Democratic Republic of the Congo

DR Congo Corruption Report

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Snapshot

DR_Congo.pngCorruption in the Democratic Republic of the Congo is an endemic problem, and seriously hinders businesses operating in the country. It permeates all levels of government and all sectors of the economy, rendering the country’s investment climate as one of the least competitive in the world. Clientelism, rent-seeking and patronage have decimated fair competition, particularly in the sectors of public procurement and extractive industries. Corruption has also impeded efforts to increase the transparency of government institutions. The ruling elite has a direct stake in the country's economy, and often steer economic activities in accordance to their own personal opportunities. The Penal Code (in French) makes up the country's anti-corruption legislation, yet the relevant laws are very poorly implemented, and government officials engaged in corruption with total impunity. The dysfunctional institutional framework has contributed to the spread of corruption, as well as inflating the country’s informal economy, further impairing competitiveness. Bribery is widespread, to the extent that businesses consider it a routine when carrying out operations. 

Last updated: August 2016
GAN Integrity

Judicial System

The judicial institutions suffer from widespread corruption, and poses a high risks for companies (HRR 2015). Approximately a third of all surveyed companies identified the courts as a constraint to doing business in the Democratic Republic of the Congo (ES 2013). The Congolese judiciary is severely under-financed, and lacks the most basic infrastructure (BTI 2016). Furthermore, the courts are inefficient, subject to political influence, and restricted to only a few major cities (BTI 2016). An overwhelming majority of surveyed households believe that corruption is widespread in the judicial institution (GCB 2013). 

The country’s dispute settlement policies are inoperative in practice, (ICS 2016) and such processes frequently involve bribery (HRR 2014). Congolese business contracts usually provide external arbitration clauses; nonetheless, these are not useful in resolving day-to-day business problems, due to cost and time constraints (ICS 2016). Both foreigners and nationals are subject to selective application of a complex legal code, (ICS 2016) and when obtained, court orders are often not respected (HRR 2015). 

The Democratic Republic of the Congo has ratified the International Centre for Settlement of Investment Disputes (ICSID) and the New York Convention 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.

Police

Corruption risks are very high within the Congolese security apparatus. Corruption is widespread among the State Security Forces (SSR), the national police (PNC), and the national army (FARDC) (BTI 2016). Police impunity has been reinforced by the reshuffling of the country’s security forces, and the replacement of officers with notoriously corrupt ones who have close ties with the president (BTI 2016). A sweeping majority of surveyed Congolese households perceive the police to be corrupt (GCB 2013). In fact, almost half of all surveyed firms operating in the Democratic Republic of the Congo pay for security, and more than a quarter identify crime as an obstacle to doing business (ES 2013). 

Public Services 

Corruption in the public services sector presents a very high risk for companies. One quarter of companies identify that business licenses and permits as a major constraint to doing business (ES 2013). Half of businesses believe that offering gifts to officials is part of the process of 'getting things done', and expect the same when applying for a water or electrical connection (ES 2013). Likewise, companies starting up a business may encounter demands for bribes disguised as dubious payments, non-existent taxes, or fees (BTI 2016). The high levels of petty corruption can be attributed to a weak administrative capacity and a shortage of resources, combined with low-salaries or unpaid staff (Transparency International, Mar. 2014). In fact, reports suggest that petty corruption is often the only means of survival for employees of the public administration (BTI 2016).

The state administration is almost non-existent outside major Congolese major cities (BTI 2016). Several parts of the country are subject to two parallel administrations; one is operated by the state, the other by armed groups (BTI 2016). These major dysfunctionalities in the public administration, coupled with pervasive corruption, ambiguous and unfair economic policies have served as a breeding ground for the country’s large informal sector (BTI 2016).    

The government established the one-stop window, which has successfully speed up the process of starting a business in the country (ICS 2016). The registration process has been simplified, and the minimum capital has been reduced, bringing the average cost and time-required to start a business in the Democratic Republic of Congo below the regional average (DB 2016). 

Land Administration

Land administration carries a high corruption risk for business. Almost six out of every ten surveyed companies expected to give gifts to officials when applying for a construction permit (ES 2013).

Property rights are recognized under the Congolese constitution; however, rampant corruption, a weak judiciary, and a dysfunctional public administration have rendered inconsistent enforcement of these rights (BTI 2016). Private properties are frequently expropriated, particularly by people close to the President (BTI 2016). Acquired land titles are usually revised by a competing authority. The aim is to clarify uncertainties involving land ownership that arise due to competition between statutory and customary laws (BTI 2016). Registering property takes businesses 44 days, an average that is lower compared to neighboring countries; however, the process is costlier than the regional average (DB 2016). 

Tax Administration 

Corruption is rampant in the tax administration, and presents a very high risk for business. Corrupt tax officials and the complexity of the tax system has resulted in frequent practices of bribery (FitW 2015). More than half of all surveyed companies expect to give gifts when meeting with tax officials (ES 2013). Dealing with tax payments is costlier and more time-consuming in the Democratic Republic of Congo compared to the rest of the region (DB 2016). 

An example of actions taken against whistleblowers include one who worked within the national tax agency. He was dismissed after he attempted to denounce a suspected large-scale tax evasion scheme by a multinational company operating in the country in 2010 (CatC 2012).

Customs Administration

The customs administration carries a very high risk for business. More than one quarter of all surveyed companies in the Democratic Republic of the Congo perceive trade regulations as an obstacle to doing business, and over half expect to give gifts to officials in order to obtain import licenses (ES 2013). Trading across borders in the Democratic Republic of the Congo is significantly more time-consuming and costlier compared to regional average. For instance, documentary compliance in connection to exports costs USD 2,500 compared to the Sub-Saharan Africa average of USD 246 (DB 2016).

In an effort to curb corruption in the customs sector, the government initiated in 2014, a new single window declaration system on the Zambian border, which automatically transmits forms electronically to the capital Kinshasa. Nonetheless, enforcement remains dependent on the integrity of local officials (FitW 2015).   

Public Procurement 

Companies face very high corruption risks when dealing with the Congolese public procurement sector. There is an absence of transparency of governmental decisions, and accountability when it comes to public contracting (BTI 2016). In fact, public procurement decisions and privatization deals are generally based on political considerations, rather than economic ones (BTI 2016). Over half of all surveyed business executives expected to give gifts to officials to secure government contracts (ES 2013). Monopolies and cartels dominate the market, and are generally associated with people from the president's inner circle, rendering fair competition nonexistent (BTI 2016). 

Natural Resources

The natural resources sector is plagued by corruption, and the government's management of the country's natural wealth lacks transparency (Transparency International, Mar. 2014). State-owned companies dominate the extractive industries sector, and the process of allocating exploration and exploitation licenses is arbitrary and lacks transparency (ICS 2015). Revenue from the natural resources sector has generally been siphoned by the ruling elite to the detriment of both the population and the environment (BTI 2016). The mining and the oil sector in particular, suffers from rampant corruption, and a culture of secrecy and informal dealings, which has in turn allowed for the embezzlement of public resources (Transparency International, Mar. 2014). Likewise, illegal and informal logging in the country account for almost 90 percent of all logging activities, and 94 percent of licensed forest land was issued illegally to a company instead of individuals between 2010 and 2012 (U4, Apr. 2015). Several of these logging permits were issued to the benefit of the Congolese political elite (U4, Apr. 2015). 

Secrecy surrounding mining contracts has led to banks cancelling loans accorded to state-owned mining companies, including the African Development Bank and the World Bank (Transparency International, Mar. 2014). In one instance, the IMF completely withdrew a loan worth USD 532 million in 2013, as the Congolese government at the time refused to disclose details surrounding the dubious sale of 25 percent of a state-owned copper project (BTI 2016). The government in power between 2008 and 2011 were accused of selling mining concessions for USD five billion under market price in return for kickbacks (CatC 2012). While the national assembly commission found that government officials pocketed USD 23 million in kickbacks from a USD six billion mining-for-infrastructure deal with China (CatC 2012). It should also be mentioned that the current Congolese civil war is reflected in the natural resources sector; rivalries over the control of resources have escalated, as warring groups have used the country's natural wealth to consolidate economic bases and trading networks (Transparency International, Mar. 2014).

The Democratic Republic of the Congo was accepted back as a candidate for the Extractive Industries Transparency Initiative in 2008; however, the country failed to accomplish all validation requirements, particularly full disclosure and reliability of figures (HRR 2014). Nonetheless, the government stepped up its efforts on reporting in the mining and oil industries which gained the country compliant status in 2014 (HRR 2014).

Legislation

The government of the Democratic Republic of Congo has established a legal anti-corruption framework; however, its enforcement is very weak (Transparency International, Mar. 2014). The Congolese Penal Code (in French) criminalizes most forms of corruption by public officials, including abuse of office. The latter offense can be punished by up to 15 years' imprisonment. Money laundering is also criminalized under the Money Laundering Act. The president and government officials are subject to financial disclosure laws, and reportedly the president, and his cabinet ministers disclosed their assets to a government committee; however, the information was not made public (HRR 2014). The government has established a code of conduct to promote transparency and integrity in the public and the private sector, as well as civil society organization. However, the code is not implemented in practice (BTI 2016). Whistleblowers are not protected under Congolese law. There are no mechanisms in place to monitor, evaluate and/or audit the public administration, which has in turn contributed to the continuous degradation of the country's institutions (BTI 2016). Furthermore, audits and tracking of government expenditure almost never take place (BTI 2016). Evidence also suggests that non-discretionary spending is high (BTI 2016). Recruitment is plagued by high levels of patronage, as key administrative and governmental positions are offered on the basis of complex patronage networks (Transparency International, Mar. 2014).

Political motives often drive the anti-corruption agenda in the country (Transparency International, Mar. 2014). Programs initiated to curb corruption include: 'Zero Tolerance against Corruption' and the 'Mining Sector Free of Corruption'. However, these have mainly served as a tool to secure foreign funding for the government (BTI 2016). 

The Democratic Republic of the Congo has ratified: the UN Convention against Corruption, the African Union Convention on Preventing and Combating Corruption, the Southern African Development Community Protocol against Corruption, and the Memorandum of Understanding on Co-operation in the Area of Anti-Corruption between the DRC, South Africa, and the United Nations Office on Drugs and Crime.

Civil Society

Freedoms of speech and press are guaranteed under the constitution; however, authorities have strictly limited these freedoms in practice through a range of security and libel laws (BTI 2016), (Transparency International, Mar. 2014). Reporting on issues, such as public criticism or corruption result in reprisal, particularly on behalf of the Congolese National Intelligence Agency (HRR 2014). Journalists criticizing the government are frequently killed (BTI 2016). The media is perceived as biased, and reporting generally favors President Kabila's party (FotP 2015). Media outlets that deviate from this type of reporting are shut down by authorities (FotP 2015). Since mid-2014 the press was prohibited from initiating or sharing political administrative declarations and information about mining companies, without prior approval (FotP 2015). Corruption and political manipulation within the ranks of journalists is a risk, due to poor training and pay (FotP 2015). The internet is not monitored by the government; however, only a very small percentage of the population have access (BTI 2016). There are no laws that allow for public access to government information (FitW 2015). The media environment in the Democratic Republic of the Congo is described as 'not free' (FotP 2015). 

Civil society rights are frequently violated by the Congolese authorities; despite being guaranteed under the law (BTI 2016). Civil society activists are often the victims of intimidation, harassment, and assassinations (BTI 2016). Only non-political NGOs are able to operate without government interference (Transparency International, Mar. 2014). NGOs often distance themselves from engaging in anti-corruption activities for fear of reprisal (BTI 2016). Civil society are generally not involved in political-decision making (BTI 2016).  

Sources 

Topics: Sub-Saharan Africa