Would i lend a penny to the DR Congo?

The beginning of this year has seen a number of African countries planning to raise financing from the sovereign debt market.

Ivory Coast, Rwanda and Angola have planned debt raising in February this year.

I took the opportunity to look at Congo’s attractiveness to these very inventors.

Ivory coast’s economy has many similarities with DR Congo’s: Similar GDP sizes averaging USD 31 Bn, growth rates at 8%, inflation rates around than 3%, budget deficit at 2 to 3% and, interestingly enough, similar sovereign ratings with S&P’s B- for Congo and B for Ivory Coast.

So why has the later been able to oversell two sovereign bonds in less than a year while DRC fails to appeal even to the most yield starved investors? 

Would i lend a penny to DRC ?

S&P gave us gross indications citing weak institutions, continuing conflict, poor governance, extremely low-income levels (70% of the population lives under poverty line), heavy dependence on external financing and very limited economic policy flexibility.

I would personally add the needs of more diversified growth prospects while dropping the heavy external debt elements (Mauritius and, again, Ivory Coast are healthier more indebted economies).

Despite these instructive elements my view is that, like every lending decision, intangible and immaterial factors greatly impact final sanctions.

The fact that the positive signals (on growth, low inflation and mining output) sent out there have actually little to do with thorough and through out, sequential economic and financial actions is a rather disturbing impression to me.

There this overall feeling that the country is growing despite of it self and that it is merely an happy and convenient spectator of the show put on by foreign multinationals. This is probably an element setting Congo apart from its concurrent of the day.

In question, amongst other, is the ability to plan with weak forecasting abilities hampered by a clear lack of reliable data as economic coverage remains poor -some parts of the country do not have a formal central bank presence.

This subsequently impacts the abilities to organize and the lead executions and finally to control and monitor outcomes.

So No, I would probably not lend a penny to DR Congo in its current setting. While cognizant of the country’s tremendous growth potential, it remains purely theoretic. Little to nothing is done on the implementation front to insure value to investors.

The country will have to get its act together as most of its smaller neighbors (Rwanda is a very compelling case) are doing a much better job in actually owning their growth, a capacity Congo remains far from today.