Congo’s economic performance in 2010 owes a great deal to the increase in its oil production. The latter reached a record level, estimated at 115 million barrels compared to 99 million in 2009. Fiscal reform and debt relief obtained under the Heavily Indebted Poor Countries (HIPC) Initiative also consolidated fundamental indicators and improved the budgetary balance. The result was a strong 10.2% growth rate in 2010, with 8.4% expected in 2011. These growth rates nevertheless remain fragile. They depend too heavily on the international oil market and maintenance of a high level of oil production. Medium-term forecasts show that oil production will gradually diminish unless new reserves are discovered. Diversification of the economy remains a crucial issue. Construction, public works and telecommunications continue to thrive. The forestry sector seems to be recovering after having been penalised by the global crisis. Increased demand from Asian countries, particularly China, which is the leading buyer of Congolese timber, is ensuring the industry’s survival.

The budgetary balance improved markedly in 2010 to reach 13.9% of gross domestic product (GDP) and is forecast to reach 16.5% in 2011. This is the result of a budgetary policy based on improving the quality of expenditure and implementation of the public contracts code and the public investment management system in line with the Medium-Term Expenditure Framework (MTEF). Revenue should increase 12% in 2011, with oil revenue up 74.3% and fiscal revenue up 17.8%. The Republic of Congo should benefit from XAF 50 billion (CFA Franc BEAC) in 2011 in HIPC resources. Grants should reach XAF 45 billion and state borrowing XAF 115 billion.

Congo’s external position progressed in 2010 thanks to good oil price levels, improved productivity from certain reserves and a recovery in timber exports. The current account deficit fell to 2.6% of GDP in 2010 thanks to the increase in exports.

The inflation rate stood at 4.8% in 2010 under the impact of strong domestic demand and an increase in international prices for food products.

Table 2: GDP by sector (in percentage)

Source:AfDB Statistics Department based on data from national authorities.

Figures for 2010 are estimates; for 2011 and later are projections.

Driven by the oil sector, which represents 66.3% of GDP, the Congolese economy showed 10.2% growth in 2010 in real terms after 6.8% in 2009. Oil production reached a record 115 million barrels in 2010, even if this was short of the 126.3 million barrels expected. The offshore oilfields, which produced more than 40 million barrels, kept their leading position.

France remains a major client. It and China are the biggest buyers of Djeno Blend quality oil and it and the United States are the main buyers of Nkossa Blend light oil.

Gas production increased by about 47%, according to July 2010 data, rising from 75 405 tonnes in 2009 to 110 375 tonnes in 2010 thanks to good activity levels on the Nkossa field.

Oil is going to drive medium-term growth. In 2011, production should grow by 7.4% before starting a period of decline unless new discoveries are made. The decline hypothesis seems unlikely to be realised, however, given the level of exploration work being carried out by numerous companies. In early 2011, the Italian national oil group Eni was due to start exploiting the tar sands in the Tchikatanga and Tchikatanga-Makola areas, 70 km from Pointe-Noire. The tar or oil in nearly solid form produced will be processed in Italy at a rate of 40 000 barrels per day. Eni plans to build a tar processing plant on site in future, however.

On the domestic market, the activities of the Congolaise de Raffinage (Coraf) refinery which is owned by the state, produced contrasting results in 2010. Production fell 16.4% to 276 500 tonnes, while sales increased 6.5% to 90 700 tonnes. These results are explained by the low impact of world crude oil prices on prices at the pump and the fact that since November 2009 Coraf has been processing Nkossa Blend rather Djéno Blend. Previous investment on the Nkossa oil field penalised Coraf’s results in 2010. Prospects are promising nevertheless as the company continued to process Nkossa Blend in 2010, as well as carrying out a multi-year investment plan. Coraf can be expected to extend its coverage of the domestic market where it currently meets only 70% of demand.

The mining sector offers good prospects. In 2010, Soremi, a subsidiary of the American group Gerald Metals, continued to produce copper ore at Boko Songho and Yanga Koubanza. Production in 2010, which was estimated at 16 000 tonnes, represented more than double the 7 000 tonnes initially forecast. It was exported to China and Germany.

The Canadian company Mag Minerals Potasse du Congo, in which the Congolese authorities have a 10% stake, is pursuing construction of a potassium plant. Carnallite is to be exploited to extract magnesium for production of a light alloy for use in the automobile industry and sodium chloride and potassium chloride for production of non-polluting fertilisers. The initial investment in this plant is estimated at USD 1.6 billion. Annual production would be 600 000 tonnes, which would make Congo the biggest producer of potassium in Africa and the 13th biggest in the world. The Chinese company Complant has also expressed its interest in this sector.

The forestery sector continues to be penalised by the crisis. Recovery is getting under way with difficulty. Its contribution to GDP is marginal at 0.3%. Production of logs and sawn timber nevertheless continues to offer promising prospects. Still low prices for sawn timber on the international market resulted in a drop in production from 77 109 m3 in 2009 to 62 146 m3 in 2010. Nevertheless, increased demand from Asian countries should help the sector. China is the principal buyer of Congolese timber, ahead of Spain and Portugal. It takes 70% of all timber exported. The Singapore-based group Olam is reported to be in the final stages of acquiring the major Congolese timber company, Congolaise Industrielle du Bois (CIB), a subsidiary of the Danish group Dalhoff Larsen & Horneman (DLH Group).

In 2011, the authorities intend to maintain the measures they took to reduce the effect of the crisis in the sector. These allow the exportation of up to 30% of logs and offer payment facilities for the felling tax. Wood processing remains an option for the future provided that an effort is made to train labour. The introduction of certification should enable the country to take full advantage of its potential in this sector.

Agriculture, livestock rearing and fishing contributed 3.4% to GDP in 2010 compared to 5% in 2009. Despite the fertile soil and heavy rainfall, the agricultural sector remains weak and turned mainly towards subsistence. It meets no more than 30% of the country’s food needs and makes use of less than 5% of arable land. The country’s needs are covered by imported foodstuffs at an estimated cost of XAF 130 billion. Imports represent 60% of cereal and meat needs and 50% of fish and seafood needs. Cassava production remained stable at 1.27 million tonnes in 2010, while plantain volumes increased 13.6% to 96 800 tonnes. Groundnut production rose 4% to 34 100 tonnes.

Some agro-industrial projects were launched in 2010, including one with South African partners for the production of alcohol from sugar cane. Malaysia-based companies also plan to produce biofuel from palm oil at a rate of up to 400 000 hectolitres per year, while Italy aims to produce up to 120 000 hectolitres per year.

Despite a reduction in fishing resources in territorial waters, notably in the departments of Pointe-Noire and Kouilou, the volume of fish catches progressed 5% to 4 500 tonnes in 2010. Fishing is handicapped by high production costs. Diesel fuel represents 35% of costs in this activity. Other problems are the use of fishing gear that does not comply with regulations and non-compliance with designated fishing zones.

The dynamism of the construction sector, which represents 4% of GDP, looks set to continue. It is one of the most promising non-oil sectors and is driven by a vast construction programme and upgrading work. Mention should also be made of the roadworks in the capital, Brazzaville, for the festivities to mark the 50th anniversary of independence; construction of a gas-fired power station in Djéno at an estimated cost of XAF 200 billion; the building of homes on oil industry sites; and modernisation of the railway. The sector is nevertheless suffering from difficulties in getting supplies of building materials and a lack of qualified labour.

The manufacturing industry registered 11.5% growth in 2009, driven by production of wheat-based goods, engineering and woodworking, which showed increases of 14.6%, 14.8% and 10.2% respectively. They contributed only 3.6% to GDP compared to 4.7% in 2009, however, as they felt the effects of outdated plants and inadequate supplies of spare parts.

The value added by volume of the water and electricity production companies declined 3% because of a complete shutdown of the 32.5 megawatt (MW) thermal power station in Brazzaville. The fall occurred despite increases in production at the 74 MW Moukoukoulou hydroelectric plant and the 50 MW Djeno gas-fired power station. In 2011, the national electricity production capacity will increase from 156 to 576 MW. The transport and distribution network still needs to be rehabilitated but, according to the authorities, it will be in a much improved state by 2015.

Telecommunications growth should speed up following the installation of optical fibre as part of a submarine cable project planned for 2011. This sector, which contributed 4.7% to GDP in 2010, is continuing to progress rapidly. In 2010, the Equateur Congo Télécom subsidiary Azur Télécom became the fourth operator on the mobile telephone market. In addition, an Indian operator bought the Saudi Arabian group Zain. The two other operators present in Congo are South Africa’s MTN and Kuwait’s Celte. On 16 October 2010, numbers switched from seven to nine figures to accommodate rapid growth in the number of subscribers, which at the end of 2010 stood at 2.7 million. The seven-figure number system, which was launched in 2004, had reached saturation point with a take-up rate of 85% among the three leading operators.

In the transport sector, Chemin de Fer Congo et Océan (CFCO) had mixed fortunes, with an increase in the quantity of freight transported but a fall in the number of passengers. Freight carryings rose from 40 000 tonnes per month to 75 000 tonnes, principally in the form of staples, imported cement, oil and timber.

The financial system was spared by the international crisis. The six Congolese banks have sufficient equity and reserves to meet all prudential norms. Despite the limited scale of the economic fabric, short-term prospects are good thanks to the launch of major infrastructure projects like the potassium plant, the gas power station and the modernisation of the port of Pointe-Noire.

On the demand side, public and private investment rose 4.9% and contributed 2.9% to 2010 growth. Public investment increased 7.5% in 2010 thanks to the launch of major infrastructure projects in the construction sector to mark the 50th anniversary of independence. Private investment, driven by the oil sector and telecommunications, increased 4%.

Public and private consumption rose 6.7% and contributed 3.4% to 2010 growth. The contribution to growth of final private consumption was limited to 2.4%, however, because of low purchasing power.

In an economy that is heavily dependent on oil, exports contributed 4.3% to the formation of GDP in 2010. Buoyant oil production levels were supported by high prices and strong demand from Asian countries, especially China.

Table 3: Demand composition

Source: AfDB Statistics Department based on data from national authorities; estimates (e) and projections (p) based on authors’ calculations.

Figures for 2010 are estimates; for 2011 and later are projections.

Fiscal Policy

Fiscal policy aims to improve the quality of public spending so as to ensure more efficient use of resources. The public procurement code was introduced for this reason. In the same way, better co-ordination is sought between the public investment management system and the MTEF. The spending chain has been rationalised and simplified.

The stabilisation of public finances has enabled the state to obtain a complete cancellation of its debt to external creditors. The HIPC Initiative completion point has been reached. Congo has since committed itself to a policy of growth, mobilisation of non-oil resources and rigorous management of public finances.

Total revenue represented 35.5% of GDP in 2010 after 32.5% in 2009. The improvement was the result of good oil revenue, which rose to 25.7% of GDP in 2010 compared with 22.8% in 2009. Fiscal revenue stabilised at 8.4% of GDP in 2010 despite the efforts made to improve tax collection and enlarge the tax base. Fiscal policy was one of the major priorities of the government in 2010. A start was made on a plan to computerise revenue recovery services, using a system with a single identifier that has improved the fiscal revenue level, as well as taxpayer registration. An anti-fraud plan is under way in the customs service and has reduced the length of tax clearance procedures.

There was a marked reduction in public spending, which was reduced to 21.7% of GDP in 2010, compared with 27.1% in 2009. Public-service salaries were brought down from 4.3% of GDP in 2009 to 3.9% in 2010. Following the increases granted in 2008 to compensate for the sharp rise in food and energy prices, the wage bill was kept under relative control. Efforts were made to keep control of budget expenditure under the terms of the Poverty Reduction and Growth Facility backed by the International Monetary Fund (IMF). Spending on goods and services fell to 3.9% of GDP in 2010. Also down were subsidies and transfers, fuel subsidies included.

In the final analysis, the budget balance showed a marked improvement, increasing to 13.9% of GDP compared to 5.4% in 2009. Two factors are maintaining the Congolese economy in a state of fragility, however: its heavy dependence on oil and the absence of a clear, sustained diversification strategy. The country remains exposed, therefore, to external events and the budget balance depends on variations in oil prices

Congo was accepted as a candidate for the Extractive Industries Transparency Initiative (EITI) in February 2008. It must now prepare a final validation report showing progress made in terms of increasing transparency in its oil accounts. Progress made will be consolidated through the adoption of a new public procurement code.

Revenue in 2011 is expected to increase 9.7% to reach an estimated XAF 3.029 trillion. Non-fiscal revenue should comprise 74.3% of the total and fiscal revenue should comprise 17.8%. Progressive modernisation of the tax service and the new public procurement code should have a positive impact on revenue. Congo should benefit, moreover, from XAF 50 billion in resources from the HIPC Initiative, XAF 45 billion in grants and XAF 115 billion in state borrowing.

Table 4: Public finances (percentage of GDP)

Table 5: Current account (percentage of GDP)

Source:AfDB Statistics Department based on data from national authorities; estimates (e) and projections (p) based on authors’ calculations.

Figures for 2010 are estimates; for 2011 and later are projections.

Figure 2: Stock of total external debt (percentage of GDP) and debt service (percentage of exports of goods and services)

Economic co-operation between Congo and such partners as China, India and other Asian countries goes back a long way. Relations with the Middle East, notably the United Arab Emirates and Saudi Arabia, began more recently. Links were forged with China as early as 1964. Several projects have been carried out, notably in infrastructure. A textile industry was set up in Brazzaville, as were health centres. Co-operation also involved sending Chinese doctors and posting teachers in secondary schools and universities.

Since 2000, this co-operation has changed a great deal. There was a renewal of co-operation with China that began with the visit of President Denis Sassou-Nguesso to Beijing in 2000. This first visit resulted in the conclusion of an agreement on the promotion and protection of investment. A second visit in 2005 was aimed at building a strategic partnership in infrastructure and the social sector.

New Asian partners such as Malaysia, Singapore and Korea also play a role in Congo, as do the United Arab Emirates and Saudi Arabia.

Asia is Congo’s leading client with 56% of total exports in 2009, followed by the United States, Mexico, Brazil and Argentina, which represent 20%.  Europe and other African countries account for the remainder. China is the leading Asian partner with a 40% share of Congo’s exports, notably oil and timber. China is also the leading investor in the country, where it is active in oil, the processing industries and wood. Chinese Taipei, India, Malaysia and Korea also have a share of investment.

Recent data show that Congo’s exports to China increased in dizzying proportions between 2000 and 2009. They rose in value from XAF 270.5 billion in 2003 to XAF 1.3 trillion in 2009, which amounts to an increase of 380.6%. This increase confirms the enormous raw material needs of the Chinese economy. Congolese hydrocarbons and wood are exported in their raw state. In 2004, no less than 32% of Congolese exports were bound for China, a proportion which increased to 40% in 2009.

Chinese Taipei served as an outlet for about 10% of Congolese exports in 2009, followed in Asia by India with 3% and Korea and Singapore with 1.5% each. Exports to South America have progressed steadily since 2000, notably to Brazil, which accounts for 4% of total exports, followed by Argentina, Mexico and Chile, each with 1%.

Imports from emerging countries have increased a little during the last decade but remain low in relation to purchases from African and EU countries.

Imports from China comprise mainly manufactured goods and foodstuffs. The four main import products are rice, tobacco, cement and construction materials. These imports have increased in value but have nevertheless diminished as a share of total imports. They increased from XAF 28.5 billion in 2004 to XAF 601.7 billion in 2007 but their share of total imports fell from 7% to 3%. Imports from Korea, Singapore and Chinese Taipei consist mainly of capital equipment and electronic products.

In general, these new trading relations have a positive impact in so far as they allow Congo to diversify its trading partners. Trade was for a long time centred on EU countries for imports and the United States for exports. Indeed, EU countries, particularly France, continue to play a dominant role as suppliers of food, chemicals and mechanical products to Congo. More than 50% of these products are imported from Europe.

Foreign direct investment (FDI) from China, Saudi Arabia, India and Malaysia represented only 1.1% of FDI in 2009 compared to 3.2% in 2004. In absolute terms, however, FDI from these four countries rose from XAF 5.4 billion to XAF 9.1 billion. China mainly directs its investment into the oil sector, India and Malaysia into timber and Saudi Arabia into telecommunications. Other forms of development aid, notably from China, go into health and social protection.

The outgoing president Denis Sassou-Nguesso, who has been in power since 1997, was re-elected in 2009. Mid-term elections to the senate took place on 28 February 2010 without disturbance.

Certain political parties, among them the Alliance pour la République et la démocratie (ARD), are highly critical of the way the government carries out the electoral census. They claim that it is continuing with malpractice it carried out in 2007 by organising a purely administrative census of the electorate for the 2012 elections. They point to irregularities in the way it is being carried out.

The opposition has called on the country’s political class, government included, to show wisdom and humility with a view to establishing a real dialogue and allowing the future elections to be prepared in a climate of serenity. They accuse the government of refusing to listen and of creating a climate of insecurity.