"business is all about taking a certain amount of

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    From http://allafrica.com/stories/200309160504.html

    Investment Prospects in Congo Brighten

    Business Day (Johannesburg)

    September 16, 2003
    Posted to the web September 16, 2003

    Serge Basaula

    THE barometer of investment in the Democratic Republic of Congo shows positive signals of economic recovery and South African companies are taking a large part in that process. SA was top of the bill of 17 countries whose investors started or expanded business in the Congo for the first quarter of this year.

    The legal framework and investment climate in the Congo have improved significantly over the past two years, since the establishment of a new investment code and mining code. These were developed within the context of economic reforms which have liberalised the economy.

    The reforms have stabilised the foreign exchange market as result of the liberalisation of the diamond trade and the implementation of a floating and transparent exchange rate system. Another significant result of the reforms is the end of hyper- inflation the inflation rate decreased from 511% (December 2000) to 12% (December last year).

    The quarterly report released by the Congo's national investment promotion agency shows $1,2bn of total direct investment into the country, of which $472m consisted of South African investors' contribution, with Vodacom taking the lead. The South African cellphone operator began its Congo operations in May last year within a war-torn environment.

    It has developed a wide network that services more than 500000 subscribers in former government-controlled regions and connects towns with remote areas. It has also developed an interconnected network with other cellular operators, achieving a cost-saving solution for a large number of consumers.

    With the end of the war and the creation of a national unity government last July, Vodacom is expanding coverage in the northern and eastern regions. Business is about taking a certain amount of risk. After a year, Vodacom is poised to reap higher returns as a result of higher risks it took when peace prospects were still uncertain.

    Of significance to the investment promotion agency report is the contribution of most investment to poverty alleviation and job creation. On distribution per sector, the cellphone industry contributed 65% of total investment. However, more cellular telephony investment is needed as the status of the fixed line network is poor.

    Investment in the latter field should also be profitable. The second-largest category of investment related to forestry and mining. These investments take advantage of incentives offered in the new investment code towards projects that add value to domestic natural resources.

    An environment is said to be conducive to investment when it ensures political and economic stability, transparency and security for the investors' assets and revenue. The Congo government is working hard in that direction. In recognition of its efforts in the past two years, the International Monetary Fund and World Bank assessed the Congo's economic performance last July and decided to extend $10bn to relieve debt, followed by a $120m loan to improve the investment climate.

    The World Bank prospect of 5% economic growth next year (against 3% last year) now seems more realistic since further resources, previously allocated to servicing debt, will be made available to finance productive sectors such as agriculture, and to enhance social services delivery.

    Basaula is economic and commercial adviser for the Congo embassy in Pretoria.

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