Foreign Policy Blogs

Continued Uncertainty in DRC Hindering Energy Growth

Photo: WikiCommons

The Democratic Republic of Congo has had its national election delayed again by President Joseph Kabila; on this occasion the election was delayed one week to December 30 and the announcement came three days before citizens were scheduled to head to the polls. On December 26, the electoral commission (CENI) announced elections in three regions – two in the east and one in the west – will be delayed until March due to Ebola and violence.

These delays come two years after the president initially delayed elections, violating the constitution, thus a new wave of questions have been raised about an attempt to retain his grasp of power or if elections will be free and fair, with Emmanuel Shadary representing the ruling coalition on the ballot. Twenty-one candidates will be running. Felix Tshisekedi, president of Congo’s largest opposition party the Union for Democracy and Social Progress (UDPS), is seen by some pundits as a strong challenger.

Mr. Kabila, 47, came to office in 2001 after his father, Laurent, who was part of the revolution that overthrew Mobutu Sese Seko in 1997, was assassinated and is constitutionally mandated for his terms to conclude. He won the first open, multiparty elections in 2006 in a run-off vote. Discussing the future at a regional meeting, he was quoted as saying “I’m not saying goodbye, just see you later.” There is also speculation he may attempt to return to office in 2023.

The extra uncertainty is piling another challenge to foster an environment for sustained investor confidence, especially for direly necessary energy and infrastructure projects, for the country plagued with poverty, energy shortages and high levels of unemployment in the formal economy.

Pervasive uncertainty has fomented in the nation of about 80 million inhabitants not only because of political instability, revolution, ongoing violence and the recent Ebola outbreak, but also chronic corruption, nonexistent or crumbling infrastructure and energy systems, lack of accountability, insufficient transparency, high-levels of inflation and difficulties gaining access to capital.

Facing these challenges, ninety-five percent of export revenues are derived from mining and extractive industries. Many of commodities, such as cobalt, lithium and copper, have become vitally necessary globally to produce high-tech products such as hand-held devices, renewable energy and batteries for electric vehicles.

Added together, years of war and institutions that are inadequate to stave of the enormity of external and internal forces has left the infrastructure network in disrepair, access to reliable electricity (non-diesel generator) at stunningly low levels and diversifying its economy a tall order to overcome. It is difficult for the government to implement effective reforms to reach sustained economic growth as the nation is exposed to volatile commodity market swings – demonstrated in 2016-2017. The prices of many goods, services and financial activities are indexed to the U.S. dollar.

On the World Bank’s Ease of Doing Business index, DRC is ranked 184 out of 190 behind Haiti and ahead of South Sudan and on the UN’s Human Development Index it is ranked 176 out of 189. GDP per capita tallies about 460 USD, according to the World Bank.

Despite the barriers, DRC is often viewed with abundant socioeconomic growth potential from its burgeoning population, strategic location in central Africa and resource treasure trove and untapped energy potential to transition to be one of Africa’s most successful nations and even serve as a catalyst for African economic growth.

Extractive Industries Vast Impact

The DRC, which gained independence in 1960 from Belgium and is the second largest nation by land in Africa, is home to hundreds of minerals and metals. The need to attract foreign direct investment has left the nation prone to policy missteps or ineffectiveness at times. However, it has been able to implement a tax and customs duties regime applicable to mining rights. The terms of agreements signed by the parties involved, according to information from the Extractive Industries Transparency Initiative (EITI), also must meet regulations of common law or fiscal policy. DRC began to implement the EITI in 2007 to attract foreign mining companies back to the nation, to overcome the increased national instability.

Chinese companies, similar it’s strategy in other nations, have been investing billions of dollars in pursuit of the DRC’s minerals. There is the expanding global, and especially on the African continent, dynamics of the West, with companies such as Glencore, and the Chinese state-owned enterprises for dominance of extractive minerals to support the expanding industries fostering new technologies for the future. For example, DRC Congo has close to half of the world’s cobalt reserves. There have been unsubstantiated estimates that DRC’s land could contain $24 trillion worth of raw minerals below its surface.

With such immense opportunity, mining companies have been constructing new power generation at their work sites for continued productive operations due to the lack of reliable energy.

The Persistent Energy Crisis

An overarching area that needs continued focus after elections, which can play a role in fostering socioeconomic growth in DRC in addition to economic diversification, is electricity access. Currently it is estimated that less than twenty percent of the country of 80 million has access (with some estimates well below that number), with less than 1 percent in rural areas. The access that is available is unreliable and there are frequent outages.

Unreliable or a lack of access to electricity has proven to be a drag on socioeconomic growth due to the inability to start a new enterprise or expand business to hire new employees, store vaccines, provide education, ensure security to vulnerable populations, charge communication technologies and continue productive activities once the sun goes down. Wider access to reliable electricity is a critical bridge to access to basic services.

Despite its mineral wealth, traditional biomass (such as wood and charcoal) represents more than 90 percent of total energy consumption – which is also having severe impacts on health and deforestation (70 percent of DRC’s land is forest). Like many of more than 2 billion people across the globe, inefficient biomass fuels are used for their basic energy needs such as cooking, heating and lighting.

National utility Societe Nationale d’Electricite (SNEL), the national utility, is mandated to oversee the transmission, distribution, generation and trading of electricity. SNEL has stated it has committed to partner with multilaterals, such as the World Bank and the African Development Bank (AfDB), regional neighbors and private actors. In 2014, a new electricity law was adopted, enabling the energy sector to be opened up to more independent producers of traditional and renewable energy.

Lack of investment, no cost reflective tariffs, management problems, a small base of skilled workers and no independent regulatory body in the energy sector has left the sector with challenging operational abilities. Many power plants, transformers and transmission and distribution networks are in severe need of being refurbished or replaced due to lack of maintenance and age, leaving the infrastructure dilapidated and operating far below designed capacity. Estimates range that about one third of the national electricity capacity is not operational.

The electricity mix is dominated by hydro accounting for 96 percent of the electric supply of the 2,677 MW national capacity, with a potential of 100,000 MW the equivalent of 13 percent of the world’s hydropower potential. The balance of the mix is mostly heavy fuel oils.

A perfect example is the Inga I and II dams that have an installed capacity of 1,775 MW, about 100 miles southwest of Kinshasa and these facilities operate at about 60 percent generation due to decades of overdue maintenance and neglect.

Along the Congo River, a saga over a potential “Grand Inga” project has played out for years. In theory a completed multi-stage project would have the potential to produce 39,000 MW and cost $80 billion and $10 billion for transmission, which could provide energy for potentially 500 million Africans without electricity. There has been a myriad of schemes but controversy and many other issues have kept the project on the drawing board with many other calls for it to be completed scrapped. The latest iteration of plans has stakeholders from China, Spain, the AfDB and the European Investment Bank involved.

There is also vast potential in renewable resources such as biomass, solar, geothermal and moderate wind potential that can be harnessed with proper policy and investment structures.

DRC Home to Oil and Gas Reserves

DRC’s oil industry, dating to the 1970s, is operated solely by Perenco, an independent European company. In DRC it operates eleven fields onshore and offshore with an average production of 25,000 barrels per day, according to the company. Oil started being produced in 1975 and peaked at 33,500 b/d in 1985; output has continued to decline. All oil has been exported as there is no refinery. However, discoveries in the east of the country give the country the second largest crude oil reserves in Central and Southern Africa after Angola. There has been discussion of opening Virunga park, a UNESCO World Heritage site and one of the most biologically diverse areas on the planet home to about a quarter of the world’s remaining mountain gorillas, to exploration for oil and minerals.

DRC may hold as many as 30 billion cubic meters of methane and natural gas in the three major petroleum deposits. In addition, Lake Kivu which has a border with Rwanda and recently commissioned a 25 MW plant, has a significant reserve of methane from natural gas. There is inherit risk with methane but it can be tapped for productive use as well.

In February 2017, a revised hydrocarbon code was published in hopes of making the sector more structured and attractive for investors.

 

Expanding Energy Options

With such low rates of electricity access, there is potential for decentralized systems to play a significant role in the energy market. The sheer size of the country leaves many areas without transmission and distribution infrastructure available and presents a problem to construct. Standalone gensets, mini-grids and household level systems can be an integral approach to combating the energy crisis.

Furthermore, new smart policy from the next administration could be developed to promote renewable energy sources using solar, wind, geothermal and biomass to tap the energy potential and stave off further energy crises.

Solar irradiation models show solar energy is viable throughout the country, but installed capacity is next to nonexistent currently. There is increasing micro-hydro being investigated and in operation but these systems can lead to problems with inter-seasonal deviations. Whichever technology, education at the local level is necessary for optimal operation and long-term sustainability.

Most Congolese have been caught in a no-win situation with apparent waves of growth only to be halted and not extend across the nation. With a new administration, a renewed focus onto energy infrastructure can lend a hand to provide a stimulant for sustained, expanded growth and be one spoke on the road to a strong nation.

 

Author

Joe Gurowsky
Joe Gurowsky

Joe Gurowsky focuses on energy, environment, geopolitics, trade, international development and climate related issues. Recently, he worked in Kenya, Ethiopia and Tanzania regarding different energy related programs . Joe has also traveled to Costa Rica, Ghana, the UAE, Germany and Alberta, Canada for aspects of energy and environmental policy.

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