of Justice,
business registration). Ministry of Commerce, Ministry of
MSMEs
• Institutionalize technology upgrading plans and
MPTEN, DGDEN, Ministry
customized firms/worker capabilit y suppor t
of MSMEs, private sector
programs for better adoption and use of digital SHORT TO
associations, local industry, MEDIUM-TERM
technologies, targeting smaller firms and productive multinationals, Ministry of Higher
sectors such as manufacturing and agribusiness as Education, training institutes
well as technology-intensive sectors.
Note: Ministry of TVET is Ministry of Technical and Vocational Education and Training. Ministry of MSMEs is Ministre des Petites et Moyennes Entreprises, de
l’Artisanat et du Secteur Informel (Ministry of Small and Medium Enterprises, Handicrafts and the Informal Sector).
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 103
CHAPTER 4 Boosting Productivity through Digital Technology and Improved Access to Electricity
4.2 Accelerating productivity through
improved access to electricity
4.2.1 How much access to electricity do Congolese firms
have?
As in the rest of Africa, firms in Congo face challenges related to electricity, the most notable being the
time and cost to get connected to the grid. Congolese firms must contend with difficulty in securing access
to the grid outside of the main cities of Brazzaville and Pointe-Noire. Both the time and the cost of a new
connection are prohibitive, suggesting that it could be an important barrier for most smaller firms. The quality
of service is also unreliable, and, as a result, firms outside the main cities will (like many other firms across Sub-
Saharan Africa) resort to costly self-generation.
Firms outside urban areas struggle to get an electricity connection, and even urban firms face uncertain
access. According to the World Bank World Development Indicators, in 2020 only 49.5 percent of the Congolese
population had access to electricity. In urban areas where 64 percent of the Congolese live, mainly in Brazzaville
and Pointe-Noire, the electrification rate is 66 percent, while only 14.8 percent of the rural population has access
to electricity. Despite significant domestic energy resources, access to electricity in Congo is lower than three
of its four regional peers, having only a marginally better access rate than Angola at 46.8 percent (Figure 37).
FIGURE 37
Access to electricity is relatively low in Congo
Access to electricity (% of population)
Angola
Sub-Saharan Africa
Congo
Nigeria
Cameroon
Ghana
Lower middle income
Upper middle income
0 25 50 75 100
2005 2020
Source: WDI 2020. June 2022.
Firms located outside of urban areas face great difficulties in getting an electricity connection. Because of
the country’s low population density, any extension of the grid is complicated and costly. Amongst its regional
peers, Congo has the lowest population density with only 16 people per square kilometer. It is, in part, because
of this that much of the population outside of the major urban centers in the Brazzaville – Pointe-Noire axis
lacks access to electricity. Only six of the 4,382 localities without access to electricity have a population of more
than 5,000 inhabitants.194 This means that firms in non-urban environments, often engaged in agribusiness
such as rice de-husking, face even more difficulty in getting access to electricity without resorting to costly-self
generation than in Congo’s urban areas.
194
World Bank staff analysis.
104 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 4 Boosting Productivity through Digital Technology and Improved Access to Electricity
© Erwan Morand/World Bank
To get a new electricity connection, firms must face a long wait and significant costs. Amongst its peers and
despite a similar number of procedures, it takes longer and is costlier to benefit from an electricity connection in
Congo. Recent surveys indicate that Congo has a less efficient connection process than the Sub-Saharan African
average (Table 6). The cause for a longer time and higher cost of connection in Congo, according to the 2020
World Bank survey, was the need for the firm to hire a licensed electrical contractor, who purchases the material
and conducts the external connection work. This procedure requires 120 days, accounting for approximately 89
percent of the total time to obtain a connection, and costs CFAF 58 million (or US$95,000).195 By comparison,
in Cameroon, the highest cost in the process consists of hiring an authorized supervision agency (only when the
surface of the business exceeds 400 m2) and costs CFAF 3 million (or US$5,000). Although the survey number
for Congo may somewhat exaggerated, nevertheless, this data suggests the cost of connecting could well be
prohibitive for many smaller firms in Congo.
TABLE 6
Getting a new electricity connection takes more time and costs more than in peer countries
Country Peer Time (days) Procedures (number) Cost as % of income per capita
Congo - 134 6 5,569.3
Nigeria Regional 110 7 296.4
SSA Average - 109.6 5.2 3,178.5
Angola Regional 97 7 623.3
Timor-Leste Structural 93 3 1,255.7
Botswana Aspirational 77 5 251.5
Mauritania Structural 67 5 3,929.3
Cameroon Regional 64 4 1,470.7
Ghana Regional 55 4 632.0
Azerbaijan Structural 41 7 125.7
Indonesia Aspirational 32 4 233.8
Vietnam Aspirational 31 4 994.2
Malaysia Aspirational 24 3 25.6
Source: World Bank, 2020. June 2022.
195
It was noted by the World Bank report for Congo that such a high cost of connection in the region were because often the customer had to pay to import a
transformer and other materials (for the type of capacity analyzed in the report, of 140 kVA). The exact cause for such a high cost must be studied further.
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 105
CHAPTER 4 Boosting Productivity through Digital Technology and Improved Access to Electricity
Firms suffer from unreliable electricity service. As a result of limited and uncoordinated investment into its
infrastructure, the country has the least reliable electric supply system among peer countries, which in turn
negatively affects the private sector (Table 7). In 2021, there were 54 blackouts across Brazzaville and Pointe-
Noire.196 For firms, power outages are a common occurrence. A recent survey of 44 firms in Congo indicated
that power outages were a daily occurrence for many respondents, with generally one to three outages per day
lasting from a few minutes to one-to-three hours.197
TABLE 7
Congo has the least reliable supply and least transparent tariff among peers
Country Peer Reliability of supply and transparency of tariff index (0-8)
Malaysia Aspirational 8
Azerbaijan Structural 7
Vietnam Aspirational 7
Indonesia Aspirational 6
Ghana Regional 4
Angola Regional 2
SSA Average - 1.6
Botswana Aspirational 0
Cameroon Regional 0
Congo - 0
Mauritania Structural 0
Nigeria Regional 0
Timor-Leste Structural 0
Source: World Bank, 2020. June 2022.
Many firms still rely on costly self-generation. Given the unreliable supply of electricity, many firms need to
supplement their connection to the electricity grid with self-generation. Of firms recently surveyed, the large
majority responded that they used the electricity grid for their primary energy supply, but an equally large
number responded that they used a diesel generator as a secondary source. Furthermore, these surveyed
firms indicated that the cost of electricity represented some ten to 20 percent of their operating costs.198 This
high cost is not surprising given that the cost of self-generation is estimated to be almost three times more
than current tariff rates. It can be estimated that firms in Congo pay approximately US$ 0.27/kWh when using
generators.199 This is almost three times more than the current tariff charged by E 2C and slightly less than twice
the cost of the estimated cost-recovery tariff. However, a more rigorous study is needed to obtain more precise
data on the consumption of diesel needed to power Congolese generators as well as the cost of diesel fuel in
different localities.
196
E2C, 2021.
197
World Bank, 2022b. This is a generalization of the statements made by those surveyed but, given the qualitative nature of the response and limited sample size,
it is not a statistically representative finding.
198
World Bank, 2022b.
199
Calculated using the approximation that one liter of diesel generates 3.3kWh of energy (Sustainability Exchange, 2022), and 1 liter of diesel costs 90 cents (WDI,
2022). Therefore, 90 cents divided by 3.3kWh = US$ 0.272 per kWh.
106 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 4 Boosting Productivity through Digital Technology and Improved Access to Electricity
4.2.2 The current context of the electricity sector explains
the difficulties faced by firms
Congo has been facing substantial and growing electricity shortages, but the country is endowed with
significant untapped hydropower resources. Of Congo’s installed electricity generation capacity of 756 MW
(of which 231 MW from hydro, 484 MW from gas, and 41 MW from oil), only 553 MW is available due to lack
of investment and poor maintenance (160 MW hydro, 378 MW gas and 15 MW oil) while peak demand was
estimated at 600 MW in 2020. This demand is expected to continue to grow rapidly and steadily, estimated by
ten to 20 percent per year. Against this rising demand, Congo’s hydroelectric potential is estimated at 14,000
MW of which only 1.5 percent has been exploited to date. The Government of Congo is considering upgrading
capacity to meet this growing demand, including the Sounda hydroelectric project (600 MW), Chollet hydro
(300-600 MW), Mourala hydro (100 MW), and the rehabilitation of existing hydroelectric plants as well as a
new gas-fired power plant. 200 These are still at the early stages of planning, with financing yet to be recruited.
Despite past attempts at reform, the sector remains constrained by limited coordination and oversight,
discouraging private investment. Planning capacity within the sector has been uncoordinated, and investments
across the sector have not resulted in any tangible improvement in the level of service in recent years. A
Generation and Transmission Master Plan was prepared in 2016 but never fully implemented. In addition, over
US$2 billion has been invested over the past decade by government and private enterprise in generation assets
and the transmission and distribution network without any tangible improvement in quality of service. 201
The country has recently set out its ambitions to reform the sector, placing an emphasis on the unbundling
of the sector and the participation of the private sector to improve performance. The sector is governed by
the 2003 law on electricity which decreed the liberalization of the electricity sector, the creation of new agencies
(regulator, rural electrification agency) and allowed for private sector participation. However, it was only in 2017
that several decrees were approved to operationalize this law. In 2018, at the initiative of the Government, the
then national electricity company, Société Nationale d’Electricité, (responsible for the generation, transmission
and distribution of electricity) was dissolved, and a state-owned asset company, Energie Electrique du Congo
(E 2C), was created in its stead. E 2C is a public limited company under OHADA law and operates the service on a
transitional basis, pending eventual participation by the private sector as part of an unbundling of the sector. 202
These reforms included the creation of a regulator to support entrance by the private sector to improve the
quality of service. This ambition to open the sector up to competition led to the establishment of a regulator,
the Agence de Regulation du Secteur de l’Electricité (ARSEL). As the regulator, ARSEL’s main mission is to
regulate, control and monitor the activities of operators in the sector and to arbitrate disputes between them.
However, crucially, it is still subordinated to the Ministry of Energy (Ministère de l’énergie et de l’hydraulique),
arguably impacting its ability to regulate the sector in an impartial and objective manner. 203 Most notably, it has
not yet acted in the other area of importance for a regulator—that of tariff setting, which is critical in promoting
the financial viability of any electricity sector which in turn may attract private investment.
The Government intends to encourage private sector participation, in particular in distribution and
generation, so that competition can improve performance. Until recently there was no dedicated PPP legal
framework or unit, which could be a cause for uncertainty for investors. 204 This might explain the difficulty the
country has had in concluding concession agreements for generation projects in the recent past. 205 The new PPP
law could facilitate such agreements. It is therefore essential for the government to prepare its implementing
decrees.
200
World Bank staff analysis.
201
World Bank staff analysis.
202
Unbundling is the creation of different companies across the energy sector value chain from an existing monopoly with the aim of improving electricity service
and reduce costs through improved management and competition, sometimes–as is the ambition of Congo–through private sector participation.
203
World Bank staff analysis.
204
PPP Knowledge Lab - https://pppknowledgelab.org/countries/congo-republic
205
World Bank staff analysis.
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 107
CHAPTER 4 Boosting Productivity through Digital Technology and Improved Access to Electricity
The sector is financially unviable, preventing re-investment that could improve the quality of service
for firms. The poor quality of electricity supply stems in large part from the financial distress in which the
sector finds itself. As a result of the limited financial flows within the sector, there is little re-investment into its
infrastructure to increase the number of connections or towards operations and maintenance, which in turn
results in a poor quality of service. 206
E2C is heavily indebted with debt of approximately US$111 million in 2021, only slightly less than its turnover
of US$121 million.207 In 2016, E 2C inherited the US$421 million obligations of its precursor, Société Nationale
d’Electricité. This included nearly US$210 million of arrears to the Centrale Electrique du Congo (CEC), an
independent power producer (IPP), representing 70 percent of national electricity production. E²C and its
predecessor relied heavily on government subsidies through direct budget support or other arrangements,
including the securitization of payment for energy purchases from CEC. This was allegedly undertaken through
an agreement between the government and ENI (the Italian oil company that is a private shareholder of the CEC
along with the Government ) to reduce levies on its Congolese oil production. 208
Power is sold at a loss to customers as the tariff does not reflect the real cost of electricity. The current tariff
as April 2022 is CFAF 51/kWh (US$0.091 /kWh) and has not changed since 1994. 209 By contrast, the cost of
electricity was estimated in a 2015 study210 at around CFAF 92/kWh (US$0.16/kWh). Further compounding this
shortfall, technical losses in 2016 were estimated at around 52 percent (the average acceptable loss level across
Sub-Saharan Africa is about 20 percent), and only 73 percent of bills were recouped. In addition, contrary to
standard practices, the tariff for Medium Voltage clients (such as larger industrials) is lower than Low Voltage
customers (households and smaller businesses). As these Medium Voltage customers are often larger firms,
they are most likely to be able to pay for the real cost of power. 211
In addition to the low tariffs, cost recovery is eroded by the fact that many customers, including firms,
are not charged according to their consumption. While E 2C launched a campaign to supply their customers
with meters, this has had limited results. According to documentation on inventorying losses and installing
meters, around half of the customers are not metered and therefore are charged flat rates regardless of their
energy consumption. 212 It should be noted that of 41 recently surveyed firms, 26 responded that their electricity
consumption was metered, and ten that they were billed on a flat rate. 213 This finding, while not statistically
representative, provides anecdotal support for the importance of E 2C to increase the metering of its customers
to accurately recoup a larger share of its costs.
Furthermore, the national utility has a disproportionately large salary cost relative to its assets under
management. Salaries represented 27 percent of the company’s operating costs in 2016 (compared to around
ten to 20 percent in countries such as Senegal, Mali, Côte d’Ivoire and Burkina Faso) with a ratio of 117 customers
per employee (compared to 490 in Senegal). 214 Compounding this, the 340 workers hired by E²C in 2021 for
the inventory of subscribers and the installation of meters were hired permanently, increasing the proportion
of salary costs within the total operational expenditures of the company. 215 According to a 2016 assessment
of financial viability of African utilities, these staff costs were the third highest of the 36 surveyed countries in
Africa after The Gambia and the Central African Republic (31 percent and 36 percent of operational expenditures
respectively) (Figure 38). 216
206
World Bank staff analysis.
207
https://www.finances.gouv.cg/sites/default/files/documents/CCA%20Rapport%20v2.4.pdf.pp40
208
World Bank staff analysis.
209
World Bank staff analysis.
210
Artelia, 2015.
211
World Bank staff analysis.
212
E2C, 2021.
213
World Bank, 2022b.
214
Trimble et al., 2016.
215
World Bank staff analysis.
216
Trimble et al, 2016.
108 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 4 Boosting Productivity through Digital Technology and Improved Access to Electricity
FIGURE 38
Congo had one of the highest staff costs as a percentage of operational expenditures
Staff costs across African utilities
70 40
60 35
30
50
US$ thousand
% of opex
25
40
20
30
15
20
10
10 5
0 0
South Africa
Gabon
Cameroon
Botswana
Senegal
Cote d’lvoire
Burkina Faso
Mauritania
Mali
Congo
Ghana
The Gambia
CAR
Ethiopia
Annual cost per staff (constant 2014 US$) Staff costs as % of opex
Source: Adapted from Trimble et al, 2016. June 2022.
4.2.3 Potential avenues of reform in the electricity sector to
improve firm-level productivity
International experience suggests that a long-term approach is required to achieve a reliable power
supply through considerable capital investments in the power system as well as institutional and
governance reforms in the sector. The following policy options can improve quality of service for firms and
reduce barriers to benefits from electricity access, thereby improving firm-level productivity (see Table 8 for
detailed recommendations).
To improve the financial viability of the sector, which would support re-investment to improve the quality
of service for firms, the current tariff regime in the Congo needs to be reviewed. This tariff has not been
revised since 1994 and does not reflect the true cost of electricity today, therefore penalizing E²C as well as
other actors upstream in the sector. Some preliminary work has already been undertaken which could inform
the Government as to how a financial equilibrium could be achieved, 217 but an updated and thorough review of
the cost of power across the value chain needs to be undertaken. The Government has already indicated that it
is open to clarifying revenue requirements for sector actors. 218 Any adjustment of tariffs is, of course, a sensitive
matter, but one that should at least be studied. Ultimately the decision on how much to charge customers
remains a political and sovereign decision of Congo, but at the very least, a review of the tariff regime should
clearly identify the true cost of power across the sector and therefore clearly identify how much any subsidy
should amount to. This would leave no doubt as to what is owed to whom and help promote financial viability
for the sector. The caveat, however, is that it is essential—in the interest of supporting the most vulnerable
population—that any change in the tariff regime does its utmost to avoid increasing the burden on the poorest
clients.
217
Artelia, 2015.
218
Ministère de l’énergie et de l’hydraulique, 2021.
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 109
CHAPTER 4 Boosting Productivity through Digital Technology and Improved Access to Electricity
The operational and financial situation of E2C is in urgent need of redress to enable it to deliver a more
reliable service to its customers—including firms. Improved financial viability is key to attracting the private
sector participation that the government hopes will improve the sector. Financial viability for E 2C could be
achieved by: i) increasing the proportion of metered customers vs. those paying a flat rate; ii) conducting an
operational review to identify options for reducing overstaffing; iii) introducing digital tools such as Enterprise
Resource Management software, SCADA (supervisory control and data acquisition) systems, and other
measures that could improve the operational effectiveness of the utility; iv) reinforcing staff in areas such as
maintenance, studies, planning or the execution of projects; and v) extending the distribution network and last-
mile connections to increase the number of customers (and therefore the revenue base).
Strengthen the legal and regulatory framework to support the sector and encourage investment. Reinforce
the capability of ARSEL to regulate the sector, allowing it to set tariffs and regulate the market objectively
and independently as well as to enforce performance standards to the benefit of customers, including firms.
Given the need to review the tariff regime and introduce transparency in the tariff-setting process, ARSEL
requires capacity, for example through knowledge exchange with other regulators. Furthermore, international
experience shows that an independent energy regulator is essential for governments to promote an efficient
and reliable energy sector. 219 of the Government could explore the option of revising the legal status of ARSEL
as an agency independent of government intervention. Ultimately, a better-regulated sector will work in the
interest of firms connected to the grid by ensuring their electricity service meets a minimum level of reliability
and that tariffs are fixed in a fair and transparent manner.
Support institutional reforms that could attract private investment, to promote competition, improve
performance and meet growing demand, therefore improving the quality of service for firms. In line with
the Government’s ambitions of bringing in private sector participation, 220 the power sector requires further
reform efforts to create a legal and institutional environment conducive to private sector participation. This
would provide a clear framework for independent generation through IPPs as well as for non-grid connected
infrastructures like mini-grids. IPPs would help meet the growing demand for electricity, and the entry of private
sector participation elsewhere (if managed correctly) could also help improve performance standards.
Invest in infrastructure and activities to increase the number of firms that could benefit from access to
a reliable and affordable source of electricity. Reducing the cost and time of a new connection would
increase firms’ competitiveness. Given the indication in the World Bank’s assessment of 2020, that the cost of a
connection would be prohibitive for many businesses, measures should be taken to assess the options available
to reduce the cost and streamline the process. For example, it is not clear if the prohibitive cost and time for the
licensed electrical contractor (Step 3 of the connection procedure) is the result of a lack of qualified technicians,
the elevated cost of materials and services to install the connection, or because of a state of low-equilibrium
market dynamics. A study of the current process and comparison to other peer countries could help identify the
drivers of the high cost and inform options for making electricity connections more affordable.
Improve the reliability of the network and, therefore, the reliability of the electricity service to firms by
investing in new or rehabilitated transmission and distribution infrastructure. Given the lack of investment in
the transmission and distribution network, one avenue could be mobilizing financing from development finance
institutions (including the World Bank) and the private sector, specifically towards rehabilitation or upgrades.
This would help improve the quality of service, increase the number of connections, and reduce technical losses.
In 2018, activities in grid rehabilitation, the installation of meters, and new connections, as well as US$10 million
were cancelled under the last electricity project of the World Bank (PEEDU) (P106975) to rehabilitate the
electricity infrastructure in Brazzaville and Pointe-Noire due to the unavailability of Government counterpart
funding. 221 These activities could resume within a framework of another World Bank operation.
Support access to electricity initiatives to enable firms outside of urban environments to be able to electrify
their activities without having to resort to costly self-generation. Given the low electricity access rates in rural
areas, firms are constrained to urban areas if they want to electrify their activities without resorting to self-
219
Cubbin and Stern, 2006.
220
World Bank staff analysis.
221
World Bank. 2022. PEEDU (P106975) Implementation Completion Report.
110 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 4 Boosting Productivity through Digital Technology and Improved Access to Electricity
generation. Mini-grids present a viable solution for some of the larger agglomerations of populations such as
the larger townships that are yet to be electrified, and project structuring and auctions could be undertaken (on
the back of the legal and regulatory reforms previously discussed), similarly to the African Development Bank’s
Green Mini-Grids program in the Democratic Republic of Congo or the IFC’s Scaling Solar program in Zambia
or Ethiopia. For firms in even smaller population centers, solar home systems could be distributed (through
grants or subsidies) to households (including those out of which firms are run) as has been done in Bangladesh
or through the Regional Off-Grid Electricity Access Project in the Sahel region of Africa.
TABLE 8
Detailed Policy Avenues to improve Access to a Reliable Electricity Service
POLICY OPTIONS RESPONSIBILITY PRIORITY
Improve the financial viability of the sector to allow for reinvestment and
improved quality of service
• Review the current tariff regime (see chapter 3). ARSEL SHORT-TERM
• Ensure that any adjustment (if any) in the tariff regime protects the Ministry of Energy,
MEDIUM-TERM
most vulnerable clients. ARSEL
• Redress the operational and financial situation of E2C by:
» increasing the proportion of metered customers;
» introducing digital tools such as SCADA systems; SHORT TO
E 2C MEDIUM-TERM
» reinforcing staffing in areas such as maintenance, studies,
planning or the execution of projects; and
» extending the distribution network and last-mile connections.
Strengthen the legal and regulatory framework to support the sector and
encourage investment
• Reinforce the capability (through capacity-building and South-
Ministry of Energy,
South knowledge exchange with other regulators, for instance) SHORT-TERM
ARSEL
and independence of ARSEL to effectively regulate the sector.
• Provide a clear framework for independent generation through Ministry of Energy, SHORT TO
IPPs and for non-grid connected infrastructures like mini grids. ARSEL MEDIUM-TERM
Invest in infrastructure and activities to increase the number of firms that could
benefit from access to a reliable and affordable source of electricity
• Undertake a study of the current process to get a new connection
Ministry of Energy,
to assess options available to either reduce the cost or streamline SHORT-TERM
ARSEL
the process.
• Mobilize financing for investment in new or rehabilitated
Ministry of Energy MEDIUM-TERM
transmission and distribution infrastructure.
• Support access to electricity initiatives (mini-grid, solar home
SHORT TO
system) to enable firms outside of urban environments to electrify Ministry of Energy MEDIUM-TERM
their activities without resorting to costly self-generation.
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 111
112 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
© Alexandra Tyukavina/Shutterstock.com
CHAPTER 5
Trade
Competitiveness
and
Diversification
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 113
CHAPTER 5 Trade Competitiveness and Diversification
5.1 Why greater trade integration matters
Empirical evidence shows that no country has achieved sustained growth and significant poverty
reduction without greater integration into the global economy (World Bank 2020). For instance,
integration into the global economy lies behind the successful diversification of countries in East Asia into
manufacturing, which in turn has led to unprecedented poverty reduction. A less diversified output and export
structure increases the volatility of fiscal revenues and export receipts, which has substantial implications for
growth. Export diversification can support growth and drive structural transformation, an effect that is stronger
in low-income countries and diminishes as the level of income rises (IMF 2017 and Box 12). Commodity exporters
like Congo, with concentrated export baskets that are highly susceptible to international price fluctuations, have
the most to gain from diversification.
International trade can help accelerate growth and
improve living standards. Greater trade integration can
boost productivity by shifting production toward sectors Greater trade integration
and firms with greater comparative advantages and higher
can boost productivity
efficiency, expanding their access to markets and creating
opportunities for overall growth in output and employment. by shifting production
Trade liberalization and lower trade costs offer a wider range of toward sectors and firms
intermediate inputs. They help reduce input costs; increase firm
with greater comparative
competitiveness; and enhance national and foreign investment,
technological spillovers, innovation, and other dynamic effects advantages and higher
that can cumulate over time. Greater trade integration can also efficiency, expanding their
lead to lower consumer prices and a wider variety of goods and
access to markets and
services, benefiting consumers through higher real incomes
and a greater choice of consumption goods and services. On creating opportunities for
the other hand, greater integration with global markets can also overall growth.
imply adjustment and transition costs, some of which may need
to be mitigated to ensure inclusive growth.
This chapter explores the opportunities for Congo to diversify its exports as a driver for structural
transformation. The chapter examines the country’s main trade patterns, then discusses trade policy areas
which Congo could consider to promoting export competitiveness and diversification, such as tariffs, trade
agreements, and non-tariff measures. It concludes with policy options to support export diversification.
5.2 Congo’s trade dynamics: a tale of a
commodity exporter
Congo’s trade openness is high for its per capita income, but it has been declining. Trade openness, as
measured by the ratio of total trade (i.e., exports plus imports) over GDP, declined from about 134 percent on
average between 2005-2007 to 120 percent on average between 2017-2019 (Figure 39), especially openness for
merchandise trade (Figure A1 in the Annex). 222 Since merchandise trade is larger than trade of services (Figure
40), the former has driven the reduction of Congo’s overall trade openness.
222
Congo’s trade openness both for merchandise and services is however higher than expected for its income per capita level.
114 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 5 Trade Competitiveness and Diversification
FIGURE 39 FIGURE 40
Congo’s trade openness is high for its per Trade in goods is bigger than trade in
capita income, but it has been declining services
Trade openness in goods and services: 2005-2007 and 2017-2019 Trade dynamics in goods and services in Congo, 2005-2020
Average 2005-2007 Average 2017-2019 16 10
12 8
500
500
8 6
Billions US$
Billions US$
4 4
400
400
Trade of GDP (%)
0 2
300
300
-4 0
-8 -2
200
200
VNM
MYS
-12 -4
VNM
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
MDA
COG MYS
COG
100
100
TLS IRQ MDA
BWA MRT
GHA MRT TLS BWA
GHA
IDN IRQ
CMR
NGA
CMR
NGA
IDN Goods exports Trade Balance
Goods imports Trade Balance for Goods
0
0
6 8 10 12 6 8 10 12 Service Exports Trade Balance for Services
Log GDP per Capita (PPP) Log GDP per Capita (PPP) Service Imports
Source: WB staff calculations using data from WDI. June 2022.
Note: Each dot represents a country. The curve shows the average of trade openness for a given per capita income. The grey band represents the 95 percent
confidence interval. COG indicates the data for Congo.
5.2.1 Congo’s export basket remains highly concentrated
Congo’s exports are highly concentrated on minerals. Hydrocarbons (mostly crude oil) account for the
bulk of Congo merchandise exports (Figure 41), followed by copper and other minerals. Overall, hydrocarbons,
copper, and other minerals accounted for more than 90 percent of Congo’s total merchandise exports in the
last 20 years.
FIGURE 41
Congo’s exports are highly concentrated on oil and minerals
Congo’s merchandise exports (Billion US$), 2002-2020
16
14
12
10
8
6
4
2
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Cocoa Copper Hydrocarbon Other Minerals Other agriculture Others
Source: WB staff calculations using data from BACI (CEPII). June 2022.
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 115
CHAPTER 5 Trade Competitiveness and Diversification
Congo has a revealed comparative advantage (RCA) in minerals, wood, and metals, reflecting a high
concentration of exports on commodities. The RCA index is the ratio of a country’s export share of a specific
sector to the world’s export share of that sector in total exports. A country is deemed to have an RCA in a sector
if its share of exports in that sector exceeds the global export share of the same sector, and thus the RCA index
is bigger higher than one. During the three periods considered (Table A1 in the Annex), the minerals (which
includes oil) and wood sectors had an RCA, whereas metals—mostly composed by copper product exports—
only gained RCA status in 2018-2020.
The real exchange rate does not seem to have played a significant role in the limited diversification of
exports. In the last 15 years, the real effective exchange rate (REER) for Congo has occasionally deviated from
its medium-term fundamentals, combining periods of overvaluation with periods of undervaluation, although
these estimations of under/overvaluation are highly sensitive to underlying assumptions and methodology.
Since 2005, the REER remained relatively flat compared to other non-CEMAC oil-exporting peers, such as
Angola, Ghana, and Nigeria (Figure 42), mainly due to the peg with the Euro. Besides, the literature finds that
exchange rate misalignment (either over- or under-valuation) does not seem to have an impact on export
diversification (Sekkat, 2016; Tran, 2017).
FIGURE 42
Congo’s REER has remained broadly unchanged
Monthly REER, 2005-2021
200
180
160
140
120
100
80
60
40
20
0
2005/01
2005/06
2005/11
2006/04
2006/09
2007/02
2007/07
2007/12
2008/05
2008/10
2009/03
2009/08
2010/01
2010/06
2010/11
2011/04
2011/09
2012/02
2012/07
2012/12
2013/05
2013/10
2014/03
2014/08
2015/01
2015/06
2015/11
2016/04
2016/09
2017/02
2017/07
2017/12
2018/05
2018/10
2019/03
2019/08
2020/01
2020/06
2020/11
2021/04
2021/09
Congo Angola Ghana Nigeria Cameroon
Source. Darvas (2021). June 2022.
Not only is Congo’s export basket highly concentrated, but also the number of products it exports is
lower than in most comparators. The number of Harmonized System 6-digit (henceforth referred as HS-6)
exports by Congo went up from 1,321 in 2007 to 1,559 in 2019. Yet, in both years, the total number of products
Congo exported was lower than that of comparator countries, except for Mauritania (Figure 43). Concentration
of the export basket as measured by the Herfindahl index 223 shows that Congo went from having the third most
concentrated basked after Nigeria and Botswana in 2007 to the second one after Nigeria in 2019. When measuring
export concentration with the share of the top 3 HS-6 exports, Congo has the second most concentrated export
basket after Botswana. Thus, identifying and addressing the barriers to export diversification is crucial for
Congo’s efforts to diversify its exports and economy (Box 12 discusses the relationship between per-capita
income and export diversification found across countries).
223
The Hirschman-Herfindahl Index (HHI) is the sum of the squared export shares by product. Thus: 0<HHI<1. The higher the index the more concentrated are
exports.
116 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 5 Trade Competitiveness and Diversification
FIGURE 43
Congo’s export basket is highly concentrated
a. Congo export diversi cation for HS6 exported products, 2007 b. Congo export diversi cation for HS6 exported products, 2019
1.0 5,000 1.0 5,000
Number of exported products
Number of exported products
0.8 4,000 0.8 4,000
0.6 3,000 0.6 3,000
In %
In %
0.4 2,000 0.4 2,000
0.2 1,000 0.2 1,000
0.0 0 0.0 0
Congo
Cameroon
Nigeria
Ghana
Mauritania
Botswana
Indonesia
Malaysia
Vietnam
Congo
Cameroon
Nigeria
Ghana
Mauritania
Botswana
Indonesia
Malaysia
Vietnam
Norm. Her ndhal (export) Norm. Her ndhal (export)
Share of top 3 products Share of top 3 products
Number of exported products Number of exported products
Source: Authors’ calculations using data from WITS and BACI (CEPII). June 2022.
BOX 12
Export diversification and income
Export diversification and rising per capita income go hand in hand until per capita income
reaches $25,000, constant 2005 purchasing power parity, according to Cadot et al., 2011.
Then, income growth appears to drive more concentrated exports and vice-versa. In this regard, a
country such as Congo with a per capita income of less than $25,000 should have higher growth
as diversification increases. Yet, the diversification challenge is greater for low-income countries
and for countries whose economies are dominated by minerals or other commodities. Economic
diversification is linked to the structural transformation of their economies and the achievement of
higher levels of productivity engendered through the movement of economic resources both within
and between economic sectors. Thus, for Congo to diversify its exports and/or economy, structural
reforms and trade policy reforms will be needed.
© John Simmons/unsplash.com
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CHAPTER 5 Trade Competitiveness and Diversification
Congo’s export destinations are also highly concentrated, towards Asia. In 2020, Asia accounted for
more than 70 percent of Congo’s export receipts, with China (39.7 percent) and the Unite Arab Emirate (19.7
percent) being the predominant markets. 224 The European Union accounted for about 16 percent with Spain
(7.3 percent) and Italy (3.4 percent) the key markets. African countries represented only about 7 percent of
total exports where Gabon (2.9 percent) and Togo (1.2 percent) represented the main markets. Other CEMAC
countries accounted for only about 3.4 percent of exports. However, exports to African countries (CEMAC and
the Democratic Republic of Congo for instance) are undervalued due to informal trade across borders that goes
unaccounted in trade statistics.
Congo’s imports are less concentrated than exports and are mainly composed by food and beverages,
industrial, capital and consumer goods. In 2020, food and beverages accounted for 26 percent of all imports
while industrial and capital goods represented 24 and 20 percent respectively (Figure 44). Yet, some import
products like food products could be produced locally and even exported, if the business environment was
more favorable.
Gas and agriculture sectors provide immediate opportunities for Congo to diversify its export basket
in the near future. As discussed in Chapter 1 (see section 1.2), Congo has the fifth largest proven natural gas
reserves in SSA with 284 billion cu. m., which remains largely unexploited. Europe current efforts to diversify its
sources of gas imports is a huge opportunity for Congo. Also, the arable land for agriculture in Congo remains
untapped. As a result, Congo is a net importer of food products (Figure A4 in the Annex provides a landscape
of Congo’s food imports), which represent close to 70 percent of Congo’s food consumption and more than a
quarter of Congo’s imports bill. The current global food crisis is a waking up call for Congo to modernize and
invest in agribusiness (in line with one of the 2022-26 PND’s pillar) and increase its agricultural production that
will help reduce food imports bill, ensure its food security but also enable exports of food products to other
African countries that are net importers of food products, especially the neighboring large potential market, the
Democratic Republic of Congo (see section 5.3). Currently, the potential for more sophisticated export products
is limited given the Country’s comparative advantages (see the discussion below on Global Value Chain (GVC)).
FIGURE 44
Congo’s imports are less concentrated than exports
Congo import products (Billion US$), 2002-2020
12
10
8
6
4
2
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Food and beverages Industrial supplies not elsewhere speci ed Capital goods (except transport equipment)
Transport equipment Other goods
Source: WB staff calculations using BACI, CEPII. June 2022.
224
In 2019, the two countries accounted for 66 percent of Congo’s total export receipts with China accounting for more than half.
118 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 5 Trade Competitiveness and Diversification
5.2.2 Low export survival rates limit export growth and
diversification
For countries to achieve faster export growth and diversification, they need firms to both successfully
enter new export markets and to continue exporting to them. Export diversification can be driven by the
entry of new firms into exporting or by existing exporters entering new markets. Often the export survival of
these firms is the main challenge. Exporters from developing countries tend to form less long-lasting trade
relationships than exporters from advanced economies. From a policy perspective, understanding the main
challenges to export survival is key to promoting competitiveness and diversification.
Congo’s export survival rate is below those of most of its peers. The probability of export relationships
surviving the first year is 28 percent for Congo, a much lower figure than the survival rates of its peers, which
range from 30 to 38 percent (Figure 45-a). Also, the probability of Congo being able to maintain an export
relationship for more than four years is less than 10 percent, lower than the survival rates of its peers, which
range between 11 and 25 percent. As expected, medium and larger exporters in Congo have higher survival
rates than small and micro exporters (Figure 45-b). 225 Export survival is a key determinant for export growth
and diversification (Brenton et al., 2010). Understanding the challenges and structure of firms’ export survival
may inform policies intended to facilitate export diversification.
FIGURE 45
Congo export survival relationships lags peers and do not last long
a. Congo export survival compared, 2012-2020 b. Congo export survival by rm size, 2016-2020
Kaplan-Meier survival estimates Kaplan-Meier survival estimates
1.0 1.0
0.8
Probability of survival
Probability of survival
0.8
0.6 0.6
0.4 0.4
0.2 0.2
0.0 0.0
0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5
Years Years
Botswana Cameroon Congo Large Medium
Ghana Indonesia Malaysia Micro Small
Mauritania Nigeria Vietnam
Source: WB staff calculations using customs firm-level transaction data. June 2022.
Note: Firms size by annual export value in US$, Micro <100,000; 100,000<=small<1 million; 1 million <=medium < US$10 million; large > US$10 million. Hydrocarbon
products are excluded from the data.
225
The likelihood of a large exporter’s trading relationship surviving one year is a bit lower than for a medium exporter, but higher for than small and micro
exporters. Survival rates for all Congolese companies fall more than half in the second year and start to converge.
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 119
CHAPTER 5 Trade Competitiveness and Diversification
5.2.3 Services exports, especially tourism, have untapped
potential for growth and diversification
Services matter for export growth and diversification. Services provide opportunities for a wider range
of exports and a broader base of domestic activities. Many developing countries have diversified into exports
of tourism and are also moving into exports of professional services such as health and education. But
services are also critically important as inputs into other sectors. The quality and availability of health and
education services are key in determining the productivity and capacities of workers for new tasks. Access
to efficient energy, transportation ICT, and financial services can be important for export diversification.
Another key transformation in the global economy is the increasing “servicification” of manufacturing, whereby
manufacturing firms increasingly buy, produce, sell, and export services. These increasing complementarities
between trade in services and goods entail that trade policies for goods and services should be designed in a
coordinated manner.
Congo’s services exports have been volatile and dominated by commercial and business
services. Exports of services have increased over time by category between 2005 and 2017 (Figure 46). Yet,
there has been a lot of variation in exports of services. Commercial, business, and other services exports were
the top three service export categories in 2017 and accounted for more than US$500 million each. In the same
vein, service imports are dominated by commercial, business, other services, and transportation, as well as
other services (Figure A2 in the Annex). Note that the balance of trade in services has been in deficit throughout
the observed period (Figure 40).
FIGURE 46
Congo’s services exports have been volatile and dominated by commercial and business
services
Congo’s services exports (Billion US$), 2005-2017
2.5
2.0
1.5
1.0
0.5
0
2005 2007 2009 2011 2013 2015 2017
Travel Transport Insurance and pension Other services Other business Commercial Cultural ICT
Source: WB staff using data from UNCTAD. June 2022.
There is untapped potential for growth of services exports, especially in tourism. Thanks to Congo’s
vast biodiversity, tourism has enormous potential to help diversify the economy away from oil and other
extractive industries. When responsibly planned and managed, tourism has demonstrated its capacity to create
jobs, promote shared prosperity, protect natural and cultural heritage, conserve biodiversity, and generate
sustainable livelihoods. Chapter 6 provides a case diagnostic of ecotourism226 in Congo and provides policy
options.
226
Ecotourism is defined as “a sustainable, non-invasive form of nature-based tourism that focuses primarily on learning about nature first-hand, and which is
ethically managed to be low impact, non-depletive, and locally oriented”.
120 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 5 Trade Competitiveness and Diversification
5.2.4 Congo participates in Global Value Chains (GVCs)
as an exporter of commodities but transitioning to more
sophisticated GVC participation would bring significant
gains
Congo participates in GVS as a high exporter of commodities. Countries participate in GVCs in different
ways, but there are patterns in the type of GVC integration and how countries upgrade their participation.
Countries being part of the commodities GVC taxonomy-group have a share of total domestic value added
lower than 60 percent, and backward linkages in manufacturing of less than 20 percent (see Box A1 in the Annex
for a definition of backward and forward linkages, and how to measure GVC participation). The commodities
GVC taxonomy-group is further divided into three subcategories: low participation, limited commodities, and
high commodities. Congo belongs to the latter, which includes countries whose primary goods’ share of total
domestic value added in exports is equal to or greater than 40 percent (Figure 47). 227
FIGURE 47
A Taxonomy of GVC participation
GVC linkages, 2015
Low participation
Limited commodities
High commodities
Limited manufacturing
Advanced manufacturing
and services
Innovative activities
Data gaps IBRD 44640 | AUGUST 2019
Source: World Bank (2020) WDR, World Bank.
Congo has higher GVC participation than most African countries. In 2011, Congo had around 28 percent
of foreign value added in its exports (backward participation), and about 32 percent of its value added
either absorbed as intermediates abroad or embedded in exports from other countries. 228 Congo’s forward
participation was slightly lower than the African average, but its backward participation was larger. The high
GVC participation of Congo is due to the significant foreign value added in exports of extractives and the
amount of them embedded in other countries’ exports.
227
By contrast, other countries such as China, India and Turkey specialize in advanced manufacturing and services, while the United States is part of innovative GVC
activities. Similarly, most EU28 countries fall in one of these two categories. Source: GVC taxonomy. See World Bank (2020) WDR.
228
Conde, C., Heinrigs, P., O’Sullivan, A., 2015. Tapping the potential of global value chains for Africa. Europe 57, 50–9.
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 121
CHAPTER 5 Trade Competitiveness and Diversification
Yet, the Congolese economy could gain substantially in terms of job creation, productivity, and growth
from transitioning to more sophisticated participation in GVCs, such as in manufacturing. While all forms
of participation in GVCs bring aggregate productivity and income gains for the countries involved, the benefits
are larger when countries transition from exporting commodities into exporting basic manufactured products,
such as garments, using imported inputs such as textiles (World Bank, 2020). This has happened recently in
countries such as Bangladesh, Cambodia, and Vietnam. Eventually, however, high economic growth cannot be
sustained without moving progressively to more sophisticated forms of GVC participation.
The transition from exporting limited numbers of commodities to more sophisticated participation in
GVCs has become increasingly demanding in terms of skills, connectivity, and regulatory institutions.
GVC participation is determined by factor endowments (land, labor, and capital), geography, market size,
and institutions, among other elements. These fundamentals alone do not necessarily determine outcomes,
however, as policies play an important role. The path toward greater integration into global value chains for
a commodity exporter like Congo requires a multipronged strategy covering different policy areas. The first
step for Congo would be the transition from commodities to limited manufacturing and services. Examples of
national policy that can support such a transition in GVCs participation are provided in Figure 48. 229
FIGURE 48
Transitioning to more sophisticated participation in GVCs: examples of national policy
Commodities to limited Limited manufacturing to advanced Advanced manufacturing and
manufacturing manufacturing and services services to innovative activities
Fundamentals Policy priorities
Foreign direct investment:
adopt supportive investment policy and improve the business climate
Finance: Finance:
Endowments
improve access to banks improve access to equity nance
Labor costs: Technical and managerial skills: Advanced skills:
avoid rigid regulation and exchange educate, train, and open to educate for innovation and
rate misalignment foreign skills open to foreign talent
Access to inputs: reduce tariffs Standardization:
and NTMs; reform services harmonize or mutually accept standards
Market size
Market access: Market access:
pursue trade agreements deepen trade agreements to cover investment and services
Trade infrastructure:
Advanced logistic services:
reform customs; liberalize transport
invest in multimodal transport infrastructure
services; invest in ports and roads
Geography
Basic ICT connectivity: Advanced ICT services:
liberalize ICT services; invest in ICT infrastructure expand high-speed broadband
Governance: Governance:
promote political stability improve policy predictability; pursue deep trade agreements
Institutions
Standards certi cation: establish Contracts: Intellectual property rights:
conformity assessment regime enhance enforcement ensure protection
Source: WDR 2020, World Bank.
229
World Bank’s WDR (2020). Trading for Development in the Age of Global Value Chains.
122 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
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5.3 Trade policy
5.3.1 High tariffs are hindering trade development
Congo applies the CEMAC common external tariff (CET) on imports from outside the CEMAC region,
which on average is high. CEMAC’s common trade policy includes two main instruments: the common
external tariff (CET) and a zero-rate preferential tariff for intra-CEMAC trade, both of which have been subject
to exceptions and flaws. The CEMAC CET, adopted in 2000, contains 5,478 tariff lines with all tariffs applied on
an ad-valorem basis over the cost, insurance, and freight (CIF) import value. The CET comprises five duty rate
categories (Figure 49) as follows: a 0 percent tariff for certain cultural and aviation products (31 tariff lines or
0.6 percent of all tariff lines); a 5 percent tariff for consumer staples (281 tariff lines or 5.1 percent of all tariff
lines); a 10 percent tariff for raw materials and capital goods (2,510 tariff lines or 45.8 percent of all lines); a 20
percent tariff for miscellaneous goods (671 tariff lines or 12.3 percent of all lines); and a 30 percent tariff for
discretionary consumer goods (1,968 tariff lines or 35.9 percent of all lines). The simple average CEMAC CET is
18.1 percent, which is high by global standards. By comparison, the CET of ECOWAS and MERCOSUR are 12.3
percent 14.0 percent, respectively. CEMAC tariffs are particularly high for certain manufactured goods such as
footwear, where more than 90 percent of tariff lines are in the highest tariff band of 30 percent duty; and for
stone, ceramic, and glass products, where more than 80 percent of tariff lines are subject to the highest duty
rate of 30 percent (Table A2 in the Annex). Food products are also highly protected with an average tariff of
close to 25 percent.
Congos’s applied most-favored-nation tariff is on average lower than CEMAC and African peers, but
higher than non-African peer countries. Given a series of exceptions and safeguards, CEMAC countries,
including Congo, establish national tariffs that deviate from the CEMAC CET for several hundred tariff lines.
Congo is the CEMAC country with the lowest rate on average. The simple average tariff for Congo in 2019 was
11 percent, which is lower than that of Cameroon (18.25 percent) for instance (Figure 50). A closer look at the
average tariff by HS-2 chapter230 (Figure A3 in the Annex) shows that the CEMAC countries maintain most-
favored-nation rates by chapter that are generally consistent with the duty rate levels of the CET. Yet, Congo
has tariffs lower than the CET for most chapters, but also tariffs higher than the CET in a few chapters, such as
preparations of cereals (HS-19), cereals (HS-10), books & newspapers (HS-49).
FIGURE 49 FIGURE 50
Most of CET bands are on the 10 or 30 Congo’s applied MFN tariff is lower than
percent tariff category CEMAC and African peers, but higher than
non-African peers
Frequency of CEMAC CET bands MFN duty rate applied by Congo and peers, 2020
0.5 20
0.4 15
0.3 10
5
0.2
0
0.1
Congo
Cameroon
Nigeria
Ghana
Mauritania
Botswana
Indonesia
Malaysia
0
0 5 10 15 20 25 30
Ad-varolem duty, percent Simple Average MFN rate Trade-weighted average rate
Source: World Bank staff estimates using the CEMAC tariff schedule. June Source: Authors’ calculation using data from WTO-IDB. June 2022.
2022. Note: Data for Congo and Cameroon are for 2019. MFN is most-favored-nation.
230
HS 2-digit level of aggregation is also called chapter level.
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The implementation of a free trade area within CEMAC has been challenging. As part of the reforms to
create the CEMAC customs union, tariffs for intra-CEMAC trade were removed by late-1990s. Although only
value added tax should be collected on products from other CEMAC countries, according to some sources,
duties are still collected in practice. For instance, World Bank (2018) reports about multiple “petty” harassments
or “tracasseries ”, which are a small-scale form of corruption that consists of many informal payments without
receipt or cause to public officials, including at the border, that increase trade costs. Determining origin for
duty-free treatment per the rules of origin seems to be subject to problems. 231 Simplifying rules of origin and
strengthening the capacity to implement the regime would be particularly important going forward to reduce
tariff avoidance, given bilateral preferences beyond the CEMAC region. 232 Furthermore, community transit trade
provisions apparently are not always followed. 233
5.3.2 The implementation of the African Continental Free
Trade Area (AfCFTA) presents a significant opportunity to
increase and diversify exports
The AfCFTA will provide opportunities for African countries, including Congo, to increase and diversify
exports, accelerate growth, and attract foreign direct investment. 234 The agreement will create the largest
free-trade area in the world measured by the number of countries participating. AfCFTA connects 1.3 billion
people across 55 countries with a combined GDP of US$3.4 trillion. It has the potential to lift 30 million people
out of extreme poverty but achieving its full potential will depend on putting in place significant policy reforms
and trade facilitation measures.
Real income gains from full implementation of the AfCFTA could reach seven percent by 2035, or nearly
US$450 billion, according to the World Bank. 235 Simulations under three scenarios: (i) tariff reduction, 236 (ii)
tariff and non-tariff barriers (NTBs) reduction, 237 (iii) tariff and NTB reduction with trade facilitation238 suggest
that broader reforms will generate greater income benefits. By 2035, Africa’s exports are estimated to grow
by US$560 billion as a result of the AfCFTA. The increase in exports of manufactured products is estimated at
about US$506 billion. Estimates for income gains for selected African countries are reported in Figure A6 in
the Annex. A country like Congo, which has a resource-based economy, can take advantage of the AfCFTA to
diversify its economy and trade, and shift away from the export of natural resources and commodities to more
diversified and advanced products. The AfCFTA will give Congo more opportunities to trade with neighboring
or regional countries. Indeed, according to Regolo (2013), when a country trades with similar countries, its
exports tend to be more diversified.
The scope of AfCFTA is larger than CEMAC. AfCFTA will reduce tariffs among member countries and cover
policy areas such as trade facilitation and services, as well as regulatory measures such as sanitary standards
and technical barriers to trade. It will complement existing subregional economic communities and trade
agreements in Africa by offering a continent-wide regulatory framework and by regulating policy areas—such as
investment and intellectual property rights protection (Figure A5 the Annex)—that so far have not been covered
in most subregional agreements in Africa. More specifically, compared to CEMAC, the AfCFTA incorporates
countervailing measures, customs, state-owned enterprises, investment, and intellectual property rights, which
CEMAC does not address. In comparison to trade integration with global partners, the AfCFTA is likely to have
231
Certificates of origin for qualification (meeting raw-material or value-added content requirements) are issued by customs authorities where the producer is
situated. Reportedly, lack of expertise at these offices can result in certificates that are rejected in other CEMAC countries.
232
This includes preferences currently in place and expected over time under the EU-Cameroon EPA. CAR and Chad are part of another regional grouping (CEN-
SAD), although an FTA has not yet been implemented.
233
World Bank (2018).
234
The AfCFTA officially started in January 2021. However, no trade has as yet taken place under the AfCFTA regime. Negotiations on some aspects, such as in
rules of origin, are ongoing and as of May 2022, 43 countries have deposited their instruments of ratification.
235
World Bank (2020b).
236
Starting in 2020, tariffs on 90 percent of tariff lines will be eliminated over a 5-year period (10 years for least developed countries, or LDCs). Starting in 2025,
tariffs on an additional 7 percent of tariff lines will be eliminated.
237
It is assumed that 50 percent of NTBs can be addressed with policy changes within the context of the AfCFTA—with a cap of 50 percentage points. It is also
assumed that additional reductions of NTBs on exports will be forthcoming.
238
Estimates of the size of these trade barriers were provided by de Melo and Sorgho (2019). These are halved, although capped at 10 percentage points.
124 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 5 Trade Competitiveness and Diversification
a greater impact on African countries’ exports and export diversification since these countries have similar
factor endowments. Indeed, it is found in the theoretical and empirical literature that exports between partners
with similar factor endowments (such as “South-South” or “North-North”) are more diversified than exports
between partners with different endowments (“South-North” and “North”-“South”). 239 Also, since an increase
in diversification of exports has been associated in the literature to lower bilateral trade costs and to regional
integration, Congo can leverage AfCTFA through customs reforms and improved connecting infrastructure to
decrease trade costs with neighboring countries.
Increased integration between the contiguous cities of Brazzaville and Kinshasa represents a significant
opportunity for trade development. With about 20 million people (and predicted to become the largest
urban agglomeration in Africa in the medium term), the Brazzaville-Kinshasa urban agglomeration (2.5 and
17.1 million inhabitants estimated in 2021, respectively) would greatly benefit from further integration between
the two cities. However, excessive costs of crossing the Congo River due to port infrastructure bottlenecks,
administrative hurdles, and costly transit procedures, and an uncompetitive market structure coupled with
poor management by the dominant river crossing traffic transport operators, limit the movement of goods and
people. The volume of trade between the Congos and, therefore, between the two cities is very low—although
underestimated because of informal trade. The trade cost-elasticity of trade between the two cities is estimated
at 0.8 implying that halving of the trade costs would trigger a 40 percent increase in the volume of trade.
Furthermore, academic research in economic geography suggests that urban agglomeration is a key engine
of growth in developing countries. Therefore, easing the Kinshasa-Brazzaville trade bottlenecks could yield
medium-term growth effects that extend to the wider economies of both Congos. 240
5.3.3 Detailed official Information on non-tariff measures is
lacking in Congo
Beyond tariffs, a range of non-tariff measures (NTMs) and procedural obstacles to trade are reported for
Congo and add to trade costs. Broadly defined, non-tariff measures are policy measures other than customs
tariffs that can potentially have an economic effect on international trade in goods, changing quantities traded,
prices or both. NTMs are classified into three categories: technical measures, non-technical measures, and export
measures (see Table A3 in the Annex). Application of standard measures, however, faces many constraints,
including numerous players with unclear roles and overly general regulations, as well as a lack of human and
financial resources. The CEMAC agreement established a process for the harmonization and mutual recognition
of technical measures and procedures, and approval and certification procedures. This process, however, has
not advanced in practice and standards regimes tend to differ across CEMAC countries. NTMs related to export
measures are not harmonized among the members. Export controls are applied by all countries for certain
natural resources (e.g., timber) reportedly for environmental reasons or to encourage local processing.
Though many NTMs pursue primarily non-trade objectives, such as protecting public health or the
environment, they may also act as obstacles to trade due to their heterogeneity, opacity and complexity,
or to the cumbersome procedures that are imposed to enforce compliance. The so-called non-tariff barriers
(NTBs) are ill-designed NTMs deemed either more trade-restrictive than required to pursue the non-trade
objective or purely protectionist in nature. NTBs on imported intermediate products can hurt downstream
producers. If some of these producers are also exporters, poor NTM design will hurt national competitiveness
by increasing export costs. As NTMs can raise the prices of intermediate and final goods, they have an impact
not only on trade, investment and GVCs, but also on poverty and income distribution.
Transparency of import and export regulations and procedures is lacking in Congo and detailed official
information on NTMs is not readily available. Provisions in the WTO Trade Facilitation Agreement call for
increased transparency in this respect via trade information portals. To date, the most comprehensive collection
239
Regolo (2013).
240
World Bank (2012). “De-Fragmenting Africa” and World Bank (2015). Republic of Congo Trade Facilitation Intervention, Trade Facilitation between Congo and
its Neighbors: Addressing the Bottlenecks.
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CHAPTER 5 Trade Competitiveness and Diversification
of NTM information at the product level is provided by a recent effort by international organizations. This has
resulted in the Trade Analysis and Information System (TRAINS) database managed by UNCTAD, which is the
most comprehensive database on NTMs for more than 110 countries, 241 not including Congo.
5.3.4 Trade development can have detrimental distributional
impacts that need to be mitigated
Although trade brings overall gains to households and is a well-established driver of growth and
poverty reduction, changes in trade policy have distributional impacts that create winners and losers.
Gains from trade do not accrue equally across and within countries, industries, jobs, and regions. Labor market
and consumption gains tend to concentrate in some regions and among some groups. These concentrated
impacts could persist because of steep adjustment costs (more so for vulnerable groups), and they are related
to geographical barriers, policy distortions, and industry- and occupation-specific human capital. For instance,
trade liberalization can produce benefits for the poor through lower prices, but these are often not fully passed
on to consumers because of barriers related to geography, the market power of intermediaries, and the structure
of domestic markets. In addition, most countries have reduced tariffs, but nontariff barriers, inadequate
infrastructure, and other impediments to trade continue to be prevalent across developing countries, raising
trade costs, and making it difficult to spread the benefits of trade. These impacts increasingly serve as an
argument for protectionism and greater economic nationalism. Indeed, anti-trade attitudes have escalated in
countries that have been unable to attract better export-oriented jobs or that offer little help for workers who
experience trade-related dislocation.
Unfortunately, data limitations do not allow for an empirical analysis of the distributional impact of
trade in Congo. An analysis of the distributional impact of trade reforms in Congo would require first collecting
input/output data for the Congolese economy and integrating them into a CGE model to estimate the impact
of trade reforms on variables such as production, prices, wages, and trade. With the help of detailed household
and labor data in a micro-setting, such simulations could be used to estimate the impact of reforms across
different groups.
The following policy options would support export diversification. Detailed policy recommendations are
provided in Table 9.
© Erwan Morand/World Bank
Multi-agency Support Team provided substantial support to improve the collection of NTM data. As a result, the Transparency in Trade initiative was launched
241
by UNCTAD, the African Development Bank, the International Trade Centre and the World Bank.
126 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 5 Trade Competitiveness and Diversification
5.4 Policy options to support export
diversification
5.4.1 Further reduce tariffs and enhance regulatory
transparency
Although Congo applies, on average, lower tariffs than the CET, it could lower tariffs that are still
high and advocate reform of the CEMAC tariff regime, including eliminating the top tariff band of 30
percent. Eliminating the top tariff band of 30 percent (which is the maximum tariff rate) to converge to a tariff
schedule with only four tariff bands (i.e., zero, five percent, 10 percent and 20 percent, see Figure 49) would
simplify the CET regime and lower the average tariff. Also, tariff reductions should be considered for capital
goods and key inputs in critical sectors such as agriculture and agro-industry. The transparency of import and
export regulations and procedures should be improved, including simplifying rules of origin procedure and
data collection. Finally, the reduction and/or elimination of some additional taxes, fees, and informal payments
assessed on imports into the CEMAC should be considered, including “ tracasseries ”, that further increase
customs charges on imports on top of already high import duties.
5.4.2 Collect data on NTMs
The Government of Congo needs to collect and publish detailed data on NTMs in the country. The
paucity of data on trade policy measures has been the main problem behind the study of the effects of NTMs
(including NTBs), and this is also the case for Congo. The fact that NTMs are increasingly used to regulate
international trade makes the need to update data even more compelling. Also, the lack of this data discourages
trade as traders cannot accurately estimate their costs and therefore their profit margins. The reason behind
the scarcity of databases on NTMs is largely related to the difficulty in collecting the data and in assembling
consistent databases. Unlike tariffs, NTM data are not merely numbers; the relevant information is often hidden
in legal and regulatory documents. Moreover, these documents are generally not centralized but often reside in
different regulatory agencies. All these issues make the collection of NTM data a very resource intensive task.
Box A2 provides, in a nutshell, the guidelines to collect data on NTMs. 242
5.4.3 Improve collection of customs data
The Government of Congo needs to improve the collection of customs data. There were large discrepancies
between the UN COMTRADE trade data and the firm-level trade data received from Customs for this report.
Customs data comes from the electronic system (SYDONIA), which does not include all transactions, as
Customs focuses on transactions that generate revenues for the government. Thus, transactions for goods
that are exempted from taxation are not always included in the database. On the other hand, the National
Institute of Statistics (INS) collects trade data for all transactions and from several sources and reports it to UN
COMTRADE. 243 Accurate firm-level customs data are needed for a deeper analysis of several aspects of export
competitiveness, including assessing in more detail export survival, market concentration, GVC participation,
and export diversification.
242
For more information, refer to: https://unctad.org/webflyer/guidelines-collect-data-official-non-tariff-measures-2019-version
243
For instance, in the case of exports of forestry products, they substantiate the data received from customs with data from the Directorate of Forest Products
Export Control Service, and the value reported by INS is often significantly higher than what customs provides as customs mostly cares about recording the taxable
value of the transaction.
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CHAPTER 5 Trade Competitiveness and Diversification
Accelerating the implementation of the PREF-CEMAC II objective of online data sharing among CEMAC
countries’ customs services, as well as the establishment of joint border control posts will further
improve trade statistics. Joint border control posts with all neighboring countries will help reduce the time
required for custom clearance, especially if the new border control posts are highly automated in accordance
with evidence-based risk management to minimize officials’ discretion in inspections. Congo could also pursue
online data sharing agreements with the customs authorities of major trading partners such as China. This
would help reduce discrepancies in mirror statistics, while also enabling faster clearance of cargo through
online pre-arrival clearance of imports.
5.4.4 Accelerating the implementation of AfCFTA
The Government should support the speedy conclusion of remaining negotiations in AfCFTA, on issues
such as rules of origin, and the swift implementation of the agreement. Although the AfCFTA has in theory
been operational since the beginning of 2022, in practice no trade has happened under its terms because
of continued negotiations on implementing regulations. At the time this report was being written, the trade
negotiators still have work to do in agreeing on rules of origin, which are the set of requirements different
products must undergo to get considered as originating in a member country and be exported to another
member country tariff free. Besides supporting a speedy implementation of the AfCFTA, Congo needs to address
domestic constraints that impede investment and trade, including by improving the business environment for
the private sector (see Chapter 1).
5.4.5 Policies for greater GVC participation
The path toward greater integration in global value chains for a commodity exporter like Congo
requires a multipronged strategy (Figure 48) aiming at different aspects such as: increasing the country’s
attractiveness as an foreign investment destination (Chapter 1), improving access to credit, avoiding rigid
regulation of the labor market, improving access to inputs by reducing tariffs, streamlining NTMs and reforming
services, pursuing deeper trade agreements, reforming customs, liberalizing transport services, and investing
in ports and roads (Chapter 1 and 6), investing in basic ICT connectivity (Chapter 4), promoting policy stability,
and establishing a conformity assessment regime for product standards certifications. These policies would be
key to leveraging the positive impact of the AfCFTA.
5.4.6 Policies to mitigate the negative impacts of trade
Three types of complementary policies are necessary for trade to promote a reduction in poverty
and inequality: (a) reducing distortions and strengthening the functioning of markets, (b) reducing
trade costs, and (c) accelerate labor market adjustment. The first type of policies includes measures to
improve the business environment (see Chapter 1), strengthen firm productivity through initiatives such as
supply-linkage programs (i.e., programs that facilitate business between domestic smaller firms and larger
ones that are integrated into GVCs), and ensuring a strong competition policy framework (Chapter 3). These
policies are critical for enabling the more productive parts of the economy to grow and expanding the benefits
arising from new export opportunities and greater market access. Policies to reduce trade costs include
investing in transport and ICT hard and soft infrastructure (Chapter 1, 3 and 6), improving access to finance, and
streamlining non-tariff measures. These policies help ensure that the export competitiveness of domestic firms
is not hampered by excessive costs and unnecessary bureaucracy. Finally, policies to accelerate labor market
adjustment facilitate the reallocation of workers toward more productive activities, thereby maximizing gains
from openness to trade and ensuring that adjustment costs are borne by society at large rather than by the few
workers whose jobs are displaced. Such policies include providing training and relocation support to facilitate
128 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 5 Trade Competitiveness and Diversification
workers’ mobility across sectors, but also social protection (unemployment insurance and other social safety
nets, universal health insurance) to support workers facing job losses. Engel, et. al. (2021) provides a detailed
discussion of these complementary policy pillars.
TABLE 9
Detailed Policy Recommendations to Support Export Diversification
POLICY OPTIONS RESPONSIBILITY PRIORITY
Policy reform to support diversification
• Reduce tariffs that are still high and advocate reform of Ministry of Trade, supply &
the CEMAC tariff regime, including eliminating the top consumption, Ministry of SHORT-TERM
tariff band of 30 percent. Finance & Budget
• Support the speedy conclusion of remaining negotiations
in AfCFTA, on issues such as rules of origin, and the swift Ministry of Trade, supply &
MEDIUM-TERM
implementation of the agreement to support greater GVC consumption
participation.
• Consider policies to mitigate the negative impact of trade
liberalization:
(a) reducing distor tions and strengthening the
functioning of markets, Multiple government bodies MEDIUM-TERM
(b) reducing trade costs, and
(c) speeding up labor market adjustment.
Data collection to inform policy reforms
Multiple government bodies,
ideally led by office of
• Collect and publish detailed data on NTMs. SHORT-TERM
Prime Minister or Ministry of
Budget & Finance
• Improve collection of customs data to ensure accurate National Statistics Agency,
measurement of imports and exports, through for Customs, Ministry of Trade,
SHORT-TERM
instance the establishment of joint border control posts supply & consumption,
and online data sharing agreements. Ministry of Finance & Budget
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 129
130 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
© Erwan Morand/World Bank
CHAPTER 6
Logistics and
Eco-tourism
to Support
Diversification
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 131
CHAPTER 6 Logistics and Eco-tourism to Support Diversification
This chapter looks over two key trade-related topics that have the potential to significantly contribute to
export growth and economic diversification in Congo: logistics or trade facilitation; and eco-tourism.
Improved efficiency of logistics processes could reduce trade costs, including for imports of equipment needed
for the development of special economic zones and increase exports of merchandise goods, including in non-
hydrocarbon sectors. Ecotourism, a sector with great unrealized potential in Congo, could provide important
contributions to job creation, rural development, and exports of services.
6.1 Trade facilitation: bottlenecks and
opportunities
6.1.1 The logistics in Congo are facing widespread challenges
Inadequate infrastructure as well as transport and logistics inefficiencies raise production transport
costs, hindering competitiveness. High transport and logistics costs are a tax on competitiveness and
development. The quality and efficiency of logistics services matter for international trade, as weak logistics
infrastructure and operational processes can be a major obstacle to regional and global trade integration.
Logistics services provide sectoral connections within the local economy, and they also connect the domestic
economy to international markets.
Although Congo’s logistics performance has recently improved, it is weaker than in most comparator
countries. Congo has improved its performance over time as measured by its score in the Logistics Performance
Index (LPI) that rose from 2.08 in 2014 to 2.49 in 2018 (Figure 51-a). Congo’s scores increased in the LPI’s
six indicators between 2014 and 2018, with customs, international shipments, and timelines showing the
largest improvements. Despite these improvements, Congo ranked 115th out of 163 countries in the LPI in 2018
(Figure 51-b). In this figure, the axis is the ranking, and the farther from the center the position, the worse the
performance. Among comparator countries, only Mauritania ranks lower than Congo in the overall LPI. Also,
Congo has the worst performance of the group in infrastructure. 244 Timeliness and international shipments are
the only two dimensions where Congo ranks close to the peers’ average.
FIGURE 51
Congo’s logistics performance has been improving but lags against peers
a. Congo’s LPI scores, 2014-2018 b. LPI rankings of Congo and peers, 2018
3.5 Overall LPI
160
3.0
120
2.5 Timeliness Customs
2.0 80
1.5 40
1.0 0
0.5 Tracking Infrastructure
0
Overall LPI
Customs
Infrastructure
International
shipments
Logistics quality
and competence
Tracking and
tracing
Timeliness
International
Logistics shipments
Vietnam Malaysia Indonesia
Cameroon Ghana Nigeria
2014 2016 2018 Congo Mauritania
Source: World Bank. June 2022.
244
The lower rating in 2018 under infrastructure is probably linked to the fact that the port was undergoing an extension in 2018 that penalized operations. The
situation has improved since.
132 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 6 Logistics and Eco-tourism to Support Diversification
Ports are used mostly for transshipment of goods. Pointe-Noire is the main maritime gateway for Congo, and
most of its traffic is linked to transshipment. Pointe-Noire is a very specialized port, with two main types of traffic:
oil industry exports and container traffic (Figure 52-a). The other traffic components are small, and volumes are
balanced between imports and exports: imports consist mostly of grain and inputs for cement factories, and
exports are almost exclusively forestry products. The moderately high container activity in Pointe-Noire, with
traffic exceeding one million Twenty Equivalent Units (TEUs), a standard measurement for container traffic,
for the first time in 2021, is mostly linked to transshipment to the other regional ports245 for which Pointe-Noire
plays a role as a regional hub (Figure 52-b). Outside of transshipment, containers related to the external trade
of Congo and neighboring countries served by land transport are only a marginal part of the port’s activity,
and volumes are low: less than 80,000 TEUs for imports and barely above 10,000 TEUs for export (consisting
mostly of forestry products and copper exported in containers). These volumes include an undetermined part246
as transit to Angola (Cabinda) and marginally to the Democratic Republic of Congo (Kinshasa). Not all overseas
trade of Congo passes through Pointe-Noire. As the port of Douala in Cameroon is located closer to the forestry
industry located in the northern part of Congo, timber companies choose that port for some of their exports.
FIGURE 52
Most of Congo’s port traffic is linked to transshipment
a. Port of Pointe-Noire Activity, 2016-2021 b. Container traf c in Pointe-Noire, 2019-2021
18 900
16 800
14 700
12 600
Thousand TEUs
Million tons
10 500
8 400
6 300
4 200
2 100
0 0
2016 2017 2018 2019 2020 2021 Loaded Loaded Outbound Transhipment
containers containers empty
for import for export containers
Oil industry Containers Others 2019 2020 2021
Source: National authorities. June 2022.
Inland transport and logistics in Congo have two main markets, one of which is bimodal. The most
important market in terms of volumes is the Pointe-Noire – Brazzaville corridor and a more modest one is the
area of Ouesso in the north for the forestry industry. The Pointe-Noire – Brazzaville corridor is bimodal (rail and
road), with a rail link (operated by an SOE, the Chemin de Fer Congo-Océan) experiencing difficulties due to
ageing infrastructure and rolling stock, and a toll road (opened in March 2016), operated under a concession
contract by La Congolaise des Routes. 247 Before the opening of the road, the railway had a virtual monopoly
on transport between Pointe-Noire and Brazzaville, but volumes remained modest: peak rail traffic for the last
decade was around 500,000 tons. On the road, the traffic is 1,100 vehicles248 (all types, freight, passengers
and individual cars), mostly concentrated on the segment Pointe-Noire – Dolisie, with trucks predominant on
the rest of the route. A weighbridge is in operation, providing information on the daily truck traffic, which was
around 300 vehicles per day in January 2022 in for both directions.
245
Transshipment corresponds to transfer of containers (ship to ship) between long haul lines, notably on the Asia-Central Africa shipping lanes, and the regional
ports (in Equatorial Guinea, Democratic Republic of Congo, and others) on feeder lines.
246
The Port of Pointe-Noire statistics do not detail information on transit, but it is assumed that both containers and general cargo could be in transit.
247
La Congolaise des Routes is a PPP with the Government of Congo, EGIS, a French company, and China State Construction Engineering as majority shareholders.
248
Traffic and weighbridge data provided by La Congolaise des Routes, https://www.lcr.cg/index.html), the operator of the toll road.
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CHAPTER 6 Logistics and Eco-tourism to Support Diversification
The forestry industry constitutes a specific segment of the inland logistics in Congo, with concessions
clustered in two main areas: (i) in the south, close to the port of Pointe-Noire, and (ii) in the north, around
Ouesso, much closer to the port of Douala (Cameroun) and therefore using both Douala and Pointe-Noire for
export trade. The north represents on average 60 percent of the total timber production of Congo.
Despite automation, logistics processes and trade procedures remain complex. Several institutions
are involved in trade procedures, and most have implemented IT systems to manage their documentation
processes. The import procedures can be divided into three main stages, involving many actors with varying
degrees of automation: (i) upstream import authorizations, (ii) the logistics processes at the port, and (iii) the
clearance, as illustrated in Figure 53.
FIGURE 53
Trade Procedures and Systems in Congo
Import Authorization Logistics Clearance
• GUOT for Import • Shipping lines must • Cotecna acts as
Declarations and issue a Bill of Lading that Destination Inspection
Transport Titles contains reference to the provider for Congo,for
Import Declaration and goods valuation and
• Congolese Shippers
eCTN certification, as well as
Council for eCTN
scanning.
• Port of Pointe-Noire has
an exit single window • Customs and Webb
(physical) to control exit Fontaine have launched
of goods. a pre-customs Single
Window, ‘eDouanes’.
• Congo Customs is using
ASYCUDA for its customs
operations.
In the upstream authorization process, two main systems co-exist. First, the electronic Cargo Tracking
Note (eCTN)249 was introduced in May 2008 by the Congolese Shippers Council (Le Conseil Congolais des
Chargeurs), with a private operator, BIM250, as the service provider for the issuance of the CTN and its electronic
version. Second, the trade Single Window (Guichet Unique des Operations Transfrontalieres, GUOT) was
launched in November 2014 to replace the manual procedure in which traders had to apply for clearance
from the Ministry of Commerce to obtain the eCTN from the Congolese Shippers Council. The GUOT251 was
developed by a technical solution provider under a PPP agreement, for 5.3 million Euros. On average, it handles
332 transactions per day, split into six percent for export declarations, 61 percent for Import Declarations,
and 23 percent other for transactions. It is important to note that although GUOT aims to cover all modes of
transport, it is only operational for the port of Pointe-Noire. Both systems generate a unique reference for the
import declaration, the transport title, and the eCTN that the shipper must communicate to the shipping line at
the time of the booking so that the Bill of Lading contains that reference. For specific commodities, additional
line ministries and agencies are involved, for instance, Ministry of Agriculture for SPS252 certificates, or Ministry
of Mining Industries for ore exports. In addition to the valuation program managed by a private provider,
Cotecna, that is part of the clearance stage, a certification program at pre-shipment stage was launched in
2022, with two providers, Cotecna in January 2022 253 and Bureau Veritas in April 2022, 254 in partnership with
the Congolese Agency for Standardization and Quality.
249
Or Bordereau Electronique de Suivi de Cargaison, BESC.
250
The eCTN is the main revenue stream for the Congolese Shippers Council, which receives 70 percent of the revenue generated by the eCTN, with the remaining
portion retained by the operator. https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=r:/WT/TPR/S285R1-03.pdf&Open=True
251
Additional information on the GUOT is available in the UNECE SW Case Study Repository at https://unece.org/DAM/cefact/single_window/sw_cases/
Download/2019/CongoRep_Fre.pdf.
252
Sanitary and Phytosanitary Certificate.
253
https://www.cotecna.com/en/media/news/cotecna-signs-a-5year-voc-contract-with-congo-brazzaville
254
https://verigates.bureauveritas.com/sites/verigates/files/2022-04/VoC-%20Congo%20-%20Flyer%20-E-1.1.pdf
134 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 6 Logistics and Eco-tourism to Support Diversification
© Chuttersnap/unsplash.com
In contrast, the logistics stage is less structured. The only form of coordination in the logistics portion of
the process is an Exit Single Window for the port, launched in April 2019, but only as a physical location for
the coordination of all the stages leading to the physical release of the goods from the port. However, this may
need to change. In April 2019, the Facilitation of Internal Maritime Traffic (FAL) Convention, of which Congo is a
signatory, enforced a major amendment requiring national governments to implement the electronic exchange
of information related to maritime transport. This amendment is expected to enter into force in January 2024.
There is currently no project to develop a maritime single window or a port community system at the port of
Pointe-Noire, but with the mandatory requirement linked to FAL, this could provide an opportunity to rationalize
the different IT tools used by different border and trade agencies in Congo.
The clearance of imported goods shows a similar coexistence of different systems. Customs are, in general
and not specifically in Congo, vigilant about potential fraud on the value or quality of goods, and outsourcing
this verification to inspection companies has been a general trend. Congo replaced pre-shipment inspection,
which was then part of the upstream authorization process, with destination inspection performed by Cotecna
when the goods have arrived, therefore at the clearance stage. Clearing and forwarding agents must obtain
valuation reports from Cotecna255 before submitting the declaration in the Customs system, which is using the
UNCTAD ASYCUDA (Automated System for Customs Data) system. 256 In September 2018, Customs launched
eDouanes, a Customs Single Window operated by Webb Fontaine for the customs processes and declarations
(plus possible tracking if goods are not cleared in Pointe-Noire) that adds a step before its ASYCUDA system
used for the clearance of goods. Validated pre-import declarations were introduced in eDouanes in March 2019.
Despite automation, users still report significant difficulties in obtaining different documents. This is
notably due to the fact that the systems are sequential, and one stage needs to be completed before initiating
the process in the next one. Time delays due to inefficient customs and administrative procedures have become
the main non-tariff barrier that obstructs international trade. For instance, international experience finds that
longer time delays at the border would significantly decrease highly perishable agricultural products’ quality
and price. 257
255
AV (valuation certificate) and AR (inspection report).
256
Or Système douanier automatisé (SYDONIA).
257
Liu and Yue (2017).
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CHAPTER 6 Logistics and Eco-tourism to Support Diversification
6.1.2 Trade costs are high across the board: freight rates,
port costs, land transport, and documentation
Freight rates to and from Congo have risen, impacted by the global shipping trends of rising prices
as well as congestion at the container terminal. As a reference, the cost of shipping a 20’ container of
vegetable oil from Indonesia rose from US$2,400 in 2019 to US$4,800 in 2022, while the cost of shipping a 40’
container of salted fish (reefer) from Norway rose from US$4,000 in 2018 to US$17,500 in 2022. Rates have also
been impacted by congestion at the container terminal, starting in August 2020, which has led some shipping
companies to implement a port congestion surcharge. 258
Compared to other West African ports, container handling costs in Congo are expensive (Figure 54). For
different transport segments, Pointe-Noire handling costs are much higher than other ports in West Africa. The
Port Authority and the container terminal have public tariffs, detailed in Table A4 (Annex). Cargo handling is
paid by the shipper for loaded containers only, but the port authority is levying fees for both loaded containers
(paid by shippers) and empty containers (paid by the shipping line). Import and export container handling costs
in Pointe-Noire are around US$540 and US$295 respectively. 259 Terminal operators often apply reduced rates
for a selection of essential goods (‘first necessity’) that may differ from country to country, and most West
African ports have special tariffs for transit containers. On the other hand, the transit of containers is not a
contested market in Central Africa, as Chad and CAR primarily use the port of Douala, so Congo’s Terminal does
not have any incentive to offer preferential rates for containers in transit through Congo.
FIGURE 54
Container handling costs in Pointe-Noire are higher than in other West African ports
350
300
250
Thousands CFAF
200
150
100
50
0
Standard 20' Special rate 20' Transit 20' Standard 20' Special rate 20’ Transit 20'
import import inbound export export outbound
Dakar Abidjan Lomé Cotonou Pointe-Noire
Source: World Bank Staff calculations. June 2022.
Long-distance road transport costs in Congo are higher than the average in West Africa. For instance, the
road between Pointe-Noire and Brazzaville is 525 km, and it costs on average CFAF 1.1 million, or US$1,770, i.e.,
US$3.4 per km per a truckload. Yet, some operators, such as trucking companies under contract with shipping
lines for Through Bill of Lading260, charge CFAF 900,000 (US$1,470) for the trip. The distance between Ouesso
and Pointe-Noire is 1,300 km and the freight cost is CFAF 2.5 million or US$4,020, i.e., US$3.1 per km per a
258
The Congolese Shippers Council has been conducting several trade costs studies, with the last update dating from April 2022.
259
Assuming containers are delivered without stripping, CFAF 330,000 = US$540 for import in a 20’ container, and for export, price is CFAF 120,000 + CFAF 60,000
= US$295, also for a 20’ container.
260
A Through Bill of Lading is when the destination port nominated is an inland destination, for instance Brazzaville, as opposed to a Bill of Lading that nominates
a port as destination, for instance, Pointe-Noire. Under a Through Bill of Lading, the inland portion of transport to the nominated destination is under the
responsibility of the shipping line.
136 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 6 Logistics and Eco-tourism to Support Diversification
truckload. These costs are notably higher than in West Africa261. As an international reference, flatbed rates
in the USA in April 2022 were at US$2.15. Comparable references for other African corridors date back from
before the global increase in fuel prices.
The tariffs paid for the tolls are not included in the rates quoted above and they are paid by the shippers
on top of the trucking rate. There are seven toll gates between Pointe-Noire and Brazzaville, and large trucks
(anything with three axles or more) pay CFAF 30,000 per gate, whether the truck is full or empty. Therefore, a
delivery to Brazzaville, knowing that returns are typically empty, bears a toll cost of CFAF 420,000 in addition
to the trucking rate of CFAF 1.1 million. In addition to toll gates, several border and enforcement agencies, as well
as municipalities, charge formal and informal fees. According to the Congolese Shippers Council report, these
additional fees amount to CFAF 54,000 between Pointe-Noire and Brazzaville, and CFAF 106,000 between
Brazzaville and Ouesso.
Two main factors that influence road transport prices in Congo are operational practices and fuel
consumption. These two factors are explained below:
(i) Operational practices. Most companies operate on the basis of a weekly roundtrip Pointe-Noire –
Brazzaville due to terminal delays at port and destination. Night driving is prohibited, but there are no
labor regulations limiting the number of hours a driver can drive in a day. Yet, some companies also use
a system in which tractors are just shuttling between Pointe-Noire and Brazzaville, hooking to trailers
when ready. This mode of operation allows for two roundtrips per week, reducing the fixed costs at the
expense of additional equipment positioned at the two ends.
(ii) Fuel consumption. Trucking operators reported a high level of fuel consumption for roundtrips, 740
liters when loaded in both directions on Pointe-Noire – Brazzaville, and 680 liters with an empty return,
and a tanker company reported 700 liters for a roundtrip, with an empty return. This equals respectively
65 liters per 100 km loaded and 60 liters per 100 km with an empty return, which is high considering
the age of the truck fleet, for which consumption should be below 50 liters per 100 km loaded. One
explanation is that drivers sell excess fuel on the road, and companies have not been able to prevent this
practice.
© Erwan Morand/World Bank
261
No region wide surveys were conducted on road freight prices since the recent peak of fuel prices, to allow for comparison beyond the USA indices. Road
transport tariffs to Burkina Faso in May 2022, ranged from US$2.42 per km on Abidjan–Ouagadougou, to US$2.84 per km on Lomé–Ouagadougou. However, the
differences in rate per km are an artifact of the equalization of the rates from all the transit ports, which happen to be at different distances, than a true reflection
of a price per km, as all full load trucks range between CFAF1.65 million and 1.7 million irrespective of the port.
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 137
CHAPTER 6 Logistics and Eco-tourism to Support Diversification
Documentation costs are especially high. Traders and logistics operators reportedly perceive several of the
documents and associated fees as rent extraction from border and trade agencies. This disconnect is created
because the tariff of the procedure is not set to reflect the actual cost of the service provided, but rather
generate revenue for the trade and border agencies. In several cases, different documents seem to cover similar
purposes. The latest CCC report provides information on the cost of trade-related procedures.
The documentation costs in Congo are far higher than other countries in the region. The relatively high
volumes at the port of Pointe-Noire, comparable for instance to those of Abidjan in Cote d’Ivoire262 and Dakar in
Senegal263, hide the fact that this traffic does not exit the port on the land side, with most of the container traffic
being transshipment, and the oil traffic directly exported. Actual external trade handled by the different IT
systems put in place by the trade and border management agencies is comparatively much smaller than in the
two West African countries, which both have a real Single Window in place rather than a multiplicity of systems.
Developing a Single Window or similar IT tools for trade implies development and operating costs, which are
generally recovered through a user fee per transaction. The UNECE Single Window Repository264 provides
information on development and operating costs, fees, and transaction volumes for several Single Window
systems, and Table A6 (Annex 5) provides that information for the African Single Window systems covered by
the study. The fee for Senegal is roughly consistent with the annual operating costs (assuming 300 working
days per year), while for Kenya, which does not charge fees, a fee of US$4 per transaction under the same
hypothesis, would cover the operating costs. In Congo, the revenue generated under the same assumptions is
around US$25 million per year which is very likely to be far higher than operating costs. 265
6.1.3 Public-private dialogue is aiming to craft solutions but
fails at implementation
The private and public stakeholders are aware that trading costs are high in Congo, and several
forums have been established or tasked to address them. Three initiatives are worth describing. First, the
Congolese Shippers Council regularly updates cost analysis and discusses options for reducing costs266, but
most, if not all, recommendations remain unimplemented. Second, a committee was established in October
2015 by the Minister of Transport and Civil Aviation for the Port of Pointe-Noire community, and recently met
in January 2022 to review a range of recommendations. One of the recommendations, for instance, led to
the creation of an Exit Single Window for the port (aforementioned). Third, an inter-Ministerial committee on
the improvement of the business environment, supported under the World Bank-financed PADEC Program,
reviewed the procedures and past recommendations for reducing the cost of trading in Congo. A report was
prepared and reviewed in March 2020.
6.1.4 Policy recommendations to decrease costs and
increase efficiency of the logistics system
The following policy options would improve the efficiency of the logistics systems. Detailed policy
recommendations are provided in Table 10.
A government review of PPP arrangements of concessions and contracts with external service providers
would aim to reduce costs. The systematic use of concessions and contracts with external service providers
likely drives up costs. With several PPPs for trade procedures for which investment and operating costs can only
be recouped from a very limited number of trade transactions, it is not surprising that trade procedure costs
are higher in Congo than in other countries in Africa. High costs also hold for other PPP arrangements outside
262
27 million tons, 760,000 TEUs in 2020.
263
19.4 million tons, 700,000 TEUs in 2020.
264
https://unece.org/trade/uncefact/SW-repository and https://unece.org/fileadmin/DAM/cefact/single_window/draft_160905.pdf
265
Unfortunately, information on annual operating costs is not available for Congo.
266
The latest update of the Congolese Shippers Council cost survey was conducted in April 2022.
138 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 6 Logistics and Eco-tourism to Support Diversification
of trade procedures, e.g., for the toll road with road freight bearing a disproportionate cost due to low overall
traffic volumes. The Government could review the existing contracts to determine if they contain exit clauses or
revision clauses that would open the door for lowering costs. Similarly, if the tariffs are not set in the contract,
the Government could explore the possibility for the operator to reduce its fees while ensuring a proper level
of profitability. Finally, the government needs to make sure that the existing contracts are in line with the new
PPP law.
To bring coherence to the multiple IT systems for trade and logistics, the Government could take
advantage of its commitment under the FAL Convention (Convention on Facilitation of International
Maritime Traffic) to unify all of them. 267 Each IT system currently in use for trade and logistics in Congo is
charging fees that are higher than in comparable countries. A deeper analysis is needed to determine their
adequate level. A good starting point would be to take advantage of the mandatory requirement under the FAL
Convention for the establishment of a Maritime Single Window which could provide the opportunity to address
the fragmentation of systems by establishing a unified IT system for trade. Unified systems are in place in
Djibouti and Benin, for example, with the functionalities of a Maritime Single Window, Port Community System,
and Trade Single Windows combined. As part of Congo’s review, fees can be reviewed to ensure that they cover
only the operating costs of the system.
TABLE 10
Detailed Policy Recommendations to Improve the Efficiency of the Logistics System
POLICY OPTIONS RESPONSIBILITY PRIORITY
Bring coherence to the multiple IT systems for trade and logistics
• Review the mutual commitments with the technical
Ministry of Commerce,
service providers for the IT tools for trade to determine
Customs, Ministry of SHORT-TERM
the options for revising scope and fees applied, with a Economy and Finance
view to reduce the cost for traders.
Port Authority, Maritime
• Conduct a feasibility study for a Maritime Single Window Administration, Ministry
that would encompass the trade functions currently of Transport, Ministry
MEDIUM-TERM
provided by multiple systems with a view to combining of Commerce, Customs,
them on a more cost-effective single platform. Ministry of Economy and
Finance
Reviewing PPP arrangements to reduce costs and aligning existing contracts with
the new PPP Law
• Review PPP arrangements of concessions and contracts
to determine if they contain exit or revision clauses that
allow revision of contract conditions with the objective of Ministry of Economy and
reducing costs. SHORT-TERM
Finance
• Make sure that the existing contracts are in line with the
new PPP law.
267
https://www.imo.org/en/OurWork/Facilitation/Pages/FALConvention-Default.aspx
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 139
CHAPTER 6 Logistics and Eco-tourism to Support Diversification
6.2 Ecotourism: diagnostic and roadmap
Congo has huge potential for sustainable and poverty-reducing ecotourism. Ecotourism is “a sustainable,
non-invasive form of nature-based tourism that focuses primarily on learning about nature first-hand, and
which is ethically managed to be low impact, non-depleting, and locally oriented”. 268 In comparison with mass
tourism, ecotourism actively aims to reduce poverty and inequality while also conserving a destination’s natural
heritage. If managed well, ecotourism should not only minimize negative impacts on the natural and socio-
cultural environment but also support the long-term sustainability of the natural areas upon which it depends.
“A land of steamy jungles hiding half the world’s lowland gorillas, masses of forest elephants, and hooting,
swinging troops of chimpanzees,” Lonely Planet claims the Republic of Congo is “on the cusp of becoming one
of the finest ecotourism destinations in Africa.” 269
The government’s PND for 2022-2026 identifies over 20 sites for tourism development, but Congo’s vast
biodiversity must be protected as a prerequisite for ecotourism development. The sites with the most
potential for ecotourism development in Congo are four of the country’s 18 Protected Areas (PAs): Odzala-
Kokoua National Park, Nouabalé-Ndoki National Park (NNNP), Conkouati-Douli National Park, and Lesio-Louna
Nature Reserve (Figure 55). Of those identified by the government, Odzala-Kokoua is the most prominent,
with three high-end operational camps operated by the privately-owned tour operator, Congo Conservation
Company. Additionally, Noubalé-Ndoki, Lesio-Louna/Lefini, and Conkouati-Douli have high potential based on
interest from the private sector and marquee fauna such as forest elephants, lowland gorillas, and chimpanzees.
However, Congo’s environmental health and ecosystem vitality, upon which ecotourism development would
depend, is lagging, with Congo ranked 152 out of 180 on Yale’s environmental performance index. Importantly,
the country ranks only 130th for ecosystem vitality despite ranking first in the sub-categories for terrestrial
biomes (both nationally and globally). This is due to rapid habitat loss and inadequate management of natural
resources, among other factors. 270
If well managed, ecotourism can support direct and indirect job creation in Congo and enhance the
economic development of the regions where it operates. If developed with a whole community approach,
ecotourism can ensure equitable community benefits beyond those individuals or enterprises directly involved
in tourism activities. This can be achieved by integrating and expanding the tourism value chain to include
agriculture and other local suppliers, so jobs and benefits are widely shared. Moreover, by increasing the value
of forests and wildlife and offering viable alternative livelihoods, ecotourism development will discourage
activities that degrade these natural heritage resources and instead spur sustainable economic growth.
© Erwan Morand/World Bank
268
(Fennell, 2001) A more basic definition of ecotourism is provided by the UN World Tourism Organization as, “all nature-based forms of tourism in which the main
motivation of the tourists is the observation and appreciation of nature as well as the traditional cultures prevailing in natural areas.”
269
(Lonely Planet, 2022).
270
(Yale University, 2020).
140 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 6 Logistics and Eco-tourism to Support Diversification
FIGURE 55
Map of Republic of Congo with key protected areas
Source: Map by Edgar Francois Loua, GEMS team. GEMS: Geo-Enabling initiative for Monitoring and Supervision.
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 141
CHAPTER 6 Logistics and Eco-tourism to Support Diversification
6.2.1 Tourism demand is on the decline, suffering from weak
brand identity
Tourism demand in Congo is relatively low and declining since
its peak in 2013, consisting mostly of business travelers and
friends and family visits. International arrivals to Congo peaked
at 345 thousand in 2013 and declined to 158 thousand in 2018. 271 The biggest task
By comparison, Cameroon, the Democratic Republic of Congo,
and Angola received 997, 351, and 218 thousand arrivals in 2019,
of any marketing
respectively. Before the pandemic in 2019, travel and tourism’s and promotion
contribution to Congo’s national GDP was only 3.4 percent compared efforts will be to
to a global average of 10.4 percent. The COVID-19 pandemic further
reduced activity in the tourism sector. 272 As of 2019, Congo’s top five
differentiate the
international tourist source markets were France (28 percent), the Republic of Congo
Democratic Republic of Congo (DRC) (13 percent), Cameroon (seven from the Democratic
percent), Angola (six percent), and Italy (three percent). Overall, in
2018, Africa accounted for 56 percent, Europe 33 percent, Asia
Republic of Congo
seven percent, the Americas three percent, and the Middle East one and build general
percent. 273 Leisure travel accounts for 58 percent, with business travel awareness of the
accounting for the remaining 42 percent of travelers. 274 Government
data provides no further information on travelers’ motivation beyond
Republic of Congo
business or leisure. It is likely that a large share of leisure travelers as a destination.
is “visiting friends and relatives” tourists who are less likely to stay
in hotels or take expensive excursions such as those to Odzala and,
therefore, contribute little to tourism sector earnings. 275
With insufficient tourism promotion, the Republic of Congo suffers from weak brand identity and confusion
with neighboring DRC. Without a functioning Office for the Promotion of the Tourism Industry (Office de
Promotion de L’industrie Touristique, OPIT) to actively market Congo as a tourism destination, information
is difficult to find or outdated even for determined tourists or the travel trade. Untapped tourism potential in
Congo partly reflects the absence of a functioning national Destination Management Organization (DMO), let
alone regional or city level DMOs. Compared to most countries, Congo conducts little to no tourist-oriented
marketing and promotion. Congo does not currently participate in major international travel trade shows and
has little engagement with international travel trade or media. As a result, most of the marketing and promotion
efforts are led by the private sector and with minimal consultation or coordination with the government. On
Bloom Consulting’s annual rankings of country brands, Congo is rated as “D” (the lowest) for their Country
Brand Strategy and ranks 46 out of 50 African countries and 195 out of 203 countries globally. 276 Where name
recognition exists, it is often conflated with the Democratic Republic of Congo, a negative association as DRC is
more widely recognized and associated with instability, conflict, and disease. The biggest task of any marketing
and promotion efforts will be to differentiate the Republic of Congo from the Democratic Republic of Congo
and build general awareness of the Republic of Congo as a destination. While lack of financial resources is a
limiting factor, there are low-cost measures that, if implemented, could have positive returns. Finally, Congo
directly competes with countries like Rwanda and Uganda that are more established (e.g., gorilla treks), yet
Congo is more expensive. Congo’s DMO must demonstrate the country’s distinctiveness that justifies the higher
price point while also appealing to travelers’ altruism and ability to directly contribute towards conservation
through their trips.
271
Year most recent data is available.
272
While more recent figures are unavailable, it is likely the numbers have only declined further. Across Africa, tourism arrivals declined on average 73 percent year
over year since 2019 and Congo likely mirrored the same trend.
273
Comprehensive tourism figures were most recently published in 2018. (Ministere du Tourisme et de l’Environnement, Republique du Congo, 2018)
274
Based on pre-pandemic 2019 figures. (WTTC, 2021)
275
(Backer, 2007)
276
(Bloom Consulting, 2022).
142 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 6 Logistics and Eco-tourism to Support Diversification
6.2.2 Tourism supply, with difficult and expensive access
and a dearth of skilled staff, could benefit from a different
model of development
Congo has numerous possible ecotourism destinations, including current and potential UNESCO World
Heritage sites, with charismatic wildlife and valuable cultural heritage assets. The most popular itinerary
for international ecotourists at present is flying into Brazzaville, visiting Odzala, and returning to Brazzaville to
leave. However, Congo has a broad range of possible ecotourism destinations including visits to the nation’s
PAs, the Congo River and other waterways, the wild coast and beaches, and nature sites not designated as PAs
such as waterfalls and other natural landscapes. Of the PAs, the Sangha Trinational area that includes NNNP is
designated as a UNESCO World Heritage Site, while Conkouati and Odzala are on UNESCO’s tentative list. 277
Congo’s noteworthy fauna include lowland gorillas, forest elephants, chimpanzees, buffalos, hippos, turtles,
humpback whales, and hundreds of species of birds. Integral to Congo’s natural heritage are its cultural heritage
assets, including indigenous communities, foodways, 278 and artisan handicrafts (such as wood carvings, jewelry,
woven fabrics, and ceramics).
An appropriate model for tourism development in Congo would be similar to South America’s model
for tropical Amazon rainforests rather than the African savanna model. The conventional African safaris
in eastern and southern Africa consist of a very different type of visit compared to the experience of visiting a
dense forest in Congo. Kenya or Tanzania’s sprawling savanna allows tourists to spot fauna from great distances
and appreciate them from afar in their safari vehicles. These open spaces are easily accessible to the average
tourist who can sit and drive across the vast open terrain. In contrast, Congo’s dense forests in sites such as
Odzala or NNNP make encountering Congo’s animals difficult and often require tourists to get out on foot to
explore the distinctive Baïs or forest clearings, hiking the landscape in small groups (because large groups
would risk scaring away the very animals they have come to see). This type of experience is specialized and
requires a different approach. Although ecotourism experiences other than dense forest are available in Congo,
just as there are more than savanna safaris in eastern and southern Africa, Congo’s forest elephant and lowland
gorilla treks are the signature experiences upon which Congo could distinguish itself as a successful destination.
© Erwan Morand/World Bank
277
(UNESCO World Heritage Centre)
278
A foodway is “the eating habits and culinary practices of a people, region, or historical period” according to the Merriam-Webster dictionary.
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 143
CHAPTER 5 Trade Competitiveness and Diversification
© Erwan Morand/World Bank
Access to tourism destinations in Congo is difficult and expensive, with both air and land transportation
falling short. There are limited direct international flights from key source markets, 279 and international airlift
capacity and frequency continue to limit tourism sector growth. Business travelers account for almost half of
the market’s share of total travelers, and with the sector catering to this market segment, prices are driven
up. Business travelers’ tolerance for higher prices limits ecotourist demand as they are more price sensitive.
Even for tourists that manage to arrive in Congo, inadequate or non-existent infrastructure makes accessing
the country’s remote and isolated PAs difficult and expensive. Within Congo, there are almost no regularly
scheduled air services apart from flights between the two population centers of Brazzaville and Pointe-Noire.
While some regional airports exist, few have any regularly scheduled air service. To get to most ecotourism
destinations, either expensive private charter flights or prohibitively long land transits via degraded roads are
required. Traveling by land during the rainy season can be even more challenging, if not impossible. Even the
existing lodges in Odzala require numerous transfers, from a plane to a 4x4 to a boat to a canoe and still require
multi-hour treks on foot through swampy forests or across streams before reaching the lodge.
Customs and police staff lack an understanding of the benefits of tourism and harass tourists. Upon
arrival at points of entry, customs agents could be more welcoming and streamline entry procedures. Once in
279
Brazzaville is serviced by 12 airlines with only one flight to Europe via Paris on Air France. Whereas Pointe-Noire is serviced by 11 airlines with only two routes to
Europe via Paris and Istanbul on Air France and Turkish Airlines, respectively. The rest of the international air links are intra-African with carriers such as Ethiopian,
Rwand-AIR, Royal Air Maroc, Angola’s TAAG, and AIR-IVOIRE. There is also a small number of maritime entries to Pointe-Noire and Brazzaville via the Congo River
from Kinshasa.
144 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 5 Trade Competitiveness and Diversification
country, police checkpoints along the roads often cause headaches for tourists and tour operators, increasing
travel times and requiring bribes to be paid despite the national tourism authority’s (NTA) efforts to eliminate
them. Whether through unnecessary checkpoints or negative encounters elsewhere, these officials may create
a negative tourism experience.
The sector lacks adequate educational programs and training to supply qualified human resources
to staff hotels, protected areas, tour operators, restaurants, and other tourism enterprises. The lack of
proper workforce development contributes to high turnover and a poor customer service culture. Apart from
one course in a general business program at Université Marien Ngouabi (Marien Ngouabi University), 280 there are
no tourism specific training centers, let alone specialized training in ecotourism related fields. Currently, senior
staff of hotels with international clientele, including lodges in Odzala, are primarily staffed with international
employees such as South Africans or Europeans. There have been efforts in the past to organize vocational
internships and exchange programs between properties (e.g., from Odzala to the Radisson Blu during the
off-season), but these have not been successful or are no longer functioning programs. The private Congo
Conservation Company recruits professional guides from abroad to work in Odzala, primarily from South Africa,
but aims to use those guides to train local guides over time. In addition to establishing proper training institutes
for the sector, there are opportunities in the short-term to utilize international staff to train up a Congolese
workforce.
6.2.3 Tourism governance, essential to ecotourism growth,
has been unstable, understaffed, outdated, and unable to
provide quality control to the sector
Effective governance and management of ecotourism are essential to foster local community
stewardship. Without strong governance, ecotourism has the potential to undermine intended conservation
goals if local communities do not directly benefit and see improvements to their livelihoods and living conditions.
If locals perceive tourism to benefit only government authorities and private companies, they are less likely to
develop the necessary vested interest in the protection of their natural heritage upon which ecotourism depends.
An emphasis on building local capacity and agency, reducing social and economic inequality, and improving
livelihoods are needed to mitigate possible negative aspects of ecotourism development and incentivize local
community stewardship.
The national tourism authority has been plagued by instability. Since the first NTA was created in 1963,
Congo’s tourism authority has gone through 24 restructurings into various Ministries, often combined with
other sectors such as environment (six times), culture (three times), and industry (three times). Only twice has
it stood alone—from 2007 to 2009 and from 2016 until now. This means that, on average, the NTA has been
reorganized every 2.6 years, nearly half of those times for two years or less. 281 With each change, the tourism
agenda has been effectively reset as new leadership sets out to make their mark, leaving the NTA without
a consistent long-term vision, clear objectives, or intermediate indicators upon which to measure progress
towards its goals, severely limiting the tourism authority’s ability to manage the sector effectively.
There are insufficient financial and human resources in Congo’s public sector to manage and coordinate
tourism. In large part, the Congolese government correctly identifies the major challenges for growing tourism
and, in many instances, proposes appropriate solutions that would have positive impacts on the sector, as
demonstrated in the government’s 2017 Sustainable Tourism Development Plan. However, there is a persistent
disconnect between drafting national plans and strategies and taking action. The government is hamstrung
by small budgets and stretched thin by too few staff to manage the sector. If given adequate resources (both
financial and advisory), Congo may finally be able to address the persistent challenges and implement the plans
they have long proposed and that are articulated in the recent PND.
280
(Umng.cg, n.d.)
281
(Ministere du Tourisme et des Loisirs, Republique du Congo, 2017)
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CHAPTER 5 Trade Competitiveness and Diversification
Legislation and regulations governing the tourism sector should be updated to reflect current national
priorities, in particular the easing of visa requirements. The NTA is in the final stages of launching a hotel
classification system to formalize the accommodations industry; yet there is no equivalent regulation of other
travel businesses. While there are some efforts to streamline business registration and licensing through a
One-Stop-Shop for Tourism (Guichet Unique du Tourisme, GUT), 282 this organization needs to be carefully
monitored so as not to create opportunities for corruption and structured in a way that encourages efficiency
and transparency. Visa policies need to be reformed as they create unnecessary burdens for the travel trade
and individual travelers, which stifle the overall growth of the sector. Industry best practices show that relaxing
or eliminating entry visa requirements boosts tourism demand. 283 Simply, the more welcoming a country’s visa
policies, the more tourists they are likely to receive. Other African countries that opened their borders saw 20
percent increases in arrivals year over year on average. 284 Congo should endeavor to reduce the number of
countries that require tourist visas altogether, move away from paper visas and visas on-arrival, and abolish the
invitation letter requirement completely. Visa requirements for citizens from Congo’s key source markets should
be unilaterally eliminated while offering a nominal-fee e-visa to other countries as appropriate.
Until recently, there has been a lack of oversight in the design and construction of tourism facilities
and infrastructure. Regulations need to be updated and enforced to ensure any new construction is of high
quality, able to withstand Congo’s humid climate, and well designed. With the exception of Congo Conservation
Company lodges in Odzala, other facilities, such as those in Lesio-Louna and Lefini, are not well designed
to meet the high expectations of the discerning ecotourists Congo hopes to attract. Along with the GUT,
the NTA recently established the Congolese Society of Tourism Engineering (Société Congolaise d’Ingénierie
du Tourisme), which will be responsible for overseeing and building tourism facilities and infrastructure. It is
imperative that they follow high standards of quality and design. When considering construction in the PAs’
delicate environments, sustainability must also be considered or risk destroying the very assets upon which the
industry is built.
6.2.4 Roadmap for Congo’s tourism sector development
demands broad improvements to deliver on ecotourism’s
promise
Policies that safeguard Congo’s natural heritage and improve tourism governance and its enabling
environment are key to unlocking the country’s enormous ecotourism potential. First and foremost, for
Congo to both conserve the environment and sustain the well-being of the local people, the natural heritage
upon which ecotourism depends must be safeguarded and sustained, including by avoiding biodiversity loss
and forest degradation. In order to develop ecotourism, the sector requires strong tourism governance that
allows the private sector to innovate and thrive. Not only must the Ministry of Tourism and Leisure (Ministère du
Tourisme et des Loisirs, MTL) act as a steady leader, but it also must bring together the various public, private,
and donor stakeholders to unite around a common vision and collaborate to address shared challenges based
on a data-driven strategy. Finally, other factors that impede both private sector and civil society partners from
operating efficiently should be tackled, including access to infrastructure and services, a low-skilled workforce,
and an onerous business environment (e.g., burdensome taxes and fees, corruption and inconsistent application
of laws). Congo also needs to build a brand identity and foster media exposure to increase tourism demand.
While these may seem like significant challenges, there is a path forward and enormous potential should these
challenges be overcome (see Table 11 for detailed policy recommendations). An excellent place to start is
learning from the ecotourism success story in Costa Rica where the creation of payments for environmental
services, large areas set aside for protection, strong tourism sector governance, and balancing of types of land
use together shaped Costa Rica into a top ecotourism destination (see Box 13).
282
(Ministère de l’Environnement, du Développement Durable et du Bassin du Congo, 2020)
283
Globally, visa-free entry increases demand 16.6 percent, new types of visas result in an 8.1 percent increase, and implementing best practices only 4.3 percent.
(WTTC, 2019).
284
(Visa, 2020).
146 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 6 Logistics and Eco-tourism to Support Diversification
BOX 13
A country peer case of successful development of
ecotourism - Costa Rica
Source: WDI and HCI (2020)
Costa Rica’s large and mature ecotourism industry has earned it a reputation as a top
ecotourism destination in the world. Costa Rica has built a world renowned “Green Trademark,”
centered on conservation, reforestation, and protected areas.
Several measures helped Costa Rica earn its Green Trademark:
• Green framework and payments for environmental services: Payment for environmental
services (PES) was formally established in 1995 through its Forest Law, making the costs of
reforestation tax deductible and establishing fiscal incentives that rewarded landowners for
reforestation as well as establishing a National Fund for Forestry Financing (FONAFIFO) to
manage the PES. Subsequently, FONAFIFO’s share of fuel tax revenues was fixed at 3.5 percent,
guaranteed through the national budget. In addition, a decree introduced a mandatory payment
for ecosystem services by allocating 25 percent of water tariffs to the PES program.
• National parks and protected areas: Costa Rica has set aside 26 percent of its land area for
protected areas. The National System of Conservation Areas (SINAC), an agency of the Ministry
of Environment, Energy and Telecommunications, was introduced in 1994 to organize the country
into 11 large conservation areas, most of which are based around a major national park, to avoid
protected areas becoming isolated “green islands” in an otherwise improperly managed landscape.
SINAC is responsible for directly administering Costa Rica’s protected areas and for formulating
policies and the planning and execution of processes that promote conservation and sustainable
natural resource management, including forests, across the entire country. SINAC works in close
collaboration with FONAFIFO, various forestry organizations, independent forest regents and
forestry engineers, and oversees over 160 protected areas, of which 26 are designated national
parks.
• Tourism sector governance: Costa Rica’s tourism sector is well organized, with strong public-
private collaboration. The private sector is organized around the Chamber of Hotels, representing
large and small hotels, and the National Chamber of Tourism, for other tourism-related businesses.
The Costa Rica Institute for Tourism (CR-ICT) is the autonomous public institution in charge of
setting tourism policy, with a good balance of political appointees and representatives of the
industry on its board of directors. Over time CR-ICT has adopted the role of promoter of private
sector tourism development and administrator of tourism development incentives.
• Balancing forest conservation and other land uses: Maintaining healthy forest ecosystems
while promoting sustainable agricultural growth is fundamental to the country’s development
strategy and to its efforts to improve livelihoods in rural areas. To harmonize and jointly leverage
its agricultural and environmental goals, the Government formulated an “Agro-environmental
Agenda” among its Ministry of Agriculture and Ministry of Environment and Energy which aims
to improve the efficiency of food systems as well as meet global commitments related to climate
change (in particular, reducing emission from livestock while maintaining negative emissions from
forestry).
Costa Rica’s investments in nature and environmental protection have paid off. Costa Rica is
the first tropical country in the world to have reversed deforestation, increasing the area covered
by forests from 26 percent in 1983 to over half of the country today. It ranks fourth in the 2021 Latin
American Region Travel and Tourism Competitive Index of the World Economic Forum. The country,
which has a population of 5.1 million, attracted 3.1 million visitors in 2019. In a survey carried out by
the government in 2017-2019, 65 percent of visitors revealed that eco-tourism is the reason they
chose Costa Rica. The tourism industry is one of the country’s main sources of foreign exchange, and
in 2019, its share in GDP was 4.8 percent while contributing 19 percent of total exports.
Sources: Brown and Bird (2010), Bennet and Henniger (2009), Oviedo, et. al. (2015), Raul, Cole, and Shutterstock (2022), Rodriguez and Zunega
(2003), World Economic Forum (2022), Wallbott et. al. (2019), WorldWatch Institute (2015), Costa Rican Tourism Board.
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 147
CHAPTER 5 Trade Competitiveness and Diversification
Congo must urgently protect the natural environment upon which the eventual success of ecotourism
depends. Key to protecting these natural assets is halting and reversing biodiversity loss, deforestation,
and forest degradation that directly or indirectly deplete the very wildlife that ecotourists want to see.
Unsustainable hunting for bushmeat, poaching, and fisheries overexploitation must be addressed, including by
combating wildlife trafficking beyond PAs and buffer zones and reducing human-wildlife conflict. Deforestation
linked to industrial commercial forestry (e.g., palm oil farming or unsustainable logging) can be addressed by
requiring certification from the Forest Stewardship Council. Efforts must be accompanied by robust monitoring,
strong community engagement in identifying and mitigating threats, and enforcement of laws. Ultimately,
by demonstrating the economic value from safeguarding ecosystems and wildlife, ecotourism can engender
community support for safeguarding natural assets.
Tourism governance must be strengthened by securing effective leadership and sufficient resources to
implement recommendations. Experienced and stable leadership for MTL is a prerequisite to a successful
tourism sector. MTL needs to unite all stakeholders around a common, long-term vision to break free from the
history of restructurings and inconsistent strategies for tourism development. Further, MTL needs sufficient
resources, both financial and human.
The role of the Supreme Tourism Council (Conseil Suprême du Tourisme,
CST) should be reformed and strengthened. Restructure the CST to be more
action oriented and a forum that convenes the private sector at the national The natural
level to advise and advocate their interests with the central government’s heritage upon
public institutions, including but not limited to the MTL. This advisory
board to the MTL should be comprised of travel sector representatives
which ecotourism
(e.g., accommodations, transportation, travel trade, guides, activities and depends must
attractions, PA authorities, retail and artisans, restaurants) and meet regularly be safeguarded
to discuss current challenges and strategy. Thematic working groups within
the CST should meet regularly on assigned topics and be accountable for
and sustained,
realizing results. In addition to a direct line of communication with MTL, it including
would also facilitate working with other public institutions. 285 MTL can then by avoiding
act as the lead public agency to relay specific requests for support, advocate
on behalf of private sector interests, and collaborate with other public sector
biodiversity
partners to optimize travel sector performance. By reorienting the CST away loss and forest
from an annual presentation of industry results and towards accountable, degradation.
outcome-driven working groups, the CST will help sector stakeholders discuss
and implement solutions that address the sector’s many challenges.
Coordinating with the private sector to address shared challenges. A country-level travel association
is needed to complement the CST and provide the private sector with a forum to collaborate and have a
shared voice to address government institutions. Options include creating a new organization or expanding the
scope of an existing association (such as the hotel association or even UniCongo, the employers’ federation)
to encompass the entire travel sector (with a preference for utilizing existing structures rather than founding a
new entity).
Engaging donors for strategic alignment. Actively convene and coordinate donor efforts in the travel sector
to leverage strengths and avoid inefficiencies. Suggest holding bi-monthly or at least quarterly meetings with
representatives of relevant multilateral and bilateral donor agencies to allow the MTL to direct activities and
ensure alignment with Congo’s tourism strategy and coordination amongst partners. Combined with the CST,
these meetings should ensure full transparency and that planned actions match the needs of the travel sector.
Conducting research on supply and demand. Strong data collection and analysis lead to better decision-
making. MTL should strengthen data collection and surveys in the sector. These should cover the three areas
285
The primary institutions include the Ministry of Forest Economy (concessions), Ministry of Environment and Sustainable Development (environmental impact
assessments and regional linkages), Ministry of Transport (aviation, regional links, and road accessibility), Ministry of Interior (visa policy and access), Ministry of
Economy (investment and access to finance), Ministry of Finance (taxation) and Ministry of Labor (workforce development). Others could include the government
authorities for urbanization, public works, education, arts and culture, and agriculture.
148 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 6 Logistics and Eco-tourism to Support Diversification
© Erwan Morand/World Bank
of demand, supply, and residents. Currently, many decisions within the travel sector are made based on past
anecdotal experience and could be better informed by research and evidence on who comes to Congo and
why. The only regularly collected data are entry surveys on arriving international flights and at the Yoro Port
in Brazzaville for boats arriving from Kinshasa, DRC. There is no systematic collection of statistics at tourism
sites nor are there any exit surveys. A few PAs managers (Odzala, NNNP, Lesio Louna, Conkouati) collect
some data, but these are not aggregated up to the NTA and risk double counting. It is impossible to estimate
tourism spending, determine where tourists go, duration, and develop informed marketing and promotion
strategies without sufficient data. For marketing purposes, more information is needed to create traveler
personas, including both demographic and psychographic profiles. MTL should also regularly survey local travel
businesses to gauge sentiment and identify challenges. By monitoring and maintaining regular communication
with the private sector, MTL can identify opportunities to innovate and diversify tourism services across the
sector. Results from these surveys will inform and serve as justification for other initiatives, such as those
developed in consultation with the CST.
Access to Congo’s ecotourism sites and services can be improved by strengthening enabling
infrastructure and related services. Air routes from key international source markets should be expanded.
Prioritization of which markets to pursue should be data driven and correspond to the selected markets
identified through research. Domestically, air and road access to priority PAs and sites need to be improved.
The Government should pursue building and maintaining roads to ensure travelers can easily get to flagship
attractions and sites within the country. Short-term priorities include access between Brazzaville and Lesio-
Louna/Lefini, and between Pointe-Noire and Conkouati, as well as air access infrastructure to gateways
communities of other flagship PAs (Odzala and NNNP). Further, approvals for infrastructure such as roads or
airstrips within PAs are not efficiently evaluated nor approved in a timely manner, which impedes development.
Measures should be implemented to address risks associated with building roads and the high potential for
negative impacts on the adjacent natural ecosystems. Additionally, maintenance plans must be in place to
prevent the destruction and degradation of sites once access is improved or created.
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 149
CHAPTER 6 Logistics and Eco-tourism to Support Diversification
© Erwan Morand/World Bank
Collaborating with the private sector to train the next generation workforce. Collaboration with public
education institutions and private training centers can be established to train a qualified workforce needed to
realize the PND’s ambitious goals. This includes educational institutions to train hospitality workers for hotels
and restaurants, culinary programs, professional nature guides, protected area management and operational
personnel, and other human resources across the sector. Target market language skills are also needed.
Institutions should establish partnerships with the private sector to source trainers from their internationally
experienced staff to teach programs and develop curricula. From conversations with private sector stakeholders
with pools of international staff, there is a general openness to this concept with some suggesting that they
could easily find volunteers to lead training courses if they were organized. With these same private sector
partners, internship and exchange programs both domestically and regionally in Africa could be established to
expose participants to best practices. 286
Building awareness and stimulating demand. The MTL should support the creation of DMOs, both nationally
(through the proposed OPIT) and decentralized DMOs of flagship destinations and PAs. In the short-term,
the OPIT as a national-level DMO is the priority. This includes a comprehensive website with all necessary
information on key destinations, including sub-pages for respective PAs. Additionally, the DMO needs to better
facilitate connections with the international travel trade to reach target markets. The biggest task will be to
generate awareness of Congo as a destination, including by distinguishing Congo from the DRC. Travelers’
preferences have changed due to the pandemic, with higher demand for outdoor, nature-based, or active/
adventure experiences; responsible travel that positively impacts host communities; health, wellness, and
personal growth; private accommodations and intimate, small group or private experiences. 287 These trends
are likely to continue and position Congo competitively. With these emerging traveler preferences in mind, the
OPIT should create messaging for all stages of the traveler’s journey: inspiration, planning, booking, scheduling,
traveling, experiencing, sharing, dreaming/reflecting. In the short-term, planning, booking, and traveling
are important for domestic audiences, while inspiration and planning stages matter most for international
markets. Beyond building brand consumer awareness, there is a need for awareness building among the general
population about the value of Congo’s natural heritage and their duty as citizens to care for it. Using a public
campaign to demonstrate what exists around the country, the first goal of preserving it will be that much easier.
Establishing media relationships and pursuing new exposure in both consumer and travel trade
publications. Invite media journalists and independent influencers on familiarization tours to experience
trips to flagship PAs, as well as other distinctive attractions and experiences to generate greater awareness
and publicity among target audiences. In addition to attending trade shows, support matchmaking between
local receptive tour operators and international outbound tour operators with a travel trade portal on OPIT’s
286
For instance, a program could organize sending nature guides to other successfully protected areas in Gabon or Rwanda or establish training programs for
hospitality workers from remote areas to train in larger hotels in Pointe-Noire or Brazzaville.
287
(ATTA, 2021); (TravelPulse, 2021)
150 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 6 Logistics and Eco-tourism to Support Diversification
website. Beyond in person-activities and recognizing still existing travel restrictions in the short-term and
budgetary limitations overall, OPIT should host thematic and/or geographically targeted destination webinars
that highlight ecotourism products or itineraries for the international travel trade. 288
Improving the business environment. The Government should update legal frameworks and apply and enforce
existing laws and regulations. This includes supporting entrepreneurship and investment by streamlining
business licensing (such as through the GUT) and removing unnecessary bureaucratic steps to create and
operate a tourism enterprise. Legislation should govern all facets of the sector, including tour operators and
DMOs that are currently in limbo without specific regulations. To complement these reforms, there should be
measures to prioritize access to finance and bankability for SMEs to start businesses and upgrade operations,
such as green retrofitting aging hotels or purchasing vehicles to run tours. The Government should also
evaluate outdated operational burdens and simplify procedures, such as requiring tour operators to provide
passenger lists to authorities before traveling. In addition to removing red tape and other bureaucratic hurdles,
an Enterprise Incubator to foster innovation and entrepreneurship in priority areas could be established. The
incubator would provide access to business advisors on operations and travel sector advice, expedited and
simplified registration, access to finance, and other complementary services and training.
Reforming tax and fee policies. Authorities should explore recalibrating taxes and fees in the sector. There
is a tourism-related tax of ten percent levied on room nights per person. Hotels in Brazzaville effectively pay
31 percent in taxes (ten percent hotel tax, 18 percent value added tax, and two percent city tax), in addition to
employment-related taxes and income taxes. The private sector cites high taxes in Congo as a primary inhibitor
to the development of the tourism sector as it raises costs beyond comparable tourism offerings elsewhere. A
heavy tax burden stifles investment, hiring, and entrepreneurship while also pushing some businesses to avoid
regulations altogether.
Increasing transparency and reducing opportunities for corruption. Management structures (such as
public-private partnerships) should be accountable, transparent, and free from political interference. Protocols
and procedures should be in place to ensure efficient and transparent functioning of the sector and to limit
opportunities for corruption. For instance, reform should increase the transparency of awarding concessions to
operate national parks, collecting entry fees, issuing business licenses, etc. Trainings should be organized for
customs officers and police to better understand the needs of tourists and how to interact without unnecessarily
harassing them.
Assessing concession policies to maximize community and conservation benefits. As a broad offering
of tourism services should be available to satisfy potential demand, sufficient competition and access for tour
operators should be ensured. Indeed, too much control in the hands of a single company could stifle innovation
and destination competitiveness. To that end, PA management partners (international non-governmental
organizations Africa Parks Network, Wildlife Conservation Society, and Noé) should be empowered to collaborate
in day-to-day oversight of concessions. Other models of concession management should be considered,
including community managed concessions such as those established in Namibia. New concessions should
be awarded based on their potential for tourism development (including access, attractiveness, community
benefit, conservation priorities, etc.). Appropriate mechanisms to measure performance against concession
agreements should be implemented, including means to course correct as warranted and needed.
Strengthening the tourism supply chain. The Government should conduct a gap analysis of the current supply-
chain and, in consultation with the needs of the private sector, identify priority areas to support. Using a place-
based model for destination development, cultivate national and hyper-local supply-chains to create greater
resilience for domestic supply and production. To support the local economy and reduce long-term reliance on
imports, a program to support linkages with local entrepreneurs should be put in place. This will create shared
value and enhance the overall competitiveness of the destination by reducing costs while advancing social and
economic conditions to benefit host communities.
288
This will help increase Congo’s exposure with other international operators that they either were not able to meet during the shows or operators who do not
attend these shows. Even once travel fully resumes, these webinars require little financial investment and would continue to supplement outreach and sales
efforts, living on the travel trade section of the website as an additional planning resource. On a regional level, Congo should seek opportunities in neighboring
destinations, such as Gabon, Cameroon, and the Central African Republic, to collaborate and develop multi-destination itineraries that will mutually benefit each
country.
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 151
CHAPTER 6 Logistics and Eco-tourism to Support Diversification
TABLE 11
Detailed Policy Recommendations to Deliver on Ecotourism’s Promise
POLICY OPTIONS RESPONSIBILITY PRIORITY
Safeguard natural heritage assets, which serve as the foundation for ecotourism
development
• Consider implementing programs that address demand ACFAP, Ministry of
for bushmeat and illegal hunting and support alternative Environment and Sustainable SHORT-TERM
protein production. Development
Ministry of Forest Economy,
• Ensure wildlife protection authorities have sufficient
ACFAP, Ministry of
resources and a clear mandate to stop poaching, illegal SHORT-TERM
Environment and Sustainable
hunting, and wildlife trafficking in PAs and buffer zones.
Development
• Regulate and limit industrial commercial forestry that
Ministry of Forest Economy,
contributes to deforestation in or adjacent to PAs and SHORT-TERM
ACFAP
degrades or reduces natural habitats.
• Engage with communities in and around PAs to mitigate Ministry of Environment and
threats, reduce instances of human-wildlife conflict, and Sustainable Development, MEDIUM-TERM
empower them to co-implement solutions. ACFAP
Improve tourism governance
• Ensure stable leadership of the MTL and create a
long-term vision for the sector that reduces the risk of MTL SHORT-TERM
inconsistent strategies for tourism development.
• Allocate sufficient financial and human resources to
public sector institutions implicated in the success of
the tourism sector, including hiring sufficient, qualified MTL SHORT-TERM
human resources at the MTL to manage the sector’s
development.
• Restructure the CST to be more action oriented. MTL SHORT-TERM
• Support the creation of a country-level travel association
to provide the private sector a forum to collaborate and MTL MEDIUM-TERM
have a shared voice to address government institutions.
• Actively convene and coordinate donor efforts in the
travel sector to ensure strategic alignment, leverage MTL SHORT-TERM
strengths, and avoid inefficiencies.
• Conduct research on supply and demand to ensure
decision-making is data driven with informed analysis,
MTL SHORT-TERM
including strengthening data collection and surveys in
the sector.
152 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
CHAPTER 6 Logistics and Eco-tourism to Support Diversification
POLICY OPTIONS RESPONSIBILITY PRIORITY
Strengthen the enabling environment
• Strengthen international air linkages by increasing air
MTL, Ministry of Transport MEDIUM-TERM
routes from key international source markets.
MTL, Ministry of Transport,
• Improve domestic air and road access to priority PAs and ACFAP, Ministry of
SHORT-TERM
sites by building and maintaining roads. Environment and Sustainable
Development
• Consider collaborating with the private sector to train
the next generation workforce by fostering partnerships
to source trainers from their internationally experienced MTL, Ministry of Labor SHORT-TERM
staff to teach programs, develop curricula, and create
internship and exchange programs.
• Establish public education institutions and support
MTL, Ministry of Labor MEDIUM-TERM
private training centers.
• Ensure the national OPIT is fully operational to act as the
national DMO to build awareness and stimulate demand
MTL SHORT-TERM
through a comprehensive website, connections with
travel trade and media, and active promotion efforts.
• Consider inviting travel trade and media on familiarization
MTL SHORT-TERM
tours of flagship destinations and PAs.
• Consider updating legal frameworks, applying and MTL, Ministry of Economy
enforce existing laws and regulations, increasing
and Finance, Ministry of the MEDIUM-TERM
transparency (including of awarding concessions), and
Interior
creating an Enterprise Incubator.
• Consider reforming tax and fee policies to be less Ministry of Economy and
MEDIUM-TERM
burdensome for the sector. Finance, MTL
• Facilitate visa procedures. Ministry of the Interior, MTL SHORT-TERM
MTL, Ministry of
• Consider conducting a gap analysis of the current supply-
Environment and Sustainable MEDIUM-TERM
chain.
Development
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 153
Annex
154 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
Annex
Annex 1.
Implementation of a State Aid Framework
Related to Chapter 3: Boosting Productivity through Competition
Moldova adopted a state aid control law in 2012 that includes ex ante approval and monitoring of
any state aid by the Moldovan competition authority. 289 The purpose of the law is to maintain a “regular
competitive environment.” 290 It seeks to avoid market distortions brought about by competitive advantages
conferred to some players in a market, but not all. It recognizes, however, various state interests in providing
state aid, and seeks to ensure that those interests are weighed against possible market distortions in deciding
whether to approve state aid.
State aid is not limited to direct subsidies. State aid is defined to be a transfer of public resources that gives
an economic advantage to its recipient, that is given on a selective basis (not to all players in a market), and that
distorts—or is likely to distort—competition. 291 State aid can be in the form of direct subsidies but can also be in
indirect forms such as preferential loans, forgiveness of debt, or discounts. 292
With limited exceptions,293 all state aid must be approved ex ante by the national competition authority.
State aid can be approved if it serves remediation of a severe economic disturbance, professional training,
support of SMEs, support of Research & Development, environmental protection, services of “general economic
interest,” rescue of beneficiaries in difficulty, support for female entrepreneurs, sectoral aid, and regional
development aid. 294
The criteria for the national competition authority’s decisions are explicit, and the law attempts to
provide transparency in the decision-making process. Detailed regulations exist for each category of
recognized state interest, and each includes a customized application form. As an example of the level of
detail, one provision of the regulation on state aid to support SMEs, provides that state aid for the purpose
of participating in trade fairs can cover only costs of hiring outside consultants, and only 50 percent of those
costs. 295 Transparency is afforded by a requirement to publish opinions and an annual report. 296
289
Moldovan Law on State Aid, Law no. 139 (Jun. 15, 2012). This law and associated regulations can be found at https://www.competition.md/tabview.
php?l=en&idc=36&t=/Official-documents/State-aid.
290
Id. at art. 1.
291
Id. at art. 3.
292
Id. at art. 6; Moldova: A Guide for the Design and Identification of State Aid Instruments to Minimize Competition Distortions, WBG, ¶ 6(a), available at https://
www.competition.md/public/files/Ghid-Ajutor-de-stat-Engleza13534.pdf.
293
Exceptions are provided for aid granted to consumers without regard to the supplier of the goods or services purchased, for responses to “natural disasters and
exceptional situations,” and for de minimis aid (less than 2 million MDL, which is about US$100,000). Moldovan Law on State Aid, arts. 4, 8(1).
294
Id. at art. 5.
295
Regulation on state aid granted to small and medium-sized enterprises (2013), § 4.
296
Moldovan Law on State Aid, art. 41.
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 155
Annex
Annex 2.
Government Presence in Network Industries
Related to Chapter 3: Boosting Productivity through Competition
National, state or provincial Yes No Government's share Market share of the
governments hold equity stakes in in the largest firm in largest company in the
the largest firm in the sector the sector sector
Electricity
Electricity generation 80% 297 Greater than 50% 298
Electricity transmission 100% Greater than 90%
Electricity distribution 100% Greater than 90%
Telecom
Fixed-line network 100% Greater than 90%
Fixed-line services 100% Greater than 50% 299
Mobile services n/a Greater than 50% 300
Gas
Gas generation 100% Between 50% and 90%
Gas transmission 100% Between 50% and 90%
Gas distribution n/a Between 50% and 90%
Water
Water supply 100% Greater than 90%
Source: 2022 Survey for Congo (following the OECD PMR template – selected questions)
297
Centrale Electrique du Congo (CEC) is owned by the government of Congo (80 percent) and the corporation ENI (20 percent). See CEC Pointe-Noire Power
Plant, Republic of the Congo, Power Technology (Jan. 11, 2022), https://www.power-technology.com/marketdata/centrale-electrique-du-congo-cec-pointe-noire-
power-plant-republic-of-the-congo/.
298
CEC produces 60-70 percent of Congo’s electricity. The Integrated energy access project in Congo, ENI website, https://www.eni.com/en-IT/operations/congo-
energy-access-project.html.
299
Congo Telecom has a monopoly on fixed voice lines, but (according to Telegeography) has only a 50 percent share in the fixed broadband market. Teleogeography
Congo Report, Telegeography (Apr. 2022), p. 27.
300
Based on revenue shares in mobile, mobile money, and mobile internet for 2021, MTN has 68.8 percent of the combined market. Data from Rapport 2021 du
marché de l’internet mobile, ARPCE; Rapport 2021 du marché de la téléphonie mobile, ARPCE ; La Grand’Actu du Régulateur (Newsletter), ARPCE (Dec. 2021) (for
mobile money data), available at https://www.arpce.cg/rapports; https://www.arpce.cg/bulletins-mensuels.
156 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
Annex
Annex 3.
Framework for the Competition Analysis of
Electricity Sectors
Related to Chapter 3: Boosting Productivity through Competition
The electricity sector value chain can be broadly broken-down into: (i) generation, import and
wholesale, (ii) trading; (iii) transmission, (iv) distribution and (v) retail. Across this value chain, we can
typically find a series of bottlenecks that are likely to produce anticompetitive outcomes. These may include:
• Generation level:
» Lack of balanced generation portfolio comprising baseload and peak assets;
» Presence of SOEs in contestable market segments such as electricity generation;
» Unduly burdensome licensing or concession regime to enter contestable market segments such as
generation.
• Trading level:
» Lack of liquidity in the trading market;
» Lack of clarity on the legal/regulatory framework regarding long term power purchase agreements.
• Transmission and distribution levels:
» Low levels of interconnection;
» Regulatory framework that does not encourage investment in transmission and distribution infrastructure;
» Ineffective third-party access rules that facilitate access to essential infrastructure and assets by non-
vertically integrated operators;
» Ineffective integration of decentralized energy sources into the energy grid.
• Retail level:
» Ineffective regulatory framework to ensure consumers can easily change suppliers;
» Price regulation that does not adequately target vulnerable consumers.
• Bottlenecks covering the entire value chain:
» Lack of competitive neutrality to the detriment of private sector operators;
» Lack of adequate definition of universal and public service obligations, which may result in the cross-
subsidization of commercially-viable market segments;
» Vertical integration covering natural monopoly and contestable and competitive market segments;
» Ineffective enforcement of ex post and ex ante (merger control) competition rules that can tackle abuse
of dominance and anticompetitive agreements, and prevent the creation of market structures that
substantially lessen competition in the market.
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 157
Annex
Annex 4.
Framework for the Competition Analysis of
Mobile Telecommunication Sectors
Related to Chapter 5: Trade Competitiveness and Diversification
The mobile telecommunications value chain can be broken-down into: (i) upstream wholesale,
comprising international connectivity and backbone, (ii) downstream wholesale, including backhaul
and the last mile; and (iii) retail levels. Across this value chain, we can typically find a series of bottlenecks
that are likely to produce anticompetitive outcomes:
• Upstream wholesale level:
» Exclusivity rights in the purchase capacity from international cables;
» Lack of effective enforcement of access conditions to backbone network.
• Downstream wholesale and retail levels:
» Absence of market mechanisms in spectrum management, including auctions and secondary market
trading;
» Mobile termination rates ineffectively regulated;
» Absence of framework for market entry by mobile virtual network operators;
» Unduly burdensome licensing procedure for activities that do not rely upon scarce resources (e.g., ISPs).
• Bottlenecks covering the entire value chain:
» Lack of competitive neutrality to the detriment of private sector operators;
» Lack of adequate definition of universal and public service obligations, which may result in the cross-
subsidization of commercially-viable market segments;
» Overly high licenses and authorizations fees that discourage market entry;
» Ineffective enforcement of ex post and ex ante (merger control) competition rules that can tackle abuse
of dominance and anticompetitive agreements, and prevent the creation of market structures that
substantially lessen competition in the market;
» SOE presence in contestable and competitive market segments.
158 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
Annex
Annex 5.
Additional Figures and Tables
Related to Chapter 5: Trade Competitiveness and Diversification
FIGURE A1
Merchandise and service trade openness 2007 and 2019
a. Merchandise b. Services
Average 2005-2007 Average 2017-2019 Average 2005-2007 Average 2014-2016
400
400
300
300
Trade to GDP (%)
Trade to GDP (%)
Trade to GDP (%)
Trade to GDP (%)
200
200
100
100
100
100
CONGO
CONGO
50
50
CONGO
CONGO
0
0
0
0
6 8 10 12 6 8 10 12 7 8 9 10 11 12 7 8 9 10 11 12
Log GDP per Capita (PPP) Log GDP per Capita (PPP) Log GDP per Capita (PPP) Log GDP per Capita (PPP)
Source: WB staff calculations using data from World Development Indicators. Trade openness is the ratio of the sum of exports and imports (trade) over GDP.
Each dot represents a country. The curve shows the average of trade openness for a given per capita income. The grey band represents the 95 percent confidence
interval.
FIGURE A2
Imports of services
12,000
10,000
8,000
Million USD
6,000
4,000
2,000
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Travel Transport Insurance and pension Other services
Other business Cultural Commercial ICT
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 159
Annex
FIGURE A3
Deviations from the CET by country and HS2 chapter, 2015
CAR Cameroon Chad
10
5
0
CET deviations, percent
-5
0 50 100 0 50 100 0 50 100
Congo Gabon
10
5
0
-5
0 50 100 0 50 100
HS2
Source: Estimates based on TRAINS and CEMAC tariff schedule.
FIGURE A4
Landscape of Congo’s food imports, 2020
Meat and edible Aquatic Edible Cereals
Animal
meat offal Animals By-
Products
3.92% 13.9%
Other Animal Products of the milling Vegetables and Coffee, tea, mate
Products industry; malt, starches, certain roots and
and spices
23% 12.6% 1.18%
inulin, wheat gluten tubers; edible 0.61%
1.97% 1.45%
Oil seeds
0.41%
Preparations of Miscellaneous edible Beverages, spirits Meat, sh or
crustaceans,
Preparations
of vegetables,
cereals, our, preparations and vinegar fruit, nuts or
starch or milk;
molluscs or
other aquatic
invertebrates;
other parts
of plants Animal or
pastrycooks’ 4.57%
preparations
thereof vegetable fats,
products 3.87% oils and waxes
Sugars and sugar Tobacco and manufactured
confectionery tobacco substitutes 2.48% 1.85%
8.14% 4.17% 2.78% 11.6%
Food industries, Cocoa and cocoa
residues and wastes preparations
0.59% 0.58%
Source: Observatory of Economic Complexity
160 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
Annex
TABLE A1
Merchandise Exports in Congo: Sectoral Composition, Revealed Comparative Advantage,
and Growth
Average 2002-2004 Average 2010-2012 Average 2018-2020
Value Share RCA CAGR Value Share RCA CAGR Value Share RCA CAGR
(US$ M) in % Index % (US$ M) in % Index % (US$ M) in % Index %
01–05 Animal 5.51 0.20 0.099 30 10.01 0.07 0.039 40 9.58 0.07 0.037 -44
06–15 Vegetable 12.45 0.46 0.161 8 26.80 0.20 0.060 -6 17.96 0.14 0.041 17
16–24 Foodstuffs 26.25 0.96 0.311 6 35.50 0.26 0.085 -43 34.80 0.27 0.080 50
25–27 Minerals 2,368.32 86.68 7.638 39 10,467.85 76.61 3.925 0 8,550.79 66.38 4.804 -28
28–38 Chemicals 17.91 0.66 0.071 100 21.74 0.16 0.018 5 11.99 0.09 0.010 171
39–40 Plastic/ Rubber 1.17 0.04 0.010 160 72.81 0.53 0.118 13 3.49 0.03 0.006 -35
41–43 Hides, Skins 0.02 0.00 0.001 -15 0.77 0.01 0.009 48 0.24 0.00 0.003 -52
44–49 Wood 206.33 7.55 2.146 40 396.36 2.90 1.198 6 546.99 4.25 1.804 22
50–63 Textiles, Clothing 0.71 0.03 0.005 6 5.45 0.04 0.010 -21 2.02 0.02 0.004 -45
64–67 Footwear 0.02 0.00 0.001 149 0.78 0.01 0.008 50 0.75 0.01 0.007 3
68–71 Stone / Glass 47.87 1.75 0.579 70 71.72 0.52 0.129 173 78.47 0.61 0.140 2
72–83 Metals 35.32 1.29 0.185 47 571.40 4.18 0.554 10 2,653.87 20.60 2.966 3
84–85 Mach/Elec 5.68 0.21 0.007 9 123.87 0.91 0.037 0 102.92 0.80 0.029 -48
86–89 Transportation 0.97 0.04 0.003 141 1,813.09 13.27 1.408 -14 841.76 6.53 0.640 -94
90–97 Miscellaneous 3.64 0.13 0.022 -61 45.48 0.33 0.061 19 26.30 0.20 0.032 -60
Source: authors’ calculation using data from BACI, CEPII.
Note: The RCA index is the ratio of a country’s export share in a specific sector to the world’s export share of that sector in total world exports. An RCA index above
one means that the country’s share of exports in that sector exceeds the global export share of the same sector in the same period, and the country is deemed to
have a revealed comparative advantage in that sector.
CAGR is the compound annual growth rate, which measures the mean annual growth rate of export over a specified period of time longer than one year.
TABLE A2
CEMAC Common External Tariff, by broad sectors
Percentage of tariff lines by duty rate
Average tariff Duty-free 5% 10% 20% 30%
Animal products 22.1 0.0 10.2 1.5 49.6 37.9
Vegetable products 23.7 0.0 10.6 17.3 1.8 70.4
Food products 24.6 0.0 10.2 13.6 1.3 74.6
Minerals 10.4 0.0 4.5 89.2 6.3 0.0
Fuels 10.2 0.0 0.0 98.3 1.7 0.0
Chemicals 11.1 0.0 13.5 76.5 1.5 7.9
Plastic and rubber 15.7 0.5 3.7 64.8 2.3 28.7
Hide and skins 19.3 0.0 0.0 52.9 1.4 45.7
Wood and paper products 21.7 4.2 5.1 27.3 1.8 60.7
Textiles and textile products 21.9 0.0 0.5 30.0 19.3 50.2
Footwear and headgear 29.1 0.0 0.0 0.0 8.5 91.5
Stone, ceramic, glass products 26.1 0.0 0.5 18.8 0.0 80.7
Base metals 16.6 0.0 0.5 54.9 22.8 21.6
Machinery, electrical equipment 13.8 0.3 0.1 72.6 15.9 11.2
Vehicles and transport 15.0 8.2 1.8 49.4 22.4 18.2
Miscellaneous 21.5 0.0 9.8 24.2 10.6 54.1
Source: Estimates based on the CEMAC tariff schedule.
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 161
Annex
FIGURE A5
Most favored nation overview of policy areas covered in Africa’s subregional trade
agreements and AfCFTA
Common Economic West African Economic African
South African South African
East African Market for Community Economic and Monetary Continental
Development Customs
Community East and of West and Monetary Community of Free Trade
Community Union
(EAC) South Africa African States Union Central Africa Area
(SADC) (SACU)
(COMESA) (ECOWAS) (WAEMU) (CEMAC) (AfCTA)
Tariffs on manufactured goods √ √ √ √ √ √ √ √
Tariffs on agricultural goods √ √ √ √ √ √ √ √
Export taxes X √ √ X √ X √ √
Customs √ √ √ √ X √ X √
Competition policy √ √ √ X √ √ √ √
State aid √ √ √ X X X √ X
Antidumping X √ √ √ X X √ √
Countervailing measures X √ √ X X X X √
STEs X X X X X X X √
TBTs √ √ √ X X √ √ √
GATS √ √ √ √ √ X √ √
SPS measures √ √ √ X X √ √ √
Movement of capital √ √ X √ √ X √ √
Public procurement √ X X X X X X X
IPRs √ X X X X X X √
Investment √ √ √ X X X X √
Environmental laws √ √ X √ X X √ X
Labor market regulations √ √ X X X X X X
Source: World Bank, 2020
Note: √ = policy area covered; X = policy area not covered; AfCFTA = African Continental Free Trade Area; GATS = General Agreement on Trade in Services;
IPRs = intellectual property rights; PTAs = preferential trade agreements; SPS = sanitary and phytosanitary; STEs = state trading enterprises; TBTs = technical
barriers to trade.
FIGURE A6
A reduction in tariffs and NTBs accompanied by trade facilitation measures will bring the
biggest gains
Simulated real income gains, by country and policy reform
14
EV, 2035 (% relative to baseline)
12
10
8
6
4
2
0
Côte d'lvoire
Zimbabwe
Kenya
Namibia
Tanzania
Congo, Dem. Rep.
Ethiopia
Cameroon
Morocco
Burkina Faso
Mauritius
Egypt, Arab Rep.
Tunisia
Ghana
Senegal
Botswana
Zambia
Nigeria
South Africa
Uganda
Rwanda
Madagascar
Mozambique
Malawi
Total, AfCFTA
-2
Tariffs, NTBs, and TF Tariffs and NTBs Tariffs only
Source: World Bank 2020b
Notes: Three scenarios are simulated: (i) tariffs reduction (tariffs only), (ii) tariffs & NTBs reduction, (iii) tariff and NTBs reduction, and trade facilitation (TF).
Equivalent variation (EV) is the expenditure to attain utility in year t in any given simulation using base year prices. In general, the equivalent variation is the amount
of additional income needed to generate the level of utility that an individual could have achieved if the economic environment had changed.
NTB = nontariff barrier; TF = trade facilitation
162 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
Annex
BOX A1
Measuring participation in global value chains:
Backward and forward participation
Individual economies can participate in GVCs by importing foreign inputs to produce the goods and
services they export (backward GVC participation) and by exporting domestically produced inputs
to partners involved in downstream production stages (forward GVC participation). In forward GVC
participation a country’s exports may not be fully absorbed in the importing country and instead are
included in the importing country’s exports to third countries, as shown in the graph below.
Gross exports
Domestic value added (DVA) Foreign value added (FVA)
Backward participation
Exported as Exported as
Exported as
intermediates intermediates
Exported as intermediates
that are further
final goods that return to
absorbed in re-exported to
home country
destination third country
Forward participation
Source: Ignatenko et al. 2019.
FVA+DVX
Note: Hummels, et. al. (2001) and Aslam, et. al. (2017) define GVC participation as: GVCparticipation = Gross exports
The larger the ratio, the greater the intensity of involvement of a country in GVCs. FVA captures backward GVC participation, while DVA captures
forward GVC participation. FVA = foreign value added, DVX = domestic value-added exported to third countries.
TABLE A3
Classification of NTM
A Sanitary and Phytosanitary Measures
Technical Measures B Technical Barriers to Trade
C Pre-shipment Inspection and Other Formalities
D Contingent Trade Protective Measures
E Non-Automatic Licensing and Quality Control Measures
F Price Control Measures, Additional Taxes and Charges
G Finance Measures
H Measures Affecting Competition
I Trade-Related Investment Measures
Non Technical Measures
J Distribution Restrictions
K Restriction on Post-Sales Services
L Subsidies
M Government Procurement Restrictions
N Intellectual Property
O Rules of Origin
Export Measures P Export Related Measures
Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification 163
Annex
BOX A2
How to collect data on NTMs in a nutshell
According to the guidelines developed by UNCTAD (2019), seven steps should be:
1. Identify sources of information
2. Identify documents from each source
3. Identify regulations from each document
4. Identify and classify measures within each regulation
5. Identify and classify affected products for each measure
6. Identify and classify affected countries for each measure
7. Identify and classify objectives for each measure
This first step varies according to the country. In some countries, the information may be available
at a centralized location, where one official source compiles all legal measures. In others, the
information needs to be obtained from different locations/institutions. In many countries, an official
journal regularly publishes new laws, regulations, acts, decrees, and the like, the information being
contained in one publication, irrespective of the government department and the subject covered.
Information about NTMs may also be obtained through various government institutions, for instance:
NTM chapter Government bodies potentially responsible
A SPS measures Ministry of Agriculture; Standardization Agency; Ministry of Health
B TBT measures Standardization Agency; Ministry of Health; Ministry of Ecology; Ministry
of Industry
C Pre-shipment inspection and other formalities Customs Agency; Standardization Agency
D Contingent trade protective measures Ministry of Finance; Ministry of Economy or Trade
E Non-automatic licensing, and other quantity Ministry of the Economy (or Trade, Foreign Relations)
control measures
F Price control measures including additional Ministry of Economy (or Trade, Foreign Relations); Customs Agency
taxes and charges
G Finance measures Ministry of Finance; National Bank
H Measures affecting competition Ministry of Economy (or Trade, Foreign Relations)
I Trade-related investment measures Ministry of Economy (or Trade, Foreign Relations)
P Export-related measures Ministry of Economy (or Trade, Foreign Relations); Customs Agency
This list is not exhaustive. Names of government agencies could be different according to the
country. Each institution may disseminate legislative documents through their websites, or through
other means.
Steps 2 and 3 systematically register the origin of information. These steps are essential to make
sure that the data is traceable and can be verified and updated. From each source, one or more
legal documents can be obtained. These documents may also contain one or more regulations.
The remaining steps identify and classify all the relevant information from the legal text of each
regulation.
Products affected
Measure 1 Countries affected
Regulation 1
Objectives mentioned
Products affected
Measure 2 Countries affected
Objectives mentioned
Products affected
Measure 3 Countries affected
Objectives mentioned
Source: UNCTAD 2019.
164 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification
Annex
Related to Chapter 6: Logistics and Eco-tourism to Support Diversification
TABLE A4
Port Authority of Pointe-Noire and Congo Terminal tariffs for containerized goods (in CFAF)
20’ container 40’ container
Stevedoring (Import) 165,000 for select essential goods 250,000 for select essential goods
330,000 for all others 500,000 for all others
If containers are stripped, additional If containers are stripped, additional
payment of 120,000 payment of 180,000
Stevedoring (Export) Reception 120,000 Reception 180,000
Loading on ship 60,000 Loading on ship 110,000
Port Authority Import loaded container 72,000 Import loaded container 110,000
Import Empty 35,000 Import Empty 35,000
Export loaded container 25,000 Export loaded container 45,000
Export Empty 45,000 Export Empty 45,000
Source: Port Authority.
TABLE A5
Typical fees and tariffs for external trade documentation and procedures
Agency Document Cost (CFAF)
Ministry of Commerce Import Declaration 30,000
Special Authorization (ASI) 75,000
CCC eCTN 78,400 to 144,400
But some users reported much higher costs
GUOT Transport Title/ Import 132,000
Declaration But some users reported much higher costs
Customs Various fees in addition to the 75,000 to 195,000
regular customs external tariff
and value added tax
Shipping agent Bill of Lading fees Around 70,000 CFAF
Freight Forwarder Fee 200,000 to 350,000 CFAF
Additional commission of 3.5 percent on expenses
(payments to third parties, such as Customs, port, terminal)
Commercial Banks Transfer fees Up to 11 percent of the transferred amount
Cotecna Scanner fee 600,000 CFAF
Source: Congo Shippers Council cost study update, April 2022.
TABLE A6
Comparison of selected Single Window SYSTEMS in Africa
Senegal (ORBUS) Kenya (KENTRADE) Congo (GUOT)
Development costs US$2.8 M US$12 M €5.3 M (US$6.0 M)
Annual operating cost US$0.8 M US$2.5 M
Transaction volumes 300 transactions per day 2,200 transactions per day 330 transactions per day
Fees US$10 per transaction + Free (funded by CFAF132,000 (US$215) per
US$2 per document Government) transaction
Source: UNECE SW Repository.
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170 Republic of Congo’s Road to Prosperity: Building Foundations for Economic Diversification