Kenyan firms are planning to expand into the populous Democratic Republic of the Congo (DRC) that is about to join regional trading bloc after making formal application in June 2019.
The admission of DRC into six-nation East African Community (EAC), expected to be concluded this year, is projected to strengthen trade ties, expanding market for goods and services.
The mineral-rich country already has established trade ties with most of the EAC member states through bilateral deals and at multilateral level through Southern African Development Community (SADC) where Tanzania is a member.
“With a population of over 90 million, DRC offers Kenyan manufacturers a larger market for their products,” Mr Mucai Kunyiha, the chairman of the Kenya Association of Manufacturers (KAM), told the Business Daily.
“Its rich appetite for agricultural produce shall enable local manufacturers expand their volume of exports.”
With a surface area equivalent to that of western Europe, the DRC is the largest country in sub-Saharan Africa, only is dwarfed by Algeria in the continent.
Analysts say it offers huge untapped opportunity for access to one of the world's last economic frontier markets.
The central African country, 11th largest in the world by area, is endowed with exceptional natural resources, including minerals such as cobalt and copper, hydropower potential, significant arable land, immense biodiversity and the world's second-largest rainforest.
“We are at advanced stage (of admitting DRC into EAC). We are in the last step to present findings to the (EAC Heads of State) Summit. It will certainly make a difference to the smallest person all the way to multinationals,” EAC Affairs Principal Secretary Kevit Dasai said recently.
“The importance of the private sector leadership need to be stressed because while the government is rolling out structures and fabrics, it’s up to them (business leaders) to promote leadership.”
DRC is already a key African market for Kenyan firms with latest official annual data showing exports earnings from the country amounted to Sh14.3 billion in 2020 — only dwarfed by Uganda, Tanzania, Rwanda, Egypt and South Sudan.
Some of the key exports to DRC are animal and vegetable fats and oils, pharmaceutical products, tobacco, iron and steel, leather and footwear, vegetables, fruits, nuts, plastics as well as paper and paperboard.
“With enhanced access to the DRC market, the volume of these exports is expected to rise in the near term, and pave way for more products,” Mr Kunyiha said.
Dominic Kahozi, a director at DRC’s National Agency for the Promotion of Investments (ANAPI), has singled out agribusiness as the low-lying fruit for Kenyan firms, citing expansive arable land suitable for crop and livestock farming.
Other sectors ripe for investment include fishing, hydro-electric generation, mining, healthcare, hospitality and insurance sectors.
low-cost labour force
“We … have a low-cost labour force, favourable investment environment and an increasingly attractive and competitive business environment,”Mr Kahozi told a recent online forum of Kenyan firms angling for opportunities in the DRC.
“People have been talking about a market of about 100 million people, but when you look at it on great scheme of things with nine neighbouring countries, we are looking at a potential market of 250 million people for any investment.”
Kenya has been keen to deepen trade especially with Eastern DRC, and the looming entry into the EAC bloc has made it a fertile hunting ground for growth-hungry firms in Nairobi.
President Uhuru Kenyatta, for instance, had in April 2021 signed bilateral deals on transport, security and trade with his counterpart, Felix Tshisekedi, in a bid to deepen trade between the two countries.
Despite the country relying on eastern Africa sea ports for imports, Mombasa handles less than 15 percent of the share of goods sent to DRC, with Dar es Salaam in Tanzania and Beira in Mozambique getting the bulk of the deals.
“I believe that our commonality gives us a very good opportunity for us to deepen our relations further as we work together to achieve these objectives for the people of our respective countries,”Mr Kenyatta said during his three-day State visit to Kinshasa last year. “One thing I’d like our two [technical] teams to work on is to ensure that we ease the problem of our people being able to travel between our two countries.”
With endorsement from the World Bank Group and the African Development Bank as the next frontier for growth on the continent, Kenyan firms are making a beeline for opportunities in that country whose population remain amongst world’s poorest despite enormous mineral wealth.
For instance, a two-week trade mission late last year to key DRC’s key towns of Kinshasa, Lubumbashi, Goma and Mbuji Mayi, sponsored by Equity Group — Kenya’s largest lender by deposit accounts — attracted nearly 170 Kenyan firms.
170 prospecting firms
Equity has established operations in the DRC through acquisitions and sees the country as strategically important for future growth of its subsidiary business—investments outside Kenya.
KCB Group, Kenya’s largest lender by market share, has indicated that it is on tail-end of its plan to enter DRC, with an announcement expected in coming months.
Another notable blue-chip company which has firmed up strategy to set shop in the expansive market is Jubilee Holdings which has applied for a licence to set up a composite underwriting business.
Equity Group chief executive James Mwangi has compared DRC’s level of economic development to that of Kenya’s in the 1980s.
“For me, the biggest opportunity, given that Kenya has an advantage of being a service-oriented economy, is to service the mining industry. We can populate ourselves to the entire value chain of all the commodities that DRC produce,” Mr Mwangi said in an interview with Citizen TV. “We should be the ones doing boreholes for water for them, hospitality (and) spare parts using the logistics base of the Mombasa port and even energy requirements.”
For manufacturers, DRC’s minerals such as copper, cobalt and coltan offer opportunity for raw materials for industries in Kenya, while the mining industry provides market for electrical and electronic products.
“Demand for electric car batteries and electronics has been on the increase. This has led to an increased demand for raw materials such as cobalt and coltan,” Mr Kunyiha said. “By joining the region, Kenyan manufacturers will have enhanced access to these raw materials, largely produced in DRC.”
A report by African Development Bank has noted that normalisation of political situation and a new determination to reform and fight corruption in the populous DRC has instilled a climate of confidence, promoting new private investment in sectors that drive the economy forward.
The Kenyan manufacturing sector lobby, however, cites unpredictable taxation regime, a “rigid and inconsistent” justice system as well as a “tedious and lengthy” customs clearance process as some of the risks to investors.
“Exporters are required to make local arrangements for customs agents, which translates to extra costs,” Mr Kunyiha said.
“As it joins the EAC, DRC should work towards creating a conducive business environment that promotes long-term foreign investment and sustainable economic growth.”
While no latest credible data on returns is publicly available for potential investors, a 2014 DRC Country Mining Guide by global consultancy firm, KPMG, suggested DRC's mining sector presents a "high-risk high-return opportunity”.
Besides SADC, DRC is also a member of the Common Market for Eastern and Southern Africa (Comesa), Economic Community of Central African States (Ecowas), Organisation for the Harmonisation of African Business Law and the Economic Community of the Great Lakes Countries.
“By virtue of being a member state of these trade blocs, DRC adheres to the existing trade guidelines, regulations, and agreements. As such, partner states are bound to enjoy the incentives provided for within each trading bloc,”Mr Kunyiha added.