Aith nearly 70% of its budget revenue coming from oil revenues, the Congo has literally been knocked out by the economic situation that has prevailed over the past two years. Growth plunged by -8% in 2020 and by -0.2% in 2021. It should once again turn positive this year, thanks in particular to the sharp rebound in oil prices, but in the meantime we have to look further. “The economic recovery is accelerating but remains fragile in the context of the Covid-19 pandemic and the global consequences of the war in Ukraine. Real GDP growth is expected to strengthen to 4.3% in 2022, driven by improved oil production, dynamism in the agriculture and mining sectors. International Monetary Fund (IMF) in April 2022.
An emergency: diversifying the economy
Taking the measure of its dependence on the oil sector, the government has decided to accelerate the diversification of the economy. This political will resulted in the establishment of a Ministry of International Cooperation and Public-Private Partnership in May 2021. At its head, Denis Christel Sassou Nguesso. Son of the Head of State and former Deputy Director of the National Petroleum Company of Congo (Snpc), he intends to develop public-private partnership initiatives to boost certain economic sectors of the country. In fact, the ministry has embarked on the promotion of the “Congo” destination to international investors.
The last stage was played in Kintélé, 25 kilometers from Brazzaville on May 30 and 31 through the first Public-Private Partnerships Forum (PPP) organized by Congo after a road-show passing through London, Casablanca but also Dubai and Abu Dhabi. Objective: to attract foreign investors by offering them a framework that can reassure them. Thus, a specific law on public-private partnerships must soon be presented to Parliament.
The PPP, a tool perceived as innovative
Typically, in a PPP, the state retains ownership and defines the degree of private sector participation that is remunerated for the provision of an asset or facility. “The regulatory framework is there and the creation of a ministry dedicated to PPPs is interesting since we are obliged to have several interlocutors: environment, finance, energy…”, recognizes Laurent Van Houcke, director of operations of Bboxx, a production of solar kits, who came to assess the possibilities of setting up in Congo.
The PPP, not a long calm river…
Although Denis Christel Sassou Nguesso sees in PPPs “an innovative mode of financing and an alternative to public debt”, as he underlined in his preliminary declaration at the opening of the Forum, the path is far from being long calm river. The most emblematic first case of PPP is that of water in Buenos Aires. In 1993, a water sector concession contract was signed with a private operator, in this case Suez. Unfortunately, the French company Suez had to leave Argentina in 2006 following a dispute which was brought before the ICSID, the dispute tribunal of the World Bank. Anyway, the model has been adopted and PPPs have multiplied throughout the world based on large infrastructures.
… but the Congo is betting on it
Congo hopes to take advantage of this type of partnership to finance basic infrastructure and support the diversification of its economy. Thus, the new National Development Plan (PND) planned for the period 2022-2026 focuses on six sectors – agriculture, industrial development, special economic zones, tourism, digital economy and real estate development – and plans to mobilize 8,000 billion CFA francs (about 12.2 billion euros) over 4 years, including nearly 6,600 billion CFA francs (about 10 billion euros) through PPPs. To show that everyone is concerned by this challenge, the Forum, organized by the Ministry of International Cooperation and the Promotion of Public-Private Partnership, saw the active participation of many ministerial departments and created the conditions for fruitful exchanges. between international and Congolese businessmen. Concluding this Forum, Minister Denis Christel Sassou Nguesso promised that efforts to implement PPPs would be continued as well as efforts to improve the business climate.
READ ALSOBrazzaville, city of atmosphere and history
Implementations are in progress…
That said, this desire is already beginning to translate into action. Several PPPs have been signed recently.
Thus, in the field of energy, the Congolese government initialed, on 22 May in Brazzaville, an agreement with the Sino-Congolese consortium Energaz-CGGC (China Grezhouba Group Corporation) for the construction of the Morala and Nyanga hydroelectric dams in the south of the country, a structure with a total production capacity of 331 megawatts. The agreement also provides for the rehabilitation of the hydroelectric dam of Liouesso, in the department of Sangha, inaugurated in 2017 with a capacity of 19 megawatts.
On the sidelines of the PPP Forum, Denis Christel Sassou Nguesso signed a memorandum of understanding with the vice-president of the Arise company, Shailesh Barot, with a view to developing the special economic zones (SEZs) of Pointe-Noire and Ouesso. It must be said that since 2010, Arise has embarked on the development of SEZs, particularly in Africa. It started its first project in Gabon before replicating the model in Togo, Benin, Côte d’Ivoire, Chad, and more recently in Ghana. Now it’s Congo’s turn.
…especially around special economic zones (SEZs)
What is it about ?
These are typically large investments in servicing and infrastructure that come under the scheme of financing through a PPP. The memorandum of understanding provides for a feasibility study to be carried out within three months. “We plan to invest approximately 200 million dollars for the two projects but this may change after the study. We are going to start with Pointe-Noire with the area backed by the ore port”, comments Shailesh Barot.
The development model of a ZES, based on a PPP, is thus done “with the State which cedes the land to us. We work each time on servicing, roads, facilities for electricity and water. We believe that in 18 months we will be ready for the first factories in the Pointe-Noire area. If in Gabon, for our first project, it took us 36 months, here with the expertise, it is 12 to 18 months maximum. We now have 10 years experience. In each country, we offer the same model: 70% Arise and 30% for the country, as a joint venture,” explains Shailesh Barot.
To build partnerships and invest, Forum speakers all agreed that the conditions require a favorable business climate. Even if it was not at the top of the Doing Business rankings, Congo has made efforts, with the establishment of a one-stop shop for business creation, that of a public-private dialogue committee and the passing of the law on the creation of the High Authority for the Fight against Corruption.
READ ALSO“Negotiations with the IMF are only a means to an end”
There are, however, major obstacles to overcome
On the other hand, a major brake currently weighs on the economic activity of the entire Economic and Monetary Community of Central Africa (Cemac). “With the Bank of Central African States (BEAC), we have a problem with the transfer of currencies. Today, all the currencies are blocked, which causes us enormous difficulties in carrying out day-to-day operations to pay our suppliers and transfer our dividends”, indicates Christophe Pujalte, regional director Bolloré Congo Transport and Logistics, who knows what he is up to. speaks for having managed the emblematic example of PPP in Congo: the port of Pointe-Noire. This has been praised for its efficiency and has gained the upper hand over its neighbors to capture the flow of goods to Central Africa, the DRC, and even Chad. In 2021, it passed the milestone of one million containers transhipped. “When you are an investor, there is the construction phase. Many companies in the area are in the process of setting up and transferring funds to build. Once in the production phase, when the company generates cash, you have to be able to reimburse the head office. If you generate profits, you must also pay dividends. Today, we are taking more than a year to pay out our dividends and have not yet paid those of 2020. This problem, which started a little before the Covid, is linked to the foreign exchange reserves which have fallen sharply,” explains Christophe. Pujalt.
The port operator underlines another difficulty, still in the financial field: the refusal of compensation between the parent companies and the subsidiaries through the holding of accounts in foreign currencies. “We had to repatriate all of our offshore accounts to accounts in the country and no longer have the option of going through these offshore accounts to pay our suppliers. We have to go through our banks here and then through the central bank. As a result, we find ourselves out of products, because we are unable to pay our suppliers. This is extremely problematic,” he continues. The illustration that it is necessary to go beyond declarations and to be attentive to the problems encountered by operators in the field. A requirement of which the Congo seems to have become aware in order to get out of the rut.
READ ALSOChinese loans to Africa at 16-year low