By NJ Ayuk

It is no secret that the DRC’s mining industry is of vital importance in answering the country’s and the world’s mineral needs. Today, copper, cobalt and other byproducts represent the backbone of the DRC’s economic structure at about 85% of its exports. That has been the case for many years, through several regimes, with little change. Besides metals, diamonds and oil represent the remaining of all that the DRC sends abroad, the vast majority of its outbound trade balance being composed of raw unprocessed goods.

Standing in the 12th position amongst African oil producers, the DRC’s petroleum industry is miniscule at best, producing an average of 25 thousand barrels of crude oil per day off its coastal ageing fields. But that seems rather odd. While there is not much talk about this particular fact, when we think of it, it is somewhat perplexing that the DRC, which is bordered by so many oil producers and has territorial waters in the prolific Gulf of Guinea, has never really developed an oil industry or even seemed to be interested in developing one, despite its prospective reserves. With a population of around 80 million people, of which around 75%, most statistics indicate, live in extreme poverty, the DRC is today amongst the five poorest countries in the world.

One would expect that the country’s leaders would strongly push for the exploration of the country’s natural resources to produce wealth and provide for better living conditions for its citizens. Yet, the DRC’s oil and gas reserves remain largely unexplored, while most studies estimate that there could be around 20 billion barrels of undiscovered oil in the country’s basins, both onshore and offshore. That is a tremendous amount of oil which, if confirmed, would place the DRC as the second biggest petroleum holder in Sub-Saharan Africa, behind only Nigeria, and far outdoing Angola’s reserves of 9 billion barrels of oil.

This is not the Africa we want, and this is not the DRC that we want.

First of all, keeping certain communities in poverty to retain power is a complete mistake. Power stability comes from generalized improvement of life conditions. If the country is wealthier and is capable of improving the lives of those that live in it, the more stable it will be and the more capable it will become of sustaining and giving continuity to that development.

Further, as I have extensively defended over the years, the sanctity of contracts is of paramount importance to attract investment and partnerships into any country. What company would want to invest in a country where a contract can be signed and then cancelled a few months later without further explanation or justification? And it is not just a matter of reputation, but of direct financial burden, lest not forget that just in March this year, an international court ordered the Democratic Republic of Congo to pay South African DIG Oil Ltd USD$617 million for failing to honour two oil contracts. That is 1.6% of the country’s 2017 GDP. How can any leader possibly justify such a loss to its economy. Not to, again, mention the enormous economic potential that could come from actually letting those contracts take shape and allow companies to explore the country’s oil regions.

Stability depends on investment, cooperation and development. To attract investment, conditions need to be created for the business environment to be enabling for industry development. Disrespecting contracts does not achieve that. Nor does keeping people from producing wealth.

Just in May, French super-major Total abandoned its exploration license in the DRC. Bloomberg’s article on the matter was titled “Congo’s Lone Oil Giant Quits Search, Partner Says”. That’s right, it was the last major oil and gas company to abandon the DRC’s oil plays. Others had been there over the years, Shell and Texaco for instance. About 10 years ago, Tullow Oil and partners tried to acquire a license for exploration, signed a contract, paid the bonuses, and saw the contract then cancelled and the same block then sold to yet another company just a few months later. Nothing has been done in the acreage since.

This is the absolute opposite of what must be done.

Oil and gas production can bring enormous wealth to the country and its people, not to mention the ability the country’s gas reserves could have to produce electricity to power homes and industry.

Since January 2019, the DRC is led by a new government. It now has the opportunity to change the status quo of the DRC within the global oil industry and to promote investment. The country’s oil and gas laws are fairly well developed and the potential for discoveries is huge; the problem is reputation. If the country’s leaders can reassure international investors that their contracts will be respected and if investments can be facilitated and transactions made transparent, there is little limit to how quickly the country’s industry could grow and how much its people could benefit. Better living conditions across the country would ease ethnic and social tensions and provide the basis for a level of socio-economic development that the country has never seen before.

If the dependency on the volatile prices of mineral commodities continues, as well as the uneven distribution of wealth, and if the generalized situation of extreme poverty is sustained amongst the population, instability, rather than stability, will be the end result.

Further, the DRC has the opportunity to seek the help and support of international institutions and partners in developing its oil industry, such as the World Bank, the IMF or the Norwegian government, which have vast experience in helping other African oil producers. They can also seek closer proximity with the US, where most of the major companies with the capability, technology and capital to help develop their industry reside.

The US government also has an interest in promoting these developments in the DRC, as maintaining stability in the sub-continent and the Central African region is of particular strategic importance for US interests.

It is astonishing to me that the leaders in Kinshasa are not willing to look from their windows just across the Congo river to Brazzaville and want to emulate the steps taken by their neighbour, the Republic of Congo, currently the third biggest oil producer in Sub-Saharan Africa.

Finally, good signs are coming from the current administration. In April, at the latest Africa Petroleum Producers Association’s Conference in Malabo, Equatorial Guinea, the DRC’s oil minister announced the country would put 38 blocks on offer for bidding and negotiation, located in three different basins. This is an important step in order to call out investor attention to the country, and I applaud the initiative. Hopefully the regime change, the country’s adherence to the EITI, and the new block offer will help bring investment, but more will have to be done to reassure investors that entering this market will be a profitable and safe bet, and that their interests and rights are protected by the law.

I hope to see these developments happening soon and to be a witness to the fulfillment of the DRC’s oil industry’s full potential.

NJ Ayuk is the CEO of Centurion Law Group, a pan-African law Conglomerate and the current Executive Chairman of the African Energy Chamber, the voice of the African Oil and Gas industry. He is the author of the upcoming book “Billions at Play: The Future of African Energy and Doing Deals”

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By Bejoy Das Gupta and Miles Au Yeung 

Cross-border payments are growing rapidly, propelled by services trade, demand from foreign investment flows and workers’ remittances, but remain costly, slow and opaque. Processes are complicated by the presence of multiple parties, regulatory approaches and capital requirements, as well as differences in technical and operational standards, legacy systems and infrastructure. Concentrated market structures and information asymmetries exacerbate costs.

Businesses and individuals are looking for faster, more convenient, transparent and inexpensive cross-border payment methods. While there have been innovations, they are often limited to the front-end user experience. The back-end clearing and settlement payment networks still go through the traditional value chain optimised for high-value, low-volume transactions involving banks.

There is a burgeoning need for technologies to improve back-end processes, lower compliance costs and transform payment means. Models involve bilateral connection between domestic e-money services, extending an e-money system to multiple countries, and creating a peer-to-peer payment network accessible in multiple countries.

One way to facilitate cross-border payments would be the use of a digital composite asset of stable value based on the special drawing right, the International Monetary Fund’s composite currency unit. The development of this ‘eSDR’ has its genesis in a 2017 speech by Christine Lagarde, the IMF managing director and soon-to-be European Central Bank president, in which she said: ‘The Fund will also have to be open to change, from bringing new parties to the table, to considering a role for a digital version of the SDR.’

The value of the eSDR is based on the SDR basket of currencies. It exists in the form of digital tokens and represents a claim on the freely usable currencies of transacting parties and can be exchanged for these currencies. The eSDR possesses banknotes’ characteristics: it bears a monetary value; is protected by multiple security features; is uniquely identifiable and traceable; its supply is controlled by the participating authorities; its value are backed by the issuing authorities; and it is interoperable across payments systems.

Central banks could make use of the eSDR by issuing what would in effect be a universal central bank digital currency for cross-border transactions. As the value of the digital token would be determined by the IMF SDR’s currency composition and weights, it would be a stable instrument with no additional volatility, trading or investment activity, nor danger of manipulation.

To illustrate, Southeast Asian central banks, which already hold SDRs in their reserves, could issue eSDRs for regional cross-border payments. Foreign exchange costs could be reduced through direct settlement between central banks, as payments would move from currency A to eSDRs to currency B. Transactions would be instantaneous, peer-to-peer, round-the-clock, with enhanced transparency and data-sharing. Problem posed by multiple intermediaries would be eliminated. All providers could use the central bank-backed digital tokens.

Over time, more central banks could join, and a multilateral institution, such as the IMF, take over management of the eSDR. Alternatively, the technology could be applied in different regions, with another currency basket as the reference point. However, private sector-issued eSDRs may hold more promise for faster implementation of a global solution for cheaper, quicker and more transparent cross-border payments.

An eSDR-based payment network would enable financial service providers to offer efficient, transparent and inexpensive cross-border payment services even for low-value and high-volume use cases. Settlement times and costs should fall substantially, and improved compliance should enhance financial integrity.

The inefficiencies of cross-border transactions must be addressed. The use of digital composite tokens should create a product that is a trusted and stable store of value as well as effective medium of exchange. In its ideal form, the eSDR will greatly benefit both private sector financial businesses and the authorities that supervise them.

Bejoy Das Gupta is Chief Economist and Miles Au Yeung is Chief Markets Officer at eCurrency. This article is based on a whitepaper covering cross-border payments and the eCurrency eSDRTM.

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