16 Congo
Radley
In the DRC, external shocks unmasked the failures and limitations of Mobutu’s nation state-building project. Nationalization measures undertaken in 1973 and 1974 to provide an emerging politico-commercial class of senior state bureaucrats with access to productive capital—known as Zairianization — were poorly planned and implemented and went badly awry. Agriculture had been neglected, receiving less than 1 per cent of state expenditure from 1968 to 1972, and the Congolese manufacturing sector was in decline.
In the DRC, staff from the World Bank worked in close collaboration with a Congolese committee on the drafting of the mining law. Blaming mining-sector decline on poor governance under the Mobutu administration, the eventual 2002 Mining Code moved to privatize state-owned mining enterprises and attract fresh foreign direct investment (FDI) by offering a generously liberal fiscal regime, including tax holidays and exemptions and low royalty rates. This included the eventual privatization of the country’s two largest SOEs, the copper producer Gécamines and the diamond producer Société minière de Bakwanga.
In the DRC, FDI inflows focused almost exclusively on mining, increasing by a factor of seventeen between 2002 and 2012, from $188 million to $3.3 billion. Across the same period, FDI stocks rose from $907 million to $22.5 billion or from 10 per cent to 59 per cent of gross domestic product.