## 1. Mining Codes ## Source details **Canonical URL:** [1. Mining Codes](https://www.imf.org/-/media/files/publications/cr/2022/english/1codea2022003.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2022/english/1codea2022003.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2022/english/1codea2022003.pdf.json) --- ### A. Context - Objective: Understand exposure to climate vulnerabilities and bottlenecks in scaling climate policies to achieve the Nationally determined contribution (NDC). - Long-term opportunities: Substantial benefits from low-carbon technology development and carbon sink conservation; need to strengthen forest and mining management and build resilience. - Key policy priorities: - Improve governance and transparency on managing mining resources to generate tangible opportunities and promote inclusive growth. - Manage forests efficiently and optimize gains from carbon markets. - Promote equitable sharing of climate resource dividend across and within generations. - Integrate climate risks in public finance management and debt sustainability analysis. - Improve PFM, investment, and debt management frameworks to unlock international climate funds. - Strengthen capacity in early warning, promote climate-smart agriculture, and develop a national disaster contingency plan. - Enhance capacity to support forest and peatland preservation and tackle the effects of poverty on deforestation. ### B. Exposure to Climate Change Vulnerabilities - Disaster exposure and readiness: - Between 2010-20, the DRC experienced 21 episodes of severe floods. - According to the 2019 ND-GAIN index, the DRC is the 10th least ready country and the 8th most vulnerable country to climate change in the world. - Channels of economic impact: - Health: Floods spread diseases (cholera, malaria), harming worker productivity over the medium term. - Infrastructure: In 2021, more than one percent of the Congolese population was directly exposed through destruction of housing and properties. - Agricultural land: About one percent of arable land under cultivation is destroyed by floods every year. - Food security: Agriculture employs 70 percent of the population and represented 19 percent of GDP in 2020; between July to December 2020, over 21 million people faced high levels of acute food insecurity. Around 500,000 people lost almost all food reserves due to heavy rains and flooding. - Inflation and transport: Transportation represents 11 percent of the CPI basket; estimated additional economic cost caused by commuter travel delays in Kinshasa is at least US$1.2 million per flood day. Food products have a 54 percent weight in the CPI basket. - Long-run climate projections (RCP8 scenario): - Precipitation: Frequency of extreme precipitation likely to increase by as much as 27 percent. - Temperature: Annual temperatures in DRC projected to increase by +1.7°C by the end of the century (RCP8 median). - Agricultural potential: DRC has 80 million of arable land, but only 10% is used for agriculture. ### C. DRC’s Role in Global Carbon Sequestration - Net sequestration: - The DRC is carbon-negative: gross carbon absorption from forests exceeds gross emissions, yielding a net forest carbon absorption of approximately 0.4 GtCO2e per year. - The DRC can absorb up to 2/3 of African carbon emissions every year. - Carbon stock estimates: - Total carbon stock from peatlands and rainforest is estimated around 42 GtCO2e (equivalent to about 120 percent of annual global CO2e in 2020). - Peatlands: - DRC has 90,800km2 of peat area with 19 GtCO2e of peat carbon stock. - The Congo Basin stores about 30 GtCO2e; the DRC represents 60 percent of the Congo Basin. - Forests: - Forests cover more than 130 million hectares (58 percent of land area). - This represents 10 percent of the world’s tropical forests or 60 percent of the Congo Basin. - Forests contain a total of 23.3 GtCO2e accumulated and stored above the ground. - Emissions profile and deforestation: - LUCF (land-use change and forestry) activity accounted for 91 percent of total emissions in 2018. - Agriculture accounted for 5 percent of emissions in 2018. - Deforestation rates: 0.2 percent per year for 1990-2010; tree cover loss increased from 0.69 percent in 2016 to 0.74 percent in 2017; tree cover loss reached a record high in 2017. Population growth has led to the loss of about half a million hectares of forest every year in recent years. - The DRC stands among the six countries with the highest forest cover lost in the world. - Governance and timber trade: - The 2002 Forest Code contains best-practice elements, but several implementing regulations are still missing. - The logging concession moratorium signed in 2002 has failed to protect forests per a 2022 audit by the Inspectorate General of Finance (IGF). - In 2018, US$110.38 million of timber was exported by the DRC, of which only US$36.5 million went to regulated markets. - Social Cost of Carbon (SCC) and avoided-damage valuation: - Nordhaus (2017) global SCC estimates (per ton of carbon) used in baseline and conservative scenarios: - Conservative: US$22.6 in 2020, US$49.2 in 2050. - Baseline: US$38.7 in 2020, US$102.5 in 2050. - A one percentage point decrease in the DRC’s carbon sequestration would have led to losses of 1.4 and 2.4 percent points in World GDP in 2020 under the conservative and baseline scenarios respectively. - Conclusion: Large gains exist from increasing policy intervention and international partner support for forest and peatlands management over time. ### D. Implication of the Global Energy Transition - Strategic role: DRC is critical for the global supply chain of "green metals" needed for decarbonization (notably copper and cobalt). - Production and reserve shares (2020): - Cobalt: DRC accounted for 71 percent of global cobalt mining production and held 46 percent of the world’s reserves. - Copper: DRC accounted for 7.8 percent of global copper mining production and held 3.5% of global reserves. - Demand outlook: - Under a net-zero emission scenario, the IEA (2021) projects global demand for copper and cobalt to soar by a factor of more than five by 2040, driven by demand for electric vehicles, wind, solar and battery storage technology. - Note: The global energy transition may trigger an increase in emissions over the medium-term that could compromise the DRC meeting its COP26 reduction targets. ### 15. Green metals demand, supply dynamics, and revenue implications - Timing and supply response: - Matching demand for green metals will require intensive investment and take more than a decade according to the IEA (2021). - Supply will react slowly to price signals. - Revenue potential: - In the net zero emissions scenario, the demand boom could lead to a more than fourfold increase in the value of metals production. - Estimated cumulative global revenues for copper and cobalt over 2021-40: $7.2 trillion. - With the DRC new tax code enacted in 2018, a potential energy transition could tremendously benefit the DRC, improve its external sector balance, and provide the resources to address priority development needs. ### Mining-sector governance, fiscal frameworks, and the 2018 Mining Code - Key features of the revised Code: - Reduces exploitation licenses from 30 to 25 years and makes them renewable only once. - State’s non-dilutable equity stake increases from 5 percent to 10 percent, increasing by a further 5 percent with each renewal. - Ten percent of the shares in a mining company to be held by the public administration on behalf of the citizens through a sovereign wealth fund. - Royalties and taxes introduced or increased: - Iron and ferrous metals: from 0.5 to 1 percent. - Non‑ferrous and base metals: from 2 to 3.5 percent. - Precious metals: from 2.5 to 3.5 percent. - Introduction of a 10 percent royalty for strategic minerals (copper, cobalt). - Special 50 percent tax on excess profits, defined as profits made when a commodity’s price exceeds by 25 percent the price used in the bankable feasibility study. ### Artisanal and small-scale mining (ASM): employment, production share, and risks - ASM statistics and issues: - ASM currently accounts for an estimated 15–30 percent of domestic cobalt production. - ASM employs more than 2 million people (2 percent of Congolese population). - Labor conditions and wages are described as miserable; minerals are extracted using basic tools and sold in the shadow market. - Policy response: - Creation of the Enterprise Générale du Cobalt (EGC) in 2019 to strengthen responsible cobalt sourcing standards and buy ASM-produced cobalt. - Risk: Absent proper frameworks and governance, ASM workers could fail to benefit from the energy transition and tailwinds may increase ASM production. ### GHG emissions from mining and environmental risks - Emissions and environmental pressures: - The green metal transition would increase greenhouse gas (GHG) emissions through energy-intensive mining and processing activities, biodiversity loss and social disruption due to land use change, water depletion and contamination, and air pollution. - Under the stated policy scenario and the net zero scenario, year-to-year GHG emissions growth induced by large scale mining activities in the DRC are projected at 1 percent and 3 percent respectively. - Projected emissions could be underestimated since they exclude small-scale mining activities and the impact of mining development on land‑use change and deforestation. - Emissions intensities (IAE (2021) averages for large scale mining production): - Cobalt: 4.8 tCo2 eq per ton. - Copper: 16.5 tCo2 eq per ton. - Environmental risk drivers: chemical waste dumping, heavy metal pollution, improper handling of waste, abandonment of excavated pits by ASM could lead to additional environmental cost. ### Climate policy steps, strategies, and targets - Engagement history and targets: - Since 2009 involved in REDD+ and CIFOR’s Global Comparative Study on REDD+ (GCS-REDD+). - In 2015, presented its REDD+ Readiness-Package and released its first Nationally Determined Contribution (NDC). - First NDC pledge: reduce GHG emissions by 17 percent and increase forest cover to 60 percent by 2030. - National Strategic Development Plan (NSDP, 2019-23) integrates climate change in its fifth pillar with actions including REDD+. - REDD+ and forest targets: - Reforest about 3 million hectares over the next 5 years. - Maintain forest cover at 63.5 percent of the territory by 2030. - REDD+ investment plan coordinated by FONAREED includes interventions across agriculture, energy, forestry, land use planning, land governance, and demography. ### COP26 commitments, financing needs, and carbon market engagement - International pledges and agreements: - $19 billion in public and private funds pledged for forests globally. - Congo Basin Pledge: $1.5 billion in financing between 2022-25. - Landmark $U500 million 10-year agreement with the Central African Forest Initiative (CAFI) to protect DRC’s rainforest during 2021-2030; partnership will regenerate 8 million hectares of degraded land and forests and place 30 percent of national areas under protection. - Updated NDC and financing: - Increased emissions reduction ambition from 17 percent to 21 percent by 2030. - Financing needs to achieve updated NDC: $US48 billion (87.5 percent of GDP in 2021) between 2022 and 2030, split between mitigation ($US25 billion) and adaption ($US23 billion). - 19 percent of emissions reduction is conditional on external financing and 2 percent will be financed on domestic resources. - Resulting fiscal cost estimated around 13 percent of fiscal revenue in 2021. - Carbon markets and credits: - DRC is carbon negative and can benefit from international carbon credit schemes. - Up to 14 million tons of carbon credits were already issued through international markets as of the end of 2021; less or no fiscal revenue was collected from these transactions since the government didn’t have ownership rights on those credits. - In January 2022, the DRC met the REDD+ environmental Excellence standard (TREE) and will issue REDD+ carbon credits with government full ownership right through the Ministry of Environment and Sustainable Development. - Authorities plan to issue 30 million tons of carbon credits at more than $US 10 per ton by the end of 2022. - Ecosystem marketplace data: price of a carbon credit varies between $US5 and $US10. - Financing strategies suggested: - De-risking climate adaptation projects to encourage private investment. - Seeking concessional loans such as the Resilient and Sustainability Trust, grants and result-based financings. - Developing a domestic carbon trading system and a national REDD+ carbon registry to track payments and foster transparency. ### Key implementation challenges for climate finance and sustainable mining - Project identification and implementation: - Processes and practices critical for green and resilient investments are weak. - Financing gap compounded by capacity constraints hindering operationalization of climate adaptation strategies. - National and sectoral public investment strategies are not aligned with long-term climate goals except for the forestry sector. - Effective implementation will require upgraded public investment management. - Forest governance and peatlands management: - Unregulated logging and limited oversight on conservation concessions linked to carbon credit sales pose challenges to achieving the NDC and mobilizing domestic revenue. - A government audit (April 2022) highlighted regulatory loopholes, weak governance, and lack of transparency enabling potential abuses including tax evasion. - Authorities and CAFI plan to review all forest conservation concessions and logging activities by 2024. - Limited capacity in carbon trading and regulation: - Weak capacity in climate finance hinders monetization of carbon sinks and engagement in international emission trading schemes. - No national REDD+ carbon registry exists to track payments and foster transparency in forest conservation activities that lead to carbon credit issuances. - Developing domestic carbon trading could enhance transparency and accelerate access to international carbon markets. *International Monetary Fund — Extracted content from the PDF chapter "1. Mining Codes" (June 13, 2022).* --- ### 2. As of end-2021, the credit to the private sector in the Democratic Republic of the Congo ### Credit and Deposits (key statistics) - Credit to the private sector: 7.5 percent of GDP (as of end-2021). - Deposits in the banking system: 19.7 percent of GDP (as of end-2021). - Regional comparisons (2020 estimates): domestic credit to the private sector = 38 percent of GDP in sub-Saharan Africa and 14 percent among fragile state peers. - Maturity composition (2019): short-term credit accounted for 34 percent and medium-term credit for 38 percent. - Maturity composition (as of end-2021): short-term credit = 44 percent and medium-term credit = 33 percent. - Dollarization: Both credits and deposits remain heavily dollarized (referenced: Staff Report Annex VII on Dollarization). - Distribution by sector (2021): private enterprises = 52 percent of credit and 54 percent of deposits; households = 20 percent of credit and 26 percent of deposits. - Geographic concentration: over 95 percent of credits attributed to the same six provinces and over 95 percent of deposits attributed to the same seven provinces since 2019. - Source attribution in figures: BCC. ### Access to Financial Services — Physical Infrastructure - Country size: 2.3 million square kilometers (second largest in Africa, 11th-largest in the world by area). - Account ownership: only 26 percent of the active population have a bank account. - For adults without an account, about 35 percent cite distance to financial institutions/services as a major impediment. - Cash points (Financial Access Survey): commercial bank branches = 300; ATMs = 634. - Branch density: Number of branches per 1,000 km2 in the DRC has remained below 0.2 in recent years—often more than 10 times less than averages in fragile state and sub-Saharan African peers. - ATM locations per 1,000 km2 have risen incrementally but infrastructure requires further improvement. ### Access to Financial Services — Social and Regulatory Infrastructure - Account ownership: 26 percent of the population have an account with a financial institution. - Top five reasons for not having an account (age 15+): 1) lack of sufficient funds; 2) cost; 3) distance; 4) lack of proper documentation; 5) lack of trust in financial institutions. - Account ownership patterns: higher among those with secondary education, higher among the richest 60 percent, and higher among those participating in the labor force. - Wage modalities: 60 percent of wage recipients report receiving wages in cash; only 26 percent report receiving wages into a financial institution account. - Data gaps: Cash receipts for public sector pensions, domestic remittances, government payments and transfers, private and public sector wages, and wages from self-employment are poorly documented. - Emergency funds: only 41 percent of individuals indicate it is possible to raise emergency funds. - Top 3 sources for those able to raise funds: 1) money from working; 2) family or friends; 3) savings. - Only 1.7 percent indicated they raise emergency funds by taking a loan from a bank, employer, or private lender. - Saving behavior: 39 percent of individuals reported saving any money in the past year; 4.7 percent saved at a financial institution. - Borrowing behavior: 35 percent of individuals reported borrowing money in the past year. - Top source of borrowed funds: family or friends, followed by financial institutions or credit card use. - Primary reasons for borrowing: health or medical purposes, followed by education or school fees. - Documentation barrier: 27.3 percent of those without a financial institution account cited absence of necessary documentation (proof of residence, proof of income, ID or ID equivalents) as a major impediment. ### Informality and Labor Market Effects - Informality metrics: - Estimated size of the informal economy: 47 percent of GDP in 2015 (compared to 40 percent for fragile state peers and 36 percent for sub-Saharan Africa). - Congo’s Trade Union Confederation estimate: 97 percent of the overall workforce may be engaged in informal sector activities. - Gender: More women than men are engaged in the informal sector; data availability limits measuring effects on women in the DRC. - FSSR recommendation: Enhanced gender-disaggregated data collection. ### Financing for SMEs and Firm Finance - SMEs financing share (2021): SMEs accounted for approximately 8 percent of the credit base and 5 percent of the deposit base. - Microfinance: Opportunity to fill SME financing gaps; BCC has worked to improve the regulatory framework for microfinance institutions and work is ongoing to strengthen legislative supervision. - Business constraints: 39.1 percent of firms cited access to finance as a major constraint to conducting business; smaller firms especially affected (41 percent). - Internal financing: Congolese firms report approximately 92 percent of investment is financed internally compared to 75 percent of sub-Saharan African firms. ### Digitalization and Mobile Money - Mobile subscriptions and digital access: - Mobile cellular subscriptions per 100 people: 49.5 in the DRC versus averages of 69.9 in fragile state peer countries and 75.5 in sub-Saharan Africa. - Mobile money account ownership: approximately 16 percent of adults in the DRC versus approximately 23 percent for sub-Saharan African fragile state peers. - Digital payments: 22 percent of Congolese individuals indicated they had made or received digital payments in the past year (fragile state peers = 24 percent). - Account access via mobile/internet: 17 percent of Congolese individuals used a mobile phone or the internet to access an account; of individuals with an account, 67 percent used a mobile phone or the internet to access an account. - Mobile money context: - Sub-Saharan Africa accounted for 43 percent of new mobile money accounts in 2020. - Mobile money transactions in sub-Saharan Africa amounted to US$490 billion out of the global total of US$767 billion. - Multipay Congo (launched 2015) aims to facilitate interoperability and shared payment services among banks to promote financial inclusion in the Congolese market. - Risks: BigTech entry and mobile money expansion may exacerbate corruption, fraud, theft, money-laundering risks where regulatory frameworks are unstable; risks amplified in largely cash-based and informal economies such as the DRC. ### Policy Recommendations - Overarching challenge: Physical, social, and regulatory barriers impede financial access; more private sector credit is needed to generate growth opportunities. - Digital/Payments policy: - Promote mobile money as a promising channel to increase engagement between financial institutions and the population given physical access constraints. - Continue strengthening the payment system and supervision of payment institutions in line with the Payment Systems Law passed in 2018. - Continue moving away from a cash-based economy; note progress from the “bancarisation” policy first implemented in 2011 requiring civil servants’ wages and salaries be paid via bank accounts. - Financial literacy and transparency: - Deepen financial literacy to ensure newly included segments can engage in healthy and responsible financial behavior and mitigate risks from financial illiteracy. - Bolster financial reporting and transparency in line with international standards to reinforce trust in financial institutions and shed light on borrower situations and system risks (as identified in the 2022 FSSR). - Structural and legal reforms: - Advance reforms to improve the business climate and protect financial market integrity. - FSSR-identified needs include improvements to insolvency management, updates to emergency liquidity assistance (ELA), recovery planning, and a resolution funding mechanism. - The expected Banking Law would further establish a framework for risk and banking crisis management. - Strong legal and judicial frameworks as well as accounting and reporting systems will facilitate reform and financial deepening. *International Monetary Fund — Extracted content from the IMF chapter on the Democratic Republic of the Congo provided in the supplied document.* ### 1. Mining Codes___________________________________________________________________________ 11 ### 1. Mining Codes ### A. Context - Addressing climate change challenges in the DRC requires understanding exposure to climate vulnerabilities and bottlenecks in scaling climate policies to achieve the Nationally determined contribution (NDC). - The DRC has substantial long-term benefits from low-carbon technology development and carbon sink conservation; focused efforts are needed to strengthen forest and mining management while building resilience. - Key policy priorities identified: - Improve governance and transparency on managing mining resources to generate tangible opportunities and promote inclusive growth. - Manage forests efficiently and optimize gains from carbon markets. - Promote equitable sharing of climate resource dividend across and within generations. - Integrate climate risks in public finance management and debt sustainability analysis. - Improve PFM, investment, and debt management frameworks to unlock international climate funds. - Strengthen capacity in early warning, promote climate-smart agriculture, and develop a national disaster contingency plan. - Enhance capacity to support forest and peatland preservation and tackle the effects of poverty on deforestation. ### B. Exposure to Climate Change Vulnerabilities - The DRC is highly vulnerable to floods, heavy rainfalls, and landslides and is among the least ready to address disaster-related climate shocks: - Between 2010-20, the DRC experienced 21 episodes of severe floods. - According to the 2019 ND-GAIN index, the DRC is the 10th least ready country and the 8th most vulnerable country to climate change in the world. - Channels through which climate-related shocks affect the economy: - Health: Floods spread diseases (cholera, malaria), harming worker productivity over the medium term. - Infrastructure: In 2021, more than one percent of the Congolese population was directly exposed through destruction of housing and properties. - Agricultural land: About one percent of arable land under cultivation is destroyed by floods every year. - Food security: Agriculture employs 70 percent of the population and represented 19 percent of GDP in 2020; between July to December 2020, over 21 million people faced high levels of acute food insecurity. Around 500,000 people lost almost all food reserves due to heavy rains and flooding. - Inflation and transport: Transportation represents 11 percent of the CPI basket; estimated additional economic cost caused by commuter travel delays in Kinshasa is at least US$1.2 million per flood day. Food products have a 54 percent weight in the CPI basket. - Long-run climate projections (RCP8 scenario): - Precipitation: Frequency of extreme precipitation likely to increase by as much as 27 percent. - Temperature: Annual temperatures in DRC projected to increase by +1.7°C by the end of the century (RCP8 median). - Agricultural potential note: DRC has 80 million of arable land, but only 10% is used for agriculture. ### C. DRC’s Role in Global Carbon Sequestration - The DRC is carbon-negative: gross carbon absorption from forests exceeds gross emissions, yielding a net forest carbon absorption of approximately 0.4 GtCO2e per year. - The DRC can absorb up to 2/3 of African carbon emissions every year. - Total carbon stock from peatlands and rainforest is estimated around 42 GtCO2e (equivalent to about 120 percent of annual global CO2e in 2020). - Peatlands: - DRC has 90,800km2 of peat area with 19 GtCO2e of peat carbon stock. - The Congo Basin stores about 30 GtCO2e; the DRC represents 60 percent of the Congo Basin. - Forests: - Forests cover more than 130 million hectares (58 percent of land area). - This represents 10 percent of the world’s tropical forests or 60 percent of the Congo Basin. - Forests contain a total of 23.3 GtCO2e accumulated and stored above the ground. - Emissions profile: - LUCF (land-use change and forestry) activity accounted for 91 percent of total emissions in 2018. - Agriculture accounted for 5 percent of emissions in 2018. - Deforestation rates: 0.2 percent per year for 1990-2010; tree cover loss increased from 0.69 percent in 2016 to 0.74 percent in 2017; tree cover loss reached a record high in 2017. Population growth has led to the loss of about half a million hectares of forest every year in recent years. - The DRC stands among the six countries with the highest forest cover lost in the world. - Governance and timber trade: - The 2002 Forest Code contains best-practice elements, but several implementing regulations are still missing. - The logging concession moratorium signed in 2002 has failed to protect forests per a 2022 audit by the Inspectorate General of Finance (IGF). - In 2018, US$110.38 million of timber was exported by the DRC, of which only US$36.5 million went to regulated markets. - Social Cost of Carbon (SCC) estimates and avoided-damage valuation: - Nordhaus (2017) global SCC estimates (per ton of carbon) used in baseline and conservative scenarios: - Conservative: US$22.6 in 2020, US$49.2 in 2050. - Baseline: US$38.7 in 2020, US$102.5 in 2050. - A one percentage point decrease in the DRC’s carbon sequestration would have led to losses of 1.4 and 2.4 percent points in World GDP in 2020 under the conservative and baseline scenarios respectively. - Conclusion: Large gains exist from increasing policy intervention and international partner support for forest and peatlands management over time. ### D. Implication of the Global Energy Transition - The DRC is critical for the global supply chain of "green metals" needed for decarbonization (notably copper and cobalt). - Production and reserve shares (2020): - Cobalt: DRC accounted for 71 percent of global cobalt mining production and held 46 percent of the world’s reserves. - Copper: DRC accounted for 7.8 percent of global copper mining production and held 3.5% of global reserves. - Under a net-zero emission scenario, the IEA (2021) projects global demand for copper and cobalt to soar by a factor of more than five by 2040, driven by demand for electric vehicles, wind, solar and battery storage technology. - Note: The global energy transition may trigger an increase in emissions over the medium-term that could compromise the DRC meeting its COP26 reduction targets. *Source: IMF staff compilation from the PDF chapter "1. Mining Codes" (June 13, 2022).* ### 15. The advent of metals critical for the energy transition could strengthen the impact of ### 15. The advent of metals critical for the energy transition could strengthen the impact of global commodity cycles on external sector ### Green metals demand, supply dynamics, and revenue implications - Matching demand for green metals will require intensive investment and take more than a decade according to the IEA (2021). - Supply will react slowly to price signals. - In the net zero emissions scenario, the demand boom could lead to a more than fourfold increase in the value of metals production. - Estimated cumulative global revenues for copper and cobalt over 2021-40: $7.2 trillion. - With the DRC new tax code enacted in 2018, a potential energy transition could tremendously benefit the DRC, improve its external sector balance, and provide the resources to address priority development needs. ### Mining-sector governance, fiscal frameworks, and the 2018 Mining Code (Box 1) - Revised Code reduces exploitation licenses from 30 to 25 years and makes them renewable only once. - State’s non-dilutable equity stake increases from 5 percent to 10 percent, increasing by a further 5 percent with each renewal. - Ten percent of the shares in a mining company to be held by the public administration on behalf of the citizens through a sovereign wealth fund. - Royalties and taxes introduced or increased: - Iron and ferrous metals: from 0.5 to 1 percent. - Non‑ferrous and base metals: from 2 to 3.5 percent. - Precious metals: from 2.5 to 3.5 percent. - Introduction of a 10 percent royalty for strategic minerals (copper, cobalt). - Special 50 percent tax on excess profits, defined as profits made when a commodity’s price exceeds by 25 percent the price used in the bankable feasibility study. ### Artisanal and small-scale mining (ASM): employment, production share, and risks - ASM currently accounts for an estimated 15–30 percent of domestic cobalt production. - ASM employs more than 2 million people (2 percent of Congolese population). - Labor conditions and wages are described as miserable; minerals are extracted using basic tools and sold in the shadow market. - Policy response: creation of the Enterprise Générale du Cobalt (EGC) in 2019 to strengthen responsible cobalt sourcing standards and buy ASM-produced cobalt. - Absent proper frameworks and governance, ASM workers could fail to benefit from the energy transition and tailwinds may increase ASM production. ### GHG emissions from mining and environmental risks - The green metal transition would increase greenhouse gas (GHG) emissions through energy-intensive mining and processing activities, biodiversity loss and social disruption due to land use change, water depletion and contamination, and air pollution. - Under the stated policy scenario and the net zero scenario, year-to-year GHG emissions growth induced by large scale mining activities in the DRC are projected at 1 percent and 3 percent respectively. - Projected emissions could be underestimated since they exclude small-scale mining activities and the impact of mining development on land‑use change and deforestation. - IAE (2021) average GHG emissions intensities for large scale mining (LSM) production: - Cobalt: 4.8 tCo2 eq per ton. - Copper: 16.5 tCo2 eq per ton. - Unresponsible mining practices (chemical waste dumping, heavy metal pollution, improper handling of waste, abandonment of excavated pits by ASM) could lead to additional environmental cost. ### Climate policy steps, strategies, and targets - DRC engagement history: - Since 2009 involved in REDD+ and CIFOR’s Global Comparative Study on REDD+ (GCS-REDD+). - In 2015, presented its REDD+ Readiness-Package and released its first Nationally Determined Contribution (NDC). - First NDC pledge: reduce GHG emissions by 17 percent and increase forest cover to 60 percent by 2030. - National Strategic Development Plan (NSDP, 2019-23) integrates climate change in its fifth pillar, promoting sustainable resource management, good governance of natural resources, climate monitoring and early warning, resilient livelihoods, and mitigation and adaptation actions (including REDD+). - REDD+ and forest targets: - Reforest about 3 million hectares over the next 5 years. - Maintain forest cover at 63.5 percent of the territory by 2030. - REDD+ investment plan coordinated by FONAREED includes interventions in agriculture, energy, forestry, land use planning, land governance, and demography with aims to reform land allocation and design sustainability policies. ### COP26 commitments, financing needs, and carbon market engagement - COP26 outcomes and commitments: - $19 billion in public and private funds pledged for forests globally. - Congo Basin Pledge: $1.5 billion in financing between 2022-25. - Landmark $U500 million 10-year agreement with the Central African Forest Initiative (CAFI) to protect DRC’s rainforest during 2021-2030; partnership will regenerate 8 million hectares of degraded land and forests and place 30 percent of national areas under protection. - Updated NDC: - Increased emissions reduction ambition from 17 percent to 21 percent by 2030. - Financing needs to achieve updated NDC: $US48 billion (87.5 percent of GDP in 2021) between 2022 and 2030, split between mitigation ($US25 billion) and adaption ($US23 billion). - 19 percent of emissions reduction is conditional on external financing and 2 percent will be financed on domestic resources. - Resulting fiscal cost estimated around 13 percent of fiscal revenue in 2021. - Carbon markets: - DRC is carbon negative and can benefit from international carbon credit schemes. - Up to 14 million tons of carbon credits were already issued through international markets as of the end of 2021; less or no fiscal revenue was collected from these transactions since the government didn’t have ownership rights on those credits. - In January 2022, the DRC met the REDD+ environmental Excellence standard (TREE) and will issue REDD+ carbon credits with government full ownership right through the Ministry of Environment and Sustainable Development. - Authorities plan to issue 30 million tons of carbon credits at more than $US 10 per ton by the end of 2022. - Ecosystem marketplace data: price of a carbon credit varies between $US5 and $US10. - Financing strategies suggested: - De-risking climate adaptation projects to encourage private investment. - Seeking concessional loans such as the Resilient and Sustainability Trust, grants and result-based financings. - Developing a domestic carbon trading system and a national REDD+ carbon registry to track payments and foster transparency. ### Key implementation challenges for climate finance and sustainable mining - Climate project identification and implementation: - Processes and practices critical for green and resilient investments are weak. - Financing gap compounded by capacity constraints hindering operationalization of climate adaptation strategies. - National and sectoral public investment strategies are not aligned with long-term climate goals except for the forestry sector. - Effective implementation will require upgraded public investment management. - Forest governance and peatlands management: - Unregulated logging and limited oversight on conservation concessions linked to carbon credit sales pose challenges to achieving the NDC and mobilizing domestic revenue. - A government audit (April 2022) highlighted regulatory loopholes, weak governance, and lack of transparency enabling potential abuses including tax evasion. - Authorities and CAFI plan to review all forest conservation concessions and logging activities by 2024. - Limited capacity in carbon trading and regulation: - Weak capacity in climate finance hinders monetization of carbon sinks and engagement in international emission trading schemes. - No national REDD+ carbon registry exists to track payments and foster transparency in forest conservation activities that lead to carbon credit issuances. - Developing domestic carbon trading could enhance transparency and accelerate access to international carbon markets. *International Monetary Fund* ### 2. As of end-2021, the credit to the private sector in the Democratic Republic of the ### 1codea2022003 - 2. As of end-2021, the credit to the private sector in the Democratic Republic of the ### Credit and Deposits - Credit to the private sector in the Democratic Republic of the Congo stands at 7.5 percent of GDP (as of end-2021). - Deposits in the banking system account for 19.7 percent of GDP (as of end-2021). - Regional comparisons (2020 estimates): domestic credit to the private sector = 38 percent of GDP in sub-Saharan Africa and 14 percent among fragile state peers. - Maturity composition (2019): short-term credit accounted for 34 percent and medium-term credit for 38 percent. - Maturity shift after COVID-19 (as of end-2021): 44 percent in short-term and 33 percent in medium-term credit. - Both credits and deposits remain heavily dollarized (referenced: Staff Report Annex VII on Dollarization). - Distribution by sector (2021): private enterprises = 52 percent of credit and 54 percent of deposits; households = 20 percent of credit and 26 percent of deposits. - Geographic concentration: over 95 percent of credits attributed to the same six provinces and over 95 percent of deposits attributed to the same seven provinces since 2019. - Source attribution in figures: BCC. ### Access to Financial Services — Physical Infrastructure - Country size: 2.3 million square kilometers (second largest in Africa, 11th-largest in the world by area). - Account ownership: only 26 percent of the active population have a bank account. - For adults without an account, about 35 percent cite distance to financial institutions/services as a major impediment. - Cash points (Financial Access Survey): commercial bank branches = 300; ATMs = 634. - Number of branches per 1,000 km2 in the DRC has remained below 0.2 in recent years—often more than 10 times less than averages in fragile state and sub-Saharan African peers. - ATM locations per 1,000 km2 have risen incrementally but infrastructure requires further improvement. ### Access to Financial Services — Social and Regulatory Infrastructure - Account ownership: only 26 percent of the population have an account with a financial institution. - Top five reasons for not having an account (age 15+): 1) lack of sufficient funds; 2) cost; 3) distance; 4) lack of proper documentation; 5) lack of trust in financial institutions. - Account ownership is higher among those with secondary education compared to primary education or less, higher among the richest 60 percent, and higher among those participating in the labor force. - Wage receipt modalities: 60 percent of wage recipients report receiving wages in cash; only 26 percent report receiving wages into a financial institution account. - Data gaps persist documenting cash receipts for public sector pensions, domestic remittances, government payments and transfers, private and public sector wages, and wages from self-employment. - Emergency funds: only 41 percent of individuals indicate it is possible to raise emergency funds. - Top 3 sources for those able to raise funds: 1) money from working; 2) family or friends; 3) savings. - Only 1.7 percent indicated they raise emergency funds by taking a loan from a bank, employer, or private lender. - Saving behavior: 39 percent of individuals reported saving any money in the past year; 4.7 percent saved at a financial institution. - Borrowing behavior: 35 percent of individuals reported borrowing money in the past year. - Top source of borrowed funds: family or friends, followed by financial institutions or credit card use. - Primary reasons for borrowing: health or medical purposes, followed by education or school fees. - Documentation barrier: 27.3 percent of those without a financial institution account cited absence of necessary documentation (proof of residence, proof of income, ID or ID equivalents) as a major impediment. ### Informality and Labor Market Effects - Informality drivers: poverty and poor access to education hinder formal employment, public benefits, and financial services; consequences include a narrower tax base, reduced productivity, lower access to financing, higher gender inequality, decreased access to formal social safety nets, and wider wage gaps. - Estimated size of the informal economy: 47 percent of GDP in 2015 (compared to 40 percent for fragile state peers and 36 percent for sub-Saharan Africa). - Congo’s Trade Union Confederation estimate: 97 percent of the overall workforce may be engaged in informal sector activities. - Gender and informality: more women than men are engaged in the informal sector; data availability limits measuring effects on women in the DRC. The January 2022 Financial Sector Sustainability Review (FSSR) calls for enhanced gender-disaggregated data collection. ### Financing for SMEs and Firm Finance - SMEs financing share (2021): SMEs accounted for approximately 8 percent of the credit base and 5 percent of the deposit base. - Microfinance institutions: seen as an opportunity to fill SME financing gaps; BCC has worked to improve the regulatory framework for microfinance institutions and work is ongoing to strengthen legislative supervision. - Business constraints: 39.1 percent of firms cited access to finance as a major constraint to conducting business; smaller firms especially affected (41 percent). - Internal financing: Congolese firms report approximately 92 percent of investment is financed internally compared to 75 percent of sub-Saharan African firms. - Table 1 (World Bank Enterprise Survey, 2013) highlights numerous firm-level indicators (percentages provided in original table for DRC, SSA, All Countries across size categories). ### Digitalization and Mobile Money - Mobile cellular subscriptions per 100 people: 49.5 in the DRC versus averages of 69.9 in fragile state peer countries and 75.5 in sub-Saharan Africa. - Mobile money account ownership: approximately 16 percent of adults in the DRC versus approximately 23 percent for sub-Saharan African fragile state peers. - Digital payments: 22 percent of Congolese individuals indicated they had made or received digital payments in the past year (fragile state peers = 24 percent). - Account access via mobile/internet: 17 percent of Congolese individuals used a mobile phone or the internet to access an account; of individuals with an account, 67 percent used a mobile phone or the internet to access an account. - Potential gains: improved mobile cellular subscriptions and upgraded telecommunications infrastructure could lead to greater digital engagement. - Mobile money industry context: - Sub-Saharan Africa accounted for 43 percent of new mobile money accounts in 2020. - Mobile money transactions in sub-Saharan Africa amounted to US$490 billion out of the global total of US$767 billion. - Multipay Congo (launched 2015) aims to facilitate interoperability and shared payment services among banks to promote financial inclusion in the Congolese market. - Risks: BigTech entry and mobile money expansion may exacerbate corruption, fraud, theft, money-laundering risks where regulatory frameworks are unstable; risks amplified in largely cash-based and informal economies such as the DRC. ### Policy Recommendations - Overall challenge: physical, social, and regulatory barriers impede financial access; more private sector credit is needed to generate growth opportunities. - Recommendation: promote mobile money as a promising channel to increase engagement between financial institutions and the population given physical access constraints. - Continue strengthening the payment system and supervision of payment institutions in line with the Payment Systems Law passed in 2018. - Continue moving away from a cash-based economy; note progress from the “bancarisation” policy first implemented in 2011 requiring civil servants’ wages and salaries be paid via bank accounts. - Recommendation: deepen financial literacy to ensure newly included segments can engage in healthy and responsible financial behavior and mitigate risks from financial illiteracy. - Recommendation: bolster financial reporting and transparency in line with international standards to reinforce trust in financial institutions and shed light on borrower situations and system risks (as identified in the 2022 FSSR). - Recommendation: advance structural and legal reforms to improve the business climate and protect financial market integrity. - FSSR-identified needs include improvements to insolvency management, updates to emergency liquidity assistance (ELA), recovery planning, and a resolution funding mechanism. - The expected Banking Law would further establish a framework for risk and banking crisis management. - Strong legal and judicial frameworks as well as accounting and reporting systems will facilitate reform and financial deepening. *Source: Extracted content from the IMF chapter on the Democratic Republic of the Congo provided in the supplied document.* ### References ### References ### Cited studies and reports - Adoho, Franck M., and Doumbia, Djeneba. 2018. Informal sector heterogeneity and income inequality: evidence from the Democratic Republic of Congo (English). Policy Research working paper, no. WPS 8328. Washington, D.C.: World Bank Group. http://documents.worldbank.org/curated/en/984711517510605615/Informal-sector-heterogeneity-and-income-inequality-evidence-from-the-Democratic-Republic-of-Congo. - Andersson-Manjang, Simon K; Naghavi, Nika; et al. 2021. State of the Industry Report on Mobile Money 2021. Global System for Mobile Communications Association (GSMA). https://www.gsma.com/mobilefordevelopment/wp-content/uploads/2021/03/GSMA_State-of-the-Industry-Report-on-Mobile-Money-2021_Full-report.pdf. - Bains, P., Sugimoto, N., and Wilson, C. 2022. BigTech in Financial Services: Regulatory Approaches and Architecture. FinTech Notes, Vol. 2022: Issue 002. Washington, D.C.: International Monetary Fund. - Delechat, Corinne, and Leandro Medina, eds. 2021. The Global Informal Workforce: Priorities for Inclusive Growth. Washington, D.C.: International Monetary Fund. - Klapper, Leora, and Singer, Dorothe. 2014. The Opportunities of Digitizing Payments. Washington, D.C.: World Bank. https://openknowledge.worldbank.org/handle/10986/19917. - Regional Economic Outlook. 2016. Sub-Saharan Africa Time for a Policy Reset. Washington, DC: International Monetary Fund. ### Databases, surveys, and data sources - Enterprise Surveys. 2013. World Bank. www.enterprisesurveys.org. - Financial Access Survey (FAS). Updated 2022. Washington, D.C.: International Monetary Fund. https://data.imf.org/?sk=E5DCAB7E-A5CA-4892-A6EA-598B5463A34C - Global Financial Inclusion Database. 2017. Washington, D.C.: World Bank. https://databank.worldbank.org/source/global-financial-inclusion - ILOSTAT. International Labour Organization. https://ilostat.ilo.org. - UNData. United Nations Statistics Division. http://data.un.org/en/iso/cd.html. - World Development Indicators (WDI). World Bank. ### IMF and World Bank publications related to the Democratic Republic of the Congo - International Monetary Fund and World Bank Group. 2018. “The Bali Fintech Agenda.” IMF Policy Paper. Washington, D.C.: International Monetary Fund. https://www.imf.org/en/Publications/PolicyPapers/Issues/2018/10/11/pp101118-bali-fintech-agenda. - International Monetary Fund. 2015. Democratic Republic of the Congo: Selected Issues. Country Report No. 15/281. Washington, D.C.: International Monetary Fund. https://www.imf.org/en/Publications/CR/Issues/2017/01/07/Democratic-Republic-of-the-Congo-Selected-Issues-43336. - International Monetary Fund. 2014. Democratic Republic of the Congo: Financial System Stability Assessment. Country Report No. 14/315. Washington, D.C.: International Monetary Fund. https://www.imf.org/external/pubs/cat/longres.aspx?sk=42410. *1codea2022003 - References* --- _Source: https://www.imf.org/-/media/files/publications/cr/2022/english/1codea2022003.pdf_